The Owners-Strata Plan No. 51487 v. Broadsand P/L [2001] NSWSC 813

Judgment 1 His Honour: The defendant's Notice of Motion dated 24 August 2001 claims an order that the proceedings be stayed until further order. Two proceedings are pending between the parties, one brought by The Owners Corporation in this Court for a declaration that a Management and Letting Services Agreement dated 11 January 1996 is void or alternatively unenforceable, and one brought by Broadsand in the Industrial Relations Commission of New South Wales claiming relief under s.106 of the Industrial Relations Act 1996 (which relates to declaring void or varying a contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract). Both courts are superior courts of record and each has been asked to exercise a jurisdiction which the other does not have. 2 The Agreement relates to Victoria Tower at 197-199 Castlereagh Street, Sydney, and to the part of the building which is subject to Strata Plan 51487 and comprises 35 of 36 floors on which there are one commercial unit and 251 residential units. The Owners Corporation entered into the Agreement all the units were owned by the developer of Victoria Towers, and the management company Victoria Tower Management Pty Ltd was wholly controlled by the developer. The Agreement recited that the Body Corporate had resolved "… to appoint the Management Company to perform duties and provide services on behalf of the Body Corporate for the control, administration, management and maintenance of the Strata Scheme." The Agreement provided in cl.2 for appointment of the Management Company to perform duties and provide services defined in the Agreement, including letting services as defined in Schd.3. The definitions of the services to be performed are very extensive and relate to managing and maintaining the common property, providing services associated with occupation of lots, the arrangements of leases and licences for the occupation of lots and the provision of any services associated with occupation of lots. Exceptions to the management company's powers in cl.3.4 include a provision to the effect that nothing in the Agreement imposes any obligation or confers any right on the management company to "(b) perform any duty or power of a licensed managing agent;" The Agreement was initially for a term of five years but there were options for renewal which could extend it to twenty years. The management company was entitled to remuneration being an Establishment Fee and a Scheduled Works Fee; the Scheduled Works Fee was defined in an elaborate way which it is not necessary to consider fully now, and appears to entitle the management company to $100,000 in the first year, with an escalation of at least 8% in each subsequent year, potentially for a term of 20 years; in the last year, on the construction put forward by the Owner's Corporation, the fee of $100,000 p.a. would be escalated by 1.08 to the 19th power, which I was told produces over $600,000. 3 Under cl.10 the Agreement was assignable; consent of the Body Corporate to assignment was not required if the management company provided evidence that the proposed assignee was a respectable and responsible assignee, and the Body Corporate was entitled to require the assignee to execute a confirming instrument. Upon assignment the management company was to be released and discharged from further liability arising after the assignment. The Agreement was assigned to the defendant on 13 May 1998. Broadsand alleges in the Industrial Relations Commission that it paid $650,000 for the management rights and further consideration for two lots in the scheme,and that it has or had an opportunity to sell the Agreement on for a larger sum. 4 By a letter from its solicitors to Broadsand on 31 January 2000 the Owners Corporation asserted that functions purportedly conferred upon the Management Company by the Agreement were functions of the Owners Corporation and that "The authority and the discretion conferred upon the Management Company in the exercise of its functions mean that the management company is a strata managing agent for the purposes of Pt.4 of Ch.2 of the Strata Schemes Management Act 1996, and at the time the Agreement was made was a strata managing agent for the purpose of Pt.4 of Div.3 of the Strata Titles Act 1973. The fact that Broadsand did not and does not hold a Strata Managing Agents licence issued pursuant to the Property, Stock and Business Agents Act 1941 means that, by reason of the breach of s.78(1AA) of the Act, the Agreement is illegal and invalid and unenforceable." It was also asserted that exercise by Broadsand of functions under the Agreement was prohibited by s.20(3) of the Property, Stock and Business Agents Act 1941. It was also asserted that the Agreement appeared to have been drafted in an attempt to confine the management company's activities but that, for reasons stated, this had been ineffective. The letter asserted "In these circumstances, the Agreement would appear to be invalid and unenforceable ..," invited discussion of the future relationship and referred to the possibility of seeking declaratory relief about invalidity and illegality. The letter raised considerations generally similar to the matters under consideration in Gillette v. Halwood Corporation Ltd & Ors [1998] NSWSC 431. 