(2005) 64 NSWLR 58
AVS Group of Companies v Commissioner of Police [2010] NSWCA 81
(2010) 78 NSWLR 3002
Harvey v Phillips [1956] HCA 27
(1956) 95 CLR 235
Owston Nominees No 2 Pty Ltd v Branair Pty Ltd [2003] FCA 629
Source
Original judgment source is linked above.
Catchwords
(2005) 64 NSWLR 58
AVS Group of Companies v Commissioner of Police [2010] NSWCA 81(2010) 78 NSWLR 3002
Harvey v Phillips [1956] HCA 27(1956) 95 CLR 235
Owston Nominees No 2 Pty Ltd v Branair Pty Ltd [2003] FCA 629
Judgment (2 paragraphs)
[1]
Judgment
This is an application for an order setting aside a number of orders that I made in these proceedings on 26 August 2014.
The applicant is Ms Mary Jane Magney. Ms Magney is not an original party to these proceedings and was not a party at the time I made the orders on 26 August 2014. She was, on her own application, joined as the fourth defendant by order made on 19 November 2014.
The present application was heard on 24 November 2014. On 19 November 2014, Stevenson J granted certain interlocutory relief to Ms Magney and stood her notice of motion over for hearing by me. Part of the relief sought by Ms Magney was that an order should be made to set aside orders that I had previously made. On 24 November 2014 I was sitting as the duty judge.
Relevantly, Ms Magney sought the following relief in the notice of motion:
5. Orders 1, 2 and 3 of the Consent Short Minutes of Order made by this Honourable Court on 26 August 2014 be set aside.
6. Upon the Applicant, by her Counsel, giving the usual undertaking as to damages, the Owners Corporation be restrained until further order from making any payments to the Plaintiffs or the Third Defendant pursuant to the orders made on 26 August 2014 or otherwise.
7. The Plaintiffs pay the costs of this motion including the Applicant's costs and those of the Defendants.
8. The Plaintiffs pay the Defendants costs of the proceedings.
9. The proceedings be otherwise dismissed.
Stevenson J made an interlocutory order as sought in par 6 of the notice of motion, and on 24 November 2014, I continued that order until further order to preserve the position pending the delivery of judgment on the application.
For reasons that I will explain below, I only agreed to hear Ms Magney's application as framed in par 5 of her notice of motion. At the hearing, that claim was amended by consent to read: "Orders 3 and 4 of the orders made by this Honourable Court on 26 August 2014 be set aside".
The first defendant, the Owners - Strata Plan No 22014 ("the Owners Corporation"), is the owners corporation for the apartment building known as "The Quay" at Circular Quay. The plaintiffs, Drs Patrick Tian Keng Tan and Ian Paterson Walters, as well as the third defendant, Ms Janette Daisy Porter, are lot owners. Ms Magney also owns a lot in the strata plan. The second defendant, Whelan Property Group Pty Ltd ("Whelan"), engages in business as a strata managing agent.
The proceedings have arisen out of a dispute between Ms Porter and the plaintiffs that primarily concerns the operation of the executive committee of the Owners Corporation.
On 19 December 2012, Ms Porter made an application to what was then called the Consumer, Trader and Tenancy Tribunal, now the NSW Civil and Administrative Tribunal ("the Tribunal"), against the Owners Corporation primarily for an order under s 162 of the Strata Schemes Management Act 1996 (NSW) ("the Act") for an order that a strata scheme manager be appointed for a period of two years. Ms Porter nominated Whelan, which had already consented to the appointment.
Section 162 of the Act relevantly provides:
(1) An Adjudicator may by order appoint a person as a strata managing agent:
(a) to exercise all the functions of an owners corporation, or
(b) to exercise specified functions of an owners corporation, or
(c) to exercise all the functions other than specified functions of an owners corporation.
(2) An Adjudicator may also order, when appointing a strata managing agent under this section, that the strata managing agent is to have and may exercise:
(a) all the functions of the chairperson, secretary, treasurer or executive committee of the owners corporation, or
(b) specified functions of the chairperson, secretary, treasurer or executive committee of the owners corporation, or
(c) all the functions of the chairperson, secretary, treasurer or executive committee of the owners corporation other than specified functions.
It would appear that the effect of an order made under subs (1)(a) would be that the strata managing agent would not only exercise the functions of the executive committee and its officers, but would also exercise all of the functions that would ordinarily fall to be exercised by the lot owners in general meeting. Subsection (2) provides for orders that may "also" be made when a strata managing agent is appointed under the section. Those orders mirror the orders that may be made under subs (1) in relation to the owners corporation itself, but they relate to the functions of the chairperson, secretary, treasurer or executive committee of the owners corporation. None of the parties to the application contested the submission made on behalf of Ms Magney that the power to make an order under subs (2) only arises if an order has been made under subs (1). That result appears clearly to follow from the use of the word "also" in the context of an appointment being made of a strata managing agent under the section.
Section 190 of the Act empowers the Tribunal to vary an order, whether or not on application, for the purpose of correcting or clarifying it, and the order as so varied is taken to be the order instead of the original order. The effect of s 190 would appear to be that the varied order will operate as varied from the time when the original order was made. Among other persons, an application under s 190 may be made by the relevant owners corporation, by the applicant for the original order, any person who made a written submission on the application for the original order, or any other person who is required by the original order to do or refrain from doing a specified act. However, the Tribunal may make an order under s 190 whether or not an application is made to vary an order.
Section 32 of the Act provides:
If a strata managing agent is appointed by an Adjudicator to exercise a function:
(a) the function cannot, while the strata managing agent holds office, be exercised by any other person, and
(b) anything done or suffered by the strata managing agent in the exercise of the function has the same effect as it would have if the function were exercised by the person who, but for paragraph (a), could have exercised it.
Accordingly, if a strata managing agent is appointed under s 162 of the Act to exercise any function of the owners corporation, that function cannot be exercised by any other person while the strata managing agent "holds office".
