Quest Rose Hill Pty Limited v The Owners Corporation of Strata Plan 64025 and Anor

The Proceedings 1In these proceedings the plaintiff Quest Rose Hill Pty Limited, (QRH) seeks a myriad of declarations, approximately fifteen in number. The first four declarations concern various items of expenditure dealt with at the 2010 Annual General Meeting (AGM) of the first defendant (the Owners Corporation) and which in turn call for the proper construction of a lease entered into by QRH and the Owners Corporation, (registered number 8455000J). 2Declaratory relief is sought as to the proper construction of clauses 13.1 and 13.2 of the lease and QRH's ability to nominate a strata managing agent. In addition a declaration is sought to the effect that pursuant to clause 13.2 the Owners Corporation is obliged to grant QRH a lease of the common property within a specified time frame on the same terms and conditions as long as the rental is calculated in accordance with clauses 15.2.1 and 15.2.2 of the lease. 3Further declaratory relief is sought to the effect that certain resolutions purportedly passed at the AGM in November 2010 were and are of no force or effect. 4Declaratory relief is also sought to the effect that on 16 November 2010 QRH issued reasonable directions (as it alleges it was entitled) on how lot owners were to vote at the AGM convened on 18 November 2010. 5A declaration is sought that by reason of the freehold in the common property being vested in the first defendant as agent for the lot owners under s 20(b) of the Strata Schemes (Freehold Development) Act 1973 (NSW) (SDA) who to the first defendants knowledge, were and are the plaintiff's lessors, under the relevant leases the first defendant is thereby estopped from doing or causing to be done anything with the common property that interferes with the plaintiff's business or its exclusive use of the common property. An injunction is also sought restraining the first defendant from dealing with the common property. 6A declaration is also sought that QRH, by its letters to the second and third defendant and others dated 17 September 2010 has validly exercised its right to be granted new leases for a further term which commenced on or about 19 February 2006 for a rental to be determined in accordance with clause 15.2. 7Further declarations are sought by QRH which turn upon the delivery of a notice prior to 19 November 2005, (in accordance with clause 15.1.1 of the lot leases) that each represented lot owner became bound to grant leases to QRH for a period of five years commencing on the day of the expiry of the relevant lot lease granted by Roseprop (the original developer) on the same terms and conditions (as to rental and renewal options). Further a declaration is sought that QRH could on certain terms and conditions make a written request for such a lease not later than three months prior to the expiration of the period. Further again a declaration that by the plaintiff delivering a notice to each of the represented defendants on 17 September 2010 they became bound to enter into the various agreements described. 8Orders are also sought pursuant to the Commercial Arbitration Act 1984 (NSW) for QRH to be granted leave to enforce against certain defendants an award made by the Arbitrator a Mr John McDermont dated 14 October 2008. An order is also sought that the defendants who are party to the arbitration proceedings refund certain monies by way of rent overpaid, by QRH with interest. 9An order for specific performance is sought in relation to the lease agreements referred to above. 10The Owners Corporation has filed a defence and a cross claim. The issues which are raised by it involve questions concerning the validity of the lease of the common property (No 8455000J). Various grounds are put forward as to why the lease is void and unenforceable. 11The Owners Corporation seeks a declaration that the lease referred to above is void or unenforceable as a result of the manner in which it was executed in particular in circumstances where it was beyond the power of the Owners Corporation to grant it. Alternatively it seeks the same declaratory relief in relation to certain clauses; 3.1, 5.1 and 11.1, namely that they are void and unenforceable. 12The Owners Corporation also seeks a declaration that clause 2.2 of the common property lease is void and unenforceable and not binding. It also seeks a declaration as to the proper construction of clause 2.2. 13Further the Owners Corporation seeks a declaration that it is entitled to terminate the lease on one month's notice. 14The Owners Corporation also seeks declarations that the QRH cannot exercise any relevant functions without the Owners Corporation's consent. 15The second defendant (Mr White) raises a number of issues in common with the Owners Corporation. He also seeks declarations and an injunction. His relief also involves the proper construction of clauses 2.2 and 13.2 of the lot leases. They are in identical terms to those clauses in the common property lease. 16Mr White asserts and that by reason of QRH having failed properly to exercise the relevant option, QRH has no legal estate or interest in the lots and is therefore, pursuant to clause 7.2 of the lease, holding over, and as such was not entitled to seek the exercise of the option for renewal of the 2011-2016 term. 17Mr White also seeks declaratory relief to the effect that while the purported exercise of the option by QRH may bring into existence an agreement to lease, equity should refuse relief (in particular specific performance) by reason of the number of discretionary considerations but in particular that a lease either cannot be brought into existence retrospectively or that the plaintiff is in breach of essential terms of the lot leases and therefore the Court should exercise its discretion against granting specific performance to QRH. 18Mr White likewise seeks a declaration he is entitled to terminate the lot leases on one month's notice or for breach. 19Other declarations are sought which involve a construction of clause 6.2 of the relevant lease.

Background Facts 20The plaintiff, QRH operates a serviced apartment franchise business from premises, namely a strata title apartment building, situated at 8 Hope Street Rose Hill (the premises). 21The premises were developed by Roseprop Pty Ltd (Roseprop). 22Construction of the premises was completed in about late 2000. The premises contain a basement carpark, 55 apartments and common property which includes a swimming pool, common grounds and landscaped areas. 23On 5 February 2001, strata plan 64015 was registered and pursuant to the relevant legislation the Owners Corporation was brought into existence; section 8, Strata Schemes Management Act 1996 (SSMA). 24Shortly after the strata plan was registered a number of leases were entered into as follows: (i) The Owners Corporation purported to grant to QRH a lease over the whole of the common property in the strata scheme; (ii) Roseprop granted to QRH as tenant leases over each of the 55 apartments in the premises. 2519 February 2001 was the date of commencement of lease of Lot 35 (now owned by Mr White) by Roseprop to QRH. It was a 5 year lease, terminating on 8 February 2006. 26In April 2001 Mr White purchased lot 35 from Roseprop. During 2001 other apartments were sold to investors, some of whom bought off the plan. 27The common property and apartment leases are in identical terms, apart from the start and end dates of each and the rent payable under each of the leases. The term of each lease is for 5 years commencing on various dates from February 2001 and each lease contained four options to renew, each of 5 years duration. 28In the case of the common property lease, the start date was 23 February 2001 the end date was 23 February 2006 and the rent payable by QRH was $1 for the first and second years increased by 4% per annum thereafter. The apartment leases purportedly gave QRH control over the apartments in the premises so as to enable QRH to find tenants for the apartments by sub-letting or licensing the use of the apartments thereby enabling QRH to operate the serviced apartment business. 29The common property lease permitted QRH to use the common property for the purpose of serviced apartments or other long or short term lettings (First Schedule, item 2: Use). 30On 19 April 2002 the common property lease was registered. 31On 18 October 2004 the following took place:

• Mr Bailey became a director of QRH
• His company, Food Concepts acquired all 6 shares in QRH
• A franchise agreement was entered between Quest NSW Pty Ltd (sub franchisor), Spencer Bailey and Food Concepts (ATF Bailey Family Trust) ("Franchisor"/"Tenant Company") and Spencer Bailey ("Guarantor")
• QRH was not a party to the franchise agreement although it executed the agreement
• Food Concepts commenced to operate the serviced apartment business, with QRH as the lessee of the lots. 32On 23 March 2005 Roseprop was deregistered. 33The Owners Corporation asserts that the lease of the common property expired on 22 February 2006. QRH (it is accepted) did not exercise its option to renew the lease but of course has remained in possession of the common property. 34From about May 2006 onwards, QRH sent various rent notices to lot owners. As a result a dispute ensued in relation to the rent. An action group was formed to represent the interests of lot owners. 35Mr White however does not dispute that QRH purported to exercise the options to renew the leases of the represented lot owners for the first further term (19 February 2006 to 18 February 2011). 36A number of disputes between the parties having been referred to arbitration. On 14 October 2008 a Mr John McDermott as Arbitrator published his award and found:
• The rent notices served upon certain lot owners by QRH in May 2006 were valid, although served outside the time provided for in the lease
• The lot owners should execute new leases as requested
• The rent for what was described as group 1 landlords was to be determined by clause 15.1.3(b) of the lot leases
• The rent for what was described as group 2 landlords to be as per QRH's rent notices. 37More particularly as for lot owners who had objected to the rent notices the Arbitrator ruled that those owners were to execute leases in favour of QRH once rental valuations in accordance with the terms of the leases had been obtained. 38As for lot owners who had not objected to the rent notices the Arbitrator ruled that they were to execute leases in favour of QRH for the first further term. 39However the first further term expired (in February 2011) before either the rental valuations were provided to the objecting lot owners or leases were executed by the non objecting lot owners. 40On 12 March 2009 Network Pacific gave notice of its resignation as Strata Manager, to be effective 12 April 2009. 41On 4 May 2009, a notice (deferred) of the AGM was circulated indicating the meeting was to be held on 21 May 2009. The agenda items included:
• That the budget for the administrative fund be $193,963.00.
• That the Owners Corporation appoint a new strata manager. 42On 15 May 2009, Supreme Court proceedings 2009/288819 were commenced, by the filing of a statement of claim and notice of motion to restrain voting at the AGM. 43On 22 September 2009 a franchise agreement was entered between Quest Serviced Apartments Pty Ltd ("Franchisor"), Food Concepts ("Franchisee"), Spencer Bailey ("Guarantor") and QRH ("Tenant Company"). 44On 24 August 2010, Ward J delivered judgment in matter 2009/288819; Quest Rose Hill Pty Ltd v White [2010] NSWSC 939 (Quest Rose Hill). 45On 17 September 2010, QRH issued a letter purportedly exercising an option for renewal of lot leases from 18 February onwards for a further 5 years. This was apparently not received by Mr White until 9 November 2010. 46In October 2010, these proceedings were commenced by summons. 47On 2 November 2010 a notice for the resumption of 2009 AGM was circulated. On the same day a notice was issued for the 2010 AGM. 48On 16 November 2010 directions were issued to lot owners by QRH purporting to direct them on how to vote in relation to the 2010 AGM. 49On 1 December 2010 QRH issued letters to lot owners purporting to give notice as to the rent for the term 2011 to 2016. 50On 21 December 2010, Mr White wrote to QRH rejecting the rent notice. 51On 24 December 2010 numerous letters issued from other lot owners rejecting the rent notices. 52On 10 January 2011 QRH sent letters to lot owners giving notice of an intention to carry out certain renovations. There are numerous letters refusing consent however QRH asserts it has carried out the works in any event. 53On 28 January 2011 a statement of claim was filed in these proceedings. 54In February 2011, the first further term of the lot leases expired.

The Core Issues 55The parties in this litigation are at war and have been for some time. These disputes raise in my mind serious questions as to whether this type of investment sits comfortably with the concept of a strata title. Ward J had similar doubts; Quest Rose Hill [142]. 56As is apparent from the brief sketch of the relief sought on both sides and the various matters raised by the Owners Corporation and Mr White, the case turns to a very great extent on whether the arrangements between QRH and the defendants (as to the common property or any particular lot) is or is not governed (as the case may be) by enforceable and valid leases, or ones which equity ought to enforce. The construction of important terms of those leases is also a matter of contest. 57As a prelude to many of its arguments, the Owners Corporation seeks to argue that what QRH has is at best only a licence. The substance of the remaining arguments turn on whether the leases are inconsistent with relevant legislation and hence unenforceable. 58I should also observe in passing that both sides filed voluminous affidavit materials annexing minutes, spreadsheets, correspondence and other documents. There was no cross examination of any witness. That presents it own limitations. There was no attempt to file any expert evidence of an accounting or other kind. The Court is therefore left to discern in a number of respects for example what is or is not a reasonable estimate or expense on the basis of assertion and counter assertion. Important matters were left to the written evidence such as it was and what reasonable inferences were available therefrom. The difficulties in demarking the boundaries between a permissible inference and speculation is often a difficult one: Jones & Anor v Sutherland Shire Council [1979] 2 NSWLR 206 at 222 to 229, per Mahoney JA. As Lord Mansfield said long ago in Blatch v Archer (1774) 1 Cowp 63 at 65, "all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other side to have contradicted". See also Apollo Shower Screens Pty Ltd, v Building and Constructions Industry Long Service Payments Corp (1985) 1 NSWLR 561 at 565 and Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at [36].

Lease or Licence 59It is submitted on behalf of the Owners Corporation that the common property lease does not in fact confer exclusive possession in favour of the QRH and therefore, consistently with the principles articulated in Radaich v Smith (1959) 101 CLR 209, is not a lease and therefore does not create an interest in land which would gain the protection of indefeasibility pursuant to section 42 of the Real Property Act 1900 (NSW). 60In Radaich, Taylor J said at 217: I have no doubt that the substance and effect of the instrument in question here was to grant to the appellant a right to the exclusive possession of the subject premises upon the specified conditions for the prescribed term. The deed obviously contemplated that the appellant should have the right to occupy the premises for the purposes of her business and the business was to be carried on upon the premises at all times when they might lawfully be kept open. The character of the business was such that it could only be effectively carried on if the appellant had exclusive occupation and it seems clear that, even at times when they could not lawfully be kept open for the purposes of the business, the premises were to remain under her effective control. That being so it is inevitable that we should hold that the instrument created a leasehold interest and that at the material time the relationship of lessor and lessee existed between the parties. 61In the same case Windeyer J said at 221 - 222: The distinction between a lease and a licence is clear. "A dispensation or licence properly paseth no interest, nor alters or transfers property in anything but only makes an action lawful which without it had been unlawful". ...Whether the transaction creates a lease or a licence depends upon intention, only in the sense that it depends upon the nature of the right which the parties intend the person entering upon the land shall have in relation to the land. When they have put their transaction in writing this intention is to be ascertained by seeing what, in accordance with ordinary principles of interpretation, are the rights that the instrument creates. 62The document here is described as a "lease" on the front page of the agreement. It describes the respective parties as lessor and lessee. It was pointed out by Counsel for the Owners Corporation that the document purports to grant a lease to the Tenant (QRH) and the Tenant's invitees to use the common property "in common with other persons entitled to use the same subject however to the Owners Corporation rules for the time being in force and to the covenants conditions, restrictions herein contained". The argument was to the effect that if others are entitled to use the common property then exclusive possession has not been granted to the Tenant. I am not persuaded however that that is the correct construction of the document. If persons have for example statutory entitlements such as lot owners, I see no difficulty in the lease being qualified to that extent. Equally the fact there may be invitees would not mean that the arrangement was not a lease. 63Clause 4.1 indicates clearly that the Tenant will not at any time use or permit the use of the premises other than for the purposes specified in Item 2 of the first schedule, provided that the Tenant may with the consent of the Landlord alter the usage of the premises. Item 2 in the first schedule in turn indicates that the use is for serviced apartments or other long or short term lettings. 64Clause 6.1.1 however obliges the Landlord to allow the Tenant "quiet enjoyment and possession and use of the premises". The premises are of course defined as the common property in folio identifier CP/SP64025 or the various lots e.g. 35/SP64025. Clause 6.1.3 obliges the Landlord not to interfere with the Tenant's business. This is entirely consistent with exclusive possession in the relevant sense. 65Given the nature of the business and those particular terms to which I have referred I consider there is sufficient indication of exclusive possession to warrant the arrangement embodied in the leases being characterised as a lease as opposed to a licence. That is clearly in my opinion the better view. I reject the Owners Corporation argument to the contrary.

