Sattel v The Proprietors Be Bee's Tropical Apartments Building Units
[2001] QCA 560
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- Unreported Judgment
- Appeal Determined (QCA)
- Sattel v The Proprietors Be Bee's Tropical Apartments Building Units[2001] QCA 560
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Sattel v The Proprietors Be Bee's Tropical Apartments Building Units[2001] QCA 560
Reported at [2002] 2 Qd R 427
Sattel v The Proprietors Be Bee's Tropical Apartments Building Units[2001] QCA 560
Reported at [2002] 2 Qd R 427
SUPREME COURT OF QUEENSLAND
CITATION: | Sattel & Ors v The Proprietors Be Bee’s Tropical Apartments Building [2001] QCA 560 |
PARTIES: | GARY SATTEL LINDSAY ROY NICHOLSON CARINGAL SPRINGS PTY LTD ACN 005 117 108 (plaintiffs/respondents) v THE PROPRIETORS BE BEES TROPICAL APARTMENTS BUILDING UNITS PLAN NUMBER 71593 (first defendant/appellant) MARK ROBERT NETHERWOOD JOANNE MAREE SEARLE SHANE PETER ROYLE MARK ROBERT NETHERWOOD (AS TRUSTEE) SHANE PETER ROYLE (AS TRUSTEE) (second defendants) |
FILE NO/S: | Appeal No 1036 of 2001 SC No 10 of 1996 |
DIVISION: | Court of Appeal |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | Supreme Court at Cairns |
DELIVERED ON: | 14 December 2001 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 21 November 2001 |
JUDGES: | de Jersey CJ, Chesterman and Atkinson JJ Separate reasons for judgment of each member of the Court, each concurring as to the orders made. |
ORDER: | Appeal dismissed with costs to be assessed. Order that the costs so payable by the appellant be paid only by the proprietors of lots 2-10 inclusive. |
CATCHWORDS: | CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH & DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – OTHER PARTICULAR CASES – appeal against determination that body corporate liable in damages for repudiation of caretaking agreement – whether agreement ultra vires, on a number of bases – whether body corporate undertook to remunerate respondents for carrying out services in relation to their own unit, contrary to Building Units and Group Titles Act – whether body corporate required to authorise by by-law the assumption of an obligation to pay for cleaning service with respect to reception area – whether attenuated cleaning and tidying obligation fell within maintenance and repair obligation of body corporate under s 37(1)(c) – consideration of meaning of that obligation – whether respondents required to provide cleaning and maintenance services at appellant’s expense with respect to common areas over which it enjoyed exclusive use – whether provision of PABX service authorised by by-laws – whether payment for such service by appellant authorised – where provisions severable – whether certain special privileges in respect of common property authorised by by-law – where provisions severable CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH & DEFENCES TO ACTION FOR BREACH – REPUDIATION AND NON-PERFORMANCE – REPUDIATION – WHAT AMOUNTS TO REPUDIATION – whether appellant repudiated agreement – whether respondents themselves in breach by contending the agreement was valid in its entirety, where it had been found partly invalid – whether agreement had been terminated pursuant to s 50(9) DAMAGES – GENERAL PRINCIPLES – OTHER MATTERS – whether trial Judge properly remitted assessment of damages to District Court PROCEDURE – COSTS – GENERAL RULE – COSTS FOLLOW THE EVENT – COSTS OF WHOLE ACTION – GENERALLY – whether discretion in relation to costs properly exercised – where costs awarded following the event notwithstanding remitting assessment of damages Building Units and Group Titles Act 1980 (Qld) s 30(7), s 30(7A), s 30(7AA), s 37, s 37(1), s 37(1)(a), s 37(1)(b), s 37(1)(c), s 37(2)(a), s 37A, s 38(3)(b), s 38(4), s 38(5), s 38(6), s 38A(2), s 50, s 50(1), s 50(9), s 124 Carney v Herbert (1985) AC 301, referred to DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977-8) 138 CLR 423, considered Foran v Wight (1989) 168 CLR 385, cited Humphries & Anor v The Proprietors “Surfers Palms North” Group Title Plan 1955 (Appeal No 105 of 1992, 29 October 1992), referred to Humphries & Anor v The Proprietors of “Surfers Palms North” Group Title Plan 1955 (1992-4) 179 CLR 597, referred to McFarlane v Daniell (1938) 38 SR(NSW) 337, referred to Segacious Pty Ltd v Fabrellas [1991] 1 QdR 471, cited Sevenoaks Maidstone and Tunbridge Railway Co v London Chatham and Dover Railway Co (1879) 11 ChD 625, considered Water Board v Moustakas (1988) 180 CLR 491, cited |
COUNSEL: | DA Savage for the appellant CJ Carrigan for the respondents |
SOLICITORS: | Attwood Marshall for the appellant Munro Thompson for the respondents |
- de JERSEY CJ: The body corporate appeals against declarations and orders made by the learned primary judge which effectively determined that it is liable to the respondents in damages. The damages, to be assessed in the District Court, would reflect any loss sustained by the respondents (their managers) consequent upon acceptance of what the judge held to be the appellant’s repudiation of a caretaking agreement. That agreement related to Be Bee’s Tropical Apartments, a relatively small, motel style holiday resort in suburban Cairns.
