The Owners - Strata Plan No. 44999 v Premier Holdings Corp Pty Limited and Gregg Ritchie and Partners Pty Limited

• Santai Pty Ltd v Owners - Strata Plan No 77971 [2010] NSWSC 628 - The Owners Strata Plan No 61643 v 183 On Kent Management Pty Ltd [2007] NSWSC 281 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 - Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 Texts Cited: -S Christensen & W D Duncan, "Estoppel in the face of consumer protection in land transactions - Judicial reasoning or judicial intuition" (2010) 18 APLJ 113 Category: Principal judgment Parties: The Owners - Strata Plan No 44999 (Plaintiff) Premier Holdings Corp Pty Limited (First Defendant) Gregg Ritchie & Partners Pty Limited (Second Defendant) Representation: Counsel: G. Sirtes SC/P. Lane (Plaintiff) R. Brender/A. Ahmad (Second Defendants) Solicitors: Robinson & Davies Pty Limited (Plaintiff) A I Legal (Defendants) File Number(s): 10/337148

Judgment 1These proceedings concern strata development SP 44999 which is a retirement village known as "Castle Pines". The Owners - Strata Plan 44999 ("the Owners Corporation") seek declarations in respect of the arrangements governing their relationship with Premier Holdings Corp Pty Limited ("Premier") and Gregg Ritchie & Partners Pty Limited ("GRP"). 2There was no appearance for Premier in the proceedings and I have been informed that it is in receivership and the receivers do not have any interest in the proceedings. The proceedings were defended by GRP, which asserts the benefit of management rights relating to the Castle Pines retirement village as the most recent assignee of a management agreement executed in 1996 ("the 1996 Deed") between the Owners Corporation and Castle Pines Management Pty Limited ("Castle Pines Management"). Chronology of events 3The chronology of events is largely uncontroversial. On registration of Strata Plan 44999, a restriction as to user was registered in relation to the strata plan by an instrument under s 88B of the Conveyancing Act 1919 (NSW), which prevented occupation of any lot unless, inter alia, the Owners Corporation had entered into the 1996 Deed. It appears that the restriction as to user was subsequently released on 22 December 2007. 4On or about 31 October 1996, the 1996 Deed was executed under the seal of the Owners Corporation with Castle Pines Management which provided for Castle Pines Management to provide specified services to the Owners Corporation. 5By cl 2.1 of a Deed of Assignment made on 30 June 1999 between Castle Pines Management and CP Management Pty Limited ("CPM"), Castle Pines Management assigned to CPM all its "right, title and interest in", inter alia, the 1996 Deed. CPM gave no undertaking in favour of Castle Pines Management or the Owners Corporation that it would perform its obligations under the 1996 Deed. The document in evidence was not executed on behalf of CPM but the Owners Corporation took no point as to that matter. 6By a subsequent Deed of Assignment dated 12 December 2000 between CPM, Australand Holdings Ltd ("Australand") and others, CPM assigned its right, title and interest in, inter alia, the 1996 Deed to Australand. The relevant provision was that: "2.1 The Assignor as beneficial owner assigns to the Assignee absolutely all of the Assignor's right, title and interest in the [1996 Deed] and the Assignee agrees to perform and discharge any obligations of the Assignor in relation to the [1996 Deed] and hereby indemnifies the Assignor and will at all times keep the Assignor indemnified in respect of any claims against the Assignor arising out of the [1996 Deed] and which claim or claims arise only after the date hereof." Australand's undertaking to perform CPM's obligations under the 1996 Deed in that clause was provided only in favour of CPM and not in favour of the Owners Corporation. 7It appears that a dispute subsequently arose between the Owners Corporation and Australand in about May 2004 and was, at least to some extent, resolved on the basis that the Owners Corporation would pay Australand for services until May 2004. 8By a subsequent deed dated May 2007, Australand assigned its rights under the 1996 Deed to Premier. Clause 3.3 of that Deed provided that: "Australand hereby assigns its rights, title and interest (if any) in the Management Rights to Premier. Australand does not warrant the validity or enforceability of the Management Rights." Clause 3.6 provided that: "Premier hereby covenants to diligently perform and discharge the obligations of Australand pursuant to each deed for Provision of Services and hereby indemnifies Australand and will at all times keep Australand indemnified in respect of any claims against Australand arising from the performance or discharge (or lack thereof) of the provision of services to the lot owners under the said deed." That provision related to services to be provided under deeds to which Australand as manager and individual lot owners were party and not, it appears, to services provided under the 1996 Deed. Even if that provision extended to the 1996 Deed, Premier's covenant to perform Australand's obligations was given in favour of Australand and not the Owners Corporation. 9The proceedings have been conducted on the basis that Premier assigned its rights under the 1996 Deed to GRP on or after 2 June 2010. The validity of the 1996 Deed 10The Owners Corporation seeks a declaration that the 1996 Deed is void and unenforceable, by reason of matters relating to the conduct of the first annual general meeting of the strata plan purportedly held on 31 October 2006 ("the First AGM"). The Owners Corporation also seeks an associated declaration that Special By-law No 2 purportedly adopted at the First AGM is void. 11The minutes of the First AGM record the passage of a resolution appointing Bryant Strata Management Pty Limited ("Bryant Strata Management") as managing agent, authorising the application of the common seal to an instrument in writing under s 78(1) of the Strata Titles Act 1973 (NSW) and delegating the powers, authorities, duties and functions of the Owners Corporation to Bryant Strata Management. The minutes also record a resolution adopting Special By-laws as annexed, which included Special By-law No 2 to the effect that the body corporate enter into