Validity of the Lease of the Common Property 66The Owners Corporation contends that for a number of reasons the common property lease is void and unenforceable and not binding on the Owners Corporation. Insofar as it was registered, the registration did not give QRH an indefeasible title because QRH had relevantly engaged in a statutory fraud. 67There are some factual issues which are germane to this issue and which I will set out prior to dealing with the various legal propositions advanced. The relevant chronology is as follows: (i) On 24 February 1999 a Mr Paul Constantinou was appointed director of Roseprop Pty Ltd; (ii) On 2 June 1999 Mr Constantinou was appointed a director of the plaintiff, QRH; (iii) On 22 December 2000 a lease was executed for Unit 35 executed by Roseprop (Constantinou signs as secretary) and the Plaintiff (Constantinou signs as secretary and director of the Plaintiff and executes guarantee of the Plaintiff's obligations under lease); (iv) On 26 January 2001 the first meeting of the Owners Corporation of SP64025 was held; (v) On 5 February 2001 Strata Plan 64025 was registered; (vi) On 26 February 2001 units 33 and 48 in Strata Plan 64025 are transferred from Roseprop to third party purchasers; (vii) Between 3 March and 4 April 2001 units 12, 13, 30, 37, 38, 39, 40, 44, 45, 47, 50 and 51 are transferred from Roseprop to third party purchasers; (viii) On 17 April 2001 the common property lease is executed by affixing the common seal by Julie Briffa (purportedly on behalf of the Owners Corporation) and by Paul Constantinou on behalf of QRH; (ix) On 26 April 2001 unit 25 is transferred from Roseprop to a third party purchaser; (x) On 27 February 2002 the second meeting of the Owners Corporation of SP64025 is held. A resolution is passed appointing Network Pacific Real Estate as managing agent pursuant to section 27 of the Strata Schemes Management Act; (xi) On 19 April 2002 the common property lease is registered. 68For the purposes of the argument it is common ground that the lease over the common property was: not executed pursuant to a special resolution passed at a general meeting of the Owners Corporation as required by section 25 of the SDA; purportedly executed by affixing the seal of the Owners Corporation by Julie Briffa who at the time was neither a lot owner, member of the executive committee, nor the strata manager of the Owners Corporation in contravention of section 238 of the Strata Schemes Management Act, 1996 (NSW) (SSMA). 69The Owners Corporation relies upon section 21 of the SDA which provides that the common property in the premises may not be dealt with except in accordance with the provisions of the SDA and the SSMA. The Owners Corporation also relies upon section 25 of the SDA which relevantly provides that an Owners Corporation may, pursuant to a special resolution passed at a general meeting, execute a lease of common property. 70The first argument advanced therefore by the Owners Corporation is that the common property lease was executed ultra vires and is therefore void and unenforceable. The Owners Corporation also rely upon the manner in which the common seal was affixed to support an argument of invalidity. The seal was affixed with the attestation of a Ms Julie Briffa. 71It is clear from section 238 of the SSMA that in order to be able to affix the seal of the Owners Corporation, the person has to be a lot owner, a member of the executive, or a strata manager of the Owners Corporation. It is common ground that Ms Julie Briffa was none of these, and therefore it is submitted that section 238 of the SSMA has not been complied with. It is further contended by the Owners Corporation that as the seal was not properly affixed to the common property lease (and hence it was not executed in accordance with the requirements of section 238 of the SSMA) it was not the Owners Corporation's agreement and therefore is not binding on the Owners Corporation. 72QRH responds to both of these arguments on the basis that as the common property lease was registered QRH can avail itself of section 42 of the Real Property Act 1900 (NSW) and hence claim indefeasibility which would overcome what would otherwise be irregularities or defects. 73The Owners Corporation however relies upon a number of authorities to support its contentions. In particular it relies upon Gillett v Halwood Corp Ltd [1998] NSWCA 281. It also relies upon Waldorf Apartment Hotel, The Entrance Pty Ltd v Owners Corp SP 71623 [2010] NSWCA 226 (both decisions of the New South Wales Court of Appeal) and a decision of Justice Black in The Owners - Strata Plan No 44999 v Premier Holdings Corp Pty Ltd and Anor [2012] NSWSC 171. 74In Gillett's case the Court held that a management agreement by which an owners corporation purported to appoint a manager was unenforceable as against the owners corporation because it had not been authorised by the executive committee of the owners corporation pursuant to the legislation. 75In Waldorf the Court determined that an owners corporation was not bound by a building management agreement because it lacked the necessary resolution passed authorising entry into the agreement and again was thereby contrary to the relevant legislation. 76In Premier, Black J on the other hand rejected an ultra vires argument because in the circumstances he found the defendant was entitled to rely upon the indoor management rule, but did find that the services specified in the relevant management agreement were an unauthorised delegation of the powers of the owners corporation. 77In addition, the Owners Corporation relies upon the decision of the High Court in Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146. Again it is submitted that because the seal was improperly affixed it was not relevantly the act of the Owners Corporation and hence the common property lease was invalid. 78It seems to me that none of the arguments advanced (at least at this stage) by the Owners Corporation have substance. First none of the cases referred to above by the Owners Corporation involved any consideration of section 42 of the Real Property Act and hence the question of indefeasibility. Subject to any relevant exception to section 42 it seems to me that while it is clear various provisions of the relevant legislation may not have been complied with, once registered by operation of section 42 the interest has the benefit of indefeasibility. The whole point of section 42 is that, subject to the fraud exception, it is intended to overcome voidness in the instrument. In relevant circumstances it can cure a forgery, Frazer v Walker [1967] 1 AC 569. It can certainly provide a cure where there has been a lack of authority to authorise the execution of an instrument: Broadlands International Finance Ltd v Sly (1987) 4 BPR 9420. 79The Owners Corporation nonetheless submitted that QRH could not acquire an indefeasible title to the common property when the common property was not dealt with in accordance with the SDA. This was because the requirements of the SDA were said to override or impliedly repeal section 42 of the Real Property Act. This argument was not advanced in oral submissions and I consider it is likewise without substance. Both legislative regimes have their own work to do. Section 42 provides for indefeasible title upon registration subject to for example a relevant fraud. The SDA along with the SSMA regulates the business of strata titles. Both pieces of legislation are dealing with entirely different topics to the Real Property Act and insofar as they may well interact it would be necessarily assumed that both were valid enactments of the New South Wales Parliament. In any event I see no conflict between the respective pieces of legislation. 80The Owners Corporation puts as an alternative argument that what occurred here amounted relevantly to a statutory fraud for the purposes of section 42. It was said that "dishonestly" permitting a dealing to be registered, in circumstances where there was knowledge that there had been a false attestation, was a dealing that fell within the fraud exception in section 42. In particular it was submitted that the relevant director of QRH, Mr Constantinou, was also a director of the company that was the developer and major lot owner in the Owners Corporation when the common property lease was executed, and therefore would have known that the lease was executed without a special resolution being passed and in breach of section 238 of the SSMA. In this regard the Owners Corporation relied upon a number of authorities but in particular Australian Guarantee Corporation Ltd v De Jager [1984] VR 483 and Westpac Banking Corporation v Sansom (1994) 6 BPR 13,790 at 13,795. 81It is therefore necessary to consider the terms of section 42 and the relevant case law in relation to it. The principle of indefeasibility of title is the foundation of the Torrens system of title: Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 613, per Mason CJ and Dawson J. 82Section 42 is in the following terms: 42 Estate of registered proprietor paramount (1) Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except: (a) the estate or interest recorded in a prior folio of the Register by reason of which another proprietor claims the same land, (a1) in the case of the omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act, (b) in the case of the omission or misdescription of any profit à prendre created in or existing upon any land, (c) as to any portion of land that may by wrong description of parcels or of boundaries be included in the folio of the Register or registered dealing evidencing the title of such registered proprietor, not being a purchaser or mortgagee thereof for value, or deriving from or through a purchaser or mortgagee thereof for value, and (d) a tenancy whereunder the Tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a Tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected: Provided that: (i) The term for which the tenancy was created does not exceed three years, and (ii) In the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years. (2) In subsection (1), a reference to an estate or interest in land recorded in a folio of the Register includes a reference to an estate or interest recorded in a registered mortgage, charge or lease that may be directly or indirectly identified from a distinctive reference in that folio. (3) This section prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section. 83The Owners Corporation used the epithet "dishonest" to describe the conduct of Mr Constantinou, in particular given (it was said) the state of his presumed knowledge. I should observe that neither Mr Constantinou nor Ms Briffa were called to give evidence and the Owners Corporation sought to rely upon their absence in further support of the contention that dishonesty had been afoot. 84It is as well to remember that the notion of fraud in section 42 has been considered by a number of Courts and whilst it may be accepted that fraud for the purposes of section 42 is wider than the common law concept of fraud (because it is not confined to deceit or fraudulent misrepresentation), dishonesty in the sense of moral turpitude is in my opinion an essential element. The definition in section 3(1) of the Real Property Act to the effect that fraud "includes fraud involving a fictitious person" does not affect the necessity for dishonesty or moral turpitude to be present. 85In Assets Co Ltd v Mere Roihi [1905] AC 176 at 210 the Privy Council defined fraud under the Act (there the Land Transfer Act 1870 and 1885) as actual dishonesty. In Butler v Fairclough (1917) 23 CLR 78 the notion of "moral turpitude" was used as an alternative by Isaacs J at 97. In Wicks v Bennett (1921) 30 CLR 80 at 91 Knox CJ and Rich J noted that the fraud is "something more than mere disregard of rights of which the person sought to be affected had notice". 86Mason CJ and Dawson J in Bahr v Nicolay said at 614 that it was by no means the case that all species of equitable fraud were outside the concept of fraud under the Real Property Act. However, the New South Wales Court of Appeal in Grgic v Australian and New Zealand Banking Group Ltd [1994] 33 NSWLR 202 dealt with that authority and Powell JA said at 221: Those species of "equitable fraud" which are regarded as falling within the concept of "fraud" for the purposes of section 42 of the Act are those ... in which there has been an element of dishonesty or moral turpitude on the part of the registered proprietor of the subject interest or on the part of his or its agent. 87In Russo v Bendigo Bank Ltd and Another [1999] 3 VR 376, Ormiston JA who wrote the leading judgment said at [33]: Consequently having regard to the manner in which the interpretation of the concept of fraud has changed over the years both in New Zealand and in Australia, I would respectfully suggest that the most satisfactory definition of the concept of fraud was given in 1923 by Salmond J. In the Waimiha Sawmilling Case when heard by the New Zealand Court of Appeal: [1923] NZLR 1137 at 1173: The term "fraud" is not here used in its most restricted sense as including merely deceit, nor in its widest sense as including the constructive or equitable fraud of the Court of Chancery. It means dishonesty - a wilful and conscious disregard and violation of the rights of other persons. 88The Court of Appeal in Victoria has said that the mere fact that a person might have discovered fraud if further enquiries had been made does not of itself prove fraud. Inquiry is an inquiry for actual dishonesty not for want of due care: Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 at 194. 89The Owners Corporation relies upon the decision of Tadgell J in Australian Guarantee Corporation Ltd v De Jager [1984] VR 483. In that case a husband and a wife were jointly registered as registered proprietors of land. The husband arranged a mortgage over the property with AGC however the wife refused to sign the mortgage documents. Someone (unidentified) forged her signature on the mortgage documents. An intermediary of the husband took the documents to AGC. The intermediary noted he witnessed the husband's signature, not the wife's, however attested both in front of AGC's employee. The mortgage was registered. When the husband defaulted the mortgagee sought to exercise its power of sale. The reason the wife was able to claim the fraud exception is because the Court found that AGC had (through its employee) represented to the Registrar General that the wife's consent had been witnessed when it had not. Tadgell J expressly found a fraud sufficient to defeat the registered interest. There was clearly dishonesty in the registration process. This also explains Rolfe J's judgment in Westpac Banking Corporation v Sansom at 13,796 and 13,798. 90In Russo, although there was a false attestation of a signature on a mortgage as having been signed in the presence of a clerk employed by a solicitor, the Court, having heard from the clerk held that it was not shown she knew of the significance of her attestation in the process of registration, or even that the mortgage was going to be submitted for registration (see 387). The Court found it was therefore not shown that the clerk's attestation had the requisite element of dishonesty or moral turpitude required for fraud as explained by Ormiston JA. 91Whilst the Owners Corporation allege dishonesty in terms, the foundation for such an assertion was based upon the knowledge to be inferred of Mr Constantinou in that it is said he must have known that there was no special resolution and that further he must have known Ms Briffa was not authorised to affix the common seal and hence acted dishonestly. I am not so certain about that on the facts. It does seem to me that equally open is that these events occurred through a want of due care. When a Court is considering allegations as serious as that of dishonesty it is necessary to take into account the well known passages of Briginshaw v Briginshaw (1938) 60 CLR 336 and/or the provisions of section 140 (2)(c) of the Evidence Act 1995 (NSW). This is also a matter upon which the Owners Corporation bears the onus. 92The Owners Corporation submitted that such inferences could be drawn by reason of QRH's failure to call either Mr Constantinou and/or Ms Briffa on the question of what inferences could or should be drawn by reason of the failure on the part of QRH to call either evidence. It is as well to remember what Campbell JA recently said in Lym International Pty Ltd v Marcolongo and Another [2011] NSWCA 303 at paragraphs [91] to [92]: [91] Jones v Dunkel authorises, but does not require, a tribunal of fact to engage in two different types of reasoning. One is to infer that the evidence of an absent witness, if called, would not have assisted the party who failed to call that witness. The other is that the tribunal of fact can draw with greater confidence any inference unfavourable to the party who failed to call the witness, if that witness seems to be in a position to cast light on whether that inference should properly be drawn: Manly Council v Byrne [2004] NSWCA 123 at [51]. It is only the first of those courses that the trial judge followed in the present case. [92] Glass JA identified a number of propositions for drawing such an inference in Payne v Parker [1976] 1 NSWLR 191 at 201-202. Among these were the following conditions: (6) Whether the principle can or should be applied depends upon whether the conditions for its operation exist. These conditions are three in number: (a) the missing witness would be expected to be called by one party rather than the other, (b) his evidence would elucidate a particular matter, (c) his absence is unexplained. (7) The first condition is also described as existing where it would be natural for one party to produce the witness: Wigmore, para 286, or the witness would be expected to be available to one party rather than the other: O'Donnell v Reichard [1975] VR 916, at 921, or where the circumstances excuse one party from calling the witness, but require the other party to call him: ibid [1975] VR 916, at p 920, or where he might be regarded as in the camp of one party, so as to make it unrealistic for the other party to call him: ibid [1975] VR 916, at 920, Regina v Burdett (1820) 4 Barn & Ald 95 ; 106 ER 873, or where the witness' knowledge may be regarded as the knowledge of one party rather than the other: Earle v Castlemaine District Community Hospital [1974] VR 722, at 733, or where his absence should be regarded as adverse to the case of one party rather than the other: ibid [1974] VR 722, at 734. It has been observed that the higher the missing witness stands in the confidence of one party, the more reason there will be for thinking that his knowledge is available to that party rather than to his adversary: ibid [1974] VR 722, at 728. If the witness is equally available to both parties, for example, a police officer, the condition, generally speaking, stands unsatisfied. There is, however, some judicial opinion that this is not necessarily so: ibid [1974] VR 722, at 728. Evidence capable of satisfying this condition has been held to exist in relation to a party's foreman: Cafe v Australian Portland Cement Pty Ltd (1965) 83 WN (Pt 1) (NSW) 280; his safety officer: Earle v Castlemaine District Community Hospital [1974] VR 722; his accountant: Steele v Mirror Newspapers Ltd [1974] 2 NSWLR 348; his treating doctor: O'Donnell v Reichard [1975] BR 916, at 921. 93I should note here that there is no evidence that QRH has (or indeed had) any association with Mr Constantinou or for that matter Ms Briffa and on the basis of the evidence in the case it is not obvious QRH would be expected to call them. Mr Bailey was not asked a single question about this or for that matter any other issue. 94In further written submissions the Owners Corporation however drew my attention to two further authorities. National Commercial Banking Corp of Aust Ltd v Hedley (1984) 3 BPR 9477, and Davis v Williams [2003] NSWCA 371. It is pointed out by the Owners Corporation that the Court in Hedley more comfortably reached the conclusion of dishonesty by reason of the bank there having failed to call the relevant manager to give evidence in the case. Nonetheless Hedley did involve a finding that the registered proprietor had not in fact signed the relevant instrument and that the proprietor's signature had been falsely attested to. In Davis the relevant person (without the knowledge or instructions of any of the parties) altered a transfer prior to registration by deleting the claim "joint tenants" and substituting "tenants in common" in the mistaken belief that that the alteration may save stamp duty. Hence the particular person had a dishonest motive in making the alteration. 95Having considered these authorities it seems to me that they highlight the importance of the presence of what may be described as moral turpitude or an intention of depriving a person of an interest in the land by some dishonest act. It was submitted on behalf of the Owners Corporation that there is no relevant distinction between a forged instrument and an instrument created and sealed without the authority of the registered proprietor. I disagree. One is necessarily created by reason of a dishonest act, whereas the other may well occur through a want of due care. 96There are many authorities where a lack of authority as well as other irregularities have been cured by registration. For example the cases discussed by Professor Peter Butt in Land Law, 4th Edition, at [2017] where, for example, powers of attorney have been deficient, statutory provisions concerning subdivisions breached, etc. In other words there are many cases where instruments were created and sealed and registered without there being any authority to do so and yet registration provided the cure. 97It was further submitted by the Owners Corporation that in any event as explained by Dawson and Toohey JJ in Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 201 and 207 - 208, the unauthorised affixing of a corporate seal as here, is a form of forgery and as a consequence, as I understand the argument, should be regarded as fraud for the purposes of section 42. 98However in Northside, Mason CJ thought forgery may be an exception to the indoor management rule but again did not apply in that case (at 157-158). Brennan J thought one must go further than affixing the genuine seal of the company for there to be the forgery exception to the indoor management rule (at 180 - 185). 99Dawson J drew distinctions between different types of forgery. For example he distinguished between a forgery which involved a counterfeit signature or seal and that which did not. He thought the former was clearly a nullity. His Honour did consider there may be mixed answers subject to whether or not there was an intention to defraud present (at 200). 100Toohey J on the other hand thought if there was no actual forgery in the strict sense, the consequences would depend upon the conduct of the company. 101In this case before me the actual seal of the company was affixed. Authority was however lacking but I do not consider the decision in Northside assists the Owners Corporation in their argument on fraud. In any event of course Northside was not a case concerning section 42. 102I do not consider in all the circumstances that the evidence permits an inference to be drawn that Mr Constantinou knew there was no special resolution and that Ms Briffa had no authority to affix the seal such that his conduct could be said to amount to dishonesty or indeed even moral turpitude. I do not therefore consider there has relevantly been a fraud for the purposes of section 42.