- The resort is subject to a building units plan registered on 21 January 1994. The plan provides for 10 lots, with lot 1 as the caretaker’s residence and office. On 22 August 1994 the appellant entered into the subject caretaking agreement with the original proprietors of lot 1. (The original proprietors are not parties to the appeal.) On 8 May 1995 those original proprietors sold their interest in lot 1 and assigned the caretaking agreement to the respondents, the sale and assignment being completed on 26 May 1995. At an extraordinary general meeting on 9 February 1996, the appellant resolved that, the caretaking agreement “being void and unenforceable”, payment of remuneration under the agreement should cease, with no further performance under that agreement being required of the respondents. The respondents had been obliged to act as resident caretaker for the body corporate for a consideration of $11,000 per annum (subject to annual adjustment).
- The respondents in fact then ceased duties, but in March 1996 commenced court proceedings for the specific performance of the agreement. Those proceedings were practically overtaken by the appellant’s further resolution on 3 April 1997, at another extraordinary general meeting, that “without prejudice to the contention … that the caretaking agreement … is ultra vires … or alternatively has been discharged ..”, the caretaking agreement be terminated by the appellant “pursuant to s 50(9) of the Building Units and Group Titles Act 1980”. By their solicitors’ letter of 4 July 1997 to the appellant, the respondents accepted what they contended amounted thereby to the appellant’s repudiation of the caretaking agreement.
- Before the learned judge, the appellants submitted that because of a number of features, the appellant had lacked the power to enter into this particular caretaking agreement. Determining those issues involved consideration of the precise terms of the agreement, the appellant’s by-laws and the Act. Unfortunately the determination of the appeal has involved consideration of issues not properly raised below.
- The learned judge held that the agreement was in two respects ultra vires the appellant, although he went on to hold that those provisions could be severed from the rest of the agreement. He concluded that the communication of the appellant’s resolution of 3 April 1997 amounted to the appellant’s repudiation of the contract, which the respondents accepted, effectually terminating the contract and entitling the respondents to damages in respect of any consequent loss. He then remitted the assessment of damages to the District Court, and ordered the appellant to pay the respondents’ costs.
- It may for the record be noted at once that the Body Corporate and Community Management Act 1997, which commenced on 13 July 1997, has no relevant application to the circumstances of this case.
- The appellant challenges the learned judge’s findings as to the validity of the agreement. Those findings should logically be considered first. The appellant submitted that the caretaking agreement was, in five respects, beyond the powers of the appellant. I deal with them in turn.
- Reception area: location, payment for cleaning
The appellant’s first contention was that contrary to the apparent scheme of the Building Units and Group Titles Act 1980, the body corporate did, by this agreement, undertake a responsibility to remunerate the respondents for carrying out services in relation to their own unit, lot 1. The point was raised in these terms in the amended defence:
“[B]y the first schedule to the Agreement (service (i)) the (respondents) are required to provide services to clean and maintain Lot 1 in building units plan 71593 at the expense of (the appellant).”
- It may for present purposes be accepted that the Act generally assumes that it falls to a proprietor to meet the cost of providing such services to the proprietor’s own unit, the body corporate ordinarily being responsible for defraying the cost of maintaining only the common property.
- The issue arises because the schedule to the caretaking agreement, in specifying the services to be provided by the respondents, includes cleaning the “reception area”. (The matter was raised and developed by reference specifically to the reception area.) As consideration for the provision of the range of services specified in schedule 1, the appellant is required to pay the respondents $11,000 per annum (subject to annual adjustment) (clause 4.1).
- The caretaking agreement does not specify any location for the reception area. To develop its pleaded contention, the appellant sought recourse to extrinsic evidence. That evidence established that the original caretaker, from whom the respondents took an assignment of the agreement, positioned the reception area within the boundaries of lot 1. But shortly after acquiring lot 1 and the caretaking rights, the respondents moved the reception area, as the learned judge found, “to an outside passageway which was part of the common area under the control of (the appellant)”.
- In view of the way the matter was pleaded and developed before his Honour, the critical point is however that the appellant did not enter into an agreement which provided for a reception area within the caretaker’s own private lot. That being so, the contention could not be sustained on the pleadings.
- Mr Savage SC, who appeared for the appellant, submitted nevertheless that having found that the reception area was on the common property, with the respondents entitled to be paid by the appellant for cleaning it (via the annual fee), the judge should have held the agreement in conflict with s 30(7AA) of the Act. He submitted that the effect of that provision, because of the absence of a by-law authorising such payment by the appellant, is that the burden remained with the respondents, as proprietors of lot 1.