and execute the 1996 Deed. 12The Owners Corporation points to a number of irregularities in the conduct of the First AGM but does not identify any legal consequence of some of those matters for its challenge to the 1996 Deed. In particular, the Owners Corporation pleaded that proper notice of the First AGM was not given, because notification was only given of proposed Special By-law No 1 without reference to other proposed special by-laws including Special By-law No 2, but did not submit that a deficiency in such notice gave rise to invalidity of the resolution passed at the First AGM to adopt those other Special By-laws. 13However, the Owners Corporation contends that Special By-law No 2 was adopted by ordinary resolution at the First AGM and therefore did not comply with the requirement of s 58(1A) of the Strata Titles Act 1973 that any amendment or addition to the by-laws must be undertaken by special resolution. The Owners Corporation therefore contends that Bryant Strata Management did not have authority to affix its common seal to the 1996 Deed when that deed was executed on 31 October 1996. The Owners Corporation contends that, although Special By-law No 2 was subsequently registered by the Registrar-General in accordance with s 58(3) of the Strata Titles Act on 12 December 1996, it did not take effect by registration until that date. 14GRP relies on the appointment of Bryant Strata Management as the Owners Corporation's managing agent at the First AGM and the fact that authority was given for the common seal to be fixed to an instrument of its appointment and contends that Bryant Strata Management had express authority to enter the 1996 Deed. Alternatively, GRP contends that Bryant Strata Management had implied authority to enter into the 1996 Deed by reason of the delegation of powers to it at the First AGM and the adoption of Special By-law No 2 at that meeting. In the further alternative, GRP contends that Bryant Strata Management had ostensible or apparent authority to enter into the 1996 Deed and relies on the indoor management rule in that regard. GRP also relies on the registration of Special By-law No 2 as a representation by the Owners Corporation that it was passed in accordance with the requirements of the Strata Titles Act by special resolution, or alternatively on the indoor management rule. 15The evidence to which I have referred above suggests that Special By-law No 2 was not validly passed at the First AGM and did not take effect until its registration on 12 December 2006. It is not, I think, necessary to determine the more complex questions whether Bryant Strata Management, as managing agent, had authority to enter the 1996 Deed prior to the by-laws taking effect or whether the later registration of Special By-law No 2 could validate the 1996 Deed even if Bryant Strata Management did not have authority to execute it on 31 October 1996. For the reasons noted below, it seems to me that Castle Pines Management was and GRP is entitled to rely on the indoor management rule in respect of the execution of the 1996 Deed. 16It has long been established that, if an instrument executed by a company is provided to a third party, and there is nothing on the face of the instrument to su g gest it was irregularly executed or authorised, the indoor management rule has the effect that the instrument is valid as between the company and a person who had no notice of the irregularity of its execution: County of Gloucester Bank v Rudry Merthyr Steam and House Coal Colliery Co [1895] 1 Ch 629. In Morris v Kanssen [1946] AC 459, the House of Lords approved a formulation of the indoor management rule as having the effect that persons contracting with a company and dealing in good faith may assume that acts within its constitution and powers have been properly and duly performed and are not bound to inquire whether acts of internal management of the company have been reg u lar. In Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 17 ALD 658; 86 ALR 119; 7 ACLC 525, Gummow J treated the indoor management rule as reflecting a principle that, if the affairs of the company are being conducted in a manner which appears to be consistent with its constitution, third parties dealing with the company are entitled to assume that all has been done regularly and are not affected by an internal irreg u larity. 17In Northside D e velopments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146; 2 ACSR 161, Mason J cited Morris v Kanssen as authority that a person who dealt with a company in good faith could assume that acts within its constitution and powers had been duly performed and was not bound to inquire whether acts of internal management have been regular (at CLR 155), a l though his Honour noted that the rule would not apply if the person dealing with the company knew that the officer of the company lacked authority or the circumstances put that person on notice of that fact. Brennan and Gaudron JJ suggested that the indoor management rule was based upon an estoppel that prevented the company from denying the validity of an act apparently done by an officer or agent on behalf of the company. Brennan J summarised the requirements for an estoppel binding the company as to the validity of the transaction as being that the document is executed by officers or agents who would ordinarily be expected to have authority to do so; the document is executed for the purpose of the company's business or otherwise for the company's benefit; and there are no circumstances which put the recipient on inquiry as to the authority of those who ex e cuted the document (at CLR 187). Gaudron J treated the issue as being whether the company had played such a part in creating an assumption that the transaction was regular and binding on it that it should be held to that assumption. The minority, Dawson and Toohey JJ, held that the indoor management rule depended upon normal agency princ i ples and could not give rise to an assumption of authority if neither actual nor ostensible authority existed. 