A Further Alternative 103The Owners Corporation puts a further alternative argument namely that registration insulates only provisions of a dealing that "delimit or qualify" the registered interest or those which are otherwise necessary to assure that interest to the registered proprietor or that have a "direct application" to the registered interest. It may be accepted that not every term of an instrument enjoys indefeasible status. There is no doubt that in the context of a lease, registration of the lease confers priority not only on the original term of the lease, but also on any option to renew contained in the lease because an option to renew is an incident of the interest created by the lease. As Gibbs J remarked in Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326 at 345 - 346: The right of renewal is so intimately connected with the term granted to the lessee, which it qualifies and defines, that it should be regarded as part of the estate or interest which the lessee obtains under the lease, and on registration is entitled to the same priority as the term itself. 104In Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1, Barwick CJ (with whom McTiernan and Stephen JJ agreed) said at 17 Though as a term "indefeasibility" is convenient enough, it must always be remembered that it is the title to and possession of the land or of the interest in the land of which there is a registered proprietor which is rendered secure by the registration. In the case of a leasehold it may be and frequently is the case that the extent of the leasehold interest is not merely described by reference to a term of years but must of necessity be determined by reference to the operation and effect of those terms and conditions of the lease which affect or qualify the interest in the land which the lease purports to create. 105In Pt Ltd v Maradona Pty Ltd [1992] 25 NSWLR 643 Giles J was asked to consider whether the personal obligation of a Mrs Thompson as guarantor of a mortgage achieved indefeasibility by reason of the mortgage being registered under the Real Property Act 1900. The defendants argued that the registered estate or interest did not extend to the right to enforce the personal covenant in the mortgage. His Honour said at 679: The general position thus indicated is, I think as follows. That which is attained by registration is, in the words of s 42, an estate or interest in the land. Registration does not validate all the terms and conditions of the instrument which is registered. It validates those which delimit or qualify the estate or interest or are otherwise necessary to assure that estate or interest to the registered proprietor. 106In Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 Giles JA (with whom Handley and Stein JJA agreed) said at [59]: Duncan v MacDonald differs from Pt Ltd v Maradonna Pty Ltd in the extent of the operation given to the mortgagor's personal covenant. The Wall parties submitted that the operation given to a lessee's covenant to pay rent would be akin to that given to the mortgagors personal covenant in Duncan v MacDonald so that the lessor could re-enter on the failure to pay rent but could not sue to recover the unpaid rent. Whatever be the position as to the mortgagor's personal covenant in my opinion registration would give wider operation to a lessee's covenant to pay rent, entitling the lessor to enforce the covenant. Payment of the agreed rent is an essential part of the transaction between the lessor and lessee. The lessor gives the lessee an estate or interest in land in return for the lessee giving the lessor rent, rent being "a sum issuing out of the land demised payable by the lessee to the lessor for the right to occupy that land and all that went with it": Junghenn v Wood (1958) SR (NSW) 327 at 330 per Owen J. The covenant to pay rent, to adopt the words of Blanchard J in Duncan v McDonald, is a condition upon which the leasehold interest is held and intimately related to the lessee's title created upon registration, taking up concepts found in Travinto Nominees Pty Ltd v Vlattas and in Mercantile Credits Ltd v Shell Co of Australia Ltd, because of its connection with the continuance of the lessee's interest in the land, it delimits or defines that interest. 107The Owners Corporation submits that indefeasibility would not protect the personal covenants. They refer in a footnote (Fn 23, Outline submissions 6 August 2012) to fourteen clauses or subclauses. Not all of these clauses were the subject of detailed written or oral submissions. Clauses 2.2 and 13 (which were addressed in some considerable detail otherwise). Clauses, 3 (insurance), 5 (the Tenant's covenants), 7 (7.1, 7.3, 7.4, 7.5 and 7.6, setting mutual responsibilities), 8.2 and 8.3 (assignment of franchise and guarantees), 9 (ownership of contents), 10 (ownership of common furnishings and fittings) and 12 (damage, destruction and suspension of services) it was submitted should not be seen as running with the land and therefore would not be protected by registration. In short it is submitted they cannot affect the nature, quality or mode of use of the property. 108Reliance was placed upon the decision of the High Court in Gumland Holdings v Duffy Bros (2008) 234 CLR 237. That case however was concerned with s 117 of the Conveyancing Act 1919 (NSW) and its historical origins. That provision ensures that covenants in leases are enforceable by or against an assignee of a lease or an assignee of the reversion notwithstanding lack of priority of estate. The terms of the legislation and its historical origins, say nothing about notions of indefeasibility and covenants in a lease which may or may not enjoy that status. 109The purpose of s 117 is to deal with rights which are incident to a reversionary estate in the land and also to confer rights such as to provide standing of a person who may derive income from the land. The provision therefore can be called in aid even if a lease is not registered under the Real Property Act. I am not persuaded that the decision of Gumland is of relevance to the problem I have to deal with here. 110It must be recalled that the Tenant has remained in possession and conducts its business from the premises. The building is (and everyone relevantly knew) that it was to be run as a block of serviced apartments and not as individual dwellings for particular lot owners. People clearly invested on that basis. I can see force in the proposition that, given the rather special nature of this arrangement and the use to which the land is put, and, as Giles JA observed in Karacominakis, upon registration a number of clauses would and should be given a wider operation notwithstanding they are personal covenants. As Giles JA observed, payment of the agreed rent was an essential part of the transaction (as he explained it) and hence intimately connected with the lessee's title. I consider the same here can be said of each of the clauses sought to be impugned but certainly of clauses 2.2 and 13 as examples. Many of these clauses about which complaint is made are said to be essential terms by reason of clause 19 of the lease. (in relation to the Tenant, clauses 2.1, 2.2, 5, 9.4 and 11.1; and in relation to the Landlord clauses 2.3, 6. 11.3, 13 and 23.1). I consider it is difficult (in the circumstances here) not to give a wider operation to each of the relevant personal covenants to which objection is taken. 111It was put by the Owners Corporation that so far as any provisions did not enjoy the status of indefeasibility upon registration of the lease, they would not otherwise have any contractual force. This is because the provisions must be seen as being part of a contract made without authority and hence they would not be binding upon the Owners Corporation. That may well be correct but it does not arise here by reason of the views I have expressed above.

The Statutory Framework 112Before dealing with other arguments it is necessary to consider the statutory context in a little more detail. 113Broadly speaking there are two relevant statutory enactments. The SDA, which deals with the subdivision of land into cubic spaces and the development for real estate for that purpose. There is also of course the SSMA which deals with the management and administration of strata schemes.

Relevant Provisions 114Section 18(1) of the SDA provides that upon the registration of a strata plan, any common property in the plan vests in the body corporate. 115Section 20 is in the following terms: 20. Body corporate to hold common property as agent for proprietors. The estate or interest of a body corporate in common property vested in it or acquired by it shall be held by the body corporate as agent; (a) where the same person or persons is or are the proprietor or proprietors of all of the lots the subject of the strata scheme concerned - for that proprietor or those proprietors, or (b) where different persons are proprietors of each of two or more of the lots the subject of the strata scheme concerned - for those proprietors as tenants in common in shares proportional to the unit entitlements of their respective lots. 116Section 21 provides that common property shall not be capable of being dealt with except in accordance with the provisions of the 1973 Act and the 1996 Act. 117Section 24 is in the following terms: 24. Dealings with lots include common property. (1) In any dealing or caveat relating to a lot, a reference to that lot includes a reference to any estate or interest in common property which is vested in the body corporate as agent for the proprietor of that lot without express reference to the common property and without that dealing or caveat being recorded in the folio of the Register comprising the common property. (2) The beneficial interest of a proprietor of a lot in the estate or interest in the common property, if any, held by the body corporate as agent for that proprietor shall not be capable of being severed from, or dealt with except in conjunction with, the lot. 118Section 25 provides that a body corporate may "pursuant to a special resolution" execute a transfer or lease of common property. 119In the Owners - Strata Plan No. 43551 v Walter Construction Group Ltd [2004] NSWCA 429 Spigelman CJ made the following comments at [42] to [46]: [42] In my opinion, the word "agent" in s 20 and s 24 is not used in the technical sense of the law of agency. The characterisation of the relationship for purposes of determining standing to sue turns on an assessment of the whole statutory scheme, including the powers and duties with respect to common property set out above. There is a tension between the use of the word "agent" and of the words "beneficial interest" in s 24(2). The fact that the statute vests title in the owners corporation is particularly significant. [43] In Carre v Owners Corporation - Strata Plan 53020 [2003] NSWSC 397; (2003) 58 NSWLR 302 Barrett J referred to the words "beneficial interest" in s 24(2) and said: [28] ... The statute seems clearly enough to proceed on the footing that each proprietor of a lot is to be regarded as the equitable owner of an undivided interest as one of several Tenants in common in the estate or interest of which the owners corporation is the legal owner. ... [29] It is clear from the statutory scheme that an owners corporation is in no sense the beneficial owner of common property. Its ownership is always in a representative capacity identified by the Act as that of "agent", with the lot proprietors, as the owners in equity of undivided interest of Tenants in common, each identified as having a "beneficial interest". The restrictions upon alienation and other dealings and the provisions with respect to repair, renewal and replacement proceed on the assumption that common property exists for the benefit of the lot proprietors as a general body. .. As was observed in Houghton v Immer (No 55) Pty Ltd (1997) 44 NSWLR 46, by Handley JA (with whom Mason P and Beazley JA concurred), a provision that vests this common property in an owners corporation as "agent" for lot proprietors makes the proprietors equitable Tenants in common. [44] Gzell J said in Lin v The Owners - Strata Plan No 50276 [2004] NSWSC 88: [7] The notion of an agency in this context is odd. If common property is vested in the owners corporation for the benefit of the lot owners, one would expect the relationship to be that of trustee and beneficiary rather than that of agent and principal. That something more than the relationship of principal and agent was intended by the legislation was clear from the terms of the Strata Schemes (Freehold Development) Act 1973, s 24(2) which spoke of the beneficial interest of a proprietor of a lot in the estate or interest in the common property held by the body corporate as agent for that proprietor. [8] It is not surprising, then, that the nature of the interest of a lot owner in the common property has been described as an equitable interest as a Tenant in common with other lot owners (Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 56) and as a proprietary right (Young v Owners - Strata Plan No 3529 (2001) 54 NSWLR 60 at 46). [45] I agree with these observations of Barrett J and Gzell J. It is not appropriate to characterise the statutory role of an owners' corporation solely in terms of an agency at common law. [46] The institutions of trust and agency are not mutually exclusive. It is a distinguishing characteristic of the former that a trustee, unlike an agent, must have trust property vested in it. Where an agent has actual title to property, then the agent will be a trustee, albeit one who is bound to follow the directions of the principal with respect to the property. (See Scott on Trusts (4th ed) Vol 1 p95; Jacobs Law of Trusts in Australia (6th ed) 1997 par 210; Ford and Lee Principles of the Law of Trusts par 1200). 120Section 8 of the SSMA provides that upon registration of a strata plan the owners corporation is established (section 8(1)), and it has the principal responsibility for the management of the Scheme. However section 9 provides that the Owners Corporation may be assisted in the carrying out of the management function by any one or more of executive committee of the owners corporation, a strata managing agent and/or a caretaker. 121Section 13 of the Act provides that an Owners Corporation may employ such persons as it thinks fit to assist it exercise of any of its functions. However it must ensure that the relevant person has the requisite qualifications. 122Section 13(3) however, prohibits an owners corporation from delegating any of its functions to a person unless the delegation is specifically authorised by the Act. 123In Owners - Strata Plan No. 56443 v Regis Towers Real Estate Pty Ltd [2003] NSWCA 274, the Court of Appeal had to consider the construction of section 13. In writing the judgment for the Court, Hodgson JA said at [27] to [29]: [27] In my opinion, consistently with the claimant's submissions, it would not be a correct approach to the question of whether there was a delegation of functions contrary to s 13(3) to try to identify various individual functions of the owners corporation, such as maintenance of the common property, and to find delegation only if the whole of that function was entrusted to another party; that is, to say there can be no delegation if only part of such a function were entrusted to another party. [28] On the other hand, I accept the opponent's submission that s 13(1) of the Act makes it clear that an owners corporation can engage contractors to carry out tasks which contribute to the performance of the functions of an owners corporation. It is plain that the word "employ" in s 13(1) is not limited to setting up a master/servant relationship: it would be absurd to say that an owners corporation could not contract with a painter to paint the common property. [29] In my opinion, what is prohibited by s 13(3) of the Act is the engaging of another person or corporation to undertake significant decision-making and control in relation to the various areas of responsibility of an owners corporation. This has some confirmation from s 9 of the Act, which impliedly limits the persons who can become involved in the "management functions" of an owners corporation, that is, essentially, the functions of decision-making and control. 124I note in passing that the SSMA quite specifically provides for the constitution of the executive committee, the function of various persons who hold office within the Owners Corporation and perhaps more importantly the appointment and functions of a strata managing agent. 125Section 61 identifies what are described as the "key management areas" for a strata scheme. Section 61(1) indicates that the owners corporation has the responsibility of the management and to control the use of the common property and the administration of the strata scheme for the benefit of the owners. It also has responsibility for maintaining and repairing the common property, managing the finances, taking out insurance and keeping accounts and records for the strata scheme as provided by the Act. (Section 61(2)). 126Section 62 in greater detail sets out the duties of an owners corporation in respect of the maintenance and repair of the common property and any personal property vested in the owners corporation. 127Pursuant to section 66 the owners corporation "must" establish an administrative fund. In broad terms section 67 provides what money is to be paid into the administrative fund. It will either be contributions, levied on and paid by owners, proceeds of the disposal of any person property of the owners corporation and any fees paid to the owners corporation for inspection of its records and provision of information and certificates relating to its records. Section 68 provides in broad terms on the other hand what monies can be paid out of the administrative fund. 128Section 66 requires an owners corporation to establish an administrative fund. Sections 67 and 68 identify the types of monies that may be paid into and out of the administrative fund in broad terms. Section 69 requires an owners corporation to establish a sinking fund and sections 70 and 71 (again in broad terms) identify the types of monies that can be paid into and out of that type of fund. 129So far as the administrative fund is concerned the definition is found in section 1.5 of the SDA. That directs attention back to section 66 of the SSMA. 130Section 70 provides those monies to be paid into the sinking fund. Again contributions levied on or paid by owners for payment in the fund, any amounts paid to the owners corporation by way of discharge of insurance claimed and any money received by the owners corporation that is not required or permitted to be paid into the administrative fund. Section 71 provides for those monies that can be paid out of the sinking fund. 131Sections 72 and 73 deal with the distribution of surplus monies in either the administrative and/or sinking fund (section 72) and the investment of monies in either of those funds (section 73). 132Section 75 provides that the owners corporation must determine at its annual general meeting estimates to maintain the common property and any personal property vested in the owners corporation in good repair, to provide for insurance premiums and meet other recurrent expenses. Likewise, at each annual general meeting it must estimate how much money will need to credit to its sinking fund for the various items specified in section 75(2). 133There is a myriad of other provisions dealing with preparation of a ten year sinking fund plan (section 75A), and setting levies for contributions to the administrative and sinking funds (section 76). 134There are extensive provisions dealing with insurance including responsibilities on the part of the owners corporation for the effecting of insurance (section 83, 84). 135Section 245 provides that the provisions of the Act have effect despite any stipulation to the contrary in any agreement, contract, or arrangement entered into after the commencement of the section, (subsection 245(1)). No agreement, contract or arrangement whether oral etc, can be entered into after the commencement of the section which operates to annul, vary or exclude any of the provisions of the Act; (section 245(2)).