On 20 May 2014, Mr Meadows, a Senior Member of the Tribunal, acting in lieu of an adjudicator, made orders in the matter commenced by Ms Porter after a protracted hearing. The relevant orders made were:
1. Pursuant to section 162(1)(a) of the Strata Schemes Management Act 1996 ("the Act"), I order that Whelan Property Group is appointed as strata manager of Strata Plan 22014.
2. These orders are effective for a period of twenty-four months from the date of these orders.
3. During the period of appointment, Whelan Property Group is to exercise all the functions of the Chairperson, Secretary, Treasurer and Executive Committee.
Two observations must be made about these orders. First, order 1 was made specifically under subs (1)(a), which would suggest that Whelan was appointed as a strata managing agent to exercise all the functions of the Owners Corporation. If that was the effect of the order, it would appear to cover the functions normally exercisable by the lot owners in general meeting. Secondly, on the face of it, although not expressly formulated in these terms, order 3 would appear to be an order under s 162(2)(a) of the Act with the effect that Whelan was given all of the functions of the chairperson, the secretary, the treasurer and the executive committee. In that event, it might be arguable that order 3 was either surplusage, or made for more abundant caution, as order 1 apparently made under s 162(1)(a) would have given Whelan the power to exercise all of those functions.
Mr Meadows provided lengthy written reasons for the orders that he made. It is sufficient for the purposes of dealing with this application to record only the following parts of the reasons:
[71] I find that executive committee meetings have not functioned satisfactorily at least since these applications commenced. It is also necessary to some extent to consider the functioning of the executive committee in prior years, but not within this section (see below).
…
[89] It is this aspect of the application which has persuaded me that a compulsory strata manager should be appointed to this strata scheme, with limited powers.
…
[111] There is a third major issue which I find I am unable to determine but which nevertheless demonstrates further in my opinion the unsatisfactory working of the executive committee...
…
[114] For the reasons given above, I find that the Owners Corporation is not functioning satisfactorily in that the executive committee is failing to comply with the requirements of the Strata Schemes Management Act 1996… I also find that the executive committee in strata plan [22014] treats some members of the Owners Corporation in a helpful and favoured manner while subjecting other members of the Owners Corporation to harassment.
[115] I appoint Whelan Property Group as compulsory strata manager to perform all of the functions of the executive committee for a period of two years.
At this stage, I will merely observe that Mr Meadows' reasons suggest with considerable clarity that he had determined that it was the executive committee of the Owners Corporation that was not functioning properly and that he was not concerned with the manner in which the lot owners had exercised the functions that fell to them. Mr Meadows intended to appoint Whelan "with limited powers" rather than with all of the powers (or functions) of the Owners Corporation. Finally, Mr Meadows' statement in par 115 of the order that he understood he was making was that Whelan was to be appointed "to perform all of the functions of the executive committee for a period of two years".
The reasons given by Mr Meadows therefore appear, with respect, to be at odds with the manner in which he expressed order 1 in so far as he purported to act under s 162(1)(a) of the Act. If in fact Mr Meadows meant to make an order that had the effect expressed in par 115 of his reasons, he should have purported to act under s 162(1)(b), which was appropriate where the strata managing agent was intended to be appointed to exercise only specified functions of an owners corporation.
The manner in which Mr Meadows expressed order 1 has had unfortunate consequences. In due course in these proceedings, it may be necessary to determine whether the consequences that in fact have eventuated were avoidable or not.
As I have noted, Ms Porter's application was made against the Owners Corporation, and accordingly, it was bound by the orders that were made. If the Owners Corporation wished to challenge the orders made by Mr Meadows, a question arose as to how the Owners Corporation could validly determine to institute whatever proceedings may have been available to do so. If the true effect of the orders was that Whelan had exclusive power to exercise all of the functions of the Owners Corporation, including to the exclusion of the lot owners in general meeting, then a consequence of the orders would be that only Whelan could determine to make the application. Whelan may, in those circumstances, have felt some inhibitions about instituting the challenge at the behest of some only of the lot owners, as it had consented to its appointment as strata managing agent, it would be challenging the validity of its own appointment, and would be doing so without the formal consent of the lot owners in accordance with the constitution of the Owners Corporation. If only Whelan could exercise the functions of the lot owners in general meeting, that may be an impediment to Whelan exercising the powers of the executive committee to convene a meeting of the lot owners to consider whether Whelan should be requested to institute a challenge to the orders made by Mr Meadows.
The present plaintiffs decided that, by whatever means were available, an appropriate challenge should be instituted to the orders made by Mr Meadows.
That gave rise to the practical problem, in the face of the manner in which the Tribunal's auditors were formulated, as to how proceedings could be commenced on behalf of the Owners Corporation to mount a challenge.
One possibility that may need to be considered in due course is whether, as submitted on behalf of Ms Magney on this application, the appropriate course was for the plaintiffs to make an application to the Tribunal under s 190 of the Act for a variation of the orders to make it clear that the Owners Corporation could take whatever steps were available under the Act to challenge the orders. It will not be necessary for me to consider that issue now. That issue would raise questions about whether the application to vary the original orders would have been "for the purpose of correcting or clarifying" the orders and whether the plaintiffs had standing to make the variation application under s 190(2) of the Act. Not only is it not necessary for me to consider this issue now, but it has not been the subject of evidence or proper submissions.
In fact, the plaintiffs decided that it was appropriate for them to commence the present proceedings in the Equity Division of the Supreme Court, and they did so by summons filed in court on 13 June 2014 in the duty list. They joined the Owners Corporation and Whelan as defendants. The primary relief sought was an order that the plaintiffs be authorised to use the name of the Owners Corporation in filing and prosecuting an application for leave to appeal to this Court against the Tribunal's decision and an order that the Owners Corporation indemnify the plaintiffs in respect of costs and liability incurred in respect of the application and the appeal. Alternatively, they sought an order that Whelan convene an extraordinary general meeting of the lot owners to ratify and approve the filing and prosecution of the appeal by the plaintiffs, or by a further alternative, that Whelan be ordered to initiate an appeal to be conducted by the plaintiffs. The plaintiffs sought orders that they be indemnified in relation to costs and liability involved in implementing the alternative orders.
