Yedway Pty Ltd v Owners Corporation of Strata Plan 62871

CATCHWORDS : CONTRACTS - property maintenance and caretaking contract for home unit block - owners corporation may terminate for "misconduct" of caretaker - relevant concept of "misconduct" discussed - whether particular episodes and matters amount to "misconduct" - CONTRACTS - right to assign with consent - consent not to be unreasonably withheld - content of qualification discussed - whether withholding of consent to assignment was unreasonable - WORDS AND PHRASES - "misconduct"

Adamson v Queensland Law Society Inc [1990] 1 QdR 498 Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385 CASES CITED : Laing O'Rourke (BMC) Ltd v Dampier Port Authority [2007] WASC 87 Roylance v General Medical Council [2000] 1 AC 311 Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596 Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161; (2006) 33 WAR 1

PARTIES : Yedway Pty Limited - Plaintiff Owners Corporation of Strata Plan 62871 - Defendant

COUNSEL : Mr J E Thomson - Plaintiff Mr J Stoljar/Ms K W Dawson - Defendant

SOLICITORS : Gordon & Johnstone - Plaintiff Dobes & Andrews - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4316/02 YEDWAY PTY LTD v OWNERS CORPORATION OF STRATA PLAN 62871 JUDGMENT 1 The defendant is the owners corporation of a strata scheme affecting a residential complex of some 82 home units at Balmain known as "Dockside". The proceedings concern a contract between the plaintiff ("Yedway") and the defendant ("Owners Corporation") for the provision by the plaintiff to the defendant of certain services in relation to "Dockside". 2 The contract came into operation between Yedway and the Owners Corporation upon the Owners Corporation being constituted a corporation under the strata titles legislation in 2000. The contract was for a term of five years. 3 It is pertinent to quote at once certain provisions of the contract as follows: "2.1 Appointment The Owners Corporation engages the manager to provide the services required to be performed by the Manager under this contract.

2.2 Acceptance (a) The Manager accepts the appointment; (b) The Manager must carry out the duties and obligations required to be performed by the manager under this contract; (c) The Manager is an independent contractor of the Owners Corporation.

. . . 3.1 Scope The Manager must perform the duties in clause 3.2 personally or by staff paid and supervised by the Manager.

3.2 Managers Caretaking Duties Performance by Manager (i) Cleaning Keeping the Common Property and other property of Owners Corporation clean and tidy. (ii) Repairs and Maintenance Maintaining the Common Property and other property of the Owners Corporation in good order and condition excluding disbursements. (iii) Gardening Maintaining the gardens as reasonably required excluding disbursements. This includes: - Watering - Fertilising - Weeding - Mulching - Top dressing (iv) Pool Maintain pool and its surroundings as reasonably required. (v) Drains and Gutters Keeping the Common Property drains and guttering clear. (vi) Security Provision of security services during ordinary business hours.

3.2 Performance by the Manager (i) Property, Materials and Services The Manager must: * Obtain quotes for property, materials and services as instructed by the Owners Corporation; * Buy property for the Owners Corporation as instructed; * Buy materials for the Owners Corporation necessary to perform these caretaking duties; * Engage services for the Owners Corporation as instructed. (ii) Compliance with laws * The manager must advise the Owners Corporation on compliance with relevant laws. This include for example fire safety laws, workplace health and safety, health legislation and local authority by-laws; * The Manager must notify the Owners Corporation of any lack of compliance; * The Manager must notify all occupants of the lots of fire safety requirements and carry out for the Owners Corporation mandatory inspection of fire safety equipment. (iii) By-laws The Manager must: * Monitor compliance with the by-laws; * Advise the Owners Corporation of any serious or persistent breaches of the by-laws. 3.3 Duties of the Owners Corporation (a) The Owners Corporation must give the Manager a set of all plans of the complex in its control; (b) The Owners Corporation must pay for the materials, equipment and repairs and maintenance of equipment necessary to enable the employees and contractors of the Owners Corporation to perform the caretaking duties which the Manager must supervise. …

5.1 Outlays The Manager may spend up to $500.00 per month on behalf of the Owners Corporation for material or services required to enable the employees and contractors of the Owners Corporations to perform the caretaking duties which the Manager must supervise.

5.2 Reimbursement The Owners Corporation must reimburse the Manager for any outlays of an urgent nature made on behalf of the Owners Corporation within 14 days of a written claim by the Manager with supporting documentation.

6.1 Owners Corporation Appointee The Executive Committee must appoint one person to communicate with the Manager on behalf of the Owners Corporation. Only one person must be appointed at any one time. The Executive Committee appointee must give the Manager written notice of the appointment and any subsequent appointments.

6.2 Managers Obligations The Manager must: (a) confer as reasonably required with the appointee of the Executive Committee appointed to communicate with the Manager; and (b) attend the meetings of the Owners Corporation and its Executive Committee if given reasonable notice. . . . 7.1 Dispute Notice (a) A party asserting a dispute must give the other party a dispute notice; (b) The dispute notice must state: (i) what is in dispute (ii) the argument of the party giving the dispute notice (iii) what should be done to rectify the dispute. 7.2 Notice in Response The party receiving the dispute notice must respond in writing within 7 days of receiving the dispute notice.

. . . 8.1 Reasons for Termination The Owners Corporation may terminate this contract if the Manager: (a) is convicted of an indictable offence involving fraud or dishonesty; (b) is convicted on indictment of an assault or an offence involving an assault; (c) engages in misconduct, or is grossly negligent, in carrying out or failing to carry out, the functions required under the contract; (d) Fails to carry out contractual duties, and persists in the failure for 14 days or more after the Owners Corporation, by written notice, requires the Manager to carry out the duties; (e) Carries on a business involving the supply of services to the Owners Corporation, or to Owners Corporation or occupiers of Lots, without holding a licence or other authority required by law; or (f) Transfers, or accepts the transfer of, an interest in this contract without the Owners Corporation's approval.

9.1 Transfer Requires Approval The interest of the Manager in this contract may be transferred if the Owners Corporation approves the Transfer. Such approval is not to be unreasonably held [sic; scil: "withheld"].

9.2 Relevant Factors In deciding whether to approve a proposed Transfer, the Owners Corporation may have regard to: (a) The character of the proposed transferee and any Associates. (b) The financial standing of the proposed transferee; and (c) The proposed terms of the transfer; and (d) The competence, qualifications and experience of the proposed transferee and any Associates, and the extent to which the transferee and any Associates has received or will receive training.

9.3 Time Limit The Owners Corporation must decide whether to approve the proposed Transfer within 30 days after the applicant for approval gives it the information reasonably necessary to decide the application for approval.

9.4 Deed of Covenant The approval may be given on condition that the transferee enters into a deed of covenant to comply with the terms of this contract.

9.5 Owners Corporation must be Reasonable The Owners Corporation must not: (a) unreasonably withhold approval to the Transfer of this contract; (b) require or receive a fee or other consideration for approving the Transfer (other than reimbursement for legal expenses reasonably incurred by the Owners Corporation in relation to the application for its approval)."