Clauses Which Are Said to be Void and Unenforceable 136The Owners Corporation's primary submission is that a number of the provisions of the lease are void and unenforceable by reason of the fact that they conflict with provisions of the SDA and/or the SSMA. For various reasons it is said they involve impermissible delegations of the functions and duties of the Owners Corporation. 137The delegation of certain functions of the Owners Corporation to QRH including the duty to effect insurances over the common property (clause 3.1 of the common property lease) are said to be in contravention of sections 13(3), 61(2)(c), 83 and 87 of the SSMA. Likewise, the maintenance of the common property pursuant to clauses 5.1.1, and 5.1.4 and 11.1 and 11.3. Again these are said to be in contravention of sections 13(3), 61(2)(a) and 62 of the SSMA. It is also submitted that the manner in which QRH asserts clause 2.2 operates conflicts with sections 75 and 76 of the SSMA. 138Next the duty to supervise the standard and behaviour of occupants of the common property (clause 5.1.2) is in contravention of sections 13(3) and 8 of the SSMA and the power of attorney clause (clause 13) is said generally to be in breach of section 13 and other provisions of the SSMA. 139QRH denies that there has been any delegation in breach of the relevant legislation and further that QRH is only acting as the agent of the Owners Corporation pursuant to section 20 of the SDA. 140QRH submitted that pursuant to section 20 of the SDA, the Owners Corporation initially held the common property as agent for Roseprop (when it was the sole proprietor of all the lots in strata plan upon its registration) and subsequently for the latter's successor in title. Owners Strata Plan 43551 v Walter Construction Group Ltd [2004] NSWCA 429. 141Further by reason of section 24 of the SDA, QRH submits that when Roseprop granted a lease of all of the lots in the Strata plan to QRH on 23 February 2001 it also granted a lease of the common property to QRH on terms mutatis mutandis with those of the lease registered 845500J. 142It is therefore contended (as I understand it) that by reason especially of section 20, QRH is and was at all times acting as agent of the Owners Corporation. I consider this proposition to be incorrect. The question is whether the Owners Corporation retained authority to direct QRH in respect of various matters relating to the management of the premises. If it did not (as submitted by the Owners Corporation) then QRH is not acting as agent of the Owners Corporation but in its own right. In any event I do not consider that the effect of sections 20 and 24 of the SDA has the effect contended for by QRH. 143On the authorities it seems to me that what has to be shown is whether what has occurred has involved such a delegation of some or other of its functions which result in a significant shift in decision making control. In my view much depends upon what the particular function said to be delegated is and it will inevitably involve matters of degree. Regis at [29]. 144In Premier Holdings (which I have already discussed) Black J, in considering a management agreement and in particular the terms of section 78 of the then Strata Titles Act 1973, commented that as the deed in that case gave the owners corporation no real control over the strata manager as to the manner in which certain functions were to be performed there was an impermissible delegation [33], [35]. The owners corporation there also did not have the power to confine the manager by setting a budget for repair, maintenance, renewal or replacement or give reasonable and lawful directions. Black J thought the absence of any real control over the functions to be performed by the manager meant that the owners corporation there had conferred sufficient decision making control to amount to the appointment of an unlicensed managing agent in contravention of s 78 (1AA) of the Strata Titles Act 1973. 145It is of course necessary to give consideration to each of the clauses which are pointed to by the Owners Corporation here as impermissible delegations in breach of the legislation.

Clause 2.2 146Clause 2.2 of course is a clause which was subjected to a good deal of attention by all parties. 147Clause 2.2 is of particular importance because the construction of it assumed by QRH clearly provided the basis upon which certain directions were given to the Owners Corporation by it for the purposes of 2010 AGM. I will return to this aspect of the case in due course. 148Both the Owners Corporation and Mr White submit as their primary submission that it is inconsistent with the SSMA and is therefore void and amounts to an illegal delegation of power to QRH. It is submitted in the alternative that properly construed (contrary to QRH's construction) the clause can and does work harmoniously with the SSMA. At the heart of the dispute in practical terms is the question of who in effect controls the finances in relation to the premises. It is submitted if QRH's construction is correct it effectively controls the management of finances in contravention of sections 75 and 76. 149As I have observed however it is said in the alternative that if properly construed at least the lot leases (clause 2.2) can be read as consistent with sections 75 and 76 of the SSMA. On this point both the Owners Corporation and Mr White adopt a substantially similar stance, although there are differences in their approach. In the end result they contend that the QRH construction is erroneous such that it has in the past wrongly assumed responsibility for the management of the finances of the premises. Properly construed it is submitted clause 2.2 imposes appropriate management control in the hands of the Owners Corporation. 150I should observe that the lease documents generally, both for the common property and lots, have a number of unsatisfactory aspects to them. Although they purport to be in a standard form they are in a number of instances ill suited for the purpose they are intended to serve, especially the lease for the common property. 151In any event clause 2.2 commences with the following words: "The Tenant hereby covenants with the Landlord to pay and/or reimburse to the Landlord immediately upon demand by the Landlord at any time". 152The phrase "to pay and/or reimburse" in clause 2.2, conveys in my opinion clearly that some of the outgoings are to be met by the Tenant and some by the Landlord. This construction arises simply by reason of the alternative payment mechanisms that emerge from the language. 153However, as I understand the submission on behalf of QRH, the words "pay and/or reimburse" ought to be read so in effect the Tenant can choose which of the expenses are itemised subsequently in the clause it pays and those it does not. In other words it should be construed so as to give the Tenant a discretion to pay as it were all of the outgoings if it choses to do so. However QRH accepts it would not apply to clause 2.2.3 which obliges the Tenant in terms to pay "all reasonable Owners Corporation levies". This latter proposition cannot be gainsaid. 154The Owners Corporation and Mr White dispute QRH's construction. They submit that correctly construed clause 2.2 could not be understood in the way contended by QRH. The Owners Corporation and Mr White do not accept QRH's basic proposition namely that the clause entitles it to pay all maintenance costs itself. The Owners Corporation indeed submits that, properly construed, clause 2.2 has the effect that the majority of maintenance costs are actually incurred by and are to be paid by the Owners Corporation and the lot owners (as Landlords) and that the Tenant has an obligation to reimburse the Owners Corporation accordingly. This is so it is submitted independently of clause 2.2.3. 155It is submitted by the Owners Corporation that QRH is obliged to either "pay or reimburse" as it were, where applicable. In other words the language of each sub-clause of clause 2.2 indicates by its terms whether the Tenant is to pay or whether the Landlord is to pay. This means it is submitted that some of the outgoings are in the ordinary course those types of outgoings one would expect to be in the name of the Tenant and therefore would be paid by the Tenant. Clause 2.2.1 which deals with electricity, water rates and the like, is such a clause. Indeed the language of clause 2.2.1 it is submitted, correctly, in my view, identifies that apart from those rates or charges payable by the Landlord "in accordance with clause 2.3.1" all others would be payable by the Tenant. That is clearly the correct construction. 156Clause 2.2.2 deals with insurance premiums and the clause in turn makes reference to clause 3.1. That clause in turn makes it abundantly plain what the respective obligations are in relation to the Tenant, the Owners Corporation and the Landlord so far as insurance is concerned. The Tenant has an obligation pursuant to clause 3.1 (so far as may be practicable or necessary) to keep the relevant property or premises insured in the name of the Landlord, the Tenant and the Owners Corporation. It covers property insurance, public risk and plate glass. Indeed if it is required by the Owners Corporation all insurances must be effected and maintained in common with the Landlord and/or the Owners Corporation (clause 3.2). Clause 3.3 makes it clear that, notwithstanding clause 3.1 and for that matter clause 3.4, all insurances are the responsibility of the Owners Corporation and will be effected by the Owners Corporation and it is expressly stated will not be the responsibility of either the Tenant or the Landlord. The Tenant and Landlord are to use their best endeavours to ensure that the Owners Corporation effects such insurances. 157However it is further submitted that some items would be either incurred in the name of the Owners Corporation/Landlord or estimated by them as levies which would involve the Landlord seeking reimbursement from the Tenant. This is the case with clause 2.2.3. 158The operative words of clause 2.2.3: "all reasonable Owners Corporation levies, charges and fees other than those paid by the Landlord in accordance with clauses 2.3.3 and 2.3.4", are relatively clear. Those words give an indication of the direct responsibilities of the Owners Corporation by the use of the words "other than". Secondly, the Tenant is only liable to pay to the Owners Corporation those levies etc that are "reasonable", and thirdly they obviously do not include those levies etc covered by clauses 2.3.3 and 2.3.4. 159Although I was not addressed on the meaning of the word "reasonable" in this context, it is clear that it must mean reasonable in the light of the relevant circumstances. The word would or ought to be construed having regard to the factual considerations which it could be inferred were present in the minds of the contracting parties at the relevant time the contract was made including the fact that the premises were to be used as a block of serviced apartments with investor/absentee landlords. Email Ltd v Robert Bray (Langwarrin) Pty Ltd [1984] VR 16; Ponsford v HMS Aerosols Ltd [1979] AC 63, and TX Australia Pty Ltd v Broadcast Australia Pty Ltd [2012] NSWSC 4, per Brereton J. The Owners Corporation is not entitled to be paid levies etc which are not reasonable and if they are the subject of dispute it has to be in a position to substantiate the objective reasonableness of the amounts claimed by way of reimbursement. 160Clause 2.3.3 provides that the Landlord will be responsible and hence will pay all "Owners Corporation" levies that relate to capital works after the first two years of the initial term of the lease unless the capital works were caused by negligence on the part of the Tenant etc. Pursuant to clause 2.3.4 the Landlord is to pay all contributions required to be made to any sinking fund established by the Owners Corporation. The language in my view is quite clear. 161Clause 2.2.4 deals with the operating costs and expenses of maintaining the "Common Furnishings and Fittings". The latter is a defined term in clause 1.1.5. What is important about the definition is that there is proviso in clause 2.2.4 namely it refers to costs which are "not attributable" to the "Owners Corporation". This provision of course must be construed in the context of the definition of "Common Furnishings". In respect of the common property, the common furnishings and fittings are defined in clause 1.1.5. The Owners Corporation submits these items would mostly if not entirely be the property of the Owners Corporation. Again this is made tolerably clear by reason of the proviso in clause 1.1.5. It expressly excises from the definition that which is acquired from time to time by the Tenant (QRH). The clear implication is that otherwise they would be the property of the Owners Corporation and/or at least its responsibility as far as maintenance is concerned pursuant to clause 2.2.4. On that basis it is submitted that there would be very little which QRH is entitled to pay direct. I agree. 162Clause 2.2.5 refers to all costs and expenses associated with and incurred in respect of maintenance etc "in accordance with clause 11.1". Clause 11.1 deals with the repair, maintenance and replacement of the "Contents" and the "Common Furnishings and Fittings". In particular clause 11.1 deals with those aspects of repair, maintenance and replacement which are to the expense of the Tenant. Clause 11.2 deals with expenses of the Owners Corporation and clause 11.3 deals with matters referable to the Landlord. However clause 11.1 provides that the Tenant at its own expense will repair, maintain and replace damaged "Contents", any "Common Furnishings and Fittings" in respect of which it is directly responsible and any fixed equipment. The definition of "Contents" is found in clause 1.1.7 and is said to mean "furniture, fittings, items equipment" and the like. The responsibility of QRH as Tenant in respect of clause 2.2.5 is very limited by reason of clause 11.1 and in turn the definition of "Contents". It is submitted by the Owners Corporation that by reason of clause 11.2 when properly construed and contrasted with clause 11.1 the inevitable conclusion is that the Owners Corporation has the primary obligation for repair work. Hence it follows that QRH does not have a primary obligation in relation to repairs and hence maintenance and this again runs contrary to the construction sought to be placed on clause 2.2 by QRH. Again I agree with the Owners Corporation. 163Clause 2.2.6 specifically deals with all charges "connected" with the "Tenants operation or business" including licence fees and inspection fees. There seems little doubt in my mind (although this was not separately addressed) that these would be expenses incurred and paid for directly by the Tenant. 164On the basis of the above it is contended by Owners Corporation that properly construed clause 2.2 can work in conjunction with sections 75 and 76 of the SSMA. I observe in passing that both sections insofar as they impose obligations on the Owners Corporation are in imperative terms. For that reason, not only does the above approach pay proper regard to the language of the clause but it is clearly in alignment with the legislation. 165Although Mr White also submits that properly construed clause 2.2 in the lot leases can co-exist with sections 75 and 76, he does however submit that there is no construction that can make the terms of the common property lease reconcile with these provisions of the SSMA. 166In addition, Mr White advances some additional arguments on construction in relation to the lot leases. 167It is submitted that sections 75 and 76 relate to the levies to be set by an Owners Corporation for the administrative fund and sinking fund respectively in relation not only to existing but anticipated expenses associated with the common property. Such levies as may be imposed on each lot are imposed proportionately to its unit entitlement, (s 78(2)). I agree. 168It is submitted that what sections 75 and 76 require is that the Owners Corporation is to estimate what amounts need to be obtained for such purposes (s 75) and set levies sufficient in total to produce those amounts as contributions to the administrative and/or sinking funds respectively, to in turn be imposed proportionately on each lot (sections 76 and 78(2)). Again I agree. 169It is further submitted that clause 2.2.3 does not cause any conflict or disharmony with that process. Indeed it is submitted that any levy the subject of clause 2.2.3 can only be a section 75(1) administrative fund levy, imposed on an individual lot, in relation to that lot's proportionate share of existing and anticipated expenses associated with the common property. That is also correct in my view. 170Further Mr White submits that clause 2.2.3 simply provides that once the Owners Corporation has conscientiously carried out the compulsory steps set under sections 75 and 76 the administrative fund levy thus imposed on the individual lot in question will actually be paid by the Tenant (QRH) on behalf of that individual lot owner directly to the Owners Corporation, unless for some reason the lot owner pays the levy to the Owners Corporation, in which case the Tenant will "reimburse" the lot owner. It is submitted that, similarly, with the remaining sub clauses of 2.2, such expenses relating also to the particular individual lot will actually be paid by the Tenant, (QRH) directly to the relevant third party, unless for some reason the lot owner pays the expense to the third party in which case again the Tenant will "reimburse" the lot owner. While I agree in part with this submission I reiterate that the levies imposed upon the Tenant pursuant to clause 2.2.3 (however conscientiously set) must be objectively reasonable and those setting the levies have to establish that fact if the levies are disputed. 171The alternative construction (not the preferred one from Mr White's point of view) is to read the introductory words of clause 2.2 as requiring the Tenant either to "pay" to the Landlord or to "reimburse" to the Landlord various levies and expenses. It is submitted that this construction could also accommodate sections 75 and 76 but would be more cumbersome and inefficient from a practical point of view. Again I agree but it is not my preferred construction. 172Although similar in many respects, there are some obvious differences between the construction proposed by the Owners Corporation and that of Mr White. My own view is that insofar as there is a difference I prefer the construction proposed by the Owners Corporation. First of all it gives each of the phrases used in the various sub clauses of 2.2 work to do in a very real sense. It not only works in harmony with the lot lease as a whole but I do think consistently with sections 75 and 76 of the Act. 173However whether the Owners Corporation's construction or that of Mr White is adopted, it does not mean that QRH is entitled unilaterally to pay expenses as it chooses and thereafter seek reimbursement from the Landlord or Owners Corporation. I do not accept that sections 75 and 76 are "ameliorated or substantially satisfied" by QRH's construction of clause 2.2. 174QRH's construction does not, in my opinion, pay sufficient regard to the actual language of clause 2.2, nor the terms of sections 75 and 76. It is not correct as a gloss for example, as was contended by QRH, to describe clause 2.2 as providing that the Landlords simply recover rents "effectively net" of all revenue costs etc. In particular I think QRH pays mere lip service to section 75 by submitting that the Owners Corporation should perform its statutory functions by estimating the actual and expected expenditure as nil. This is another way of saying that QRH should be in control of the finances. 175I agree with Mr White that the SSMA does not provide or allow any means other than the raising of levies by which the Owners Corporation can raise funds to carry out its statutory functions in relation to the common property. The Owners Corporation also needs to keep proper financial records (sections 103 and 104). This not a token obligation. 176Equally I consider the Owners Corporation is obliged conscientiously to come to views about likely expenditures required without regard to what QRH may choose to expend. It is the Owners Corporation that is obliged by statute to arrive at estimates, not QRH. 177It cannot be gainsaid that the Owners Corporation has undoubted statutory obligations and functions to perform. Those functions can be delegated to a point and managerial activities can be performed for example by a strata manager. Nonetheless the Owners Corporation must, pursuant to sections 75 and 76, form views about estimates and budgets which permit it to perform its various statutory functions. If clause 2.2 were construed as submitted by QRH it would entitle it to pay such expenses as it chose and agreed on with third parties. In that event the Owners Corporation could not in reality perform its statutory functions. The Owners Corporation for example would have no idea how much was being spent on common property or indeed would be excluded from making assessments as to the likely expenses going forward. The fact that some practice was adopted in the past does not assist where there are statutory obligations of the kind as set out in sections 75 and 76 of the SSMA, and in any event properly construed (as I have said) the language of clause 2.2 does not support QRH's construction in any event. 178I have already observed that, so far as the common property lease is concerned, Mr White at least submits that there is no construction of clause 2.2 that is workable in the context of that lease. There are a number of reasons why it is submitted that is so. First the "Premises" are of course the common property. All expenses referrable to the common property both existing and anticipated must, by reason of sections 75 and 76, be the subject of levies imposed upon the individual lot owners. The funds to meet those expenses can only be raised in that way by reason of the statute. Once funds have been raised in that fashion the Owners Corporation will always have available to it the monies to meet all common property expenses including those the subject of sub-clause 2.2 other than those of course contained in clause 2.2.3. 179It is submitted on behalf of Mr White that clause 2.2 in the common property lease simply does not and cannot make sense. No levies are or could be imposed upon the Owners Corporation. Still less it is said could they be payable by the Landlord (Owners Corporation) to itself. 180However as Mr White points out for practical purposes nothing may flow from this, so far as the management of the strata scheme is concerned. It may well be, as he submitted however, that certain provisions of the common property lease are otiose. So far as the common property lease is concerned, again I am of the view that it is not permissible at law for QRH to simply unilaterally decide which expenses it will pay and which it will not. 181QRH says somewhat blandly that the Landlord has responsibility for non-current or longer term commitments for what in part involves the sinking fund by reason of clauses 2.3.3 and 2.3.4. That is overly simplistic in my view and ignores the language of clause 2.2.3 and the legislation. 182The end result of this analysis is that the Owners Corporation and hence the lot owners in effect cannot be impeded in the performance of their various statutory functions. Properly construed in my opinion clause 2.2 achieves that end and strikes the correct balance, and QRH cannot choose to pay such expenses unilaterally. The Owners Corporation is entitled, indeed obliged to perform its statutory functions whether QRH likes it or not. I therefore consider that properly construed clause 2.2 works harmoniously with the legislation and is therefore not void or unenforceable as an impermissible delegation.