On 27 June 2014, White J ordered that Ms Porter be joined in the proceedings as the third defendant.
On 7 July 2014, Mr John Loverage, a lot owner in the strata plan, wrote a letter to Mr Meadows in which he requested that the Tribunal amend the orders that it made on 20 May 2014 to reflect the fact that the reasons for judgment did not suggest that the Tribunal intended to appoint a strata managing agent to exercise all of the functions of the Owners Corporation.
On 24 July 2014, Mr Meadows made an order under s 190 of the Act to "correct" order 1 made on 20 May 2014. The corrected order was:
Pursuant to section 162(1)(b) of the Strata Schemes Management Act 1996 ("the Act"), I order that Whelan Property Group is appointed as strata manager of Strata Plan 22014.
All of the other orders made on 20 May 2014 were confirmed. The only change made to order 1 was to replace the reference to s 161(1)(a) with a reference to s 161(1)(b). The effect of this change was to make it clear that the Tribunal did not appoint Whelan as strata managing agent of the Owners Corporation to exercise all the functions of an owners corporation, but only to exercise specified functions of an owners corporation. Order 1 did not, however, itself specify any functions. The change brought order 1 into alignment with order 3, which appointed Whelan only to exercise all of the functions of the executive committee and its officers, in accordance with s 162(2)(a) of the Act.
Following this variation to the original orders made by the Tribunal, it appears that the members of the executive committee of the Owners Corporation called a meeting of the executive committee and, for that purpose, circulated a notice of meeting and agenda, a copy of which was received by Whelan. The notice of meeting and agenda does not appear to be in evidence on this application.
Whelan's solicitors wrote a letter to the solicitors for the plaintiffs dated 8 August 2014, which set out Whelan's position, and asked that it be circulated to the recipients of the notice and placed on the Owners Corporation's notice board. The letter indicated that the contents of the notice were "broadly reflective of the circumstances" but that "in some respects the commentary with the agenda is, in our view, not properly representative of the position of Whelan". That position was stated to be as follows:
Whelan Property Group considers that the most arguable view to the "slip rule" correction to the NCAT orders made on 24 July 2014 is that the original orders cease to have effect because that correction replaces those orders with an order that is not within the power of NCAT to make.
Whelan Property Group's view is that the most arguable view of those corrected orders is that the first order (to appoint Whelan Property Group under section 161(1)(b) of the Strata Schemes Management Act 1996) is of no effect because it fails to specify the functions of the owners corporation that are intended to be delegated to Whelan Property Group under that order (which is required by this section), and the subsequent order appointing Whelan Property Group to have the functions of the Executive Committee and office bearers is ineffective because a valid order under that power (section 162(2) of the Strata Schemes Management Act 1996) can only be made in circumstances where a valid order under section 162(1) of the Strata Schemes Management Act 1996 has been made.
Whelan Property Group however notes the following:
* It is not correct to state that Whelan Property Group has resigned its position. The legislation does not provide for a compulsory strata manager to resign and Whelan Property Group does not purport to.
* Whelan has not withdrawn instructions from the legal representatives of the owners corporation in the above Supreme Court proceedings. However it will not take further steps to instruct them at this stage and has instructed them not to take any steps in the name of the owners corporation.
* For the avoidance of doubt, Whelan will not (unless circumstances change) take steps to instruct lawyers on behalf of the owners corporation in any matter.
* There are other arguable views of the effect of the NCAT orders. Although Whelan Property Group presently acts on what it considers to be the most arguable view of the orders, it may be that a Court of competent jurisdiction could order Whelan Property Group to act on the basis of a different view, in which case Whelan Property Group would comply.
* In the event that NCAT makes further provision, or a Court of competent jurisdiction makes appropriate orders, it may be that Whelan Property Group takes a different view (or is compelled to) in which case Whelan Property Group may act on the NCAT orders, or act on any new or varied order of NCAT.
It appears that Whelan and its solicitors took the view that the "most arguable" view of the effect of the variation order made by the Tribunal on 24 July 2014 was that, in an apparent attempt to correct a slip, the Tribunal had worsened the position because the varied orders were invalid. That conclusion appears to be based on the words "to exercise specified functions" in s 162(1)(b) of the Act. The varied order 1 substituted a reference to s 162(1)(b) for s 162(1)(a), but it did not specify as part of the varied order 1 any functions of an owners corporation and, in particular, did not specify the functions of the executive committee and its officers. However, the letter made it clear that Whelan had not resigned its position, as it had no entitlement under the Act to do so. Whelan had not withdrawn instructions from its solicitors in these proceedings, but it would not take any further steps to instruct them (by inference, until its doubt about the validity of its appointment as strata managing agent had been resolved). Whelan acknowledged that other views as to the effect of the varied orders were available, and that it would comply with its obligations as strata managing agent, if appropriate orders were made by the Supreme Court or the Tribunal.
A meeting of the executive committee of the Owners Corporation was held on 11 August 2014. The members of the executive committee recorded as being present are Ms J Shepherd, Mr T Oberg, Mrs E Ball, Dr Ian Walters and Dr P Tan. Dr Tan took the chair. Draft minutes of that meeting of the executive committee, which were in evidence, record the following:
The Chair reiterated that the NCAT orders appointing Whelan as the compulsory strata manager are ineffective. This is set out in the explanation note of the Agenda and in the letter from Chamber Russell Lawyers.
The resolutions made included the following:
1. Resolved that the EC ratify on behalf of the Owners Corporation the applications made by Dr and Mrs Tan and Dr Walters in proceedings No 2014/0017 6516 in the Equity division of the Supreme Court of NSW (Supreme Court Proceeding) to act on its behalf or in its interests.
Carried with Mr Oberg dissenting.