4 On 20 August 2002, the Owners Corporation delivered to Yedway a letter of that date headed: "Termination of Management Contract between The Owners - Strata Plan 62871 and Yedway Pty Limited/Mr & Mrs James Iveson." 5 The operative words of the letter, which followed some three pages of narrative, were: "The Owners Corporation is therefore invoking clause 8.1(c) and (d) of the Agreement and terminating the Agreement. The effective date of termination is 14 days from the date of the letter (3 September 2002)." 6 Yedway contends that the giving of this notice of termination was not authorised by or consistent with the contract and was itself a breach of contract. Despite the notice of termination, the Owners Corporation did not actually terminate the contract. Rather, the contract continued in force and a mortgagee of Yedway's interest under the contract, relying on the giving of the notice of termination as an event of default under the mortgage, later appointed a receiver of that interest. The receiver later assigned the contract (with the Owners Corporation's consent) to a new property manager. 7 The first breach of contract alleged by Yedway is the giving of the notice of termination in circumstances in which, Yedway says, no occasion for termination had arisen. 8 A second and quite separate breach of contract by the Owners Corporation is alleged. It is an alleged breach of clause 9.1 consisting of unreasonable withholding of approval of a transfer of the plaintiff's interest in the contract to Mr and Mrs Betyounan. 9 It is necessary to trace certain matters of history and background. At the time of the events relevant to the dispute, Mr James Iveson and his wife were the effective owners of shares in Yedway. They or, more precisely, a company owned by them purchased the shares at an early point - before owners had begun to take up residence in the newly built apartments. As owners arrived and came into contact with one another in the context of owners corporation affairs, they became the inheritors, as it were, of a situation where Yedway, represented virtually solely by Mr Iveson, held the position of caretaker and manager under the pre-existing contract - a contract the terms of which were fixed and had been formulated without any input by apartment owners. 10 Differences between Yedway and the Owners Corporation emerged in 2000. They resulted in earlier proceedings brought by Yedway against the Owners Corporation ("the 2001 proceedings"). By a statement of claim dated 9 May 2001, Yedway (together with Mr Iveson, Mrs Iveson and their company that had acquired the shares in Yedway) claimed against the Owners Corporation a declaration that the Owners Corporation was estopped from denying the enforceability of the contract and certain by-laws of the Owners Corporation, an order that the contract and the by-laws were valid and subsisting and an order that the Owners Corporation specifically perform the contract. 11 Yedway alleged in the 2001 proceedings that certain members of the executive committee of the Owners Corporation had, in December 2000, informed Mr Iveson that they did not consider the contract to be legally enforceable. Thereafter and despite several requests (made at times when Yedway was negotiating with a prospective purchaser of the management rights under the contract), the Owners Corporation did not confirm the enforceability of the contract or the entitlement of Yedway to sell the management rights to a third party. The prospective purchasers withdrew. The Owners Corporation then stated that it considered that the relevant by-laws were of no force or effect and that there was doubt as to the enforceability of the contract. The Owners Corporation sought to negotiate a new contract but Yedway declined the invitation and commenced the 2001 proceedings. 12 Those proceedings were settled in February 2002. The Owners Corporation consented to the making of a declaration that it was estopped from denying the enforceability of the contract. 13 Ms Grace and Mr Cooper, among others, had been active within the Owners Corporation in relation to the 2001 proceedings. After the settlement, the executive committee of the Owners Corporation took the view that, in the interests of a "new start" with Yedway and Mr Iveson, a unit owner not previously actively involved in the relationship should become the Owners Corporation representative for the purposes of communication with Yedway. The unit owner chosen was Mr Dolan. He wrote to Mr Iveson on 25 March 2002 to inform him of the appointment. 14 Mr Dolan's letter concluded: "As a first step I would like to meet with you to establish some formal and contingency communication protocols. I can be contacted on the following numbers […]." 15 Mr Iveson replied by handwritten note dated the following date, 26 March 2002, indicating his availability "most days during the week during normal business hours" and inviting Mr Dolan to contact him by telephone. Mr Dolan's response of the same day was as follows: "Thank you for your note. I am working particularly long hours these days and unfortunately have little scope to modify current work demands. In view of this it is not possible for me to accommodate the hours you have suggested, at least for the foreseeable future. With some effort I can be available to meet at 1800 one afternoon per week. I suggest that we meet on the same day each week (say Wednesday), this would make it far easier for me to schedule consistently for 1800. Of course I am also available to meet early mornings (say 0630) most rights after 2000 or on weekends. I see concise regular meetings as the key to building a productive communication link between the Owners Corporation and the building management/caretaker. Accordingly I am keen to commence a genuine dialogue with you and suggest that we meet this Thursday afternoon in the manager/caretaker's office at 1800. I have a very busy schedule tomorrow but can be contacted on my mobile 0407 XXX XXX (m)." 16 On 27 March 2002, Mr Iveson wrote to Mr Dolan as follows: "Thank you for your communication of 26th March, 2002. I am working particularly long hours these days and unfortunately have very little scope to modify current work demands. In view of this it is not possible for me to accommodate the hours you have suggested, at least for the foreseeable future. I will be available to meet with you on a regular basis as per written notices between the hours of 9am to 5pm Monday to Friday and any subsequent appointment on this basis. My preferred time would be on a Wednesday between the hours of 12pm and 5pm. Accordingly I am also keen to commence a genuine dialogue with you or alternatively a representative from the Owners Corporation who can communicate with my representative or me during normal business hours. I suggest that these meetings take place in the Buildings Managers Office at an agreed time within the boundaries as outlined above. I am at present balancing many issues and trying to cope with a very busy schedule for the foreseeable future but I can be contacted on my mobile 0413 XXX XXX." 17 Mr Dolan wrote to Mr Iveson as follows on the same day: "I am disappointed by your response (ref yedman5) to my last note and do not understand your inflexible position on meeting times. As I explained in my note it is extremely difficult for me to attend any weekday meetings at Dockside between 0900 and 1700. With significant effort I could arrange to meet on a nominated weekday at 1800. I could meet earlier in the city, if that suits you better. Please understand that I am trying to build a communications structure that will direct the majority of the building issues through one forum and consequently facilitate speedy resolutions. This would surely be of benefit to Dockside proprietors, residents and the building manager/caretaker. In view of this, I don't understand why you cannot make yourself available to meet at a time earlier than 0900 or later than 1700. I would welcome a detailed explanation on this point to help me appreciate your position. As a fallback I can propose an alternative communication model, at least until we can work through our current impasse on meeting times. Firstly, I suggest that we advance the written communication link already in place. For example, I would provide you with a weekly report covering issues requiring the building manager's/caretaker's attention, action, consideration or feedback and you would provide me with a weekly report addressing the matter raised and conveying any further information that the owners corporation requires. Secondly, we can meet prior to each Owners Corporation and Executive Committee meeting to discuss the more complex building related matters and to prepare a joint verbal report to the committee. If you can advise me what you regard as "reasonable notice" in relation to these meetings I will ensure that you are notified appropriately. I am hoping the above will meet with your approval, as I am keen to develop a cooperative and productive relationship between the Owners Corporation and the manager/caretaker in order to move forward on the many challenging matters currently before us. I will be in Nowra all day tomorrow but will be back around 2000 if you wish to discuss any of the above, or as always you can contact me on my mobile phone 0407 XXX XXX." 18 Mr Iveson's reply of 28 March 2002 was as follows: "Thank you for your communication of 27th March, 2002. As outlined in my communication of 26th March, 2002 (ref: markdolan1) I will be available to attend meetings with you or a representative of the owners corporation during normal business hours Monday to Friday and preferably on a Wednesday between 12 and 5pm. I have already explained the reasons for this and I am not giving you or anyone else a detailed explanation. Are we back at school Mark? Would you please indicate to me if we are contravening any part of our Management and Caretaking Agreement with SP 62871 and if we are would you please indicate this to me and I will pass this information on to our solicitors. I welcome any written communication from you on a regular basis regarding the management and caretaking of 'Dockside Balmain' and I will be happy to respond to this communication accordingly. I hope my company Yedway has a long and happy business relationship with Dockside Balmain and also with you as the communications employee." 19 In a letter of 29 March 2002, Mr Dolan sought to pursue the matter of meeting times, indicating a willingness "to absorb a limited financial loss to vary my working arrangements to meet with you at Dockside at 1800 on one day each week". There is no reply in evidence. 20 Hopes of an harmonious "new start" were thus not realised. No common ground was found on a time for regular meetings, but a system of written communication was established. 21 On 3 April 2002, Mr Dolan wrote to Mr Iveson raising some fourteen matters under headings "Building", "Gardening", "Cleaning", "Pool", "Accounts", "Security" and "Other". Mr Iveson replied on the same day commenting on each item. His letter concluded: "I am still available to meet with you or another appointee at the times I have outlined in my previous correspondence. Alternatively I am quite comfortable in communicating with the O.C. messenger via written communication. Should you or another representative wish to arrange a meeting with me during Normal Business hours please do not hesitate to contact me on my office phone or mobile." 22 Another matter taken up in Mr Dolan's letter of 3 April 2002 was a letter Mr Iveson had sent to Mancorp Real Estate and copied to Mr Dolan with a note, "Mark, I will explain this further for more specific details if and when you want me to". Mr Iveson said in the letter that he did not intend to communicate with Mr Robert Mann or any employees of Mancorp Real Estate about the "Dockside" building and that all further correspondence must be "via the Executive Committee of this building". Mancorp managed for owners certain of the rented units in the building. Mr Dolan complained that it was not open to Mr Iveson "to arbitrarily decide who he will not deal with" and to "assign work to the Owners Corporation". Mr Iveson replied on the same day saying simply that his refusal to eeal with Mancorp stood. 23 Mr Dolan wrote to Mr Iveson on 6 April 2002 commenting on some of the matters in Mr Iveson's letter and raising some new matters. Mr Dolan had had no reply by 12 April 2001 and wrote again on that day. He also raised some further matters. Mr Iveson sent back a copy of the letter of 12 April 2002 to which he had added brief handwritten replies on all but one of those further matters. The exception was Mr Dolan's request: "Can you advise the committee what 'relevant laws' Dockside Apartments must comply with and how regularly compliance is monitored." 24 This was to become a matter of contention. 25 Another contentious matter surfaced separately but at the same time. In a note of 16 April 2002 addressed to the executive committee, Mr Iveson said that he would be unable to monitor the movement of furniture through the common area on 20 April 2002 and asked that someone else be appointed for that day. Mr Iveson added that "this by-law and its implications" needed discussion between "us and the committee". 26 Mr Dolan replied on the same day: "From your note today (16 April) I am unclear as to why a Yedway representative will not be available to supervise the movement of Mr Anderson's furniture and goods through the common areas of the building. I would also point out that there is no certainty in the Ray White letter that Mr Anderson will be moving in on 20 April. As I understand it Mr Anderson has been asked to advise you directly in this regard. It is the committee's view that Yedway is contracted to discharge certain duties that are considered desirable or necessary for the operation of the strata scheme. It is immaterial to the owners corporation which Yedway representative actually peforms the required duties. Indeed the committee expects that contingency arrangements will be activated when you cannot personally meet Yedway's building management/caretaking obligations. I agree that we should meet to discuss building administration matters. As I have stated in previous notes I can meet with you anytime outside my working day. There will also be an opportunity to discuss any relevant matters at the next executive committee meeting (yet to be determined). In view of the above the committee recognises that the advice from Ray White is consistent with the building managers/caretakers role. I therefore return the letter to you for appropriate action by Yedway." 27 Three days later, Mr Dolan sent a follow-up letter in relation to the matters raised by him on 6 and 12 April 2002. He asked for "a reasonable response to the outstanding matters within seven days of this advice". He added a request about a malfunctioning light. 28 Mr Iveson replied on 22 April 2002 and dealt with the several outstanding questions. His response, however, was not satisfactory to Mr Dolan who said, in a reply of the same date: "In order to make this process work for both the executive committee and Yedway could you please focus your answers and comments on the questions being asked. There are several examples in today's note where a response has been provided but the question remains unanswered." 29 After referring to a particular matter concerning the pool, Mr Dolan said: "As a consequence of this sort of imprecision I now find myself needing to ask further questions about the answers you have provided to my earlier questions. There are also a number of statements in your note that require rebuttal." 30 There followed two pages of narrative and questioning. In relation to the matter of "relevant laws", Mr Dolan said: "I am confused by your response to my question (note 12 April) 'Can you advise the committee what relevant laws Dockside Apartments must comply with and how regulatory compliance is monitored". I don't see any reference to any 'laws' in your answer and have a real problem reconciling lift, garage, pest and carpet maintenance with the question. Can you please advise the committee on the original question?" 