18These principles were applied in the context of the body corporate of a strata scheme in Coastastyle Pty Ltd v Proprietors, Surf Regency Building Units Plan 4246 (unreported, Supreme Court of Queensland Court of Appeal, 12 October 1992). (A different aspect of that decision was disapproved by Brennan and Toohey JJ in Humphries v Proprietors "Surfers Palm North" Group Titles Plan 1995 (1993-94) 179 CLR 597 at 603). In the present case, the 1996 Deed was regular on its face, it was not established that Castle Pines Management knew of any deficiency with its execution and nothing has been shown that would have placed Castle Pines Management on inquiry as to such a deficiency. In these circumstances, it seems to me to be open to Castle Pines Management and GRP to rely on the indoor management rule so as to prevent the Owners Corporation denying the validity of the 1996 Deed by reason only of any deficiency in Bryant Strata Management's authority to execute that deed on 31 October 1996. Invalidity of the 1996 Deed by reason of s 78 of the Strata Titles Act 19The Owners Corporation also contends that the 1996 Deed was void because Castle Pines Management was undertaking the work of a managing agent and there was no resolution in general meeting and no written delegation of authority for Castle Pines Management to exercise the functions or powers of the Owners Corporation or such of the powers as was referred to in the 1996 Deed, as required by s 78(1) of the Strata Titles Act . The Owners Corporation also contends that Castle Pines Management (and subsequent assignees of the 1996 Deed) did not hold the necessary licence under the Auctioneers and Agents Act 1941 (NSW) (subsequently renamed the Property, Stock and Business Agents Act 1941 (NSW)) ("Agents Act") to act as a managing agent for the Owners Corporation and the 1996 Deed was therefore void by reason of s 78(1AA) of the Strata Titles Act . 20Section 78 of the Strata Titles Act provided, at the relevant time, that: "78(1) Subject to subsection (1A), a body corporate may, in general meeting and by instrument in writing, appoint a managing agent and may, in like manner, delegate to him: (a) all of its powers, authorities, duties and functions; (b) any one or more of its powers, authorities, duties and functions specified in the instrument; (c) all of its powers, authorities, duties and functions except those specified in the instrument, and may, in like manner, revoke the appointment and delegation or revoke in part the delegation. (1AA) A body corporate shall not appoint a person as managing agent unless the person is the holder of a strata managing agent's licence issued pursuant to the Auctioneers and Agents Act 1941. (1A) A body corporate may not, under subsection (1), delegate to a managing agent its power to make: (a) a delegation under that subsection ..." 21Section 20(3) of the Agents Act in turn provided that a corporation shall not act as or carry on the business of, inter alia, a strata managing agent unless it has taken out a corporation licence and employs as the person in charge of its sole or principal place of business an individual who is appropriately licensed. The evidence establishes that none of the relevant assignees, including GRP, held such a licence at any relevant time. 22The Owners Corporation relies on the decision of the Court of Appeal in Gillett v Halwood Corporation Ltd [1998] NSWCA 281. In that case, an owners corporation had entered into a management agreement with an entity which was to provide services to residents in the strata scheme. The ground of invalidity in that case was that the resolution to enter into the relevant agreement was a resolution of the council of the body corporate rather than the body corporate in general meeting. 23Priestley JA (with whom the other members of the Court of Appeal agreed) observed that s 78 of the Strata Titles Act empowers an owners corporation to appoint a managing agent and to delegate some or all of its powers, authorities, duties and functions to that managing agent. His Honour observed that, although the Strata Titles Act does not define "managing agent", the various provisions in that Act which use that term support the view that a managing agent, for the purposes of Pt 4 Div 3 of that Act, is a person or entity to whom a body corporate, pursuant to s 78(1) has delegated any one or more of its powers, authorities, duties and functions. His Honour noted that the appointment of a delegate under s 78(1) of the Act was "directed to the appointment of an agent in the nature of an independent contractor, over whom the body corporate will not have the power of control that an employer has over an employee", distinguishing the power to employ agents and servants under cl 2 of the statutory by-laws was directed to "the creation of an employment relationship, in the course of which the council will have the power of an employer to control directly the way in which its employed agent or servant carries out the employment". 24His Honour reasoned that, as a matter of policy, a body corporate was entitled to the protection following from the requirement that such an agent be licensed under the Agents Act as a strata agent where he or she would not be the subject of the owners corporation's immediate control or supervision, and the appointment of a person who did not hold the necessary licence as the owners corporation's delegate was outside its power which was confined by Strata Titles Act s 78(1). Handley JA agreed with Priestley JA and gave additional reasons, and suggested that the term "managing agent" in the Strata Titles Act should be given the definition of that term adopted in the Agents Act. Powell JA agreed with both Priestley JA and Handley JA. 25The steps in the reasoning of Priestley JA in Gillett were in turn summarised by Bergin J in Coffey v Fernbank Management Pty Ltd [2001] NSWSC 192 at [33]ff. In Owners - Strata Plan No 51487 v Broadsand Pty Ltd [2002] NSWSC 770 at [29], Hamilton J similarly held that the appointment of a management company to perform services including managing maintenance, cleaning and repair of common property amounted to the appointment of a managing agent for the purposes of s 78(1A) of the Strata Titles Act (at [29]). The agreements considered by the Court of Appeal in Gillett and by Hamilton J in Broadsand were made when the Strata Titles Act 1973 (NSW) was in force and the agreement in issue in this case was also made at that time. 26GRP contends that the proper