2. Resolved that the EC ratify on behalf of the Owners Corporation the indemnity of Dr and Mrs Tan and Dr Walters as plaintiffs in the Supreme Court Proceedings for the proper cost of the proceedings.
Carried with Mr Oberg dissenting. The meeting noted concern with conflict of interest. The Supreme Court action by Walters and Tan were done in good faith on behalf of the Owners Corporation and not for personal gain.
3.Resolved that the EC, on behalf of the Owners Corporations support, or not to oppose, Dr and Mrs Tan and Dr Walters as applicants, in relation to the further conduct of the Supreme Court proceeding.
Carried, Mr Oberg dissenting.
4.Resolved to appoint Terrett Lawyers to represent the Owners Corporation in the Supreme Court proceeding in trying to settle the matter if possible. Reference: Terrett Lawyer's fee disclosure letter of $440 including GST (Fee disclosure letter) and disbursements.
5.Resolved that the EC would, on behalf of the Owners Corporation, support the possible settlement of the Supreme Court Proceedings substantially on the basis of the draft Short Minutes of Consent Orders circulated to the Executive Committee Members.
Carried, with Mr Oberg abstaining.
The draft short minutes of order that were before the meeting of the executive committee were not specifically proved in evidence. On 26 August 2014, the Court received a document called short minutes of consent orders that had been signed by the solicitor for the plaintiffs, for the Owners Corporation and for Ms Porter. The document was not dated. No party suggested that there was any material difference between the document that was signed and the document that was the subject of resolution 5 apparently made by the executive committee on 11 August 2014. As a result of resolution 4 having appointed Terrett Lawyers to act for the Owners Corporations, Mr P A Terrett signed the short minutes of consent orders as the solicitor for both the plaintiffs and the Owners Corporation. The document made provision for signature by the solicitor or counsel for Whelan, but it was not signed on behalf of that party.
The short minutes of order provided for the following orders by consent:
1. The Owners Corporation Strata Plan No 22014 indemnify the Plaintiffs in respect of the costs and liability incurred in respect of this proceeding.
2. The Owners Corporation Strata Plan No 22014 pay the costs of the Third Defendant of the proceeding on a party/party basis as agreed or, failing agreement, as assessed.
3 . Otherwise the Plaintiffs be granted leave to discontinue the proceeding with no further Order as to costs.
On 19 August 2014, Whelan's solicitors, Chambers Russell Lawyers, who acted for Whelan in these proceedings, wrote a letter to the Tribunal. The letter advised the Tribunal that the solicitors no longer acted for the Owners Corporation in the proceedings before the Tribunal but that they were instructed by Whelan as compulsory managing agent under the original orders made by the Tribunal. The letter advised that, following the making of the revised orders, Whelan formed the view that the most arguable view was that the original orders ceased to have effect because the revised orders replaced the original orders with an order that was not within the power of the Tribunal to make. The solicitors gave an explanation that was consistent with that which was contained in their earlier 8 August 2014 letter to the solicitors for the plaintiffs. The letter also contained a discussion of an alternative view as to the effect of the revised orders, which proceeded upon the basis that the Tribunal only intended to make an order under s 162(1)(b) in respect of limited functions, being the functions of the executive committee. Whelan advised the Tribunal that it would not take any further steps in exercise of a function of the Owners Corporation or its executive committee or office bearers, and would not take any further steps to instruct lawyers to act for the Owners Corporation in these proceedings or the proceedings before the Tribunal. The letter advised:
Additionally in the event that the Tribunal makes further provision, or a Court of competent jurisdiction makes appropriate orders, it may be that Whelan Property Group takes a different view (or is compelled to) in which case Whelan Property Group may act on the Original or Revised Orders or on any new or varied order made by the Tribunal.
The letter also confirmed Whelan's consent for the purposes of s 162(4)(b) of the Act to act as a strata managing agent under an order made by the Tribunal.
It is convenient to record at this point that the Tribunal made the following further orders on 5 September 2014 after this Court made the orders that Ms Magney has applied to have set aside:
Pursuant to Section 190 of the Strata Schemes Management Act 1996, orders published on 20 May 2014 and amended on 24 July 2014 are further amended to correct order (1) and should read as follows:
1. Pursuant to s 162(1)(b) of the Strata Schemes Management Act 1996 ("the Act"), I order that Whelan Property Group is appointed as strata managing agent of Strata Plan 22014 to exercise certain functions of the Owners Corporation, being, pursuant to s 162(2)(a) all the functions of the executive committee of the Owners Corporation including the function of chairperson, secretary and treasurer.
2. Pursuant to section 162(1)(b) of the Strata Schemes Management Act 1996 (the Act"), I order that Whelan Property Group is appointed as strata manager of Strata Plan 22014.
3. These orders are effective for a period of twenty-four months from the date of these orders.
4. During the period of appointment, Whelan Property Group is to exercise all the functions of the Chairperson, Secretary, Treasurer and Executive Committee.
(The other orders made by the Tribunal were to the same effect as in the previous orders.)
By this further variation of the original orders, Mr Whelan has tried to make clear that it was his original intention to appoint Whelan to be the strata managing agent of the Owners Corporation to exercise limited functions, being the functions the subject of the original order 3 made by him; that is, the functions of the executive committee and its officers.
On 25 July 2014, I set down the plaintiffs' claim for hearing on 26 August 2014. I also granted leave to the plaintiffs to file in court a further amended summons. It is not necessary to set out in any detail the nature of the amendments made by the plaintiffs. They added in prayer 6 an alternative claim that the orders and decision of the Tribunal be quashed and set out the grounds for that application.
When the matter came on for hearing on 26 August 2014, senior counsel for the plaintiffs also announced his appearance for the Owners Corporation. He acknowledged that that course was irregular as he and his solicitor were appearing for parties on both sides of the record. As it quickly became clear that the basis for the plaintiffs' proceedings had disappeared and the parties were in apparent agreement as to how the proceedings could be disposed of by discontinuance, I permitted the parties to follow the course suggested by senior counsel for the plaintiffs because that would facilitate the just, quick and cheap disposal of the proceedings.