31 The matter of monitoring movements of furniture came to the fore on 23 April 2002 when the Owners Corporation received a letter from Ray White Balmain, a real estate agency which managed a number of apartments in Dockside. After referring to past difficulties, the letter said: "Last week, our office received a phone call from the Caretaker/Manager requesting all future movements are to take place on either Thursdays or Fridays. I must strongly object to this 'new' requirement if indeed it is one. From the outset, I see no legal requirement restricting any Lot Holder or occupier to such times. Indeed, the By-law pertaining to 'movements' through the common area only require 'sufficient notice' to be given. There is no definition of the word 'sufficient'. In a complex as large as Dockside, it is conceivable 'movements' could easily occur every day and they would not necessarily be restricted to people moving in or out of the development. Deliveries companies often say 'We can deliver either "am" or "pm" but we can't give you an exact time'. This being the accepted case within the community, 'sufficient notice' can effectively be less than three hours. Certainly not 'Thursday or Friday'." 32 This letter from Ray White Balmain was signed "Paul Cooper, Principal". This is the Paul Cooper who was a member of the executive committee. 33 Mr Iveson wrote to Mr Dolan on 29 April. In relation to the "relevant laws" question, he said: "All laws for Fire Safety, Work Place Health and Safety, Health Legislation and Local Authority by-laws are adhered to and monitored constantly. These include: Smoke Detectors CO Exhaust Fan Drains Garbage Areas Fire fighting equipment Fire escape doors Relevant fire escape door signs Trip hazards and any other safety hazards Notice Board Lift Phones-Schindler Contract Common area signage Pool fencing and locks on gates" 34 Mr Iveson did not address directly the question of movement of furniture, saying that he would reply "in due course". 35 Mr Dolan wrote to Mr Iveson on 30 April 2002. The letter reads in part as follows: "c) Your advice on the legal compliance still falls short of an explanation that the committee can reasonably assess its legal liabilities and exposures. Can you please provide a comprehensive advice that identifies and explains the key sections of the various acts, that effect the building. . . . e) In relation to the complaint from Ray White Balmain, the letter was an attachment to an email transmitted to me. The document was authenticated by phone and a copy passed onto you for response, in line with the principals [sic] of natural justice. The material issue here is, are the circumstances outlined in the letter of complaint accurate or not? Similarly, if the situation has been accurately presented do you have a rationale for your position? Your urgent advice is sought on this issue alone to assist the committee in forming an opinion and providing a timely response to Ray White." 36 Mr Dolan telephoned Mr Iveson on 1 May 2002 to arrange a meeting. Mr Iveson said that he "had to do some things" before he could determine a date to meet and would get back to Mr Dolan within two days. 37 Mr Dolan wrote to Mr Iveson on 6 May 2002 informing him that an executive committee meeting was to be held on Saturday 11 May 2002 at 4.30pm. Mr Dolan also raised again the question of when he and Mr Iveson could meet. 38 The minutes of the meeting of the executive committee held on 11 May 2002 record the following: "The Caretaker/Manager presented a report but advised, in writing, he would not give any interpretation or expansion of terms with his contractual agreement. As the Owners Corporation's appointee, Mark Dolan asked what he meant by this statement. The committee identified communication between the Caretaker/Manager and the Owners Corporation was clearly not in the spirit of co-operation. The Caretaker/Manager advised he would not meet with the appointee unless such times are between 8am and 5pm Monday to Friday. Mark Dolan indicated he had offered to meet anytime outside his working hours including before and after work (after 1800 hours) and any time on the weekend. The Caretaker/Manager advised he would only meet with the appointee outside 8-5pm, once a quarter. The committee expressed their disappointment over the stance the Caretaker/Manager was taking. The Caretaker/Manager was asked what hours he worked to which he answered 'as per the contract'. To be fair, Mark Dolan advised that his reading of the contract (which the committee endorsed), stipulated the Caretaker/Manager was required to meet with the Owner's Corporation appointee reasonably, but fails to specify such times are confined to 8-5pm Monday to Friday. Indeed, the only time specification defined in the contract is that of monitoring security. The committee offered to allow the Caretaker/Manager to start work later on the days a meeting was called. The Caretaker/Manager rejected this proposal. The Caretaker/Manager advised the meeting that 'I don't like this bloke' and 'I don't work for him'. As Chairperson, Tony Perri repeatedly called the Caretaker/Manager to order." 39 Mr Dolan wrote to Mr Iveson on 28 May 2002 saying, among other things, that his many attempts to arrange a quarterly meeting during the week commencing 26 May 2002 "have been ignored". 40 On 28 May 2002, Mr Dolan sent Mr Iveson a letter of seven pages. This appears to have been a substitute for an intended face-to-face discussion on a number of matters arising out of Mr Iveson's report to the executive committee meeting. It dealt with 26 numbered items before turning to "Security Measures" and then "Other Issues". These included a renewal of the request of 30 April 2002 for advice on legal compliance and the fixing of a quarterly meeting date. Two matters were then raised under a heading "New Business". 41 The following day, 29 May 2002, Mr Dolan followed up with some particular questioning about fire safety inspection by Sydney Fire Protection - in particular, why individual apartments needed to be inspected and what would happen if someone was not home to give access or refused to do so. Mr Iveson's reply on 31 May 2002 on the first matter was uninformative. On the second, he said that Sydney Fire Protection "has the law on its side and may take appropriate actions ie a fine may be sought for and imposed to the O/C or the occupants". Mr Dolan wrote on 5 June 2002 asking for "more expansive explanation" of the latter matter ("ie, where is the legal power for this?"). 42 The various matters covered in Mr Dolan's long letter of 28 May 2002 were taken up in Mr Iveson's reply of 11 June 2002. Mr Dolan responded on the same day with "some rebuttal/comment" running to two and a half pages. 43 On 7 June 2002, three committee members (Mr Dolan, Mr Perri and Mr Cooper), accompanied by Mr Iveson, inspected certain parts of the building, paying attention in particular to stairwells and floors. Mr Dolan's evidence is that dirt was removed easily from surfaces, with Mr Cooper removing a line of dirt from one floortile with a wet finger. There was also evidence (including by video taken on a subsequence occasion, 25 August 2002) of one half of a tile being noticeably cleaner than the other after an application of "Jiff" cleaning agent. Mr Iveson said, at the time, that dirty tiles had been sealed over by the builders and that the "Jiff" result involved removal of the sealant and then removal of the dirt beneath. 44 On 13 June 2002, Mr Dolan used his domestic steam mop on one of the landings and produced what he described as a "significantly cleaner result". Two days later he invited Mr Iveson to look at what he had done but Mr Iveson declined the invitation. Mr Dolan said that the executive committee regarded Mr Iveson's cleaning as unsatisfactory. Mr Dolan wrote to Mr Iveson on the same day saying that he had found Mr Iveson's behaviour "unreasonable and offensive". 45 On 20 June 2002, Mr Dolan wrote Mr Iveson a letter part only of which has been put into evidence. It refers to two matters as being of "great concern to the committee". The first is the matter of legal compliance. Mr Dolan referred to clause 3.2(ii) of the management agreement and said: "This is the sixth time I have asked for a comprehensive advice from Yedway so that the executive committee can assess its exposures, obligations and budgetary impact." 46 The second matter mentioned by Mr Dolan was "the crucial fire safety matters raised in my letter of 5 June". He pointed out that this was that third reminder on that issue. A reply within fourteen days was requested. 47 Other content of Mr Dolan's letter of 20 June 2002 may be inferred from his next letter, dated 15 July 2002: "James, It has now been twenty days since I last wrote to you. In that last note (20 June) I asked you on behalf of the Executive Committee to provide answers to some key questions within fourteen days. You have chosen to ignore that request now leaving the Owners Corporation with no choice but to seek remedies from within the building caretaking/management contract. I now advise you of a dispute between the Owners Corporation and Yedway Pty Ltd. What is in dispute? An amount of $11,4878 being the approximate cost of a three-year contract with Sydney Fire Protection. The position of the Owners Corporation The Owners Corporation believes that Yedway has acted negligently in relation to the appointment of Sydney Fire Protection as a contractor, resulting in financial damage to the Owners Corporation. The Owners Corporation believes this because: Yedway failed to advise the Owners Corporation competently in relation to fire safety regulatory compliance, in accordance with building caretaking/management contract; Yedway failed to advise the Owners Corporation competently in relation to fire safety regulatory compliance, in spite of several written requests for such advice; Yedway failed to advise the executive committee that the appointment of 'service contractors Sydney Fire Protection' had been at the cost of the Owners Corporation; Yedway in spite of opportunity, failed to advise Bright and Duggan that in accordance with building caretaking/management contract, Yedway 'must notify all occupations of the lots of fire safety requirements and carry out for the owners corporation mandatory inspection of fire safety equipment '. The Owners Corporation believes that as a result of the negligence of Yedway in this matter that a contract has been entered into with Sydney Fire Protection without the knowledge of the Owners Corporation, this contract being for services for which Yedway has directly been appointed (and paid) to deliver. What should be done to rectify the situation? The Owners Corporation believes that Yedway must either: Accept all responsibilities for (including costs) the three year contract with Sydney Fire Protection; or Reduce the remuneration within the building caretaking/management contract by the yearly amount to be paid to Sydney Fire Protection. (sgd) Mark Dolan for Owners Corporation Dockside Balmain 15 July, 2002." 48 By the time this letter of 15 July 2002 was sent, there had already been correspondence between Yedway's solicitors (Gordon & Johnstone) and the solicitors for the Owners Corporation (MacMahon Associates). This had related to the proposed sale of the property management rights by Yedway to Mr and Mrs Betyounan. Mr Iveson, upon receipt of Mr Dolan's letter of 15 July 2002, sent a copy of it to Gordon & Johnstone. That firm wrote to MacMahon Associates on 22 July 2002 asking whether they were acting for the Owners Corporation in relation to the matter. MacMahon Associates replied the next day saying, "We consider it appropriate that your client should respond to the letter in accordance with the Agreement". 49 Gordon & Johnstone nevertheless wrote again to MacMahon Associates, apparently on instructions, disputing the claims in Mr Dolan's letter of 15 July 2002. This caused Mr Dolan to write to Mr Iveson saying that a dispute had been notified in accordance with the contract, that the owners Corporation would deal with the dispute in the manner provided for in the contract and that if any further contact was made on Yedway's behalf with the Owners Corporation's solicitors, the costs would be passed on to Yedway. 50 Mr Iveson wrote to "Executive Committee Chairperson" on 1 August 2002 saying: "Please be advised that any correspondence addressed to us whether it be personal or a contractual matter and directed from the Executive Committee, Owners Corporation or any representative of same of the above Strata Plan be directed to our lawyers at the following address. Attention: Mr Mark Tierney Gordon and Johnstone Lawyers Level 3, 55 Market Street Sydney 2000 Telephone : 02 9264 1906. Facsimile: 02 9264 8005 DX 199 Sydney If you have any queries, please contact Mr Mark Tierney of that office." 51 Mr Dolan responded on 6 August 2002: "James, The committee finds your most recent demand for all correspondence from the Executive Committee, Owners Corporation or any of its office bearers 'whether it be personal or a contractual matter' to be directed to Gordon & Johnstone, to be unreasonable. You have provided no reasons for introducing this final barrier to the genuine attempts by the Owners Corporation to communicate with Yedway, nor have you indicated by what process matters incorporated in such correspondence would be actioned if forwarded to Gordon & Johnstone. The Owners Corporation wonders how Yedway can possibly pretend that this latest piece of obstructive behaviour is in the best interests of the owners of lots. In any case I am appointed under the contract to communicate with the building manager and will therefore be forwarding correspondence to Yedway. Feel free to pass this correspondence to Gordon & Johnstone if you wish. Notice to Perform Duties You will recall that some time back the Executive Committee advised you (both verbally and in writing) that your cleaning was unsatisfactory. As you have in the past indicated that you have no cleaning schedule or plan, the Executive Committee has decided to form a cleaning sub committee to assist you in targeting those areas of the building that do not meet a reasonable standard of cleanliness. As a first step the cleaning sub committee recently examined all internal tiled floor surfaces throughout the common area of building. Cleaning tests were conducted in strategic areas revealing significant levels of dirt and grime adhered to tiles throughout the building. Some areas were assessed as worse than others, however all the areas identified below were assessed as unsatisfactory. As a result the Executive Committee has asked me to advise you that the standard of cleaning of tiled floor surfaces in the following common areas is unsatisfactory: Pool change rooms/toilets: Tower A1 - basement tiles (adjacent to lifts); Tower A-2 - access stairs from basement to foyer, foyer, all stairs to floor 3, all landings; Tower B1 - access stairs from basement to foyer, foyer, all stairs to floor 3, all landings; Tower B2 - access stairs from basement to foyer, foyer, all stairs to floor 3, all landings; Tower C1 - basement tiles (adjacent to lifts); Tower C2 - access stairs from basement to foyer, foyer, all stairs to floor 3, all landings; Tower D1 - access stairs from basement to foyer, foyer, all stairs to floor 3, all landings; and Tower D2 - basement tiles (adjacent to lifts). The Executive Committee is happy to provide a member (with reasonable notice and at a suitable time) to assist Yedway in understanding what the committee regards as an acceptable and reasonable standard of cleaning. Similarly if Yedway requires any specialised equipment to carry out the required duties, the Executive Committee is more than happy to receive a submission. It is worth noting that the Executive Committee has in the past offered to purchase a steam cleaner for this very purpose. Accordingly the Executive Committee expects that Yedway will take action to clean the areas identified to a reasonable standard with fourteen days of this advice. The cleaning sub committee will over the next few weeks also be examining other elements of the common areas for cleaning performance, particularly carpets, walls and windows, as these are areas where Yedway has also previously been advised of underperformance. Mark Dolan Communication Appointee For Owners Corporation Dockside Balmain