5 These assertions were disputed in correspondence, and Broadsand did not alter its position, but continued to act as management company under the Agreement and to claim and to be paid fees. The Owners Corporation commenced this litigation by Summons on 14 August 2000. As well as claiming a declaration that the Management and Letting Service Agreement is void or alternatively unenforceable, the Summons claimed recovery of moneys paid to the defendant pursuant to the Agreement; this claim was later abandoned. In correspondence solicitors for the Owners Corporation have also asserted that Broadsand's services have been unsatisfactory in various ways, but no litigation claiming damages in respect of that matter has been commenced. 6 Broadsand and the solicitors who at first acted for it did not act in an effective or efficient way in preparing the Supreme Court litigation for hearing. Time was wasted by filing obviously defective documents which purported to be Notices of Appearance, and a regular Appearance was entered on 26 September 2000. Broadsand did not file affidavits in accordance with Practice Note 63; on several occasions the Registrar directed that Broadsand's affidavits be filed within stated times, but they were not. There was correspondence in the nature of a request for particulars and reply on 28 February and 1 March 2001. There was a change of representation and Broadsand's present solicitors filed Notice of Change on 17 May 2001. In June a further order was obtained limiting time for affidavits to 3 July. Broadsand filed two affidavits dealing with the merits on 26 June and 3 July 2001. On 20 July the Registrar gave leave to to file a cross-claim against the Owners Corporation and refused leave to file another cross-claim against Broadsand's former solicitors and among other directions listed the proceedings for Call-over on 12 September for allocation of a hearing date. The Owners Corporation has filed its Defence to Cross-claim and some affidavits in reply. 7 Broadsand commenced proceedings in the Industrial Relations Commission by filing a Summons for relief on 23 August 2001, and the Summons was served on 6 September 2001. The present Notice of Motion was filed one day after the initiation of proceedings in the Commission. Although it is not possible to see fully what matters will be in issue in the Commission it can be expected that the issues will include whether the Agreement falls within subs.106(1) of the Industrial Relations Act 1996 as a contract whereby a person performs work in any industry. This is a difficult question and involves an appraisal of the contract and the relation between its provisions and the performance of work. It is not within my jurisdiction to decide it nor could I predict in a clear way how it will be decided. It involves the application of the difficult test established in ex parte VG Haulage Services Pty Ltd re The Industrial Commission of NSW [1972] 2 NSWLR 81 at 87-88 and referred to by Priestley and Handley JJA in Production Spray Painting and Panel Beating Pty Ltd v. Newnham (1991) 27 NSWLR 644 at 657. I can say no more that the claim that the Agreement falls within the power, and the contrary proposition, are both reasonably open to argument, and so is the further question whether the Commission should or should not exercise the discretionary power which is conferred on it in respect of agreements which have the stated character. The Summons before the Commission raises other matters for consideration the appraisal of which will require careful consideration, including the Owners Corporation's conduct in relation to the assignment. It should be expected also that there will be issues of considerable difficulty, the outcome of which cannot be predicted, in relation to whether the contract is an unfair contract, and as to the form of any variation or other order which should follow. Counsel referred me to consideration of the matters which can arise in judgments in Reich v. Client Server Professional of Australia Pty Ltd (2000) 49 NSWLR 551 at 563-564, 566 and 570 and in Starkey v. Mitchforce Pty Ltd (2000) 101 IR 177 at [70-71]. It appears to me that there is reasonable basis for Broadsand to wish to submit its case to the Commission. 8 In asking the Court to stay the present proceedings Broadsand relied on the inherent power of the Court to control its own process and proceedings. It was not contended and of course could not be contended that the Owners Corporation's claim is an abuse of process in any sense or that there ought to be a permanent stay. The Court has a general power to control the times at which hearings before it take place which is very commonly exercised, ready examples being orders making appointments for hearings, orders expediting hearings, and administrative arrangements establishing the order in which hearings are to take place, deferring hearings or varying earlier arrangements. Most exercises of the power are administrative but the power can be exercised on the application of parties. The power is ancillary to the administration of justice and is not to be exercised in an arbitrary way. Limitations on its exercise are illustrated by Queensland v. J.L. Holdings (1997) 189 CLR 146, which deals with adjournment of proceedings, the instance in which the inherent power is most often invoked by litigants. In substance I see the present application as an application to adjourn the hearing until after the application of the Commission has been disposed of. Broadsand is not attempting to obtain a stay of proceedings so as in effect finally to dispose of these proceedings. 