Senior counsel referred to an appearance before the Tribunal the previous day and asserted that it "appeared to confirm the proposition that the Tribunal is satisfied that its orders are not effective and has decided to 'have another go'". Senior counsel said:
If it had not been put to bed by an amended order of 24 July it will be in effect reconfirmed in whatever is coming in post the 24 July order, so that there is consensus amongst those at the bar table, indeed with the corporation itself, through an executive committee meeting held. Once there was the withdrawal there was an executive meeting held in effect to confirm what had been done to this point, and to seek to appoint my instructing solicitor as a solicitor of the company for the purposes of completing what was then hoped to be an overall resolution of the matter between the parties.
I have not treated these statements as evidence of what happened before the Tribunal on 25 August 2014. It is likely that Mr Whelan made some observation to the effect that he would make a further variation of his original orders and that the parties before him were satisfied that the further variation of the orders would have the effect that Whelan would validly be appointed to exercise the functions of the executive committee of the Owners Corporation and its officers. It would not be proper for the Court to rely upon the statements from the bar table to establish that Mr Meadows accepted that his earlier orders were ineffective.
It is also to be observed that, in retrospect, the parties who were before the Court on 26 August 2014 may not have reflected fully on that part of s 190 of the Act that states that "the order as so varied is taken to be the order instead of the original order". If, on 25 August 2014, Mr Meadows made comments that satisfied the parties that he would make a new correcting order to make it clear that Whelan had been appointed to exercise the limited and specified functions of the executive committee of the Owners Corporation and its officers, then that should have informed the parties that the effect may be, by means of the operation of s 32 of the Act, that from 20 May 2014, when Whelan held office as the strata managing agent, the functions of the executive committee could only be exercised by Whelan. Further, none of the parties appear to have contemplated that the orders made by the Tribunal before that time either had the effect, or may likely have the effect, that only Whelan could exercise the functions of the executive committee of the Owners Corporation (whatever other limitations the orders may have had).
A submission was made on behalf of Ms Magney on the hearing of the application that the validity of the executive committee meeting that was referred to by senior counsel on 26 August 2014 "was not a matter ventilated before the Court, no doubt because there was no proper contradictor to do so". That observation is correct. The proceedings had been before the Court on a number of occasions, and although the Court had been provided with various materials and submissions had been made on a number of issues, by 26 August 2014, those events were of past relevance, and I expected that I would be hearing the substantive application. The plaintiffs and Ms Porter at least appeared to be protagonists. In the events that happened on 26 August 2014, no party suggested that there was any reason to doubt the effectiveness of any meeting of the executive committee of the Owners Corporation, and that issue was not addressed. That is so, even though, upon reflection, there is an obvious doubt about the effectiveness of any meeting of the executive committee once consideration is given of the orders made by the Tribunal. Given the position that Whelan had expressed in the correspondence to which I have referred above, it is of note that Whelan acquiesced in a course, and accepted the benefit of order 4 made on the day, without raising any issue about whether the executive committee had validly retained the new solicitors who gave the instructions that the Owners Corporation should consent to the costs order against it in favour of Whelan, to which I will now turn.
There was discussion about Whelan's costs. Whelan was not a party to the consent short minutes of order that had been signed on behalf of the other parties. Senior counsel for the Owners Corporation said in respect of that issue:
"So to the extent there is an outstanding issue in relation to costs, I do not think my learned friend opposes the idea of an order against the Owners Corporation in respect of such costs as there might be for the very limited role".
Counsel for neither Whelan nor Ms Porter dissented from that course, and I inferred that senior counsel for the Owners Corporation was speaking for all of the parties.
Relevantly, I made the following orders (order 3 formally by consent, and as I understood it, order 4 also by consent by reason of the manner in which the Court had been asked to make the order):
The Court…
3. Makes orders in terms of the short minutes of order initialled by Robb J and dated today's date.
4. Orders the Owners Corporation Strata Plan No 22014 pay the costs of the second defendant of the proceedings on a party/party basis as agreed or failing agreement as assessed.
It is these two orders which Ms Magney asks the Court to set aside.
The evidence on the application included a document called "Facts, Fairness Not Fear", which from its terms appears to have been circulated by the plaintiffs to lot owners in anticipation of the 2014 annual general meeting of lot owners. The document appears to have been dated 12 November 2014. The document contains a relatively lengthy exposition of the plaintiffs' view of the history of the dispute between Ms Porter and members of the executive committee, and as to the steps that lot owners should resolve to take. It is not necessary to set out the contents of the document in detail. It contained in par 38 information to the effect that the plaintiffs' solicitors' costs and disbursements were $78,787.67, and that counsel's fees were a further $36,300. Order 3 made by the Court on 26 August 2014 will, if it is not set aside, apply to these costs and disbursements. It may be that the revelation of these amounts was one factor that has induced Ms Magney to seek the relief contained in her notice of motion. Submissions were made on her behalf concerning the significance of the amount of the costs, but on the view that I have taken as to the proper way to deal with the present application, it will not be necessary to consider the significance of the quantum of the costs.
When the notice of motion was called on for hearing on 24 November 2014, Mr Sirtes of senior counsel appeared with Ms Avery-Williams for the applicant, Ms Magney. Mr Cotman of senior counsel appeared for the plaintiffs. Mr Russell, solicitor, appeared for Whelan. Mr Hand of counsel appeared for Ms Porter. There was no separate appearance for the Owners Corporation.