6 August, 2002." 52 On 19 August 2002, Mr Dolan sent Mr Iveson another letter containing "notice of dispute". This was about the gardens and a concern that they were being neglected. 53 The very next day (20 Augusts 2002), however, the Owners Corporation sent a letter by which it purported to terminate the management agreement (see paragraphs [4] and [5] above). 54 I have concentrated on the correspondence between Mr Dolan (for the Owners Corporation) and Mr Iveson (for Yedway) because it highlights the issues and deals with important aspects of the facts. The termination letter of 20 August 2002, however, makes a number of allegations which it is necessary to identify as follows: 1. That, from 25 March 2002, Mr Iveson unreasonably refused to make himself available to confer with Mr Dolan. 2. That Mr Iveson's conduct was "in direct contravention of his [ie, Yedway's] obligation to confer with Mr Dolan [ie, the Owners Corporation]. 3. That despite a "clear provision in clause 3.2 of the Agreement", a request for information as to the legal responsibilities of the Owners Corporation concerning public safety, occupational health and safety and Australian Standards had "not been given a satisfactory answer" (this is obviously a reference to clause 3.2(ii)). 4. That there were "financial irregularities" in that "Mr Iveson has separately invoiced and received payment for services which are already covered by the Agreement - in essence, that separate charges were being made for things covered by the management fee of $98,894 per year. 5. That there was unauthorised access to Mr Dolan's unit on 2 May 2002. 6. "Negligently failing to secure 15A fire safety compliance for the building". 7. "Unilaterally dictating the persons, tenants and agents with whom he would communicate - in particular, Mr Iveson's refusal to deal with Mancorp, a company which manages a number of units in the Property". 8. That there was failure to perform cleaning and maintenance duties to an acceptable standard. 9. That Mr Iveson unilaterally determined that he would not monitor in common areas thereby prohibiting tenants moving into or out of units except on Thursday or Friday. 55 In issuing the notice of termination, the Owners Corporation relied on clauses 8.1(c) and 8.1(d) of the contract. To the extent that there was reliance on the latter clause, it could only be in relation to cleaning, being the matter in respect of which a 14 days requirement was purportedly imposed by Mr Dolan's letter of 6 August 2002. The letter of 15 July 2002 concerning Sydney Fire Protection did not convey any requirement of the kind with which clause 8.1(d) is concerned. The several items in the letter of 20 August 2002, as set out above, must be approached on the basis that, except in relation to cleaning (where clause 8.1(d) my operate,, termination will be properly regarded as warranted only if the particular item involves "misconduct" or "grossly negligent" conduct as referred to in 8.1(c). 56 The Owners Corporation does not rely on any instance of "gross negligence". Its contention is that there was "misconduct" on the part of Yedway caught by clause 8.1(c). That leads to the question of the meaning of "misconduct" in this context. It was submitted on behalf of Yedway that "misconduct" in clause 8.1(c) refers to conduct that is in some sense reprehensible or illegal such as stealing. It was pointed out on behalf of the Owners Corporation, however, that illegal conduct such as stealing is likely to be within clause 8.1(a), while another form of illegal conduct is covered by clause 8.1(b). I accept that "misconduct" in clause 8.1(c) must be given a wider meaning. 57 That wider meaning is, in my opinion, one indicated by approaches taken in cases of professional misconduct. Guidance is provided by Adamson v Queensland Law Society Inc [1990] 1 QdR 498 and Roylance v General Medical Council [2000] 1 AC 311, cases concerning a solicitor and a medical practitioner respectively. The question of misconduct was judged according to whether the individual's conduct failed, to a substantial degree, to measure up to the standard of professional conduct adopted or approved by practitioners of good repute and competency. I see no difficulty in applying such a standard to a property manager or caretaker. Certain attributes of a property manager or caretaker of good repute and competency will be obvious. 58 This is particularly so in the present context where the "misconduct" that is relevant is "misconduct … in carrying out, or failing to carry out, the functions required under this contract". The standard of behaviour on the part of a property manager or caretaker of good repute and competency in and about those particular functions will be shaped very largely by the nature of the functions. 59 The question is not limited to whether any particular item in the list at paragraph [54] above of itself constitutes relevant "misconduct", although a conclusion that a particular item was, in its own right, "misconduct" will mean that grounds for termination have been shown. The question whether "misconduct" occurred should be approached by reference not only to isolated incidents or events but also the general and continuing pattern of behaviour. That said, however, it is nevertheless convenient to deal with the items separately in the first instance. I shall do so in what appears to me to be ascending order of gravity. 60 I begin with item 5 of paragraph [54] above which may be dealt with briefly. Mr Iveson stood in a planter box outside Mr Dolan's window in order to cut vegetation growing there. Accounts differ as to how much he cut. He said he cut only enough to clear tendrils obscuring a sign on the wall below the box and above a garage door. The competing view is that he "butchered" plants. The planter box was within the boundaries of Mr Dolan's strata lot but Mr Iveson thought it was common property and obtained access to it without going through the unit itself. I say that this matter can be dealt with briefly because the relevant action cannot on any basis be seen to have provided grounds for terminating the contract. A technical trespass in the course of clearing vegetation so that a sign may be seen - even if more is cut than strictly necessary - cannot on any basis be seen to be an action falling short of the standards of conduct to be expected of a property manager or caretaker of good repute and competency. 61 I consider next item 3 at paragraph [54] above and the alleged breach of paragraph 3.2(ii). I am not satisfied that there was a breach of this clause. The primary obligation is an obligation to "advise … on compliance with relevant laws". The obligation is cast upon a company having personnel obviously not legally qualified. The company is a property manager or caretaker, not a law firm. The content of the obligation must be understood accordingly. 62 The request or demand of the Owners Corporation was ultimately that Yedway provide such advice on matters of legal compliance as would enable the Owners Corporation to "assess its exposures, obligations and budgetary impact". The demand was thus, in effect, that Yedway, a property management or caretaker company, advise at large on every legal requirement, every legal rule and every legal principle that would or might entail an exposure, an obligation or a budgetary impact for the Owners Corporation. 63 This demand was beyond the scope of clause 3.2(ii). That clause, on a reasonable reading, required Yedway to raise issues of legal compliance with the Owners Corporation as and when occasion required. It did not cast Yedway in the role of a legal adviser or legal compliance consultant of whom requests for legal advice at large could be made as and when the Owners Corporation felt the urge to "assess its exposures, obligations and budgetary impact". 64 I am of the opinion that there was no "misconduct" in the clause 8.1(c) sense by reason of the responses given by Yedway to the continuing requests for legal advice received from the Owners Corporation or the inadequacy of those responses. 65 I deal next with item 9 at paragraph [54] above. This too can be dealt with briefly. There is no evidence that Mr Iveson or Yedway "unilaterally determined" not to monitor the common areas except on Thursday and Friday, thus "prohibiting tenants moving into or out of units" on other days. It is clear that Mr Iveson, in his correspondence with Ray White Balmain requested that all future movements take place on Thursday or Friday. It is said by the Owners Corporation that Mr Perri's evidence supports a finding of unilateral determination on the part of Yedway. But all that Mr Perri said was that people had to make prior arrangement with the caretaker in order to move furniture and the like in and out of the building, that some people were "not accommodated when they wanted to move their furniture in" and that "there were times when people were prohibited from moving in and out of the property except on either Thursdays or Fridays or times that they made convenient to Mr Iveson". 66 It cannot be regarded as "misconduct" in the relevant sense for the caretaker to require that prior arrangements for moving be made. Nor can it be misconduct for the caretaker to seek to centralise moves on particular days. The need for monitoring of movements is clear as there could otherwise be damage to the building. 67 I deal now with item 4 of paragraph [54] above. Although the words "financial irregularities" are used, the real allegation is that Yedway charged the Owners Corporation for work that was within the scope of its contractual tasks and was covered by the annual fee of $98,894. Examples are costs of telephone, fax and postage incurred by Yedway and expenses of weeding the gardens. It appears that, before Mr Dolan's time, these had been charged by Yedway to the Owners Corporation and paid, apparently without question. At a later stage, the point was taken that the particular charges or overheads were covered by Yedway's annual fee and that no separate and additional charge was warranted. 68 The important point about this, in my view, is that Yedway did nothing more than attempt to continue what appears to have been an established pattern - and, in particular, that it did so in the open and without any attempt at misrepresentation or deception. Whatever the contractual position may have been is beside the point for present purposes. Yedway considered itself to be entitled to reimbursement for the particular outgoings. The Owners Corporation did not. There was a difference of opinion. There was no "misconduct" on Yedway's part in this respect. 69 I deal next with item 6 in the list at paragraph [54] above. There were numerous references in the evidence and in submissions to a "15A Certificate". It was made clear that such a certificate has something to do with the adequacy or currency of fire protection equipment. No one identified the Act, regulation or ordinance under which a "15A Certificate" is required, issued or dealt with. The allegation against Yedway was nevertheless that it failed to obtain or arrange or otherwise act in relation to the so-called "15A Certificate". 70 The only potentially relevant contractual duty is that arising from the last part of clause 3.2(ii): "… carry out for the Owners Corporation mandatory inspection of fire safety equipment." 71 Beyond that, the clause 3.2(ii) obligations are concerned with advising and notifying, neither of which is a concept which would entail obtaining some form of certificate. 72 But with the information before me as it is, I simply do not know whether the obtaining of a "15A Certificate" - if, indeed, "obtaining" is a relevant concept in relation to such a certificate - is within the scope of carrying out an inspection. In general terms, the carrying out of an inspection entails merely looking at something. The obtaining of a certificate goes beyond looking at something. 73 It has thus not been shown that the obtaining of a "15A Certificate" was part of the duties of Yedway or that any form of failure to obtain such a certificate entailed conduct of a standard inferior to that to be expected of a building manager or caretaker of good repute and competency. There can therefore be no finding of "misconduct" in relation to this matter. 74 I deal next with item 7 at paragraph [54] above and the question whether Yedway or Mr Iveson unilaterally dictated the persons, tenants and agents with whom he would communicate. 75 It is clear that Mr Iveson refused to deal with Mancorp and Mr Mann. Mancorp, as I have said, managed certain tenanted units in the building. The stance taken by Mr Iveson was that, if there were to be any dealings between the Owners Corporation and Mancorp, they should be dealings direct with the Executive Committee or its representative, so that he and Yedway were not involved. 76 It may be accepted that Mancorp had legitimate reason to deal with the Owners Corporation on matters falling within the scope of Yedway's contractual responsibilities. No doubt other estate agents who managed units in the building were in the same position - for example, Ray White Balmain. Indeed, there was presumably a range of persons with whom Mr Iveson was required to have contact from time to time in the course of performing the functions that Yedway was committed to perform. It was not open to him to say to the Owners Corporation, in effect, that he refused to deal with all such persons. That would have been a complete abdication of responsibility. Likewise, in my view, it was not open to him to take the lesser step of refusing to deal with one particular person or firm with whom contact was required in the ordinary course of the performance of the caretaker's duties. That too was an abdication of responsibility. 77 A building manager or caretaker of good repute and competency would deal as necessary with all persons with whom his duties required him to deal. An abdication of the kind I have described would not be conduct expected of a building manager or caretaker of good repute and competency. There was thus misconduct in this case. 78 Items 1 and 2 in the list at paragraph [54] above may be taken together. The allegation is, in essence, that Yedway (through Mr Iveson) failed in a fundamental respect to live up to the standard of conduct to be expected of a property manager or caretaker of good repute and competency in that it steadfastly refused to engage in reasonable dialogue with its principal. 79 Mr Iveson made it clear from the outset of his contact with Mr Dolan that he would not make himself available to meet except between 9am and 5pm, Monday to Friday. This was despite his knowing that Mr Dolan was in full-time employment (as, it seems, were most, if not all, of the executive committee members). Mr Iveson was managing a home unit complex, not an office building, shopping centre or factory. He must have known that his refusal to meet except during business hours would produce the stand-off that it in fact produced. Furthermore, he lived on the premises. It was not as if a short meeting at, say, 6pm would greatly inconvenience him. 80 In cross-examination, Mr Iveson stated that he worked, on average, 60 hours a week. He accepted that he often worked on Saturday and Sunday and that he sometimes worked outside the hours 9am to 5pm on weekdays. He also accepted that he was willing to work outside normal business hours to fix power fuses or change light bulbs or to deal with security matters. Indeed, the contract itself makes it clear, by necessary implication, that some of the management functions may need to be performed outside normal business hours. This is because some services are, by the contract, required to be rendered "during ordinary business hours" (see, for example, clause 3.2(vi)) but there is no similar limitation in relation to others. 81 Yet despite both a duty involving work outside normal business hours and the fact that he regularly worked outside those hours, Mr Iveson insisted that meetings with Mr Dolan should take place only between 9am and 5pm, Monday to Friday. The matter was elucidated in cross-examination as follows: "Q. Can you now come to tab 22. You should be looking at Mr Dolan's letter to you of 29 March 2002, correct? A. Yes.