approach to the question whether Castle Pines Management was appointed as managing agent is to assess whether its engagement involved a significant shift in decision-making control: Owners - Strata Plan No 56443 v Regis Towers Real Estate Pty Ltd [2003] NSWCA 274; (2003) 58 NSWLR 78. In that case, involving an agreement made after the commencement of the Strata Schemes Management Act 1996 (NSW), Hodgson JA observed at [29] that: "[W]hat 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." (at [29]). His Honour observed that the critical question was whether the owners corporation had "given over sufficient decision-making and control in relation to its maintenance and repair functions to amount to delegation of some of those functions?" GRP also relies on the decision of McDougall J in Owners Strata Plan No 61643 v 183 On Kent Management Pty Ltd [2007] NSWSC 281 at [67] for the proposition that the decision in Regis Towers has changed the focus of analysis since the prior decision of Hamilton J in Broadsand . The decision in 183 On Kent Management Pty Limited concerned ss 13 and 28 of the Strata Schemes Management Act , which McDougall J noted resembled, in broad outline, the scheme contained in the provisions of the Strata Titles Act . 27I turn to the question whether Castle Pines Management and its successors were "managing agents" for the purposes of s 78 of the Strata Titles Act . The 1996 Deed provided that the manager was to provide specified services at the cost of the Owners Corporation, such costs to be charged to proprietors of individual lots in the strata plan as part of their levies. A number of the provisions contained in the 1996 Deed were significant functions of an owners corporation, including gardening; repair, maintenance and cleaning of common property; and enforcing the by-laws of the strata plan (clause 5.1). Clause 5.1 of the 1996 Deed in turn provided that: "The Manager shall use its best endeavours to ensure that there are no breaches of the By-Laws of the Strata Plan ... and the Body Corporate hereby grants to the Manager the rights to enforce compliance with all such By-Laws and burdens." 28Several of the services to be provided by the manager were also specified in very general terms, such that the manager would have a significant degree of discretion as to the extent of the services which would be provided, which would require it both to determine the standard to which those services should be provided and the extent of the resources which were to be applied (and the consequential costs to be charged to proprietors of individual lots through their levies) in respect of those services. For example, those services included: "(h) Sufficient staff and/or contractors to repair maintain and clean all buildings landscaped areas and communal facilities contained in Castle Pines. (j) Such other staff and services as the Manager deems necessary for the proper and efficient running of Castle Pines as a first class residential village for retirees. (k) Maintenance, repair and replacement of [specified items]. (l) Maintenance, repair, refurnishing, redecorating and cleaning of the Common Property. (m) Gardening to all common areas. (o) To fulfil the requirements of management under the Retirement Villages Act , 1989 the Regulations and Codes thereunder and without limiting the generality hereof to convene and refer to such Committees and Tribunals as prescribed under the Act." 29The extent of staff which would be necessary to comply with the requirement contained in paragraph (h) and the consequential cost would depend upon the standard which the manager determined as the standard to which the buildings, landscaped areas and communal facilities should be maintained. The extent of the services required under paragraph (j) and the consequential cost would depend upon the manager's assessment of what constituted the "proper and efficient" running of Castle Pines, what the manager understood to be the standard of a "first class" residential village for retirees and what it considered necessary for that purpose. The extent of work involved under paragraph (l) would again depend upon setting a standard to which Common Property was to be maintained etc. 30The extent of the manager's control under the 1996 Deed was reinforced by cl 6.1 of the 1996 Deed which prohibited the Owners Corporation leasing or granting any licence to any person other than the manager in respect of any part of the Common Property for the purpose of carrying on business similar or related to or incidental to any activity or business carried on by the manager and also prohibited the Owners Corporation, without the manager's prior consent, granting any right to carry out specified activities on the Common Property. Clause 7.1 of the 1996 Deed provided that the manager shall at the Owners Corporation's expense: "engage such employees and relief staff and services as are reasonably necessary for the carrying out of the Manager's services and obligations herein". While that clause adopts an objective standard by using the phrase "reasonably necessary" it also provides the Owners Corporation no control over that process. 31Clause 16.1 of the 1996 Deed in turn allowed the manager to make such rules and regulations as it deemed fit for the proper management of the Village and Common Property of Castle Pines. Again, that provision allowed no control or intervention by the Owners Corporation in respect of the content of those rules. 32The special by-laws further entrenched the manager's position under the 1996 Deed. In particular, Special By-law No 3 provided that: "That the Body Corporate specially resolved to grant to Castle Pines Management Limited the exclusive use of the part of the Common Property known as the Village Centre and such other parts of the Common Property as are reasonably necessary for the purposes of providing or causing to be provided the Services described in the [1996 Deed] ..." Special By-law No 5 in turn provided that: "Castle Pines Management Pty. Limited, the Administrator or Manager appointed by the Body Corporate, shall have the power in its absolute discretion to restrict and make rules for the use of any facility whether upon Common Property or within or around the Village Centre in the interests of the health and safety of the residents and the general amenity of the Strata Scheme and its residents." The width of that power is emphasised by the fact that it could be exercised in Castle Pines Management's absolute discretion and by reference to a criterion as wide as the "general amenity" of the scheme. 