As I have noted, Ms Magney's notice of motion was filed in court on 18 November 2014 and stood over by Stevenson J to be heard by me on 24 November 2014. I was sitting in the duty judge's list. I asked the parties whether they wanted me to try to deal with the application on a final basis, and I received an affirmative answer from each party. I specifically gave the plaintiffs the opportunity to have an adjournment if they did not think they were ready to deal with the matter. I was advised that the plaintiffs wished to proceed. Mr Russell, on behalf of Whelan, advised me that Whelan neither consented to nor opposed the making of the orders and wished only to be present on the question of costs, concerning the costs of the motion and of the hearing. Mr Hand, on behalf of Ms Porter, advised me that his client neither consented to nor opposed the making of order 5 in the notice of motion but wished to be heard in relation to the balance of the relief sought, including on the question of costs.
I advised the parties that, in all of the circumstances, I would only deal with order 5 in the notice of motion, which after amendment became an application to set aside orders 3 and 4 made on 26 August 2014. Because of uncertainty as to the amount of business that would have to be dealt with in the duty list, I advised that I would embark on the hearing provisionally and that I would decide in due course whether, and if so how, I could deal with the application.
I was advised by senior counsel for the plaintiffs that the plaintiffs had not exercised the leave granted in order 3 of the short minutes of order, to which I gave effect by order 3 made on 26 August 2014, before the notice of motion now before the Court was filed by Ms Magney. The plaintiffs took the view that it would be inappropriate to exercise the leave knowing that Ms Magney had applied to the Court to set that leave aside. The consequence will be that, if an order is made setting aside order 3, the proceedings will remain on foot without the plaintiffs' having leave to discontinue them.
The issues raised by par 5 were not defined by pleadings, but the Court had the benefit of detailed written submissions filed on behalf of Ms Magney in accordance with an order made by Stevenson J on 19 November 2014.
As I understand the submissions made on behalf of Ms Magney, she relies upon three submissions in support of her claim for relief in par 5 of her notice of motion. First, she argues that, on the proper construction of the orders made from time to time by the Tribunal, the orders have at all times been valid and effective, and have had the result that only Whelan had the power to exercise the functions of the executive committee of the Owners Corporation on 11 August 2014. Accordingly, none of the resolutions made by the executive committee on that date are valid. Therefore, the Owners Corporation is not bound by any resolution of its executive committee to instruct Mr Terrett to act on its behalf in relation to entering into any compromise agreement with the other parties to these proceedings, to sign the consent short minutes of order that he signed on behalf of the Owners Corporation, to give instructions on behalf of the Owners Corporation to request the Court to make any orders in terms of the consent short minutes of order, or to proffer or agree to the making of order 4 made on 26 August 2014 concerning the payment by the Owners Corporation of Whelan's costs. Consequently, any purported agreement constituted by the signed consent short minutes of order did not bind the Owners Corporation. The Owners Corporation was not as a matter of law represented on 26 August 2014 and did not effectively appear. Any orders made by the Court on that occasion were accordingly not made in the presence of, or with the consent of, the Owners Corporation. I will return below to a consideration of the procedural basis of this submission.
I should note that, as I understand Ms Magney's first submission, she did not rely upon an argument that, even if there was some defect in the effectiveness of the orders made by the Tribunal in so far as they reposed the power to exercise the functions of the executive committee solely in Whelan as at 11 August 2014, the second variation to the original orders made on 5 September 2014 corrected the deficiency, and on the proper interpretation of s 190 of the Act, the correction was effective retrospectively. Ms Magney's submission was that, at all times, the effect of the Tribunal's orders was that only Whelan could exercise the functions of the executive committee after the first order was made.
Ms Magney's second submission is based upon the terms of s 80D of the Act, which relevantly provides that neither an owners corporation, nor an executive committee of an owners corporation, may seek legal advice or the provision of any legal services, or initiate legal action, for which any payment may be required unless a resolution is passed at a general meeting of the owners corporation approving the seeking of the advice or services or the taking of that action. Ms Magney relies upon the fact that, if the relevant resolutions of the executive committee were effective, then the Owners Corporation would be required to indemnify the plaintiffs in respect of legal costs incurred on behalf of the Owners Corporation for advice and proceedings that had been obtained and commenced without the requirements of s 80D being complied with first. With respect, it is not entirely clear from Ms Magney's submissions as to how this argument forms a proper basis for the Court to set aside the orders made on 26 August 2014. In saying this, I do not mean to suggest in a positive way that there could be no such basis. Ms Magney's submissions note:
"Even if, technically, a resolution under section 80D of the SSMA was not required, the object of that section is to preclude an owners corporation, or an executive committee on its behalf, from incurring substantial legal costs without the approval of lot owners… That object has been defeated by the consent orders purportedly made in this case". [Emphasis in original]
For the present, I merely note that, while on the face of it there is plainly an inconsistency between the effect of the resolutions and the objective of s 80D, the resolutions do not appear directly to contravene the section, as they concern the granting of an indemnity rather than the incurring of the liability by the Owners Corporation. It may well be that the inconsistency between the effect of the resolutions and the statutory injunction contained in s 80D is sufficient to invalidate the resolutions, but the argument in support of that conclusion may be somewhat more complex than the bare argument that was put in Ms Magney's submissions.
The third basis upon which Ms Magney's case was put was that, even if the resolutions were otherwise valid, it was a breach of the fiduciary duty that the plaintiffs as members of the executive committee owed to the Owners Corporation for them to procure the resolutions for their own benefit in the circumstances that obtained (including, but not limited to, the magnitude of the costs and disbursements, and their failure to disclose the amount before the executive committee made their resolutions).
I have considered all of these arguments, but I have decided in the circumstances that the Court can properly decide Ms Magney's claim on the basis of her first submission. That submission is valid, and it justifies the Court making an order setting aside orders 3 and 4 that I made on 26 August 2014. I will elaborate my reasons for that conclusion below.