Clause 3 183I have already dealt indirectly with this clause. So far as clause 3.1 is concerned, I do not see that this gives rise to a conflict with the legislation. The clause provides that the Tenant (QRH) will take out insurance and maintain insurance "in the name of the Landlord", (ie the Owners Corporation and/or the lot owner). This in and of itself could not preclude the Owners Corporation from taking any additional cover or other types of insurance it may choose or be required to take out. The same applies to the lot owners. Given the fact that the insurance is to be in the name of the Landlord in any event, I do not see how it could breach section 13(3) of the Act. Likewise I do not see it as a breach of section 61(2)(c) or section 83 particularly given the terms of section 83(3). I see no problem with clause 3.2. It is obvious that there may well be a joint insurable interest. Clause 3.3 specifically not only leaves with the Owners Corporation the responsibility of taking out certain insurance but clearly is consistent with the statutory obligation to do so. Further I see no difficulty with clause 3.3.2 nor clause 3.4.

Clause 5 184It is said that clauses 5.1.1 and 5.1.4 - 5 and 11.1 are in contravention of the legislation. Clause 5.1.1 involves a covenant on the part of QRH at its cost and expense to maintain the premises, in relevant respects. I do not see how this could amount to an inappropriate delegation. The whole purpose of this provision is to ensure that at QRH's expense the premises are properly maintained in relevant respects. It seems to me a nonsense to suggest that in doing so there is some inappropriate delegation. Likewise clause 5.1.2, which requires QRH to supervise the standard and behaviour of occupants in the premises, is entirely unsurprising given that all parties agree that the premises are to be used for a particular purpose (clause 4.1). Again I fail to see why this would amount to an improper or inappropriate delegation. Clauses 5.1.4 and 5.1.5 simply provide that QRH will at its own expense comply with all relevant statutory requirements affecting the Premises, especially those in connection with the conduct of its own business. Again I fail to see how this amounts to an inappropriate delegation, especially when the lease is viewed as a whole, including of course clause 2.2.

Clause 13 185The lot owners are absentee landlords, and they are subject to reasonable directions pursuant to clause 13 of the lease. They can (if they wish) play a role in the running of the Owners Corporation. They can meet and as the Owners Corporation they can fix levies in accordance with clause 2.2.3 (and sections 75 and 76) but because of the nature of their contractual arrangements and in particular by reason of clause 13 (with the necessary qualifications) they can reasonably be directed to vote in a particular way at meetings. Equally, QRH must of course proceed to give those reasonable directions in good faith (clauses 13.1 and 13.5). 186Clause 13 has been the subject of proceedings already in the Court. In proceedings before Ward J in 2010, QRH sought various declarations as to the proper construction of clause 13 of the respective leases; as to the intention of the "Landlords" as evidenced from clause 13 of the leases; and various other matters, Quest Rose Hill [9]. There was no appeal from Ward J's decision. 187When the proceedings were conducted before Ward J the evidence it seems was that QRH had not given any directions as to the manner in which the lot owners were to exercise any rights to vote at any meetings. 188The lot owners cross claimed seeking declarations that clause 13 in each of the leases was illegal and contrary to public policy and or void or unenforceable, contrary to the Contracts Review Act and/or that QRH via its directors and officers had acted in bad faith: Quest Rose Hill [10], [11], [12], [13]. 189Ward J dealt in some detail as to whether clause 13 contravened the SSMA or was otherwise contrary to public policy. She formed the view (20) that clause 13 was not inconsistent and did not contravene SSMA, nor was it contrary to public policy or void or unenforceable. For reasons that follow I respectfully agree with her Honour. 190Ward J considered the construction of clause 13, at [39] to [66]. In passing she observed (which is plainly obvious) that it must have been apparent to any person acquiring a lot in the building and having regard to the terms of the lease by which he or she was to be bound that the apartment to which the person obtained rights under the strata plan might be used as a serviced apartment by QRH and/or the franchisor for up to 25 years in all. 191In particular she observed at [51] that the obligation on the part of the lot owner is only to vote in accordance with "reasonable directions" of QRH. Specifically she said at [51]: The second point to note in construing clause 13 is that the Landlord's obligation (contained in clause 13.1) to cast its vote in any particular fashion is limited in the following ways. First, the obligation is only to vote in accordance with "reasonable directions" of Quest. Thus, if a direction is not objectively seen to be reasonable clause 13.1 does not oblige the Landlord to vote in accordance with it. Secondly, the Landlords' agreement is itself stated to be for the purposes, first, of allowing Quest "to better conduct the Tenant's business" and, secondly, "to ensure compliance with the Landlord's and the Owners Corporation's Covenants as contained in this Lease". 192Therefore reasonable directions must be to "better conduct" the Tenant's business so as to ensure compliance with the "Landlord's and Owners Corporation covenants" under the lease (cIause 13.1). It is plainly correct as Ward J said that if the direction is not objectively to be seen as reasonable or of course if none was given in the first place, clause 13.1 would not oblige the lot owner to vote in accordance with it. 193I am of course cognisant of the fact that the Owners Corporation was not party to the proceedings before Ward J. 194Ward J did not express any views on what may or may not as a matter of law amount to reasonable directions and the parties before me did not make submissions about it. It was contended by QRH that the relevant directions given in 2010 were reasonable because of past practice and implicitly because of its construction of clause 2.2. The Owners Corporation and Mr White contended the directions could not be reasonable because they were predicated upon an erroneous view of clause 2.2. I will return to this particular issue later. 195It does seem to me that what is or is not a reasonable direction is ultimately a question of fact to be determined in the particular context in which the direction is given. 196In The King v Darling Island Stevedoring and Lighterage Co. Ltd.; Ex parte Halliday and Sullivan (1938) 60 CLR 601, an award of the Commonwealth Court of Conciliation and Arbitration Act 1904-1934, provided that any refusal to carry out the "reasonable instructions" of the employer was to be deemed a breach of the award. The two appellants were workers who refused to carry out the instructions of the employer in loading 35 lead bars onto a ship. The workers appealed against their dismissal and argued that the directions were not reasonable. 197Dixon J noted at 622: But what is reasonable is not to be determined, so to speak, in vacuo. The nature of the employment, the established usages affecting it, the common practices which exist and the general provisions of the instrument, in this case an award, governing the relationship, supply considerations by which the determination of what is reasonable must be controlled. When an employee objects that an order, if fulfilled, would expose him to risk, he must establish a case of substantial danger outside the contemplation of the contract of service (Bouzourou v. Ottoman Bank; Ottoman Bank v. Chakarian). 198McTiernan J noted at 623 - 624: Reasonable means "reasonable in all the circumstances of the case" (Cf. Opera House Investment Pty. Ltd. v. Devon Buildings Pty. Ltd., per Latham C.J. 2 and per Starke J. 3). There is no presumption that the instructions were reasonable, and it is not apparent on their face that they have this essential quality. The issue that the instructions were reasonable must be proved to the satisfaction of the court. 199It was put to Ward J that clause 13 was contrary to the SSMA and in particular s 245 of the Act which precludes a contracting out, by impermissibly seeking to put in place a voting arrangement this was in itself contrary to the Act. But as Ward J pointed out at [100], at law the grantor of an irrevocable power of attorney (which is what her Honour found this to be) still retains the legal capacity to do the same acts by him or herself. As Ward J further pointed out at [103] "what the Landlords have done is in effect to delegate decision making in some areas (not all) to Quest, a not surprising thing in circumstances where Quest (and a related entity if that be the case) is being permitted to operate a business from the premises which would require certain matters to be attended to in the regular management and operation of the business". 200Ward J saw no difficulty in a lot owner irrevocably appointing someone to attend and vote at meetings of the Owners Corporation. I agree with that view. 201It was also put to Ward J that there was an alleged inconsistency with the statutory obligation of the Owners Corporation to manage the interest of lot owners on the one hand and clause 13 which it was said quite specifically was contrary to sections 12, 13, and 61 of the SSMA. Ward J at [138] expressed the view that there was no necessary inconsistency between the grant of a power of attorney to secure compliance with an obligation to vote on certain matters in accordance with reasonable directions of a third party, and the obligations to manage the strata scheme as required by the Act. Again I agree. 202However Ward J at [138] commented that she saw no apparent reason why it would be necessary for the purposes of clause 13 for QRH to determine what amounts fall within the sinking fund or what amounts are put aside for insurance purposes or the like, or to sign off on financial accounts of the Owners Corporation, although she thought that where an operator of a serviced apartments business (or a related entity) has an interest in the continuation of that business, it may well have an interest in the amounts expended on upkeep of the premises and so on. That is obviously correct as a matter of commercial reality but her Honour also it seems had sections 75 and 76 in mind. 203Ward J also expressed the view [140] that she did not see the proxy/power attorney arrangements as inconsistent with a recognition that the Owners Corporation were obligated to manage the premises for the benefit of lot owners, and that any inconsistency between a direction given by QRH and the obligations of the Act "would surely lead to the conclusion that the direction was unreasonable". I agree. That does mean however that each direction would need to be carefully scrutinised to ensure it did not offend the clause and the relevant legislation. She said at [142] that clause 13 did not remove all managerial power from the Owners Corporation. Again that is plainly correct in my respectful view. 204At [143] and in response to the proposition that clause 13 in fact removed all managerial power from the Owners Corporation she said: It seems to me that this again pays insufficient regard to the contractual restrictions on the exercise of the power of attorney (they being the obligation to act in good faith under clause 13.5 and the need for the exercise to be in the context of ensuring compliance with the Landlord's obligations, including compliance with reasonable directions as to voting at meetings). It does not seem to me to deprive the Owners Corporation of power to manage the strata scheme nor does it place the management of the finances wholly in Quest's hands. (The suggestion, for example, that Quest could utilise the power of attorney to strip funds out of the Owners Corporation seems to me to be inconsistent with the limitations on the power). 205Ward J was referred to the judgment of Sully J in Eventang Development (Pyrmont) Pty Ltd v Owners Strata Plan 51573 [2001] NSWSC 452. In particular Sully J's comments about section 245 of the "Strata Act". Her Honour however considered that clause and in particular clause 13(2) did not amount to a wholesale abdication of responsibility by the Landlord of the kind contemplated by Sully J. She said at [150]: ...In my opinion, the potential for abuse of power is not the same as the power itself being an abuse or contravention of the Act. In circumstances where it seems to me that the power of attorney is limited for a purpose which is not inconsistent with the legislation (namely to permit the conduct of a business which it was anticipated would include a serviced apartments business and to ensure compliance with the lessee's obligations under the lease, none of which is otherwise suggested to be contrary to public policy) and which must be exercised by Quest in good faith, I do not find clause 13 of the leases or clause 4 of the Deeds contravenes or is inconsistent with the public policy underlying the Act. Again I agree. 206It is not clear from Ward J's judgment that she was referred to Regis but in my opinion having considered that authority does not cause me to disagree with anything that her Honour has said on the topic of clause 13. 207In my view if a direction by QRH is based upon an erroneous view or the construction of the lease (for example clause 2.2) it cannot in my opinion be a reasonable one for the purposes of clause 13. I agree with Mr White that clause 13.2 is not open-ended and does not take away statutory rights but grants rights which are complementary with statutory rights under the SSMA. Ward J said this in terms at [104]. 208In my opinion clause 13 does not, nor could it, deprive the Owners Corporation of the power to perform management functions. As I have said already clause 2.2 effectively ensures that. It does not, nor could it have the effect of placing the management of the finances of the Owners Corporation wholly in the hands of QRH. The Owners Corporation must in my opinion retain the power to make estimates in accordance with section 75. The Owners Corporation must be managed for the benefit of the lot owners and I agree with the submission put on behalf of Mr White that any inconsistency between a direction given and the obligations imposed by the SSMA would lead to a conclusion that the direction was not reasonable. Again Ward J said as much at [140]. 209As Ward J also said at [74] the exercise by QRH of the power of attorney granted under clause 13.2 is subject to the obligation under clause 13.5, and can only be exercised to secure compliance with voting directions reasonably given. Thus characterised, it is difficult to see how it could be inconsistent with the relevant legislation. 210In particular clause 13.2 has been relied upon by QRH as a source of power on its part to require the Owners Corporation and/or Mr White to enter into a lease, and/or to appoint a strata manager. The Owners Corporation contends no such rights attach to QRH as a result of the clause. Mr White supports this proposition. 211Ward J made the following comments about clauses 13.1 and 13.2 in particular in Quest Rose Hill with which I agree. She said: [45] The first point to note in relation to the construction of clause 13 is that the opening words of clause 13.2 make it very clear that the purpose for which the appointment of Quest as the Landlords' attorney is being made is better to secure the performance by the Landlord of its obligations "under this clause". [46] The obligations "under this clause" as referred to in clause 13.2 must, it seems to me, encompass the Landlord's obligations contained in clause 13 as whole. Clause 13.2 does not itself contain any obligations on the part of the Landlord (unless it can be said that the words in parentheses impose an obligation on the Landlord to permit the Tenant the power therein referred to) rather than (as I think is the case) simply clarifying the scope of the power given by the appointment of the Tenant as the Landlord's attorney. [47] The reference to "under this clause" in clause 13.2 may be contrasted with the reference, in clause 13.5, to a particular sub-clause (clause 13.5 commencing "notwithstanding the provisions of clause 13.2"). Elsewhere in the lease (see, for example, in clause 14.2 and clause 8.1.1), where reference is made to a particular sub-clause, that sub-clause is identified. This suggests that, had clause 13.2 been limited to the securing of the performance of obligations under clause 13.2 alone, the reference would have been to clause 13.2 not to "this clause" more generally. In clause 11.3, rather than referring to a failure to comply with the provisions of "this clause", there is a specific reference to a failure to comply with the provisions of "this Clause 11.3". [48] Whether or not support can be drawn from the internal clause references as used by the parties, it seems to me that it is clear (from the absence of any stated obligation of the Landlord in 13.2) that the purpose of the power granted under clause 13.2 is to provide better security for the performance by the Landlord of its obligations under the whole of clause 13. [49] One of those obligations is the obligation under clause 13.1 of the Landlord (at all or any meetings of the Owners Corporation or of the Committee of the Owners Corporation held during the term) to vote in accordance with reasonable directions given by Quest. Indeed, that is the only obligation, as such, which can be discerned on the part of the Landlord within clause 13 (clause 13.3 itself simply being the ratification and confirmation of acts, deeds and things done by the Landlord's attorney whilst the power of attorney remains in full force and effect, and clause 13.5 imposing an obligation upon Quest, rather than the Landlord. 212There is no doubt clause 13.2 is in aid of the right of QRH to conduct the serviced apartments business. The power of attorney is clearly limited in its scope such that it can only be exercised in circumstances where the Owners Corporation for example fails or refuses to vote in accordance with a reasonable direction under clause 13.1. I agree with Ward J that the only relevant obligation one can detect in clause 13 on the part of the Landlord is to vote in accordance with a reasonable direction. 213It cannot give QRH (it seems to me) a right to require a lease be entered into or to unilaterally appoint a strata managing agent. Clause 13.2 appoints QRH as the Landlord's attorney but for the stated purposes. As Ward J pointed out in Quest Rose Hill, that appointment comes with an implied obligation for example to ensure that necessary procedural requirements are met and to enable the proxy rights to be validly exercised; Quest Rose Hill [111]. 214What QRH can do is to give a reasonable direction to vote for example in favour of a lease or the appointment of a strata manager. It does not give QRH any right to execute a new lease for example on behalf of an individual lot owner in relation to a lot. 215That said I do not consider clause 13 is void or unenforceable.