33The 1996 Deed contained no provision for the Owners Corporation to direct the manager in respect of any aspect of the provision of the relevant services, whether by setting generalised standards or in respect of the manner in which the work was to be performed. I invited Counsel for GRP, in the course of submissions, to identify any controls upon the manager's provision of services and the only control that he could identify was the Owners Corporation's right, under s 78 of the Strata Titles Act , to revoke the appointment and delegation of the manager. However, as the Owners Corporation pointed out in submissions, that power was of little or no practical utility where its exercise would place the Owners Corporation in breach of the 1996 Deed which only permitted termination by agreement between the Owners Corporation and the manager. 34Clause 3.1 of the 1996 Deed in turn provided that: "3.1 The Manager is not and shall not be deemed to be a managing agent pursuant to Section 78 of the Strata Titles Act, 1973 (as amended) or a strata managing agent pursuant to the Auctioneers and Agents Act, 1941 PROVIDED ALWAYS that should a managing agent pursuant to Section 78 of the said Act be appointed, then any provision of this Deed shall prevail over any conditions which may be included in such managing agent's agreement." The proper characterisation of the 1996 Deed and of the appointment of Castle Pines Management under that deed must be determined having regard to the substance and effect of the instrument, rather than by a provision of this character: Radaich v Smith (1959) 101 CLR 209; Gillett per Priestley JA. GRP, rightly, did not contend that this provision was determinative of whether Castle Pines Management was, as a matter of fact, a managing agent for the purposes of the Agents Act at the time the 1996 Deed was executed. 35I do not think it matters, for the purposes of these proceedings, whether the decision in Regis Towers and Owners Strata Plan No 61643 v 183 On Kent Management Pty Limited involve a difference in approach, at least of degree, from the earlier decisions in Gillett and Broadsand . Whichever approach is adopted, it seems to me that the absence of any real control conferred on the Owners Corporation over the functions which were to be performed by Castle Pines Management means that the Owners Corporation had conferred sufficient decision-making and control in relation to those functions on Castle Pines Management to amount to delegation of some of those functions to it. 36The distinction between this case and Regis Towers and 183 On Kent Management is therefore one of fact. In each of those cases, the relevant body corporate had maintained control over the manner in which the manager performed its functions; by contrast, in this case, it had not. In this case, the Owners Corporation had no real power to direct Castle Pines Management as to the manner in which the functions conferred on it under the 1996 Deed were to be exercised. The Owners Corporation also did not have the power to confine Castle Pines Management by setting a budget for repair, maintenance, renewal of replacement or to give reasonable and lawful directions to Castle Pines Management of the kind which existed in 183 On Kent Management , nor are the rights conferred on Castle Pines Management by cl 1 of the 1996 Deed narrowed by subsequent provisions of the kind to which McDougall J referred in that case. The extent of the responsibilities I have set out above mean that Castle Pines Management and its successors would, in performing the functions specified by the 1996 Deed, be a "managing agent" for the purposes of s 78 of the Strata Titles Act . 37I consider that the Owners Corporation complied with the formal requirements of s 78(1) of the Strata Titles Act in respect of the appointment of Castle Pines Management, although the process by which that compliance occurred was somewhat indirect and scarcely transparent. That section required, first, that the appointment be made in general meeting. In my view, that occurred because the First AGM of the proprietors of the strata plan held on 31 October 1996 resolved to adopt the special by-laws as annexed to the minutes and the special by-laws in turn provided that the Owners Corporation enter into and execute the 1996 Deed in the form of the deed annexed to those by-laws; or at least the Owners Corporation is prevented by the indoor management rule or the registration of the special by-laws from denying that resolution. The Owners Corporation contends that the resolution adopting Special By-law No 2 and the consequential authority to execute the 1996 Deed is not a delegation of the Owners Corporation's function and powers to Castle Pines Management so as to comply with s 78(1) of the Strata Titles Act . I am unable to accept that submission, which seems to me to be a matter of form rather than of substance. The relevant instrument was in writing comprising the terms of the 1996 Deed. 38I also do not consider that the appointment involved a delegation by the Owners Corporation to the managing agent, Bryant Strata Management, of its power to make a delegation under s 78(1). I reach that conclusion because Special By-law No 2 provided for the direct entry by the Owners Corporation into the 1996 Deed although the physical act of execution of the 1996 Deed was undertaken by Bryant Strata Management. 39Accordingly, I do not find that the appointment of Castle Pines Management was invalidated by reason of any failure to comply with Strata Titles Act s 78(1). 40However, I have found that Castle Pines Management (and its successors) were appointed as managing agents for the purposes of s 78 of the Strata Titles Act and that finding has the result that that appointment was the appointment of an unlicensed managing agent in contravention of s 78(1AA) of the Strata Titles Act . The application of s 78(1AA) was considered in Gillett v Halwood Corporation Ltd , although it was not strictly necessary to the Court of Appeal's decision. In my view, the reasoning in Gillett to which I have referred above indicates that such an appointment was outside the power of the Owners Corporation. 