As I have noted above, I entertained the hearing of Ms Magney's notice of motion on a final basis during the course of the duty list on a provisional basis. I had in mind at the time that the need to deal with other business might interfere with the Court's capacity to hear the application properly. I acknowledge that my decision to determine the application solely on the basis of Ms Magney's first argument lies outside the basis upon which I originally agreed only to embark upon the hearing provisionally. As the matter was dealt with in the duty list, it was approached by all parties with considerable expedition. The expectation that the Court would have to deal with other business unexpectedly at any moment hovered, in my view, over the way in which the hearing was approached. That observation is not critical of any party. As it has happened, I am not satisfied that the parties had an adequate opportunity to deal with the subtleties that may be hidden in Ms Magney's second argument. It was not addressed in detail. This matter is not a proper vehicle for me to express any concluded view about how the terms of s 80D of the Act may impinge upon the validity of resolutions such as those made by the executive committee in these circumstances. It is easy to form a view at a superficial level that it would be strange if the executive committee could agree on behalf of an owners corporation to indemnify parties who had incurred legal costs by obtaining advice and commencing proceedings intended to be in the name of the owners corporation, where the lot owners in general meeting had not first been given the opportunity to comply with s 80D, and may never do so. However, the issue may give rise to subtle considerations that should only be determined by the Court when it is necessary to do so and after full argument.
As to Ms Magney's third argument - that the plaintiffs had breached fiduciary duties that they owed to the Owners Corporation - that also should not be dealt with given that it is not necessary to do so. Ordinarily, a claim of that type would be dealt with on pleadings and after the parties had had proper time to put on full evidence. Questions of the standing of an individual lot owner, such as Ms Magney, to seek orders setting aside the resolutions, given that they would not be void on this basis, on behalf of the Owners Corporation as a whole, might arise. The Court has no basis for knowing whether the Owners Corporation as a whole support to the outcomes sought by Ms Magney. Finally, my judgment is that the fiduciary duty claim is likely to raise many considerations that have not been addressed in the circumstances and were not properly dealt with on the hearing of the application. Given that it is unnecessary to do so, it would not be appropriate for me to make findings concerning alleged breaches of equitable duties by the plaintiffs on the material before the Court.
In support of her first submission, Ms Magney put forward a number of procedural arguments. It is sufficient to support the orders I propose to make that Uniform Civil Procedure Rules (NSW), r 36.16(2)(b) empowers the Court to set aside an order after it has been entered if it was made in the absence of a party. In my view, if a party - in this case the Owners Corporation - purports to appear at a hearing, but it does so represented by legal representatives who have no valid retainer from the party, the appearance is ineffective, and any order that is made is made in the absence of the appearance of that party. Additionally, in so far as order 3 made on 26 August 2014 was made by the Court, apparently at the request of all parties, in performance of the agreement embodied in the consent short minutes of order that were signed on behalf of the Owners Corporation, Ms Magney is entitled to rely upon the principle accepted by the High Court in Harvey v Phillips [1956] HCA 27; (1956) 95 CLR 235 at 243-4. For the purposes of the present application, it is a sufficient statement of that principle that the Court may set aside an order made by consent of parties in accordance with an agreement if, in the circumstances, that agreement is vitiated by any legal defect that would enable the Court under the general law to set aside the underlying agreement. In the present case, if the executive committee did not have authority to retain Mr Terrett and instruct him to sign the consent minutes of order on behalf of the Owners Corporation, that would be a basis for the Court to set aside the agreement. Accordingly, the Court has power to set aside order 3, as it was made on the purported request of the parties in performance of the agreement.
The submissions concerning Ms Magney's first argument distilled into two issues. First, at the time the executive committee purported to make the relevant resolutions, were the resolutions invalid because, at that time, by reason of the orders made by the Tribunal and the application of s 32 of the Act, only Whelan had power to exercise the functions of the executive committee? Secondly, if the answer to the first question would otherwise have been in the affirmative, did the actions of Whelan prior to and including the time when the executive committee made the resolutions have the effect that it had by some means vacated its office so that the pre-existing power of the executive committee to exercise its functions revived?
The first and most important of these two questions can, in my view, be answered shortly. Ms Magney correctly relied upon a number of authorities concerning how the Court should interpret the effect of an order of a court or tribunal that has been properly made: see Owston Nominees No 2 Pty Ltd v Branair Pty Ltd [2003] FCA 629; (2003) 129 FCR 558 at [27] (Allsop J, as his Honour then was); Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58 at [28] (Hodgson JA); AVS Group of Companies v Commissioner of Police [2010] NSWCA 81; (2010) 78 NSWLR 302 at [98] (Campbell JA). See also the discussion of the issue by Bergin CJ in Eq in Vitek v Taheri [2013] NSWSC 589 at [55]-[57] (upheld on appeal in Taheri v Vitek [2014] NSWCA 209). It is not necessary for present purposes to undertake an examination of those cases in detail. They at least justify the proposition that, when the meaning and effect of an order made by a court or tribunal is at issue, the Court should construe all of the orders that were made on the particular occasion as a whole, and the Court may have regard to the reasons for decision of the court or tribunal to determine the effect that the orders were intended to have. The authorities go further in relation to the material to which the Court may have regard, but it is not necessary for present purposes to assay the limits of the materials that may be taken into account.
In the present case, it must be remembered, the only relevant question is whether on 11 August 2014 the power to exercise the functions of the executive committee of the Owners Corporation resided exclusively in Whelan. The answer to that question depends upon whether order 3 made on 20 May 2014, and continued without variation on 24 July 2014, had that effect. In my view, it is clear from a consideration of order 3 that it did have that effect. That is what it says in plain terms.
True it may be that the Tribunal did not have power to make order 3 under s 162(2)(b) of the Act unless it had first made one of the orders available under s 162(1). But provided one of those orders was made, it did not matter which one. The only questionable part of order 1 was the reference to s 162(1)(a), which taken literally would suggest that the Tribunal intended that Whelan would exercise all of the functions of the Owners Corporation. Even if the Tribunal did not have that intention, but order 1 nonetheless had that effect, that would not impinge upon the meaning of order 3. In either case, so far as the functions of the executive committee were concerned, Whelan would have the exclusive power to exercise those functions.