Estoppel 216An issue that has arisen is whether the Owners Corporation is estopped from denying the authority of Ms Briffa to have executed the common property lease on behalf of the Owners Corporation. QRH submit it should be estopped. 217To some extent the issue is academic because of my view on section 42 but I should deal with it. 218It is submitted by the Owners Corporation that there is a real factual impediment to this argument namely that the QRH cannot claim reliance on the authority of Ms Briffa when at all relevant times it must have known that there had not been special resolution of the Owners Corporation authorising Ms Briffa to execute the lease on its behalf, and in turn that Ms Briffa was not the strata manager. I consider that to be a valid argument but for the reasons already expressed this is of no comfort to the Owners Corporation. 219However it is further submitted that estoppel cannot be used as a means of circumventing a statutory requirement. There is no doubt that Sully J came correctly to that conclusion in Eventang Development (Pyrmont Pty Limited) v the Owners Strata Plan 51573 and Anor (2001) NSWSC 452 at [29] to [31]. Brereton J accepted the proposition in Stolfa v Owners Strata Plan 4366 [2009] NSWSC 589 at [97]. 220Ward J in Quest Rose Hill doubted that there was any evidence of detrimental reliance on the representations alleged. Although again Ward J did not need to make any final determination of the issue, I should say the state of the evidence before me would certainly not compel me to make a finding of detrimental reliance by QRH even if estoppel was otherwise available. There is some evidence which comes close to supporting this notion but it is rather limited in its scope, and does not amount in my mind relevantly to reliance. (for example Affidavit of Spencer Bailey affirmed 6 March 2012 [29] and [30]).

Holding Over 221It is common ground that QRH did not effectively exercise the option it had under the common property lease to renew the lease. The Owners Corporation and Mr White claim that if the lease is otherwise valid QRH is holding over as a monthly tenant under clause 7.2 and the lease may be terminated on one month's notice. That would seem to me to be technically correct. 222QRH says in response that the Owners Corporation is estopped from claiming that the common property lease may be terminated in this manner or alternatively it could issue an instruction to compel the Owners Corporation to agree to a further term of the lease. I observe that, in common with Mr White, the Owners Corporation has not (as I understand it) sought to provide one month's notice and terminate the lease. 223As QRH has remained in possession and has been conducting its business there are powerful reasons why the Owners Corporation should not be entitled to give one month's notice or act upon it. For reasons I later give QRH has equitable rights which would arguably preclude the exercise of the notice to terminate notwithstanding the terms of clause 7.2. I consider in the circumstances here that even if there is a right to terminate the lease the Owners Corporation and/or Mr White should arguably be restrained from doing so. 224In addition Mr White supports the Owners Corporation generally on this issue. He makes the point that Ward J was of the view that a holding over by virtue of clause 7.2 of the original grant is such that the term of the new monthly tenancy is separate from the expired term of the original lease. Her Honour said: [130] The holding over tenancy in respect of the Landlords' lots (other than that of Mr Vilers) would seem to be a tenancy of the former kind, arising by virtue of clause 7.2 of the leases and a part of the original grant. There is no suggestion that any amended tenancy arrangements have been agreed between these parties of the kind which led to the conclusion in White v Cariste Pty Ltd [2004] NSWCA 460; [2005] ANZ Conv R 30 (to which I refer below) that there was a new tenancy agreement. It would therefore seem that the proxy/power of attorney arrangements in place under these holding over tenancies would not be said to be by way of a renewal of the initial lease as such for the purposes of clause 25(2) of Schedule 4 of the Act nor is there a new agreement between the parties to which the amended provisions of the Act might apply. (Had the holding over not been by way of a provision contained in the original lease, that is if it were the latter of the situations explained above by Brereton J in Gill v Wright, then the amendments would arguably have applied, as the holding over would have constituted a new agreement for lease implied upon the start of the holding over agreement and the proxy/power of attorney arrangements would fall within that new arrangement). [131] Is the holding over tenancy nevertheless an extension of the lease, such that it can be said that the term of the proxy/power of attorney has been itself extended for the purposes of clause 25(2) of Schedule 4 of the Act? I think not. Once the term of the lease has come to an end, the fact that the subsequent monthly tenancy operates to extend the period of time within which the tenant may remain in possession does not, as a matter of law, extend the term of the lease. What has arisen, as a consequence of the original grant, is that a new tenancy has come into existence (the term of which is separate from the expired term of the original lease and only in a practical sense an extension of that term). If so, then it would seem to me that the proxy/power of attorney must be one deriving from the new tenancy arrangement and thus there has not been an extension of the term of the old proxy/power of attorney. 225It is further submitted by Mr White that the option to renew in the original lease presupposes that the option will be exercised pursuant to the registered lease. Further it is submitted that an option to renew is for a further 5 years, although a term of the original grant of a 5 year lease is not automatically imported into a monthly tenancy. As no lease for a further term was in fact executed or registered, the monthly holding over tenancy, unregistered, commenced as and from February 2006, and has continued ever since. It is therefore debatable what terms are operative because of the words in clause 7.2 "so far as applicable", so it is contended. There is some force in that argument. 226It is submitted that QRH had no entitlement to give a purported notice of exercise of a non-existent option to renew for the assumed further term ie 2011 - 2016. There is much force again in that argument and I consider on balance it is correct. 227It is further submitted by Mr White that clause 13(2) of the lot leases does not assist QRH. It is directed to QRH exercising a vote at a meeting of the Owners Corporation on behalf of a lot owner. I consider this to be correct. It is submitted that it does not give QRH any right to execute a new lease on behalf of an individual landlord in relation to a lot. Again as I have said I consider this to be correct. 228However correct these various propositions may be, they say nothing about what equitable rights QRH has and whether it is, notwithstanding these matters, entitled in the circumstances to specific performance and if so on what terms.

Some Additional Arguments of the Second Defendant 229As I have said Mr White generally supported the arguments of the Owners Corporation but some additional and miscellaneous arguments were put by Mr White which I shall now deal with.

The 2011 - 2016 Term 230It is submitted by Mr White that leases have not been executed or registered in respect of the lots of the represented lot owners for the 2011/2016 term. As a result it is submitted that QRH has no legal estate or interest in the lease lots as a lease for a term exceeding 3 years of Torrens title land must be registered and it is not effectual to pass any estate of interest in the land until registered. (Real Property Act sections 41 and 53). 231It is conceded appropriately by Mr White however that equity would treat the purported exercise of options for the first further terms as bringing into existence agreements for lease. But as is pointed out of course the grant of relief (if any at all) in such circumstances is discretionary. Mr White submits that specific performance should not be granted and for various reasons I should exercise my discretion against granting such a remedy. 232There is indeed good reason to treat the exercise of the options for a further term as bringing into existence agreements for lease. 233In Chan v Cresdon Pty Ltd (1989) 168 CLR 242 the majority of the High Court comprising Mason CJ, Brennan, Deane and McHugh JJ said at 252: For present purposes these authorities establish two propositions. First, the court's willingness to treat the agreement as a lease in equity, on the footing that equity regards as done what ought to be done and equity looks to the intent rather than the form, rests upon the specific enforceability of the agreement. Secondly, an agreement for a lease will be treated by a court administering equity as an equitable lease for the term agreed upon and, as between the parties, as the equivalent of a lease at law, though the lessee does not have a lease at law in the sense of having a legal interest in the term. 234Here of course the reality is (as I have already observed) that QRH has remained in possession and there has been no attempt on the part of any lot owners to actually attempt an eviction. QRH has also continued to run its business from the premises and incur liabilities in relation thereto. It has also (I presume) derived revenue and continues to do so. It has done so to the clear knowledge of the Owners Corporation and Mr White. 235Mr White's submission for example that a lease cannot be now registered for the already expired first further term may well be strictly correct. There is no doubt that a lease cannot vest an interest in a tenant retrospectively: Lee v Ferno Holdings Pty Ltd [1993] 33 NSWLR 404 at 409 per Handley JA. There is also little doubt that the term of a lease cannot commence earlier than the date upon which it is executed if it is sought to create a registered interest the date of registration under the Real Property Act; Telado Pty Ltd v Vincent Telado Pty Ltd v Vincent (1996) 7 BPR 14,874. There would appear to be nothing to prevent a landlord and tenant agreeing that obligations under the lease (such as for example the payment of rent) are to run from the date anterior to the actual grant of the lease. This would perhaps commonly occur where a lease is executed after the tenant has taken possession. 236However none of what I have said prevents in principle the grant of specific performance in relation to what would have been the balance of the term up to and including the relevant date in 2016.

Alleged Breaches by QRH 237Mr White alleges that in any event even if there is an agreement for a lease which otherwise might be specifically enforceable, QRH during the first further term breached essential clauses of the lot leases by: (a) Not paying Tenants outgoings being reasonable Owners Corporation levies raised for the administrative fund of 2009 and 2010 AGMs in breach of clause 2.2.3 of the lot leases; (b) Not paying rent increases of 4% during the first further term to the non objecting represented lot owners as required by clauses 15.1.3(a) and 15.1.4 of the leases; (c) Not repaying amounts which the Arbitrator found had been wrongly deducted from the rent. 238Senior Counsel for QRH in the course of the hearing indicated that if there was any outstanding amounts of rent (or by implication any other amount), I should proceed on the basis that payment could and would be promptly remedied. There is no evidence before the Court that QRH would be unable to meet any such obligations as they may have, nor was it suggested by the Owners Corporation or Mr White that such an assurance should not be accepted. 239It is also worth observing that in May 2006 QRH forwarded rent notices to lot owners. Some of the represented lot owners objected to the rent notices and some did not. The dispute in relation to rent notices was referred to arbitration. 240On 14 October 2008 the Arbitrator made his award. He found that QRH had validly exercised its options to renew the lot leases for the first further term and that the rent notices had been validly issued (although served outside the time frame provided for in the leases). As to those lot owners who had objected to the rent notices, the Arbitrator ruled that those owners were to execute leases in favour of QRH once rental valuations in accordance with the terms of the leases have been obtained. 241As to those lot owners who had not objected to the rent notices, the Arbitrator ruled that they were to execute leases in favour of QRH for the first further term. 242It is common ground that the first further term expired in February 2011 before either the rental valuations were provided to the objecting lot owners or leases were executed by the non-objecting lot owners. This is relevant as part of the context in which any alleged breaches on the part of QRH should be viewed. Although it was not the subject of submissions I do consider that if there are any outstanding matters from the arbitration they should be finalised in the sense of enforcing the award. As I understood it there was no opposition to QRH seeking to enforce the award of the Arbitrator dated 14 October 2008 as part of its relief claimed here.

Not Paying Tenants Outgoings 243Mr White relies principally on an affidavit of Mr Bailey (QRH's witness) at [42] and Exhibit SB27 to support this allegation. At [42] Mr Bailey annexes a very substantial amount of correspondence and emails passing between relevant persons. The emails contain all manner of representations and opinions. 244Mr White relies upon certain specified materials as providing support that QRH has been in breach of relevant provisions of clause 2.2 of the lease, but especially clause 2.2.3. 245Exhibit SB/27(b) comprises a communication from Mr White of 25 October 2010 to a Ms Emily Wong (the Landlord of unit 26). The communication purports to provide her with a notice levying contributions in the amount of $2,909.40. Mr White who signs as treasurer of Strata Plan 64025 asserts that Ms Wong was liable to pay the levies. She is invited to make her cheque payable to the body corporate ie SP/64025. As part of the same exhibit there is a letter dated 3 November 2010 from Lodhia Lawyers who acted at the relevant time for QRH, to Mueller & Co who acted for the Owners Corporation. The letter refers to the prospect of the convening of an extraordinary general meeting by the Owners Corporation and refers in particular to letters dated 25 October requesting lot owners to pay various levied amounts. The letter indicates that QRH denies any liability for the levied amounts and refers to the fact that the levied amounts could not be objectively reasonable as all the outgoings for the management of the building have already been paid by QRH. Reference is also made to the affidavit of Mr Bailey at 27, (j), (m) and (n). These documents are emails, a levy notice, and correspondence with allegations and there are counter allegations. 246There is then a reference to Mr White's affidavit of 27 July 2011 at [40]. That paragraph indicates that Mr White had checked the records of the Owners Corporation and, as at the date of swearing his affidavit, QRH had not paid to the Owners Corporation on behalf of any lot owners various administrative fund levies determined by the Owners Corporation at its 2010 Annual General Meeting. 247It is put by QRH in its submission that the letter of 3 November contains a denial of liability by QRH via its solicitors for the levies. It is further put QRH had effectively satisfied the liability under clause 2.2 by paying all of the outgoings in relation to the building during the relevant period. Reference is made to Exhibit SB5, a spreadsheet. This document would on its face indicate that certain amounts of money were paid directly by QRH in relation to the items identified on the dates identified. There was no challenge to this document nor as I have already observed was there any cross examination of Mr Bailey. Mr Bailey (QRH) has not paid the levies based upon the estimates of the Owners Corporation. The reason for this is that QRH has paid various amounts and in any event questions the reasonableness of the levies as it were. The mere fact that QRH has paid amounts it regarded as owing to third parties is of course beside the point. On the other hand the Owners Corporation was only entitled to be paid levies provided they were "reasonable" (clause 2.2.3). 248It is asserted by QRH that [40] of Mr White's affidavit referred to above is no more than an assertion and is secondary evidence. However he was not cross examined nor was it suggested he was not in a position to make that assertion. The parties were content to leave allegation and counter allegation completely untested. QRH contends however in observing that it may well be that those responsible for the maintenance of the Owners Corporation accounting records may or may not have credited QRH for the payments made by it as disclosed in Exhibit SB6. That is however upon the assumption QRH was entitled unilaterally to make payments without regard or recourse to the Owners Corporation, which they were not. However as monies have been paid by QRH for some invoices this means in effect it should not be obliged to pay twice. It must in fairness be entitled to a credit or set off. But that does not solve the problem. What the Owners Corporation did (of course pursuant to the SSMA) was to form a view about estimates and budgets going forward. The fact that the budgets and estimates were not challenged in cross examination is, on one view, powerful forensically. There was no suggestion that the amounts were not reasonable, but again it is a matter upon which Mr White in my view bears the onus. Mr White called no independent evidence as to reasonableness and I am not persuaded he has discharged his onus at this stage in that regard. It may be a simple matter to do but it has not been done. The mere fact various records have been created by Mr White and others does not prove the amounts are reasonable per se, especially when they are put to proof. 249I am not satisfied on the basis of the evidence and in particular by the way in which the case has been conducted that the alleged breach by QRH has been made out.