41Early in oral submissions, the Owners Corporation suggested that it took the point that the entry into the 1996 Deed was outside the Owners' Corporation's power in that it amounted to the appointment of an unlicensed managing agent rather than a point as to illegality arising from the same facts. However, GRP fully addressed principles of illegality in its written submissions and the Owners Corporation ultimately took a point as to illegality in its oral submissions (T28). In my view, the 1996 Deed is also unenforceable by reason of illegality. 42In Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538 at 613, McHugh J identified circumstances where a Court may refuse to enforce legal rights arising out of an unlawful purpose as including where: "(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies." In determining whether a contract would be unenforceable by reason of illegality, the Court must have regard primarily to the scope and purpose of the statute to consider whether the legislative purpose would be fulfilled without regarding the contract as void and unenforceable: Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215 at 227. An agreement involving a contravention of s 78(1AA) was treated as unenforceable for illegality in Gillett and also in Broadsand , although GRP contends that this occurred on the basis of limited analysis in each case. On the other hand, in Santai Pty Ltd v Owners - Strata Plan No 77971 [2010] NSWSC 628, McDougall J declined to hold a letting agreement to be void for illegality, but in circumstances where the relevant illegality was not in performance of that agreement but in the performance of other, individual, contracts between the unlicensed party and owners. 43I consider that the statutory purpose underlying s 78(1AA) requires that the 1996 Deed be treated as unenforceable where its substance is to make a continuing appointment of an unlicensed managing agent that is prohibited by that section. Conversely, I consider the statutory purpose would not be served if the Owners Corporation was bound by an agreement with an unlicensed person which in its terms could only be terminated with that unlicensed person's consent, notwithstanding a continuing contravention of s 78(1AA) of the Strata Titles Act. I do not consider that this result is altered by the fact that s 20(4) of the Auctioneers and Agents Act 1941 (NSW) is capable of exposing the unlicensed person to a penalty in that situation. 44I also do not accept GRP's submission that the Owners Corporation should be treated as responsible for the relevant illegality and should bear its consequences, in circumstances that it was the obligation of the managing agent to comply with the requirements of the Agents Act. Nor do I consider that there is any basis on which the third and fourth assignees of the 1996 Deed, who are also unlicensed, should be in a stronger position than the original unlicensed party to the 1996 Deed. Ratification 45GRP also contends that the 1996 Deed has been adopted or ratified by subsequent conduct, including confirmation of the minutes of the First AGM; the passing of budgets after 1996 by which provision was made to pay for services provided pursuant to the 1996 Deed; the Owners Corporation accepting services provided under the 1996 Deed; and the passage of a special resolution dated 24 March 2004 by which the Owners Corporation sought to amend the level of care provided under the 1996 Deed. 46I do not consider that the conduct set out above, which involved the Owners Corporation dealing with Castle Pines Management and its successor when each of them was unlicensed, can either validate the entry into the 1996 Deed where it was outside the Owners Corporation's power by reason of Strata Titles Act s 78(1AA) or avoid the consequence that the 1996 Deed was unenforceable by reason of illegality. Whether subsequent assignments of the 1996 Deed complied with the requirements of cl 12.1 of that Deed 47The Owners Corporation also seeks a declaration that subsequent assignments of the 1996 Deed are void. I should first note that it seems to me probably that the 1996 Deed (as distinct from the manager's rights under it) could not be "assigned" and a tripartite agreement between the Owners Corporation, the assignor and the assignee would have been required if obligations under the 1996 Deed were to be addressed. It is well established that a contractual obligation cannot be assigned without the consent of the other contracting party and this, in practice, requires novation of the original contract: Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at [668]; Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473 at 491-493; Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; (2006) 149 FCR 395 at [32]. No such tripartite agreement was executed. 48Clause 12 of the 1996 Deed provides for the assignment of the 1996 Deed as follows: "12.1 This Deed is assignable by the Manager after the Body Corporate has become the Body Corporate and any assignee or transferee shall enter a deed so as to observe all the terms and obligations of this Deed as if the assignee or transferee were the Manager herein named." That clause does not expressly indicate whether the relevant deed of assignment is to be given in favour of the Owners Corporation or in favour of the assignor. 49The Owners Corporation contends that the 1996 Deed could only be assigned so far as the assignee or transferee entered into a deed with the Owners Corporation to transfer all the terms and conditions of the deed as if the assignee or transferee were the manager. This contention raises two issues as to the construction of cl 12.1 of the 1996 Deed, first, whether that clause required that a deed be given in favour of the Owners Corporation or only by the assignee in favour of the assignor and, second, whether compliance with that requirement was a pre-condition to the validity of an assignment. I approach these questions on the basis that the rights and liabilities of parties to a contract are to be determined on objective principles, by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement and with regard to the surrounding circumstances known to the parties and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]. To ascertain the intention of the parties from the words of their contract, the whole of the contract must be considered and an attempt must be made to render every part " harmonious one with another": Australian Broadcasting Commission v Australasian Performing Right Association Limited [1973] HCA 36; (1973) 129 CLR 99 at 109. 