If that is the result of the orders first made on 20 May 2014, the question would arise as to whether in some way the variation made by the Tribunal on 24 July 2014 by some mischance had the unintended consequence of invalidating all of the orders. The argument suggested by Whelan in its correspondence was that this baleful consequence had arisen because the validity of order 3 was dependent upon a valid order first being made under s 162(1). The argument appears to be that the effect of the absence of an express specification of the functions intended to be given to the strata managing agent by order 1 made under s 162(1)(b) was that the validity of order 1 unexpectedly collapsed, so taking the validity of order 3 with it.
That argument depends upon the proposition that the requirement in s 162(1)(b) that the strata managing agent be given specified functions requires as a matter of form that the functions be specified in the order that is expressed to be made under s 162(1)(b) itself. The implication is that the specification of the limited functions cannot properly be inserted in any other part of the suite of orders that is made on the occasion.
In the present case, the significance of the observation that the Tribunal's orders should be construed as a whole is that the Court should be careful to avoid looking at the individual orders separately and not in the context of all of the orders. The Court should not consider the meaning of order 1 made on each occasion divorced from a consideration of the meaning of order 3.
Nothing is to be served by making the consideration of this issue complicated. By its first variation, the Tribunal made it clear that it intended to act under s 162(1)(b). That was enough to establish that the Tribunal intended the strata managing agent that it appointed to exercise specified functions. Nothing required the Tribunal to specify those functions separately in order 1. The only question was whether they were sufficiently specified in the orders that were made. In my view, they obviously were in order 3, the meaning of which is entirely clear and has been clear from the outset.
I should record that it is not clear to me that the plaintiffs contested the proposition that the effect of one or both of the initial Tribunal orders was that the Tribunal had, as at 11 August 2014, appointed Whelan exclusively to exercise the functions of the executive committee. It may be that the plaintiffs were influenced by the effect of the second variation on 5 September 2014, which put the issue beyond argument, and they may have accepted that s 190 of the Act decided the issue retrospectively. The effect of s 190 in the context of the present case was not ventilated fully during argument. Accordingly, I should not decide the issue on the basis of the effect of s 190, although I have concluded that the better view is the words "and the order as so varied is taken to be the order instead of the original order" have effect in accordance with the ordinary and clear meaning of those words.
The second issue was whether in some way the executive committee was nonetheless empowered to exercise their functions because Whelan's conduct had the effect in some way of abandoning its appointment by the Tribunal.
It should be noted that, although Mr Russell on behalf of Whelan at the beginning of the hearing of the application informed the Court that Whelan did not consent to or oppose the making of the orders sought in par 5 of the notice of motion, and he with leave withdrew from the Court, the course that the hearing took caused me to invite Whelan to make submissions on this issue. At the time that Mr Russell withdrew, I did not appreciate that there would be an issue as to whether Whelan had in some way effectively abandoned its appointment. It would not be proper for the Court to make a finding on that issue without first giving Whelan an opportunity to be heard.
Subsequently, considered and helpful submissions on the issue were provided by Whelan. It is not necessary to relate those submissions at length. The primary issue addressed by Whelan was whether, assuming it was validly appointed as strata managing agent for certain functions of the Owners Corporation, it could lawfully resign by its own act, and whether it could accordingly cease to hold office for the purposes of s 32 of the Act without the making of some order by the Tribunal that had that effect. Whelan's position was that, once a party consented to its appointment by the Tribunal as a strata managing agent under s 162 of the Act, there was no statutory provision that entitled it to resign by its own act. It would continue to hold office pending the original order terminating by effluxion of time (see order 2 in the present case) or a further order of the Tribunal. Furthermore, Whelan submitted that as a matter of fact it had never purported to resign its office. Rather, it had raised doubts as to the effectiveness of the Tribunal's orders; consequently, it had declined to further exercise the functions imposed upon it until the legal uncertainties had been resolved, but it had always expressly explained that it remained ready and willing to act as the strata managing agent if, as the result of any court order or any order made by the Tribunal, the validity of its appointment was made clear.
Although I only invited Whelan to deliver submissions on this issue and was not asked by any other party when I made that direction to permit such party to respond to Whelan's submissions, on about 11 December 2014, I received submissions in response from the plaintiffs. The plaintiffs also sought to tender additional evidence in conjunction with their submissions. Subsequently, Ms Magney objected to the Court receiving any additional submissions that were not made in response to an invitation made by the Court. Notwithstanding that objection, I have not received any application by the plaintiffs to receive any further submissions or evidence. In these circumstances, I have not taken into consideration the additional submissions. Further, and additionally, without formal application, it would not be appropriate for the Court to receive new evidence.
The summary that I have set out above concerning the position taken by Whelan concerning the effect of the various orders made by the Tribunal is sufficient to establish - as a matter of fact - that Whelan did not at any relevant time purport to resign its appointment as strata managing agent in respect of any functions of the Owners Corporation, including those of the executive committee and its officers. All it did was to advise appropriate parties that, by reason of the doubt that it had as to the legal effectiveness of its appointment, it would not act further on that appointment until the doubt was resolved by appropriate steps taken by interested parties. It expressly disclaimed that it had resigned, and it equally expressly indicated that it remained willing to perform the functions accepted by it when its legal concerns were resolved. That conduct could in no way have the effect that Whelan ceased to hold office for the purposes of s 32 of the Act.
I will therefore in due course make an order that orders 3 and 4 of the orders that I made on 26 August 2014 be set aside.
By reason of order 7 that I made on 24 November 2014, order 2 made by Stevenson J on 19 November 2014 (which reflects order 6 sought in Ms Magney's notice of motion) will continue until further order.
That leaves for further consideration the issue of the costs of the notice of motion referred to in par 7, the costs of the proceedings in par 8, and whether the proceedings should be dismissed as sought in par 9 of the notice of motion. I will invite the parties to consider short minutes of order to implement the order that I have said I will make and to deal with the outstanding matters. The short minutes of order should provide for the return of exhibits and documents produced on subpoena.
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Decision last updated: 04 March 2015