9 Counsel referred me to decisions in which courts have addressed the question which of two courts should consider litigation relating to the same facts first, including several which raise a similar choice between proceedings in the Supreme Court and proceedings in the Industrial Relations Commission or its predecessors. The reasoning in these decisions is enmeshed in the facts and circumstances of each case under consideration, and in my respectful view the decisions do not establish broad principles, nor do they establish any clear practice or course of proceedings; and it would not be appropriate for them to do so as each matter must be addressed in its own circumstances. 10 I was referred in particular to Australian Mutual Providence Society v. Noy, Rogers CJ ComD (6 October 1992 unreported). His Honour stayed proceedings in this Court based on claims for relief under s.87 of the Trade Practices Act. It was contended that the same relief was available in the Supreme Court as in the Commission and that it would be granted or refused in accordance with the same principles. His Honour rejected that contention, with respect obviously correctly, and decided to stay the proceedings in the Supreme Court. His Honour said (at p4) "It is obviously unacceptable that two courts in this State should consider the same facts albeit in a different legal guise." His Honour made that observation in relation to claims for the exercise of two different statutory powers to grant relief against harsh contracts and decided to allow the first hearing to be in the proceedings which were on the broader basis. The observations which I have quoted were directed to that situation; with respect the expression "obviously unacceptable" would be much too broad if the whole sentence were attempted to be applied in a wider context than that in which it was used. Where the jurisdictional limits of courts differ it may well be acceptable and indeed it may be necessary to accept that two courts in this State should consider the same facts in different legal guises. That is the present situation. 11 I was also referred to the decision of Lehane J in Bell v. Macquarie Bank Ltd [1998] FCA 1763 where his Honour reached a generally similar conclusion in favour of allowing proceedings in the Industrial Relations Commission to be heard before proceedings under the Trade Practices Act in the Federal Court. I was referred to several other authorities which are a little more remote from the present circumstances; Norris v. Norris (1985) 1 NSWLR 472 and (with an outcome in the contrary sense) Majik Markets Pty Ltd v. S & M Motor Repairs Pty Ltd No. 3, Young J (unreported 13 October 1987). The decisions of the Industrial Commission of NSW in Watson v. Smythe & Anor (1982) 14 IR 281 (Glynn J) and Beattie & Ors v. Mitting & Ors (1983) 14 IR 285 (Bauer J) are instances where the Commission decided to let proceedings in other courts continue before disposition of applications to the Commission. Consideration of these first instance decisions is of value to show the breath of the power and the nature of the matters considered; however no clear practice or rule of decision has been established and a discretionary decision based on an address to the circumstances of each case is required. 12 The effect of submissions by senior counsel for Broadsand was that factors of convenience overwhelmingly favour deferral of the hearing in the Court so that the application to the Commission can be heard and determined first. It was contended that the factual matrix in both proceedings is essentially the same, and the relevant and determinative difference was in the relief available and the basis on which relief can be granted in the two proceedings. Counsel observed that the Commission can take account of a wide range of factors in considering the relief it may grant and that the range of grounds on which it may be determined that the Agreement was relevantly unfair is very wide. The Commission is in a position to give relief in circumstances and on principles not open to the Court, and can act more flexibly and have regard to more general notions of fairness and justice. Its powers extend to rewriting the Agreement by varying it ab initio or from some other time. Senior Counsel for Broadsand contended that the Commission has plenary power to deal with the whole question between the parties. I do not accept that this is so, as the Commission does not have power to make the declaratory order which the Owners Corporation claims. However in the course of determining the application to it the Commission may well make decisions establishing whether the Agreement is void, or whether it is unenforceable, and on what grounds. While this will not necessarily happen, it is on the whole likely that whichever of these two litigations proceeds to determination first, some finding of fact or issue estoppel with arise which will limit the area available for dispute in the other litigation. This is so irrespective of which court is the first to consider the proceedings However the specific relief claimed in each case is an order which it is outside the jurisdiction of the other to make. (It should be remembered however that Industrial Relations Commission's power extends to a contract as defined in s.105 of the Industrial Relations Act 1996, and is not limited to a contract under the general law but may extend to an arrangement or related condition or collateral arrangement; it would seem that the fact that a contract is void or unenforceable does not exclude it from the Commission's powers under s.106). It was not Broadsand's position, either in any pleading or in counsel's submissions that it accepts the Owners Corporation's contentions but seeks to overcome their effect by obtaining relief under s.106; the plaintiff's claim remains disputed. 