50In my view, the parties must have intended that the covenant contemplated by cl 12.1 of the 1996 Deed be given in favour of the Owners Corporation, since the Owners Corporation's interests would not be properly protected by an obligation owed only to the assignor to comply with the terms of the Deed, particularly if (as could foreseeably occur, and has in fact occurred) there were several successive assignments of the 1996 Deed. The parties could not have objectively intended that, several years after the entry into the 1996 Deed, the Owners Corporation could only enforce it by bringing proceedings against the original party to the 1996 Deed, Castle Pines Management, which might by then have been placed in liquidation or deregistered, without any practical ability to compel compliance with the 1996 Deed unless Castle Pines Management and each successive assignor then chose to bring a cross-claim to compel the successive assignee to do so. 51In my view, the requirement for entry into such a deed in favour of the Owners Corporation is properly construed as a condition of a valid assignment of the 1996 Deed, so that the Deed is not assignable if that requirement has not been complied with. It could not reasonably be understood by the parties that the Deed could be assigned in circumstances that there had been non-compliance with this requirement, leaving the Owners Corporation to bring a claim either for specific performance of the obligation to enter into that deed or to a claim for damages, which might well be difficult to establish, for non-compliance with that obligation. 52It appears that no such undertaking was given in favour of the Owners Corporation (or even in favour of the assignor) when the 1996 Deed was assigned from Castle Pines Management to CPM on 20 June 1999. It follows that this assignment was not effective in law to assign the rights of Castle Pines Management under the 1996 Deed, either on the view which I take that cl 12.1 of the 1996 Deed required such an undertaking in favour of the Owners Corporation or even if the alternative view were taken that such an undertaking only needed to be given in favour of the assignor. It follows that each subsequent assignment was also not effective, since the subsequent assignors had not acquired rights which they were capable of assigning. 53The subsequent assignment from CPM to Australand contained a covenant given in favour of CPM by Australand to perform and discharge any obligations of CPM. Even if (contrary to my view) CPM had acquired any rights to assign, that covenant would not comply with the requirements of cl 12.1 of the 1996 Deed since it was not given in favour of the Owners Corporation, on the view which I take as to the requirements of that clause. The same analysis applies in respect of the third deed of assignment from Australand to Premier, which also contained no undertaking by Premier in favour of the Owners Corporation to observe the terms and obligations contained in 1996 Deed. 54In answer to the attack on the assignments of the 1996 Deed, GRP contends that, if it is a requirement that it execute a deed with the Owners Corporation indicating that it will comply with its obligations under the 1996 Deed, it is ready willing and able to do so and the lack of such a deed to date does not invalidate the assignments. In my view, this proposition provides no answer to the previous failures to comply with the requirements of cl 12,1 of the 1996 Deed since the validity of the chain of assignments by which GRP acquired the rights would depend on each assignee having given such an undertaking and there is no evidence that any previous assignee is prepared to do so. 55Given the findings which I have reached above, it is not necessary for me to reach a finding as to whether the assignments are also ineffective by reason of a failure to comply with s 78 of the Strata Titles Act , so far as the assignment would, if otherwise effective, amount to the appointment of a managing agent otherwise than by the Owners Corporation in general meeting and by instrument in writing. I see considerable force in the Owners Corporation's contention that, where the assignee would be exercising functions which amount to those of a managing agent, compliance with s 78 of the Strata Titles Act would be required in that situation, since otherwise the requirements of the Act could readily be avoided by the appointment of a licensed person as managing agent, immediately followed by a purported assignment of the rights of that licensed person to an unlicensed person. Notice of the assignments 56The Owners Corporation also contends that the assignments were not effective in law, by reason of non-compliance with s 12 of the Conveyancing Act 1919 (NSW). (Mr Sirties SC, who appeared with Ms Lane for the Owners Corporation, indicated in oral submissions that the declaration sought by the Owners Corporation did not address the status of the assignments in equity). 