Q. And you say, Mr Dolan says in the fourth paragraph, 'What I find confusing is that you seem to be arguing with your note that we can only meet between 9 and 5 because "you were working particularly long hours"'. Are you saying that 9 to 5 represents long hours or that the work you perform after and before these times is of such importance that none of it can be rescheduled to accommodate a brief meeting once a week? What is the answer to that, Mr Iveson? A. The answer to that question, I'd already explained to Mr Dolan when I was able to meet, five days a week 9 to 5 and that was my stance.

Q. You are saying the work you were doing before and after those times that were of such importance that none of it could be rescheduled to accommodate a brief meeting once a week. Is that what you say? A. Correct." 82 Mr Iveson thus makes it clear that he taken a "stance" against Mr Dolan's request for a brief weekly meeting either before 9am or after 5pm on a weekday, and that he did so even though he recognised the need for other aspects of the caretaker's duties to be performed outside those hours. 83 Mr Iveson's "stance" was taken by him in a way that showed from the outset that he intended to be antagonistic. It was put to him in cross-examination that he had, in his letter of 27 March 2002 (see paragraph [16] above) set out to mimic the language in Mr Dolan's letter of 26 March 2002 (paragraph [15] above). Mr Iveson's refusal to accept this must itself be rejected. Even the most casual reading of the letter shows that Mr Iveson set out, right at the beginning of the relationship, to mock Mr Dolan or, at least, the language he used in his letter. That was clearly part of Mr Iveson's "stance". He had a deliberate plan to be unpleasant and unco-operative. 84 Items 1 and 2 also entailed a breach of clause 6.2(a) of the contract. It was, in the whole of the circumstances, a reasonable requirement that Mr Iveson make himself available for a brief meeting with Mr Dolan on a weekly basis somewhat before 9am or somewhat after 5pm on a weekday. The obligation to "confer" entails a duty to have oral contact in which exchanges take place. The meaning of the term is explained in the judgment of Martin CJ in Youlden Enterprises Pty Ltd v Health Solutions (WA) Pty Ltd [2006] WASC 161; (2006) 33 WAR 1. His Honour observed (at [5]) that an obligation under rules of court to "confer" involved oral communication in respect of the relevant matter as distinct from "the exchange of furious correspondence". In Laing O'Rourke (BMC) Ltd v Dampier Port Authority [2007] WASC 87, Simmons J expressed the view that, in the particular context, "confer" entailed a "genuine and meaningful attempt to resolve the interlocutory dispute". 85 The present context is not one of dispute resolution. The obligation to confer was more general and related to all matters relevant to the relationship between the Owners Corporation and Yedway as property manager or caretaker. Mr Iveson's steadfast refusal from the beginning of his contact with Mr Dolan to meet face to face except at times which Mr Dolan indicated, on reasonable grounds, were inconvenient to him entailed not only a persistent and continuing breach of clause 6.2(a) but also a persistent and continuing failure to live up to the standards of conduct to be expected of a property manager or caretaker of good repute and competency. There was misconduct in this respect. Indeed, there was continuing and persistent misconduct 86 This misconduct on the part of Yedway was consolidated and extended when Yedway delivered to the Owners Corporation the letter of 1 August 2002 set out at paragraph [50] above. Yedway, through Mr Iveson, had brought about a situation in which written communication was the only effective means of contact between Yedway and the Owners Corporation. Having done that, Yedway then took the further step of requiring that all communication be through its solicitors, "whether it be personal or a contractual matter". Yedway, through Mr Iveson, thus put a quite unrealistic and impracticable obstacle in the way of future communication. A new and separate event of misconduct occurred when that obstacle was created. That misconduct continued thereafter. 87 Finally, I consider item 8 in the list at paragraph [54] above. It can be said at the outset that Yedway did carry out cleaning and maintenance work. The contention of the Owners Corporation is that it did not do so in accordance with the contract in that the results of its labours did not cause the common property to be "clean and tidy" (clause 3.2(i)) or "in good order and condition" (clause 3.2(ii)). As I have said, the matter of cleaning and maintenance is the only one in respect of which the Owners Corporation may be able to rely on clause 8.1(d). Mr Dolan's letter of 6 August 2002 was clearly written by reference to clause 8.1(d) in that it required the specified areas to be cleaned "to a reasonable standard without fourteen days of this advice". The real question is whether there had been beforehand a failure "to carry out the contractual duties", being the duties with respect to cleaning and maintenance arising from clauses 3.2(i) and 3.2(ii). 88 Particularly compelling here is the video evidence. That evidence makes it clear that significant dirt and grime was adhering to tiled areas in the common property and that the dirt and grime was easily removed by the application of a common domestic cleaning agent. The video also showed the area previously cleaned by Mr Dolan with the steam mop about two months earlier. That area was visibly cleaner than the adjoining area despite the passage of time. There is also the point that Mr Cooper was able on 7 June 2002 to make a clean line on a tile by licking his finger and drawing it across the tile. 89 Mr Iveson's position is that the tiles were covered with a sealant which had been applied by the builder over surface dirt. One part of the evidence showed a tile on which pencilled lines had been ruled. One might infer that this was the work of the builders. There was no evidence suggesting that an attempt had been made to remove this line and that the presence of sealant had prevented its removal. 90 I cannot determine whether there was sealant on the tiles and dirt under the sealant. What the evidence does allow me to say, however, is that portions of the floor tiling became very significantly cleaner when, in one area, a moistened finger was drawn across the surface; when, in a second area, an ordinary household cleansing agent was applied with a sponge; and when, in a third area, a steam mop was used. Mr Dolan gave evidence that he had checked with the manufacturer of the steam mop whether it would damage sealant applied to floor tiles and was told that it would not. 91 My conclusion on the matter of the floor tiles is that members of the executive committee took trouble to point out to Mr Iveson on several occasions that the tiles were not clean but could be made clean by simple wiping. And this was so whether sealant was present or not. Mr Cooper's finger provided the best evidence of that. In addition, it seems unlikely that a steam mop could have lifted or stripped away sealant in a uniform way such as to make the whole of the mopped area noticeably cleaner than the whole of the unmopped area. The application of the household cleaning agent with a sponge had some capacity, through abrasion, to remove sealant but the effort applied, as shown in the video, was by no means great - certainly not as great as one would expect to be necessary to penetrate a hardened surface film. I am, on the balance of probabilities, satisfied that the simple expedients adopted by the committee members that produced such marked improvements in the cleanliness of the tiles establish that the cleaning methods that had previously been employed were inadequate to cause the tiles to be "clean and tidy" and "in good order and condition". 92 The cleaning problems went beyond the floor tiles. Mr Tsibulya, an experienced strata manager, gave evidence that the standard of cleanliness at the premises generally was below that which he would have expected and that the standard of cleanliness and maintenance was not of an acceptable nature. He was not cross-examined on this evidence. Mr Cooper who, as has been noted, is a strata manager of other apartment buildings in the area gave evidence that: "The Dockside development is not being maintained at a reasonable standard having regard to the nature of the complex, comparable developments in the area and the capital cost of apartments in the complex. Indeed it is my view that it is well below a reasonable standard." 93 Mr Cooper was not cross-examined on this aspect of his evidence. 94 There was also evidence from Ms Eddy, a unit owner who went on a tour of inspection with other non-committee residents in or about March 2001. She wrote a report at the time which includes the following: "" General Remove rubbish from common area, gardens paths and lawns The rubbish areas and bins are also an area of concern to the residents. On inspection, the odour from some of the area, particularly around Apartment building A, were particularly offensive. The bin areas are supposed to be disinfected and washed out weekly. Hosing down only will not disinfect or get rid of the odour. It is obvious that the bins need to be washed our more regularly, once weekly rather than once monthly. Check, clean and disinfect common areas The stairwell areas of all buildings have not been cleaned properly since the building was completed. A light mopping has not removed any of the normal day to day scuff marks, there are oil and grease spots in all stairwells and general marks and spills that could easily have been removed. This is a great concern to the residents, as the overall appearance of the internal areas will decay quickly over time to a standard not expected in a complex of this quality. The windows in all the common stairwell areas, including the doors, are always dirty, with hands and finger marks, smudges etc. These windows do not appear to be cleaned on a regular basis if at all. …" 95 Yedway led very little evidence about the cleanliness of the building. There was favourable evidence from Ms Ballo but she only visited the building three or four times in total from mid-2001 to late 2002 and, during her visits, saw only the common garden area near the pool. She did not see the foyers or the tiled areas in them. Mr Schwertfeger and Ms Mszanowski gave evidence in Yedway's case but it was very general evidence about cleanliness which did not address the detailed evidence given by the Owners Corporation witnesses. 96 The Owners Corporation was justified in issuing the letter of 6 August 2002 and framing it as a demand in terms of clause 8.1(d) of the contract. In addition, the failure of Yedway to attend to cleaning in a reasonable and consistent way and to refuse to accept and act upon justified complaints about cleaning entailed failure to exhibit the standard of conduct expected of a building manager or caretaker of good repute and competency. There was misconduct on the part of Yedway in the matter of cleaning. That alone was sufficient to justify termination under clause 8.1(c). The failure to remedy the cleaning deficiencies within fourteen days after receipt of the letter of 6 August 2002 was itself and separately sufficient to justify termination under clause 8.1(d). 97 I am satisfied that there were three separate respects in which Yedway engaged in misconduct of the kind contemplated by clause 8.1(c) - first, in refusing to deal with Mancorp; second, in refusing to act reasonably and constructively in the matter of conferral and communication; and, third, in relation to cleaning. In each, Yedway failed, in relation to functions required under the contract, to live up to the standards of professional conduct adopted or approved by property managers or caretakers of good repute. And when the three matters are taken together, there is seen to be a pattern of failure to live up to those standards, with the result that, apart altogether from the separate ground of termination arising under clause 8.1(d) by reason of the letter of 6 August 2002, the Owners Corporation was justified in relying on clause 8.1(c) to terminate the contract. 98 As I have said, the Owners Corporation did not, in reality, terminate the contract, even though it purported to do so by its letter of 20 August 2002. The Owners Corporation in fact allowed the contract to continue, but its move to terminate apparently prompted Yedway's mortgagee to appoint a receiver. To the extent that Yedway maintains that the mortgagee's action (disadvantageous and damaging to Yedway as it is said to have been) was prompted by wrongful action of the Owners Corporation in purporting or threatening to terminate the management agreement, the answer is that the Owners Corporation's action was not wrongful. It was action consistent with and sanctioned by the terms of the contract. Yedway has thus failed to establish the first breach of contract it alleges (see paragraph [7] above). 99 I proceed now to the second part of Yedway's case. It alleges that the Owners Corporation breached clause 9.1 of the contract by unreasonably withholding consent to an assignment of the contract by Yedway to Mr and Mrs Betyounan. 100 It is necessary, in that connection, to address aspects of the evidence not so far mentioned. First, however, something should be said about clause 9.1 of the management agreement which allows the manager's interest to be assigned "if the Owners Corporation approves the transfer" and goes on to say that approval is not to be unreasonably withheld. 101 Clause 9.1 clearly conferred on Yedway a right to assign. The right was qualified only to the extent that it was open to the owners Corporation to deny the right in respect of a particular assignment proposal provided that, in doing so, it acted "reasonably". The relevant concept of reasonableness is one that pays attention to attributes of the proposed assignee relevant to contract performance and matters going more widely to the due, proper and efficient performance of the contractual provisions to be performed by the property manager and caretaker. This approach comes from analogy with judicial attitudes to similar provisions about assignment of leases: see, for example, Colvin v Bowen (1958) 75 WN (NSW) 262. In the lease context, a significant preoccupation will be with the proposed assignee's capacity to pay the rent. Thus, in Secured Income Real Estate (Australia) Ltd v St Martin's Investments Pty Ltd (1979) 144 CLR 596, Mason J said (at 610): "If the evidence established that the respondent entertained doubts, reasonably based, that the appellant would pay the rent promptly and without difficulty, then it was reasonable to refuse to grant the lease on that ground." 102 Cathedral Place Pty Ltd v Hyatt of Australia Ltd [2003] VSC 385 concerned a contract under which the defendant ("Hyatt") managed a hotel owned by the plaintiff ("Owner"). The contract provided that the Owner was not to transfer its interest in the hotel without the consent of Hyatt, which consent was not to be unreasonably withheld. Nettle J, at [28] - [29], discussed considerations relevant to "unreasonable" withholding of consent: "[28] All that having been said, however, in this case the assignment provisions of the Hotel Management Agreement present as routine. Looked at in context they support a conclusion that the parties' purpose was to allow Hyatt to protect itself against the danger of an assignee who might not be a satisfactory substitute for the Owner - which is to say, might not be able to sustain the Hotel Management Agreement for the remainder of the term - but I see nothing in the terms that points in the direction of any wider or different considerations. Of course that may not be the end of the matter, for as has already been seen, in terms of principle the inquiry is one into the supposed intention of the parties and thus as a matter of principle and according also at least to some of the authorities, the answer depends upon "all the facts of the case". But given the terms of the contract, the scope of permissible considerations is in my view relatively constrained.