13 The Court's primary duty is to hear and determine proceedings and the purpose for which the duty exists is the administration of justice. Delay in the performance of the Court's duty should only be allowed for some reason relating to achieving that underlying purpose. Recognition of the undesirability of delay and the entitlement of the litigant who has approached the Court to have the court's consideration is of very long standing, and has been associated traditionally (but perhaps not accurately) with Magna Charta. See Jago v. District Court of New South Wales (1989) 168 CLR 23. There is a considerable gulf between matters calling for consideration in the present case and the principles considered in Oceanic Sun Line Special Shipping Company Inc v. Fay (1998) 165 CLR 197 and further considered in Voth v. Manildra Flour Mills Pty Ltd (1990) 171 CLR 538. However observations of Deane J and of Brennan J in Oceanic Sun are of present importance. 14 The "clearly inappropriate forum" test establish by Voth v. Manildra Flour Mills Pty Ltd, if it applied, would not be satisfied and under that test the present proceedings could not be stayed. The judgment of Mason CJ Deane Dawson & Gaudron JJ in Voth v. Manildra Flour Mills Pty Ltd clearly shows approval of observations of Deane J in Oceanic Sun including the sentence with which his Honour's judgment opens at 241: "A party who has regularly invoked the jurisdiction of a competent Court has a prima facie right to insist upon its exercise and to have his claim heard and determined." In my opinion this important principle should be the point at which consideration of the present application and applications like it opens, and proceedings in this Court should not be stayed pending determination of an application to the Industrial Relations Commission under s.106 arising out of related facts unless there are some practical considerations or other considerations which, in the interests of the administration of justice, override the plaintiff's prima facie right to insist upon the exercise of this Court jurisdiction. To my mind what is required is something more than an appraisal of the balance of convenience relating to proceeding in one court or the other; the litigant's prima facie right to have his proceedings heard and determined would not be overridden by any narrow balance of convenience. To override it it should be shown, for some substantial reason, that it is injurious to the attainment of justice that the proceedings should not be deferred. As it happens, I am of the view in the present case that considerations of convenience strongly favour allowing the proceedings in the Supreme Court, which are in an advanced state of preparation, to continue. 15 The plaintiff brought forward its position by a carefully considered letter in January 2000 and commenced the litigation in August 2000; the plaintiff has followed a regular procedural course which led to the matter being listed before the Registrar on 12 September to appoint a hearing date after going through a course of preparation in which Broadsand's participation was not prompt or timely. Broadsand adverted to the possibility of bringing its proceedings only about June 2001 after a change in representation by solicitors and consultation of fresh counsel. Even then Broadsand did not bring its proceedings promptly and commenced them less than three weeks before the existing appointment to fix a date for hearing. In the ordinary course, which is often departed from, the hearing the Supreme Court may well take place in the early months of the year 2002, whereas the hearing in the Commission in the ordinary course will probably take place late in that year. However there are many vicissitudes in listing and it is open to the Commission to regulate its own proceedings and to expedite matters as it thinks right. Broadsand has proffered an undertaking to conduct the litigation in the Commission expeditiously and to apply for expedition. The compulsory conciliation procedures of the Commission represent a considerable procedural advantage and offer prospects of relatively early resolution if successful. A decision by the Court that the Agreement is void would not, it seems to me, put an end to prospects of obtaining a favourable exercise of power under s.106, which extends to arrangements other than enforceable agreement. I do not accept Senior Counsel's contention that Broadsand's claim would be precluded from consideration by the Delcaratory Order which the Owner's Corporation seeks. Whichever decision is given first may well limit the issues available for contest in the other, depending on what issues the judge of trial finds it necessary to dispose of: this consequence, and any inconveniences which may be perceived to follow, cannot be averted, either way. The Owners Corporations is paying fees mouth by mouth under an agreement which it contends is void: it has got its case ready to fix a hearing date a year after its Summons was issued, and Broadsand 's litigation has only just been started. These matters outweigh the claims of convenience brought forward by Broadsands, by a considerable preponderance. 16 In my judgment the appropriate course is to allow each party to proceed with its application to the Court or the Commission, unimpeded by any special intervention by this Court with the object of controlling the order in which hearings and decisions take place. 17 Order: The defendant's Notice of Motion of 24 August 2001 is dismissed with costs. ---------

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