57A letter dated 30 September 1999 to the Executive Committee of the Owners Corporation advised that CPM and Castle Pines Management had reached agreement: "whereby Castle Pines Management Pty. Limited will purchase CP Management Pty. Limited being the owner of Lot 43 in Strata Plan and rights to the Management Company. The letter also stated that Castle Pines Management had agreed to continue managing the village as CPM's agent until the transaction was completed. I do not consider that that letter constituted notification of an assignment of the rights under the 1996 Deed. The letter contained no reference to such an assignment, and would be open to the reading that the relevant transaction involved a purchase of the shares in CPM by Castle Pines Management. Even if the recipient of the notice would understand the letter to be intended to refer to a purchase by CPM of Castle Pines Management rather than a purchase of CPM by Castle Pines Management, that would not give notice of an assignment of rights in the 1996 Deed. 58However, a letter dated 18 August 2003 from the solicitors for Australand to the Owners Corporation advised of the assignment by Castle Pines Management to CPM on 30 June 1999 and of the assignment by CPM to Australand on 12 December 2000. The letter stated that it annexed copies of the relevant documents, although they were not contained with a copy of the letter that was in evidence before me. In my view, this letter provided sufficient notice of the assignments by Castle Pines Management to CPM and by CPM to Australand for the purposes of s 12 of the Conveyancing Act . 59A letter dated 22 January 2008 from Premier to "the owners" stated that: "We also confirm that the management rights have also been transferred to us from Australand." I do not consider that this letter gave notice of the subsequent assignment of the 1996 Deed by Australand to Premier to the Owners Corporation for the purposes of s 12 of the Conveyancing Act since the individual owners and the Owners Corporation are distinct entities. 60Mr Leonard Robinson, who is the principal of the managing agent appointed by the Owners Corporation and has held that role since 1997, gave evidence that, to his knowledge, no formal notice in writing had been provided by the assignees or anyone else of the assignment of the rights under the 1996 Deed to the Owners Corporation, although he fairly acknowledged that individual residents who were members of the Executive Committee of the Owners Corporation had provided him with copies of the deeds of assignment from time to time. Ms Jeffreys, who is secretary of the Owners Corporation and has been secretary of the Executive Committee between November 2002 and November 2004 and from May 2010 to at least December 2011 gave evidence, based on her review of records of the Owners Corporation that, so far as she was aware, no formal notification was provided to it of the assignment of rights under the 1996 Deed from Castle Pines Management to CPM. Ms Jeffreys acknowledged that, in January 2008, Premier wrote to individual residents of Castle Pines stating that Australand had transferred the management rights to it (as I have noted above) but she does not recall formal notice of the assignment having been given to the Owners Corporation and cannot find a copy of such notification in the Owners Corporation's records. 61Mr Kavanagh, a director of Premier who swore an affidavit in the proceedings, did not give evidence that notice of the subsequent assignment from Premier to GRP was given to the Owners Corporation, although one would expect those matters to be within his knowledge. Given the evidence of Mr Robinson and Ms Jeffreys and the absence of any evidence of Mr Kavanagh that such notice was given, GRP has not established that notice of that assignment was given to the Owners Corporation. 62I therefore find that the assignments by Australand to Premier and by Premier to GRP are therefore not effective in law, even if (contrary to my view) they would otherwise have been effective. Election and waiver 63GRP also contends that the Owners Corporation has waived its rights because it obtained legal advice in 2004 and at that time decided not to commence litigation in respect of the relevant matters, and instead determined to leave the 1996 Deed on foot but not seek or pay for services under it. 64However, waiver or election typically arises in respect of a choice between inconsistent rights or positions: Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 655-658; Khoury v Government Insurance Office (NSW) [1984] HCA 55; (1984) 165 CLR 622 at 635; GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 at [356]ff. The Owners Corporation has maintained its objection to the 1996 Deed throughout the relevant period and I do not consider that its decision not to commence litigation at an earlier date, while maintaining a continuing objection to the 1996 Deed, amounted to an abandonment of that objection or an election not subsequently to assert it. 65Had I not decided the question of election and waiver on that basis, a question would have arisen whether GRP could rely on a waiver or election so as to prevent the Owners Corporation from relying on the statutory protections afforded to it under s 78 of the Strata Titles Act , where that waiver or election would seem to be inconsistent with the terms and purpose of the statute creating those protections; compare Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 at 1016-1017; Keen v Holland [1984] 1 WLR 251; Barilla v James (1964) 81 WN (Pt 1) 457 at 464; Owners - Strata Plan No 51487 v Broadsand Pty Ltd at [19]-[20]; Beckford Nominees Pty Ltd v Shell Co of Australia Ltd (1987) 73 ALR 373 at 378-379; Metropolitan Health Service Board v Australian Nursing Federation [2000] FCA 784; (2000) 99 FCR 95; Tudor Developments Pty Ltd v Makeig [2008] NSWCA 263; (2008) 72 NSWLR 624; Neumann Contractors Pty Ltd v Traspunt No 5 Pty Ltd [2010] QCA 119; [2011] 2 Qd R 114 at [67]; Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305 at [51]; Ace Insurance Ltd v Trifunovski [2011] FCA 1204; see also S Christensen & WD Duncan, "Estoppel in the face of consumer protection in land transactions - Judicial reasoning or judicial intuition" (2010) 18 APLJ 113. However, it is not necessary for me to express a concluded view as to that matter given the conclusion that I have reached above. Orders and costs 66I direct the parties to submit Short Minutes of Order to give effect to this judgment to my Associate by 4pm on 13 March 2012, if agreement as to the form of those orders can be reached between them. If no agreement is reached, each party should submit the form of orders for which it contends and short written submissions dealing with any matters disputed between them to my Associate by that time. My preliminary view is that the GRP should be ordered to pay the Owners Corporation's costs of the proceedings, but the question of costs should be addressed in any such draft orders and submissions.

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