Not Paying Rent Increases of 4% 250On this occasion Mr White's affidavit of 27 July 2011 is relied upon and in particular exhibits BKW4 and BKW 26, 28 and 29. Reliance is also placed on the pleadings. It is alleged that this allegation is not disputed in the pleadings and it is said QRH proffers full payment to those who are owed monies and claims relief against forfeiture. 251Mr White at [20] of his affidavit refers to a delay in obtaining certain rent determinations as he asserts because QRH rejected the appointment of a Mr Mark Hurst (auditor) in the first instance. He then annexes 16 pieces of correspondence. In particular, reference is made to what is described as BKW4 which is a letter from Lodhia lawyers of 9 November 2009. The letter does make a positive assertion about what the particular 4% rental increase would mean for certain lots. The lease provides in clause 15 that where the Landlord gives the requisite notice from lot owners, then prima facie those increases are outstanding. (Clauses 2.1.3(b), 15.1.3(a) and 15.1.4) 252But as this allegation is not disputed or traversed on the pleadings that I think is really an end to the matter. QRH does not contend it does not owe these monies. It is to that extent in breach.

Not Paying Amounts the Arbitrator Found Had Been Wrongly Deducted from the Rent 253Again it is said by Mr White (correctly) that QRH admits this allegation on the pleadings and again QRH proffers full payment of unpaid rental and claims relief against forfeiture. Reliance is also placed upon the affidavit of Mr White and the amount awarded by the Arbitrator, Mr McDermott. Paragraphs 49 - 64 of the award are relied upon. I was not addressed on these passages. A letter of 28 September 2010 (BKW 26) is also relied upon. These materials support on one view monies outstanding in the past perhaps. Precisely how much was not the subject of clarity sufficient for me to determine the issue. Again, however, there is I think a concession by QRH of breach.

The 2009 and 2010 AGM's 254As a prelude to submissions in relation to the particular resolutions passed at the 2009 and 2010 AGM, Mr White asserts that pursuant to sections 75 and 76 of the SSMA an Owners Corporation must determine contributions to its administrative and sinking funds based on a proposed budget or estimate expenses put before each AGM. I have expressed the view that the various clauses of the lease do not amount to inappropriate delegations in contravention of the SSMA. I have also however expressed my view as to the construction of clause 2.2. Properly construed clause 2.2 does not materially stifle the statutory obligations of the Owners Corporation and I agree with the submission of Mr White on this point. 255Mr White submits that insofar as QRH asserts that it has paid directly, and was entitled unilaterally to choose to pay directly amounts referable to the administrative funds levy under that, such an approach is not permitted by reason of sections 75 and 76 of the SSMA, nor is it countenanced by clause 2.2. That position is correct as I have already said. 256It is submitted on behalf of QRH that the significance of clause 2.2 is that in the years prior to 2009 all of the parties to the leases were content to proceed on the footing that QRH paid a number of outgoings or expenses referred to in clause 2.2 directly to the various parties to whom they were payable, rather than having the Owners Corporation meet those outgoings and expenses from the funds and then reimbursing them to it. It is submitted that this practice is clear from the minutes of the AGMs held on 27 February 2002, 17 June 2004, 28 April 2005, 6 April 2006, 17 May 2007 and 23 June 2008 being annexures P to W to the affidavit of Mr White sworn 30 August 2011. It is submitted therefore that the practical effect of that approach was that amounts determined by the Owners Corporation to be levied as contributions to the administrative fund pursuant to sections 75 and 76 of the SSMA at those AGMs are reflective of estimates which were directly paid by QRH. That submission for obvious reasons is plainly incorrect. 257It is further submitted by QRH that at the 2009 AGM which commenced on 21 May 2009 (and was adjourned) Mr White and others purported to abandon that approach. The minute of the 2009 AGM records as follows: In the past it was noted that Quest Rosehill Pty Limited had been paying some Owners Corporation administration costs directly without them going through the Owners Corporation accounts and he said (this is a reference to Mr White) this must stop immediately. All payments relating to the Owners Corporation must go through the appropriate admin/sinking accounts and be approved by the Executive Committee in accordance with the strata schemes management act. 258It also appears from that minute that the Owners Corporation purported to determine that the total contributions to the administrative fund determined in accordance with section 76(1) of the Act for the period 1 February 2009 to 31 January 2010 was to be $193,963.00. It was noted in the minute that QRH was alleged to be "in arrears" in relation to the administrative fund levies. It is submitted on behalf of QRH that the figure was struck without taking into consideration substantial payments by QRH directly to parties to whom outgoings and expenses referred to in clause 2.2 are made and to be made in accordance with previous practice. To the extent that QRH has made payments, it may well as I have said be entitled to a credit or a set off. If services and/or expenses have been met by QRH leaving aside its entitlement to do so, the actual costs paid to third parties may be a very good indication of what a "reasonable" levy would involve for the purposes of clause 2.2.3. On the other hand it may not. The Owners Corporation levies may be reasonable or indeed grandiose. QRH may or may not be maintaining the premises adequately. On the evidence as it presently stands I do not feel satisfied on these issues in determining who is or is not correct. 259However insofar as it is asserted that at the 2009 AGM Mr White and others purported to abandon that approach, they, like QRH, are entitled to rely strictly on the terms of the lease in the context of the statutory provisions. 260The parties have expended time and money on these issues however I have not been satisfied by the approach adopted in relation to expenditure and/or estimates etc. More to the point the proof of it on both sides. It is important that the parties have a mechanism to resolve these outstanding issues. Whilst I will return to this later I would subject to hearing submissions, and if requested to do so, be prepared to consider referring a questions or questions to a Referee so that this and other like questions involving the issues of estimates and expenses etc can be finally resolved so as to avoid fresh proceedings. 261It is submitted by Mr White (and it does not appear to be contested by QRH) that at the 2009 AGM, QRH did not give any directions as to how the represented lot owners were to vote. It is therefore submitted that the resolutions passed at the meeting including those raising contributions to the administrative fund are valid and binding and wholly in accordance with the provisions of the SSMA. That again is rather not to the point. The lease does not prevent a meeting of the Owners Corporation and if no direction is given the effect is just the same as if an unreasonable direction were given. It is the reasonableness of the levies etc of which I have not been satisfied, notwithstanding the technical validity of the resolutions.

Were the 2010 Directions Reasonable 262The Landlord is only obliged to vote in accordance with a reasonable direction given by QRH, as explained earlier. 263In the absence of an objectively reasonable direction given in good faith the Landlord's ability to vote on any matter at an Owners Corporation or Executive Committee meeting would remain unaffected by clause 13. Further the Tenant is obliged to provide details of all proposals which in my opinion have to be sufficient to enable the Landlord to participate in a meaningful and fully informed way, especially if the lot owner is expected to vote in a particular way (clause 13.5). 264Directions were given by QRH in relation to the 2010 AGM. However as will become apparent Mr White and others refused to follow those directions. 265Further it is submitted that the directions could not be regarded such as to allow QRH to "better conduct" its business as QRH itself does not conduct any business. This latter point in my mind was again dealt with by Ward J in Quest Rose Hill. Correctly again in my opinion Ward J considered that the term "Tenants business" in clause 13.1 of the lease was to be construed as meaning the business conducted or permitted to be conducted by QRH from the premises. Ward J was also of the view that for the purposes of voting directions, QRH would not be permitted to issue directions solely for the purpose of enabling its related entities to carry on the serviced apartments business. But none of the directions here fall foul of that qualification so I do not consider this point has any substance here. 266It is submitted by Mr White that the resolutions passed including, in particular, resolutions 8 and 9 at the 2010 AGM for the raising of administrative fund levies were, and are accordingly valid.

The Directions 267It is necessary however to consider each of the various directions separately for the 2010 AGM. I should observe in advance that QRH does not seek to suggest the meeting was in any way invalidly held or conducted, beyond asserting its directions should have been followed. Failure to do so renders (it contends) the resolutions invalid. QRH does challenge the reasonableness of the amounts said to comprise the levies etc. 268Motion 1 was merely for the adoption of previous minutes. No direction was issued by QRH in relation to this motion. 269Motion 2 was that the number of members of the Executive Committee for the year was to be determined. There was a direction from QRH to vote against the motion and the reason given was that there should be included a director and officer of QRH and that any one or more of a number of persons nominated, including Mr Bailey, should be entitled to attend the meetings and give directions (if necessary) pursuant to clause 13. The meeting resolved that the number of the Executive Committee members were determined to be five. Ultimately that vote was carried unanimously. It does appear however from the minute that QRH's direction was ignored. 270Whether someone from QRH was entitled to be present at such meetings, it seems to me, was a matter for the meeting, and the resolution in my view is valid. Those present were entitled to vote against QRH being in attendance and I see nothing wrong with that. I am not satisfied the direction was reasonable. It is not necessary for QRH to be physically at the meeting. The Landlord is contractually obliged to vote in accordance with a reasonable direction or effect a proxy perhaps, but that does not mandate an entitlement to be physically present. 271Motion 3 was that the members of the Executive Committee be elected. That was to be undertaken by a ballot. There was a direction from QRH that there should be included a director and/or officer of QRH to attend and give directions if necessary. The minute records that in relation to this motion nominations were received and each of Mr White, Ms Maile, Mr Kokoski and Ms Balabka had their nominations accepted. Mr Singh who was there on behalf of QRH nominated himself but his nomination was declared invalid because he was not an owner and therefore could not nominate himself. The Owners Corporation comprises the lot owners from time to time, (section 11, SSMA). It is also clear from Schedule 3, Part 1, 2(4) that Mr Singh is ineligible to be a member of the Executive Committee. Mr White, Ms Maile, Mr Kokoski and Ms Balabka were appointed as the Executive Committee members. I do not regard the direction as reasonable and the lot owners at the meeting were clearly entitled to vote as they did. The legislation simply does not provide for a person such as Mr Singh to be eligible for election nor could QRH direct the Owners Corporation to act contrary to the legislation. 272Motion 4 was that the last financial statement prepared by the Treasurer be adopted. There was a direction to vote against that on the basis that the financial statements concerning the administrative fund failed to reflect the outgoings of QRH as the Tenant under clause 2.2 which were to be paid by it directly. The minutes disclose that the motion was put to a vote. Apart from one dissenting vote, the motion was passed by majority and therefore the financial statements prepared and presented by the treasurer were accepted and adopted. 273In relation to this motion, and others of a similar kind, it is put by QRH that the directions were reasonable because they were consistent with a previously established practice and their construction of clause 2.2. Whatever the practice may have been, it seems to me that the parties, but in particular Mr White, were able to insist on strict compliance with the terms of the lease and the legislation. If the Owners Corporation and/or Mr White did observe a practice in the past that was, it seems to me, a matter for them. 274I am not satisfied the direction was reasonable because it appears to me to be based upon a misconception of the clause and the legislation. The lot owners were entitled to vote as they did. The financial statements are one thing to resolve upon, the levies imposed (for the reasons I have already mentioned) are another. 275Motion 5 was that a registered auditor be appointed to conduct a full forensic audit for the administrative and sinking fund for the past seven years. The direction was to vote against the motion on the basis that the expense of retaining a forensic auditor was not within the Tenant's outgoings under clause 2.2 of the lease and would not be met by QRH. If the forensic audit was to be undertaken QRH informed lot owners in writing that it would have to be at their own expense. 276Again the minutes record that the representative from QRH made no comment and the motion was passed unanimously. It is by no means clear to me that this was a reasonable direction. On the other hand however an audit over a period of 7 years would be likely to be quite expensive. That said it is obvious this activity would arguably assist in clearing the air. There is no doubt that much of the disputation between the parties stems from a breakdown in their relationship surrounding the whole issue of expenses in connection with the premises. 277The better view on balance is that the direction was unreasonable. The reason for having an audit in the circumstances is rational and unsurprising. The resolution was that the audit should occur. That is in my view well within the scope of the duties and functions of the Owners Corporation to decide upon. There was no resolution as to who should pay for it. The only opposition from QRH is that they did not wish to pay for it. I consider the resolution to be valid. 278Motion 6 was that the Owners Corporation obtain an updated report in relation to issues of Occupational Health and Safety for the common property. Again the direction was to vote against the motion on the basis that an Occupational Health and Safety Assessment would be arranged by QRH. 279Again the minutes record that the representatives from QRH made no comment. The motion was carried unanimously and an Occupational Health and Safety report for the common property was to be obtained in "accordance with the SSMA". 280It is by no means clear to me that the direction from QRH was reasonable. Whatever the legislation requires must be undertaken. I must say I would regard it as incumbent on the Tenant in running such a business to have regular assessments consistent with clause 2.2.6. If it had been done, so be it. If not, it would be required from time to time by reason of legislation, and the terms of the lease. 281Motion 7A was that certain payments be made to members of the Executive Committee in recognition of services performed in the period since the last AGM. In the case of Ms Maile, Mr Kokoski and Mr White each was to receive $25,000. The direction was to vote against the motion on the basis that acceptance of the position of membership of the Executive Committee should remain an honorary position without remuneration. It was further put in the direction that because ACE Body Corporate Management had been retained as the strata manager there would be very little need for the involvement of the Executive Committee in the administration and management of the business owned and operated by QRH. 282I note that the motion refers to the payments being in recognition of services performed in the period since the last AGM. In other words it is a payment for services rendered in the past. The minutes record that there was a discussion about the payments. Mr White and Ms Maile apparently explained that there was a proposal to pay the amount because there had been no strata manager appointed and the Executive Committee members had been busily engaged in the management of the Owners Corporation affairs for 22 months. Mr White also apparently explained to the meeting that although the amounts ought to fall within the definition of "reasonable owners corporation fees" for the purposes of the lease, there was a risk that lot owners may well have to pay for these moneys in the end. 283The motion however was passed by a majority with two votes against. I am not satisfied that the direction to vote against the motion was reasonable. It seems to me it would legitimately fall within the discretion of the meeting. There certainly was full disclosure about the upside and the downside of such a resolution being passed and as I have said it seems to me to be referable to the past. The question as to from whom that amount would be recovered was not really debated before me. QRH submitted in writing that such payment was not authorised by the lease and that it should not be required to pay for it. I consider the meeting was entitled at least to vote and pass such a resolution. As I say I am not satisfied the direction to vote against the motion was reasonable. 284Motion 8 was that the meeting adopt the proposed budget for the proposed administrative fund and thereby estimate that it will need to credit to the administrative fund within the sum of $273,680.00 and further that the meeting should adopt the proposed budget for the sinking fund and thereby estimate that it would need to credit the sinking fund with approximately $55,000.00. Again there is a direction to vote against the motion on the basis that the proposed budget ignores the division of responsibility for outgoings especially under clauses 2.2 and 2.3 and therefore there was no basis for the estimates. 285It was suggested that budgets should be prepared in consultation with the strata manager ACE when appointed. The minutes record that there was a "fairly robust discussion" between Mr White and representatives from QRH. Mr White appears to have advised that it was critical that sufficient funds be available to ensure that the property be maintained at the highest possible standard to support QRH's business operations. He is recorded as having said that the Owners Corporation had certain statutory responsibilities. The budgets were adopted by a majority vote. 286Again the submission is that the direction was reasonable because of past practice and QRH's construction of the lease. These matters would not support such a direction. The lot owners are entitled to form views about levies and the respective funds. That does not satisfy me however that the amounts to be levied are or were reasonable, and that QRH is obliged necessarily to pay those amounts, especially given it has in fact already expended monies, as discussed. That said I consider the resolution valid. This is precisely the kind of activity the legislation requires such a body to undertake. 287Motion 9 dealt with estimates and budgets for the administrative fund of $55,000.00 and the manner and timing of the payment of that money by the contribution of each lot owner. Again there was a direction to vote against the motion, again on the basis that it was contrary to past practice. The minutes of the meeting disclose that Mr White put an amendment to the motion to ensure that the figure of $273,680.00 was inserted into the resolution to clearly determine that that amount was to be raised for the administration fund levy. Mr White's amendment was passed unanimously and the motion as amended was carried unanimously. It was therefore resolved to raise an administration fund levy of $273,680.00 and a sinking fund levy of $55,000.00. It was noted that the administration levy was to be payable in full by December 18, 2010 and the sinking levy fund would be paid in full by April 30, 2011. For the reasons I have already expressed I consider the direction was not reasonable, and the resolution as such valid. That however does not solve Mr White's problem in showing the amount or amounts are reasonable for the purposes of clause 2.2.3. 288Motions 10, 11 and 12 all deal with the litigation in these proceedings. Motion 10 was to the effect that the Owners Corporation should defend the summons by QRH and make its own claim for declaratory relief and do whatever was needed to do to attempt a negotiated outcome. Motion 11 dealt with the retaining of J S Mueller & Co to act for the Owners Corporation and motion 12 dealt with raising funds to meet the expense of litigation. 289The direction in relation to all motions was that QRH's position was that it operated and managed the serviced apartment business and that it was not for the lot owners to dictate to it what its budget ought to be. QRH said it had no alternative therefore but to commence the proceedings but was prepared to negotiate on a particular basis, in particular depending upon whether the lot owners were prepared to accept QRH's construction of clauses 2.2 and 5. Further it said that provision for expenses is not a matter that should be determined by the Owners Corporation or the Executive. For reasons I have stated I do not agree that that position is correct. 290The minutes disclose that in relation to Motions 10, 11 and 12 representatives from QRH made no comment. Motion 10 was passed unanimously with a resolution to defend the proceedings. Motion 11 was also carried unanimously with a motion to retain J S Mueller and Motion 12 was also passed unanimously with a levee of $100,000 to meet anticipated legal expenses. These directions by QRH in the light of the respective grievances and the litigation were clearly provocative and unreasonable. 291Mr White and others were entitled to disobey the direction. They were not obliged to capitulate. The Owners Corporation and for that matter the lot owners were perfectly entitled to take legal advice and act upon it. That may involve defending the proceedings and seeking their own relief. In the scheme of things it was not only totally unrealistic but as I have already said unreasonable for QRH to direct anything given the fact that they had themselves commenced proceedings. It was perhaps a carry over of the high handedness observed by Ward J at [149] and again based on an erroneous view of clause 2.2. 292Motion 14 was in these terms: That the Owners Corporation decide if any matter or type of matter is to be determined only by the Owners Corporation in general meeting. 293The direction was to vote against the motion on the basis that it was meaningless and should be rejected. The minutes record that representatives from QRH made no comment, however the motion was carried unanimously and there were no restrictions placed on the powers of the Executive Committee. It is a little difficult to work out what the motion really is intended to mean. If it meant no more than that the Owners Corporation was governed by the SSMA (and its contractual obligations) and would have to act accordingly, that was an impeccable position. If it was intended to mean that the Owners Corporation could decide any matter they wished in general meeting then such a motion in my view is not legitimate and a direction to vote against it on the basis that it was meaningless in my view was perfectly reasonable. In the scheme of things it is of little moment. 294Motion 15 was that any two of Messrs Kokoski, White and/or Ms Maile be authorised to attest the affixing of the common seal of the Owners Corporation pursuant to section 238 of the Act. The direction was to vote against the motion, the reason being that provision should be made to section 238(2)(b), (3) and (4) for a strata manager to affix the seal if and when required. The minutes record that the motion was carried unanimously and any two of those persons mentioned were authorised to attest the affixing of the common seal of the Owners Corporation onto any documents. In my view the direction was not reasonable. Having said that both sides were technically correct. It is true that section 238 requires the presence of two lot owners pursuant to section 238(2). It is equally however true that the strata managing agent of the Owners Corporation can affix the seal (section 238(2)(b)). I consider it was a matter for the meeting to decide who should affix the seal.