[29] As a matter of principle, and as a matter of authority, Hyatt may have regard to the question of whether the proposed purchaser is a suitable substitute - able to go the distance, and also to the possibility of detriment to any other proprietary and financial interests to which Hyatt may be entitled. Accordingly, Hyatt is entitled to resist the creation of a relationship between itself and the new owner which differs from that created under the original agreement, and Hyatt is entitled to withhold consent to an assignment which might trench upon rights accrued under the Hotel Management Agreement and perhaps even rights arising out of the Hotel Management Agreement. The refusal to consent for either reason would be no more than necessary to ensure that Hyatt continued to enjoy the rights for which it contracted. But as a matter of principle and according to the authorities, Hyatt would not be entitled to refuse consent in order only to acquire rights or benefits to which it was not entitled under or arising out of, or at least contemplated by the agreement. As a matter of principle and as a matter of authority, the refusal of consent for those purposes would operate to deprive the Owner of a benefit for which the Owner had contracted, namely, the right to assign to a suitable substitute consistently with the rights and interests of Hyatt. To adopt and adapt the terms employed by Mason J in Secured Income , it would breach the obligation implicit in the agreement to do all such things as are necessary on Hyatt's part to enable the Owner to have the benefit of the contract." 103 In the present case, therefore, the qualification that the Owners Corporation must not unreasonably withhold consent must be taken to be concerned with the question whether, if the substitute property manager and caretaker is introduced, the relationship envisaged by the contract will be sustained in such a way as to ensure that the rights of the Owners Corporation are maintained. In addressing that question, the Owners Corporation had a specific duty to consider the matters set out in clause 9.2 of the contract. 104 On or about 17 June 2002, Yedway entered into a contract for sale of the management rights to Mr and Mrs Betyounan for $380,000, subject to the approval of the Owners Corporation. On 18 June 2002, Mr Iveson wrote to the executive committee of the Owners Corporation as follows: "Dear Sir, Please find attached the relevant details of Mr John Betyounan. Mr Betyounan is in the process of purchasing the Management rights for 'Dockside Balmain' and thus the transfer of the Caretaking and General Property Management contract. The relevant factors which are required by the Owners Corporation in helping in deciding to approve a proposed transfer are included in the attachment and are a. The character of the proposed transferee and any associates b. The financial standing of the proposed transferee c. The proposed terms of the transfer d. The competence, qualifications and experience of the proposed transferee and any associates, and the extent to which the transferee and any associates has received or will receive training. I am proposing the following times for Mr Betyounan to attend an interview with the committee. Would you please confirm one of these times with me or if not convenient would you please inform me via telephone or fax in order for me to arrange an alternate time. Saturday, 22nd June 10am or 2pm. The terms of the transfer are that settlement is to take place in July, 2002 and that a two week training/familiarisation session is to be conducted by me prior to handover. Please contact me for further information if required. Regards (sgd) James A Iveson cc Mr Jason Wagner/Gordon and Johnstone Lawyers " 105 Enclosed were a recommendation of Mr Betyounan by a Mr Coombes, Mr Betyounan's resumé and a statement of Mr Betyounan's assets. The resumé referred to qualifications in engineering and electronics and an employment history in the building industry, as a technician, a technical officer, a draftsman and a co-ordinator. Two particularly pertinent entries were: " 3.1 Property Maintenance 2001-2002 As a Private Contractor managing the maintenance & cleaning of Building Complexes. Helping the Building manager with Day to day operation of complex and Rectifying all technical problems and building defects. 3.2 Property Maintenance ('Dockside' Balmain) 2001 2002 Under supervision of Building Manager of above Site I have been trained in all Aspects of Property management & Maintenance." 106 On 22 June 2002, representatives of the executive committee (Ms Grace, Mr Dolan and, in the later stages, Mr Cooper) interviewed Mr and Mrs Betyounan. They were the members of the committee available at the time. 107 The committee members questioned Mr Betyounan about item 3.2 in his resumé. They asked, in effect, how that item could be correct when none of them had ever seen him around the building. According to Ms Grace, Mr Betyounan replied that he had included the item because Mr Iveson had said that it would be better if it was there. Mr Dolan confirms this account. Mr Cooper's evidence is that he joined the meeting at the end and raised with the other committee members afterwards the need to check item 3.2. 108 In a letter to Mr Betyounan dated 7 July 2002 to which it will be necessary to return, Ms Grace, on behalf of the executive committee, asked a number of questions. One was: "As discussed the committee would also appreciate a written clarification in relation to the statement in your resumé that indicates that you worked at Dockside through the year 2001-2002." 109 In his reply dated 16 July 2002, Mr Betyounan said: "As I mention this matter at my first interview with The Executive Committee, that it was typing error on date shown on my resume, I did not work at Dockside Balmain at year 2001. I did two weeks training course (working experience) with Mr Iveson from 25/06/02 to 5/07/02 as it was mentioned in Agreement for sale of management rights between two parties. Also I was employed by Yedway Pty as a casual from 8/07/02 to 12/07/02 to help him with his management duties." 110 In his affidavit and later in cross-examination, Mr Betyounan continued to say that there had been a typing error. It is necessary to quote extensively from his cross-examination on the matter: "Q. What is the typographical, what is the error that you say is in 3.2? A. Because I didn't exactly mention because didn't mention exactly what date was, just added 2001, 2002, that is I forgot to put date in there.

Q. What do you say the error is you are referring to at the meeting in paragraph 3.2?

Q. What do you say is the error that you are referring to in paragraph 3.2 on page 304? A. The error is just date, that is the error.

Q. Which year, both years or just the 2001 year? A. 2001 year, that date was carried out, if you look at 3.1 just copied, I add that extra line on it. That computer repeat the date on the second page then I forgot even to change the date.

Q. Please stop me if I have not fairly captured what you are putting. Do you say that you copied? A. Yes.

Q. The heading, 3.1, and pasted it to 3.2 on your computer, is that what you are saying? A. Yes, something like that.

Q. Is that what you are saying or isn't it? A. I don't recall what exactly, I didn't copied, or repeated, changed or edited those sentences or those words.

Q. You didn't copy it across at all, did you? A. I don't recall those things copied or not copied. I don't remember six years ago what I did.

Q. You have taken the hyphen out between 2001 and 2002, correct? A. Sorry?

Q. In 3.2 there is no hyphen between the numerals 2001 and 2002, correct? A. I don't know what you are talking about.

Q. The little dash between 2001 and 2002 in 3.1. It says 2001, then a little dash, 2002, see that in the heading of 3.1? That is what you are being referred to? A. Okay.

Q. That little dash does not appear in the heading in 3.2 between 2001 and 2002, does it? A. No.

Q. Did you take it out after you copied it? A. I tried to edit it. I make mistakes editing them. I thought editing them, I just copied or repeated just to tell the committee I had been working there. The problem, I was in the middle of editing then I forgot completely and because I was trying to change it to the exact date it is not there.

Q. Have a look at paragraph 26 of your affidavit, Mr Betyounan. You say in the first line, 'The reference to 2001 in my resume was a typographical error'. A. 26?

Q. 26 starts near the end of the first line, the reference? A. Whatever typographical error it is a record so.

Q. Come down to the page, what you depose to having said, you see a quote, an indent quote. It begins, 'It is a typographical error'. A. Yes.

Q. 'I didn't adjust it after copying it over from the previous heading'. Do you see that? A. Yes, I didn't adjust or I didn't edit, whatever happened the date hasn't been edited or changed that, the problem. Trying to play with the word, the date hasn't been edited.

Q. You didn't copy it over from the previous? A. I didn't copy it or I put extra line, I didn't completely edit it, the date.

Q. Go back to page 304. I want to put some matters to you about this. There are a number of differences in the heading between 3.1 and 3.2. First you inverted the words Dockside Balmain? A. Yes.

Q. Secondly, you have moved the date across, the date isn't indented in 3.2 in the same way as it is in 3.1? A. Yes.

Q. Thirdly, the hyphen has been removed between 2001 and 2002? A. Yes.

Q. And you did all those things yourself? A. Yes.

Q. And you tell the Court you didn't notice while doing that that the 2001 was wrong? A. When I found, when Mary told me the date was wrong and showed me at the meeting, I said, yes, I made a mistake. I didn't know until I was at a meeting. She pointed to me that date has been wrong. Then I saw it was wrong. I said sorry, I didn't mean anything, probably it was error. I didn't put the right date in there.

Q. The fact is that you hadn't started your training by the time of the meeting, had you? A. No, I was working with him for two weeks before the meeting.

Q. You are just simply incorrect about that, Mr Betyounan? A. No, I told Mary at the meeting. I work two weeks before this meeting because James Iveson said it is better in your resume when you go to the meeting they know you work two weeks for me and it, all the operation of that meeting.

Q. Mr Iveson did suggest to you, you put that reference because it would look better? A. He didn't mention a date, all that mistake was put by me. I didn't put correct date, I put, good if you work, put in your resume that you work two weeks at that property." 111 Mr Betyounan was then taken to his letter of 16 July 2002 to the executive committee in which he said: "I did two weeks training course working experience with Mr Iveson from 25 June to 5 July." 112 With Mr Betyounan's attention thus focused on his own contemporary statement that the training had occurred after the meeting with committee members on 22 June 2002, the cross-examination continued: "Q. I put it to you again, Mr Betyounan, you did your training with Mr Iveson after the meeting, correct? A. No, I don't know what dates here is doing, it looks somewhere here the dates not changed dating because if I look.

Q. That is just preposterous, Mr Betyounan? A. I don't know what date 25, 26th meeting on 22. How I can put here two weeks training course, working with Mr Iveson, work experience from that date. I went to the meeting before that. Can be right.

Q. You went to the meeting, this is the sequence of events, Mr Betyounan. You had your contract with Mr Iveson on 14 June 2002, correct? Do you accept that or would you like to see the document? A. What the exact date I had with him, contract date, contract for buying the property or--

Q. Why don't I take you to that, Mr Betyounan. Tab 52. Are you looking at tab 52 now, Mr Betyounan, first volume? A. First volume?

Q. Tab 52 should be a letter that is dated 14 June 2002 from your solicitor to Gordon and Johnson, do you see that? A. June 2002?

Q. If you turn over the page there is the agreement and you will see the agreement is dated 17 June? A. Yes.

Q. So your agreement was dated 17 June, on 18 June you provided Mr Iveson or by 8 June you provide Mr Iveson with your resume, correct, and that is behind tab 58, tab 58 in volume 1? A. Yes.