Deductions for Renovations Pursuant to Clause 6 of the Lot Leases 295Mr White submits that QRH was not entitled to make deductions for renovations whilst it was holding over as a monthly Tenant under clause 7.2. No reasons are advanced for this and it does not seem to me that it has any substance to it. In the alternative it is submitted that no such deductions are able to be claimed by QRH in respect of either of the first two terms of the lot leases because of clause 6.2.1(b). 296Clause 6.2.1 (b) provides that in order to ensure the maintenance of the premises at a particular standard the Landlord acknowledges (clause 6.2.1) that repairs and other works of a capital nature may reasonably be required at the end of each term. Clause 6.2.1 goes on to say: In accordance therewith the Landlord will at the end of each term: (a) if any of the options are exercised; (b) If reasonably required repaint, clean, renovate and otherwise update and renew the premises...provided that such renovation, update and renew will: (i) not be required during the first two terms of the lease; (ii) not require the Landlord to affect structural alterations; and (iii) not include any obligations to provide additional contents for the premises. 297The clause in my mind is relatively straightforward. The repaint, clean, etc is not to be required during the first two terms of the lease. Mr Bailey in his affidavit of 6 June 2011 points out that in his opinion in order to maintain the apartments in their original condition it is necessary to renovate the apartments after 10 years. He was not cross examined on that assertion. However whether ten years coincides precisely or not, it seems to me the obligation on the part of the Landlord does not arise in respect of either of the first two terms of the lot leases.

The 2011 Rent Determinations 298It is submitted by Mr White that the lot leases do not provide for direct payment of the difference in the rent once rent determinations are received. Rather they provide for a system of subsequent crediting in respect of future rent otherwise payable. This would seem to be so. Secondly Mr White submits that QRH cannot claim in representative proceedings relief for liquidated debts that it claims are owed by individual represented lot owners. I think this is correct. Proceedings can and should be issued separately if that is desired.

Appointment of Strata Managing Agent 299It is submitted by Mr White that as the power of attorney must be exercised in good faith it is not appropriate that relief be granted to QRH which would enable it to force upon the Owners Corporation the appointment of a strata managing agent of QRH's choice in circumstances where there is concern about instructions being given by Mr Bailey to the former managing agent. It is submitted that there are anomalies in the accounts and that there is substantial disagreement in relation to the accounts. 300It seems to me that it is essential (even more so given the disputation between the relevant parties here) that there be a strata managing agent who is both competent and independent. 301Mr Bailey in his affidavit of 6 March 2012 said that ACE carries on business as a strata managing agent and that a business associated with it manages premises at Quest World Square and Quest Potts Point. Mr Bailey said he has worked closely with ACE and he is satisfied that they have the experience and expertise required to efficiently manage the premises; [22]. He also said at [23] that he previously interviewed the owner of Macarthur Strata Pty Limited, and was not satisfied that he had had the same experience as ACE. He formed the view that it was in the best interest of QRH and the Owners Corporation that ACE be appointed. There is nothing in the evidence to suggest that Mr Bailey did not act in good faith in appointing ACE or that his assessment of them is awry. His assertion that they had the relevant expertise and indeed were better able to manage than Macarthur was not challenged. 302The managing agent has an important role to play, especially in the circumstances here. If anomalies in accounts are real then the managing agent will need to address them and attempt to resolve disagreements as to the accounts. 303That to one side, I do not consider clause 13.2 gives QRH the right unilaterally to appoint a managing agent. It could give a reasonable direction about such appointment and seek to enforce its contractual rights if the reasonable direction was ignored. That as I understand the facts is not what has happened. As a practical matter as I have said a competent and independent managing agent is vital. There is no suggestion ACE is not qualified for the job, but the manner in which the appointment has been effected is not a solution to an already difficult situation. There may well be contractual arrangements in place between QRH and ACE. That said QRH did not have the right in my opinion power to unilaterally appoint the agent.

Specific Performance 304QRH seek specific performance both of the common property lease and the relevant lot owners leases. The Owners Corporation made no specific submissions on this but were generally supportive of the position adopted by Mr White. Mr White more fully developed a submission as to why I should not grant specific performance. QRH has offered to remedy, for example, any outstanding financial obligations to the defendants which have arisen by reason of any breach of the agreement, and in that sense is ready willing and able it says to perform the contract. 305I should observe that no party suggested that in considering its claim for relief I should regard damages to be an adequate alternative remedy. QRH has been in possession for some years and runs its business from the premises. It seems to me fairly obvious that damages could not be an adequate remedy. As Lord Selborne LC said in Wilson v Northhampton and Banbury Junction Railway Co (1873 - 74) LR 9 Ch App 279 at 284: The principle which is material to be considered in the present case is, that the Court gives specific performance instead of damages, only when it can by that means do more perfect and complete justice. 306Specific performance is of course a discretionary remedy. Past defaults, of themselves are not a bar to the remedy: Fry on Specific Performance, (6th Ed. 1921), page 435, where the then author states: With regard to the matters to be done by the plaintiff according to the terms of the contract, it is, from obvious principles of justice, incumbent on him, when he seeks the performance of the contract, to show, first, that he has performed or been ready and willing to perform, the terms of the contract on his part to be then performed; and secondly, that he is ready and willing to do all matters and things on his part thereafter to be done; and a default on his part in either of these respects furnishes a ground upon which the action may be resisted. 307There are a number of decisions of the High Court which discuss the factors that may as a matter of discretion disentitle a claimant to specific performance. Courts have in this context distinguished the consequence of being in breach of essential as opposed to inessential terms: Mehmet v Benson (1965) 113 CLR 295. Fitzgerald v Masters (1956) 95 CLR 420; King v Poggioli (1923) 32 CLR 222. 308In Mehmet at (307 - 308), Barwick CJ said: That the plaintiff was in default in payment of the instalments of the price and of the interest on the unpaid balance of it (time not being of the essence) though relevant to that question does not establish that he was not in the relevant sense ready and willing to perform the contract. If it were otherwise a purchaser in substantial default of inessential terms could never be granted specific performance. Indeed, the significance of the distinction between essential and inessential terms is derived form the fact that a person in breach of inessential terms may be granted specific performance. "...A plaintiff in equity may even have actually broken his contract in the letter and yet succeed, if the substance remains": per Isaacs and Rich JJ. In Fullers Theatres Ltd v Musgrove (1). The question as to whether or not the plaintiff has been and is ready and willing to perform the contract is one of substance not to be resolved in any technical or narrow sense. It is important to bear in mind what is the substantial thing for which the parties contract and what on the part of the plaintiff in a suit for specific performance are his essential obligations. Here the substantial thing for which the defendant bargained was the payment of the price: and, unless time be and remain of the essence, he obtains what he bargained for if by the decree he obtains his price with such ancillary orders as recompense him for the delay in its receipt. To order specific performance in this case would not involve the court in dispensing with anything for which the vendor essentially contracted. Of course, the plaintiff must not by his unreadiness or unwillingness to perform have disowned his obligation to do so, or abandoned his rights to the benefit of the contract. But it is the essential terms of the contract which he must be ready and willing to perform. 309Windeyer J said in Mehmet at 314: The finding that the plaintiff was not ready and willing to meet his obligations on the dates stipulated in the contract is supported by the evidence: and the plaintiff clearly failed to prove the allegation in the statement of claim in this sense. But, with respect to his Honour, I think that there should be some qualifications to the conclusion at which he arrived. He fully appreciated that the readiness and willingness that a plaintiff must show relates only to essential terms, and that a defendant cannot rely upon the unreadiness of the plaintiff to perform what he, the defendant, has waived. But he thought that, in this case, any waiver by the vendor of stipulations as to time went only to the non-payment of moneys, instalments and interest, that had become due and owing before November 1959; that it did not extent to later instalments. I appreciate this view of the facts. But, for reasons that I have given, I agree with the opposite view that the Chief Justice has expressed: see Hunter v Daniel (1). 310For QRH to succeed in obtaining specific performance it is not obliged to show it has at all times strictly and literally complied with all of its obligations under the leases. It is certainly not fatal if a plaintiff such as QRH asserts a wrong view of the lease, acts upon it, and is thereby in breach of its obligations. I accept that QRH believed in good faith it was adopting the appropriate construction of clause 2.2. 311Moreover I accept that QRH will, as proffered, pay such amounts as are outstanding and is ready, willing and able to perform the contract as properly construed: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977) 138 CLR 423 at 431 - 2. 312In all the circumstances of this case given its equitable rights and notwithstanding QRH's defaults I do propose to grant specific performance in respect of the common property lease and the relevant lot owners leases. To that end it would seem to me that I should grant the relief sought, by way of orders requiring the Owners Corporation and relevant lot owners to enter leases, subject to the necessary rental (clause 15.2) in registrable form and on the same terms and conditions (including an option to renew) as those that exist in the leases before the Court and which leases are to run for a term ending in 2016. The leases should however commence from the date of registration. I am conscious of the imperfections in the terms of the leases, especially the one dealing with the common property. That said I consider justice is better served by such an order.

Relief 313In the light of the above findings I will indicate my views with the various aspects of relief sought by the respective parties. 314As I indicated above at [260] I would, subject to submissions, be prepared to send certain questions out to a Referee. 315Having considered the terms of this judgment the parties can take the course they are advised to take. I will of course hear the parties on the precise terms of any orders I have indicated I am prepared to make, and on any other aspect of relief. The matter can be relisted before me for the making of final and other orders and costs in due course.

Relief Sought by QRH in the Second Further Amended Statement of Claim 316I would refuse the relief sought in paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 13, 17, 18, 19, 20 21 and 22 as being contrary to my reasons or lacking utility. 317I would grant the relief sought in paragraphs 23 and 24. 318I would grant QRH specific performance in accordance with my reasons and on terms indicated in [312] above.

Relief Sought by the Owners Corporation in Their Cross Claim 319I would refuse the relief sought in paragraphs 1, 2, 4, 5, 6, 8, 9, 10, 11 as being contrary to my reasons or lacking utility. 320Insofar as paragraph 3 is concerned I am prepared to hear submissions given my reasons as to whether what is there requested is appropriate in that form. I would obviously consider making a declaration in the appropriate form to encapsulate my views on the construction of clause 2.2. 321I would be prepared to hear submissions on the utility of making declarations in the form requested in paragraphs 7 and 9.

Relief Sought by Mr White in the Amended Second Cross Claim 322I would refuse the relief sought in 1, 2, 3, 4, 5, 6, 7, 9, 10 as being contrary to my reasons or lacking utility. 323I would be prepared to hear submissions on the utility of making the declarations sought in paragraphs 8, 11, 12, 13.

Costs 324I reserve the question of costs. 325I would grant liberty to the parties to have the matter relisted at a convenient time and they may approach my Associate to make suitable arrangements

Amendments 14 December 2012 - amended last sentence to read: "In any event I see no conflict between the respective pieces of legislation." Amended paragraphs: [79] 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: 14 December 2012