Q. Then your meeting was on 22 June, correct, Mr Betyounan? A. The date here is 18 June.

Q. And your meeting was on 22 June, correct? A. Yes.

Q. And then you had your training beginning on 25 June, as you have said in your letter, for two weeks to 5 July, correct? A. Probably is correct. I am trying to remember the dates. I see here on the paper." 113 Mr Betyounan was also taken to a resumé he had submitted quite separately a year later when the receivers appointed by Yedway's lender had sought buyers for the management rights. In that resumé, he made no mention of what had been item 3.2 in the resumé of June 2002. 114 Mr Betyounan set out in his resumé to deceive the Owners Corporation. He claimed, in the resumé prepared some time before 18 June 2002, to have worked under supervision at Dockside itself in "2001 2002", in the course of which he had been "trained in all aspects of property management and maintenance". This was a false statement. The three members of the executive committee who met with Mr Betyounan on 22 June 2002 suspected it was false and made inquiry of Mr Betyounan accordingly. I am satisfied that the account of his answer given by both Ms Grace and Mr Dolan is accurate and that he said that the inclusion of the relevant item in the resumé had been at the suggestion of Mr Iveson. There is not, however, evidence that would allow me to find that Mr Iveson made such a suggestion to Mr Betyounan. That is, in any event, unimportant. The significant point is that Mr Betyounan made a material misrepresentation to the executive committee members and, when questioned, sought to disown or avoid it first on the basis that someone else had suggested its inclusion and later as a typographical error. 115 Other aspects of the Owners Corporation's consideration of the proposed assignment to Mr Betyounan must now be examined. I have mentioned Ms Grace's letter of 7 July 2002. By that letter, the Owners Corporation requested certain documents, including "evidence in relation to any formal qualifications related to your capacity to deliver the services in 3.2 of the contract (eg, fire safety inspections)". Then followed a list of specific questions: "a. a general high-level statement indicating your understanding of the role of the building caretaker/manager; b. indicate if you believe the committee has rights in relation to the administration of the contract (eg. Setting policy and standards) and if you are willing to work/communicate/cooperate with the owner's corporation and its representatives; c. declare any associations related to the proposed transfer or ongoing performance of the contract; d. indicate your understanding of the services to be delivered in 3.2 of the contract and outline your understanding of the expense responsibilities outlined in 3.2 and 3.3 of the contract; e. indicate your understanding of working hours in the context of the delivery of the services outlined in the contract; f. indicate if you will be performing both the caretaker and managers service yourself. g. indicate where you intend to reside and how this will impact on the timeliness with which the contracted services are delivered; h. indicate how you intend to deliver services when you (or your employees) are not on the premises; i. indicate how you will be trained in relation to understanding the details within the contract; j. indicate if you aware of the laws, codes and regulations that govern a building like Dockside and how you will be trained in this area; k. indicate your understanding in relation to the building manager's office, its maintenance and associated expenses (eg. phone bills, office supplies); l. indicate the process that would operate under your management when purchases are required (capital, disbursements and contingency expenditure); m. indicate what experience you have had in relation to management matters (eg. analysing reports, providing briefing material, preparing proposals); and n. acknowledge that you are aware and accept that the administration of a proximity security system and any further security installations are part of the caretaker/managers role." 116 It is clear that a number of these questions were prompted by problems the Owners Corporation had experienced with Yedway. 117 Mr Betyounan replied by letter dated 16 July 2002 already mentioned: "Dear Mary Thank you for your Letter that I received on July 10th 2002. I have read and examined all the contents of your Letter. I have attached the relevant Documentation for your information as requested by The Executive Committee. Dear Committee, as requested I am going to provide you a brief response to your questions as indicated in your letter; * Conducting Management Rights, is no different to running my business, it is important to build a good Reputation for myself and the Building, which in turn helps to occupancy rates to a maximum, the higher rental income the more happy owners. I fully understand the role of the Building Manager, remember - two major requirements to successfully running a Building are: Cleanliness and Public Relations. I have previous experience in management specially project management in network design and construction in the Telecommunication and Building industry. Also I have a vast experience in public relations as capacity of President and Secretary of Community Clubs and Associations. * Every Building has a Body Corporate Committee elected from and by the proprietors (owners) to conduct the smooth running of the building generally together with the care of the all-common areas. The Building Manager is approved by The Committee and the terms of an appointment are provided by the way of a written Agreement between two parties (contract) this Agreement is a most important document and is the "Rule Book" to be adhered to, thereby safeguarding all concerned parties. Therefore I believe that the Building Manager has to work/communicate/cooperate with the Owner's Corporation and its representative and also to comply with the Contract to achieve ease of operation and to obtain the best results for all unit Owners. * I declare that I have no associations related to the proposed transfer of the contract. * My understanding of working hours usually is business hours from 8 am to 4.30pm, or 9 to 5 weekdays. In case of emergency after hours I can respondent or attend if needed. Also when tenants are moving in/out during Saturday morning I will attend only if Real estate agent has notified me in advance. * Because my wife and me are buying the Management Rights Business we will be the sole owners and operators of the above business. And we will perform both as caretaker and manager roles and responsibilities. I will concentrate on management and maintenance side of the business and my wife will help me with cleaning side of the business. * We will reside within 3Km radius of "Dockside" Balmain to save time on travelling or in case of emergency I can attend quickly on site. Also I will consider to reside in Dockside Balmain if have enough resources. * Of course, I will train my wife in all aspects of running the business when I am away on holiday or sick leave. Also I will train a person as employee on part time bases which I can trust him and such a person will be capable and have enough knowledge and experience to run the business in our absent but with prior approval of owners Corporation. * Already I have studied and examined carefully the contents of contract with my Lawyer, and I am happy with its terms and conditions. * I am fully aware of the Laws, codes and Regulations that govern a Residential Complex. The Strata Schemes Management Act 1996 has created 21 By-law Codes in which the Owners occupier/Tenants should comply and adhere to The By-Laws, in case of any offence or breaking the Laws the Manager is responsible to issue An Infringement notice in first instant. * The Owners Corporation as indicated in Contract has provided a Manager office and storage rooms for his/her daily operation of the complex. It is manager responsibilities to keep it in good order and safe, also all the telephone bills and stationary and computer expenses will be paid and provided by the Manager. * The process that would operate under my management when purchases are required, can be divided in two groups, the first group is the expenditure or capital required for daily use of certain materials which we will use to maintain the building such as; detergents, cleaning materials, chemical used for swimming pool, garbage bags, gardening solutions and materials and so on, which we can clearly determine and estimate how much materials we need each month and what will be our expenses. The second group or contingency expenditure is uncertainty of occurrence, things that may happen at later time or things dependent on an certain event, in this even we need a plan to take account of such events, for example breaking of plant equipment, water heating equipment, security equipment, electromotor equipment and so on. Therefore we have always to allocate a certain capital for such events. Also I will provide a graph, which will show how much we can spend on materials on each group, which I mentioned above for each year, which then we can decide how much capital is required for the following year. * As mentioned in My CV, I have many years experience in project management, in network design and construction, also several years experience in Residential Building construction, specially when I was employed by Telstra, Optus and Vodafone I was responsible for projects up to several million dollars, which I involved initially of feasibility study of proposed projects and plans, analysing of structural reports and material used in the project, assessing OH&S and Environmental impacts, preparing proposals, writing reports and rec9mmendation and finally approving the project. * Yes, I acknowledge that I am aware of proposed proximity security systems to be installed in near future at Dockside Balmain, as you know the security of the building is part of Manager's responsibility during business house, therefore I have no objection to the new installation, some buildings have security on site after hours (meriton apartments) so that is a different issue. * As I mention this matter at my first interview with The Executive Committee, that it was typing error on date shown on my resume, I did not work at Dockside Balmain at year 2001. I did two weeks training course (working experience) with Mr Iveson from 25/06/02 to 5/07/02 as it was mentioned in Agreement for sale of management rights between two parties. Also I was employed by Yedway Pty as a casual from 8/07/02 to 12/07/02 to help him with his management duties. Dear Executive Committee, hope I have supplied the Executive Committee sufficient information to enable you to assess my suitability for the Manager position within The Management Rights Business for the Dockside Balmain. Kind Regards John Betyounan Detail in relation to the proposed terms of transfer The agreements for sale of management rights has been agreed and signed between two parties the Vendor as Yedway Pty Ltd and John & Julie Betyounan as Purchasers. The agreement for the sale (contract) has been exchanged and Purchaser has paid %10 deposit to the Vendor. The completion shall take place on the Completion Date, and shall be deemed to have been effected upon payment of the balance of the price. The Vendor shall provide training to the Purchaser in the management of Dockside Balmain for the period of two (2) weeks immediately prior to the Completion Date. The Vendor is the holder of the management rights for the apartment complex known as "Dockside Balmain", located at 1 Buchanan Street, Balmain. The Purchaser has offered to purchase and Vendor has agreed to sell the management rights in respect of Dockside, Balmain pursuant to the terms of this agreements. "Management Agreement" means the Caretaking and General Management Agreement dated 28th June 2000 between the Owners of Strata Plan No. 62871 and the vendor, as per Contract . Detail in relation to the structure and parties to the transfer: The Vendor is Yedway PTY LIMITED . The purchaser are: John Betyounan & Julie Betyounan of Lot XXX XXX Road Kellyville NSW 2155 as sole owner and operators of Management Rights at Dockside Balmain. Purchaser's Solicitor: IS John Puleo Solicitors of suite 23/25 Terminus Street Castle Hill NSW 2154 Ph 96346500. Evidence in relation to any formal qualifications related to my capacity to deliver the services in 3.2 of the contract (eg. Fire safety inspections). In regard to the fire safety inspection I have no formal qualifications, but I have knowledge and practical experience on fire safety equipment and fire fighting. I gained most my experience during my employment with Telstra by means of in-house training and seminars. In any Building complex such as Dockside Balmain there are fire fighting equipment/Alarms/Emergency exit doors/Water sprinklers and smoke detectors, as building manager I have to make sure the all fire fighting equipments and monitors are inspected and tested routinely by authorise person or firm and I have to make sure all are in working order and all above equipments should comply with Australian Standards and fire safety regulations. All Owners occupiers and Tenants should be notified with fire safety regulations and any Hazards arising from the Complex." 118 Ms Grace wrote to Mr Betyounan as follows on 22 July 2002: "Dear John Thank you for your letter dated 16 July 2002. As you are aware it is the responsibility of the Owners' Corporation to assure itself of a range of material issues (outlined in the contract) prior to approving the proposed transfer of the building caretaking/management rights. You would also recognise that it is in your best interests for the Owners Corporation to fully appreciate your position on key elements of the building caretaking/management arrangement. In view of this the Owners Corporation feels that some comment is required (both from you and the Owners Corporation) in relation to a few key points from your correspondence of 16 July: Is there a reason why you could not provide your last two tax returns as requested?; The structure of the transfer indicates a sale by deed, and you will be administering the contract as a sole trader, is this correct?; Your indication on working hours is not in accordance with the contract and gives the Owners Corporation some cause fro concern, perhaps should re-think your answer here (this was discussed at our meeting); The building caretaking/management contract provides for a 'room' for the building manager, any storage facilities are provided in accordance with a demonstrated need and the approval of the Owner's Corporation. In relation to the contract you have indicated that you are 'happy with its terms/conditions' but the Owners Corporation is genuinely concerned that you may not fully appreciate the detail of the building caretaker and managers responsibilities. This is an issue for the Owners Corporation because of the current building caretaker/manager's demonstrated difficulty in understanding the scope and content of the services to be provided in accordance with the contract. Similarly the current caretaker/manager seems confused by the expenses distribution arrangements with the contract (see 3.2/3.3). Accordingly the Owners Corporation wishes to avoid the confusion and misunderstandings of the current caretaker/manager being transferred to you as parte of your proposed training. Accordingly the Owners Corporation would like you to briefly, but precisely explain what services you believe are included in the contract and how you see the expense distribution operating. This is a task that is fundamental to developing a harmonious working relationship between the Owners Corporation and the building caretaker/manager through an agreed understanding of the 'Rule Book'. Please do not hesitate to contact me if any aspects of the owner's Corporation's requirements are not clear. Yours sincerely Mary Grace Chairperson Executive Committee Dockside Balmain." 119 Mr Betyounan's response of 30 July 2002 was as follows: "Dear Mary Thank you for your letter that I received on 29th of July 2002. As you remember if Have answered most questions at my first response to your request dated on 07/07/02. But I am more than happy to answer the latest set of questions which appear are not clear to Your Committee or to The Owners Corporation as follows: 1. I have supplied my group certificates for the last two years earnings, if you think it is not enough for your assessments I attach (3) tax return assessments for your information. 2. Already I have answered this question in page 4 of my first letter (16th July 2002) and yes it is correct. 3. In accordance with the contract it does not mention any working hours only indicates in section 3.2(vi) 'Provision of security during ordinary business hours', also I have answered this question in correspondence of 16th of July 2002. 4. As per contract section 10 (caretakers room) and additional 3 store rooms as per following are provided by Owners Corporation: For tools, light fittings, globes etc. Lawn mowers, edger, blower, gernie, Garden tools, wheelbarrow etc.. Cleaning products, Vacuum cleaner etc. Dear Executive Committee, I fully understand the Duties and Legalities of the Caretaking and General Management Agreement. To expedite matters I am ready to meet the Executive Committee or Owners Corporation to challenge or discuss all or parte of the contract, as this will eliminate all the alleged confusion and will hasten the process. I am available to discuss these matters ASAP as we wish to finalise this transaction. Your question, 'explain what services you believe are included in the Contract'? Answer to this question is, refer to The Managers Caretaking Duties section 3.2 of the Contract. Your question, 'how you see expense distribution operating'? Answer to this question is, refer to section 3.3 Duties of the Owners Corporation in the Contract. I hope this letter will clear up all the confusion and misunderstanding, which has arisen from the Owners Corporation. Kind Regards John Betyounan" 120 At a meeting held on 25 August 2002, the executive committee decided not to approve the transfer by Yedway to Mr and Mrs Betyounan. A document recording the decision and reasons for it was prepared by Mr Dolan a few days after the meeting. The document is as follows: " Supplementary Notes to the Executive Committee Meeting of 25/08/02 Subject Executive committee decision in relation to the transfer of management rights (Strata Plan 62871) from Yedway Pty Ltd to J & J Betyounan (proposed transferee) Decision The owners corporation SP 62871 does not agree to the proposed transfer of the management agreement from Yedway Pty Ltd to J & J Betyounan on the grounds that the owners corporation is not reasonably satisfied that the proposed transferee has the caretaking and management experience qualifications and ability to undertake the role. moved: Paul Cooper seconded: Fiona Nicol Reasons for Decision The Caretaking/Management Agreement incorporates two roles, building caretaker and building manager. Both roles are demanding in terms of the broad scope of the skills and capacities required to deliver the significantly diverse range of services within the agreement. The committee in making its decision also noted that there is no discretion within the agreement's remuneration provisions that would allow the committee to approve a transferee that could not demonstrate immediate capacity across all required duties (ie. there is no discretion to develop the required skills after commencement in the roles). In assessing the proposed transfer of management rights the Executive Committee sought enough information from the proposed transferee to reasonably allow it to make an informed decision in relation to the following matters: (a) the character of the proposed transferee and any associates; (b) the financial standing of the proposed transferee; and (c) the proposed terms of the transfer; and (d) the competence, qualifications and experience of the proposed transferee and any associates; and (e) the extent to which the transferee and any associates will receive training. With these matters in mind and considering the duties to be performed by both building caretaker and building manager [no associates or outsourcers were declared], the Executive Committee examined and considered all the material provided by the proposed transferee. The committee found the financial standing of the proposed transferee to be satisfactory and did not pursue the proposed terms of transfer beyond a broad overview. On balance the committee considers that the proposed transferee may have the capacity to deliver the duties associated with cleaning, repairs and maintenance, although the lack of any experience in maintaining a property the size of Dockside, was a concern. The Executive Committee was however not convinced that the proposed transferee had the competence, qualifications or experience to deliver a number of the other duties within the agreement. The determining factors in Executive Committee's assessment were the proposed transferee's complete absence of any building management experience, combined with a failure to demonstrate the competence, experience or skills to provide security services, research and advise on legal compliance matters/by laws, appreciate and respond to the clear instructions of the owners corporation or understand the details within the agreement [including by law 20/21]. The Executive Committee also considered the proposed transferee's reluctance to provide a clear indication on how training in relation to the agreement would be provided; the 'rule book' in the proposed transferee's words. An unsettling element of the information provided to the Executive Committee was the appearance of a misleading statement in relation to experience working at Dockside that appeared in the proposed transferee's resume. When queried on this statement the proposed transferee indicated that 'Jim Iveson' had advised him to add such a statement. This response was later modified, in correspondence by the proposed transferee, to a 'typo'. Considering all the above factors the Executive Committee does not believe that the proposed transferee has demonstrated the appropriate competence, qualifications and experience to perform the complete range of duties within the agreement." 121 There is no reason to think that this does not accurately reflect the decision and the reasons for it. 122 Perusal of the document prepared by Mr Dolan shows that most of the matters taken into account went to the capacity of the proposed assignees to perform the contract. The particular matters made relevant by clause 9.2 of the contract were addressed. Issues of concern (or on which negative conclusions were stated) included lack of experience in maintaining a property the size of Dockside; an opinion that competence, qualifications and experience were not such as to deliver some duties under the agreement beyond cleaning, repairs and maintenance; lack of building management experience; failure to demonstrate competence, experience and skills to provide security services and advice on legal compliance; a reluctance to provide a clear understanding of how training would be provided; and the misrepresentation already mentioned. 123 All these were matters properly taken into account and relevant to the decision to be made. Furthermore, I am satisfied that there was, in fact, an objectively sound basis for the expressed concerns and negative conclusions. In particular, I am satisfied, as already stated, that Mr Betyounan made a false statement to the executive committee in attempting to persuade it of his suitability for the task. The committee's expressed concern or negative conclusion about this - going to the essential attribute of trustworthiness - was amply justified. 124 It was argued on behalf of Yedway that the real reason why the assignment to Mr and Mrs Betyounan was not approved was that they had not seen fit to commit to a description of functions or specific schedule of tasks going beyond the general descriptions of duties in the management agreement. It had been something of a bone of contention between Yedway and the Owners Corporation that Yedway continually declined to commit to a timetable of work or a list of discrete tasks to be performed at stated intervals. Yedway's position (and a position quite justified by the contract) was that it was required to perform the contracted tasks in the way the contract provided and could not be required to accept any added work specification. 125 It is clear that the Owners Corporation would have preferred to obtain some such specification from Mr and Mrs Betyounan. There was no reason why it should not seek it from them. Had Mr and Mrs Betyounan said, in relation to the matter of cleaning the floor tiles, that they understood the general specification in the contract to require only a desultory mopping every couple of months (or a thorough scrubbing once a week), the Owners Corporation would have been better able to come to a view of its own about the capacity of Mr and Mrs Betyounan to perform the contracted task. Mr and Mrs Betyounan, like Yedway, declined to commit to any such specification. But I cannot find that their failure to commit was the reason for the Owners Corporation's refusal of consent. The Owners Corporation acted appropriately in seeking from Mr and Mrs Betyounan what was, in reality, confirmation that they knew what the task entailed and were ready, willing and able to perform it. Their failure to provide any such confirmation was appropriately taken into account by the Owners Corporation in its assessment of that matter. The assessment, conscientiously made on rational grounds, was a negative assessment. 126 I am accordingly of the opinion that it was not unreasonable for the Owners Corporation to refuse consent to the assignment to Mr and Mrs Betyounan and that it did not commit a breach of contract as against Yedway when it did so. 127 I should add that I am not satisfied that the Owners Corporation was in breach of such (if any) implied contractual term as required it to act in good faith in and about the performance of the management agreement. The appointment of Mr Dolan as the contact between Yedway and the Owners Corporation represented a conscious decision by the Owners Corporation to make a "fresh start" with Yedway after settlement of the earlier litigation in February 2002. It was Mr Iveson who was not prepared to make a "fresh start". His mocking and mimicking reply to Mr Dolan's letter of 26 March 2002 showed this quite clearly and set the stage for the deterioration in relations that was to follow. 128 Yedway has failed to establish an entitlement to the relief it seeks in these proceedings. The orders of the court are therefore as follows: 1. Order judgment for the defendant upon the amended statement of claim. 2. Order that the plaintiff pay the defendant's costs of the proceedings. **********

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