- Although this contention was not pleaded, as it should have been were it to be pursued, the court should, consistently with authority, determine its validity unless its not having been raised led to the respondents’ not calling relevant evidence (cf. Water Board v Moustakos (1988) 180 CLR 491, 497).
- While the positioning of the reception area was plainly established, it is possible, had this point been taken below, that the respondents would have led evidence relevant to the possibility of severance.
- That evidence may have concerned the extent of the cleaning required and the cost of providing it. The extent may conceivably have been small, and the cost minimal, warranting a conclusion that no significant part of the $11,000 lump sum annual fee should rationally have been attributed to the provision of that service.
- But that is speculative, and one would hesitate before determining the appeal on that basis. That matter aside, it is questionable whether the body corporate’s assuming an obligation to pay for that cleaning service, via the first schedule and the annual fee, necessitated any authorising by-law.
- The arguable need for a by-law authorising payment by the body corporate arises from s 30(7) and s (7A). Subsection 7 provides that a body corporate may in certain circumstances make a by-law conferring, upon the proprietor of a lot, the right to the exclusive use and enjoyment of all or part of the common property. Such a by-law was made here, with the proprietor of lot 1 being given such rights in relation to common property areas adjacent to four other lots. The reception area was located within that area.
- I set out s 30(7):
“(7) With the written consent of the proprietor or proprietors of the lot or lots concerned, a body corporate may, pursuant to a resolution without dissent make a by-law—
- conferring on the proprietor of a lot specified in the by-law, or on the proprietors of the several lots so specified-
- the exclusive use and enjoyment of; or
- special privileges in respect of;
the whole or any part of the common property, upon conditions (including the payment of money at specified times or as required by the body corporate, by the proprietor or proprietors of the lot or several lots) specified in the by-law;”
- Such a by-law may specify conditions. In this case, the condition was that the proprietor might use the space for:
“…receiving the proprietors or occupiers of Lots and their licensees and for the purposes referred to in Clause 33(a) hereof on the proviso that he or his licensees shall keep such area in a clean and tidy condition and not litter the same or use the same as to create a nuisance or eye sore.”
- Accordingly, in the first schedule to the caretaking agreement, which specifies the services to be provided by the caretaker, being the proprietor of lot 1, there is reference to work to be carried out by the caretaker in relation to the reception area. The relevant provisions follow:
“A: The Resident Caretaker covenants with the Body Corporate to perform the following services and to carry out the following obligations on a daily basis or as and when required:
…
- RECEPTION AREA
Clean floors and walls
Empty ash trays and wipe clean
Empty rubbish receptacles and wipe clean
Wipe down all counter tops, furniture and facings
Remove obvious rubbish. Tidy brochures and magazines
Clean inside and out entry doors
Sweep and mop with detergent and or disinfectant
Clean mirrors
Replace any blown light globes
Spray area with room freshener
…
- The Resident Caretaker covenants with the Body Corporate to perform the following services and to carry out the following obligation on a weekly basis or as and when required:
- RECEPTION AREA
Clean all windows
Water plants, remove any dead fall, wipe clean all planters and spray leaves lightly with white oil as necessary
Wipe clean all wallpaper frames and door frames
Wipe clean all exit and lift indicator lights
Dust and wipe clean all furniture pieces”
- Because of clause 4.1 of the caretaking agreement, the lump sum remuneration provided for by the third schedule is payable by the body corporate annually for the range of services specified in the first schedule. The by-laws contain no express authority for the body corporate to assume such an obligation in relation, as presently relevant, to the cleaning and tidying of the reception area. Need such authority have been accorded through the by-laws?
- Section 30(7A) requires that a by-law deal with the question of who is to carry the financial burden of providing services in relation to areas of common property over which proprietors have been given rights of exclusive use and enjoyment. That only applies, however, where providing the relevant services is a duty imposed upon the body corporate by s 37(1)(b) and (c). In the absence of such provision in the by-laws, in relation to such duties, the responsibility for carrying out the duties falls upon the proprietor, at that proprietor’s own expense.
- I set out subsections (7A) and (7AA):
“(7A) A by-law referred to in subsection (7) shall either provide that-
- the body corporate shall continue to be responsible to carry out its duties pursuant to section 37(1)(b) and (c), at its own expense; or
- the proprietor or proprietors of the lot or lots concerned shall be responsible for, at the proprietor’s or proprietors’ expense, the performance of the duties of the body corporate referred to in paragraph (a);
and in the case of a by-law that confers rights or privileges on more than 1 proprietor, any money payable by virtue of the by-law by the proprietors concerned-
- to the body corporate; or
- to any person for or towards the maintenance or upkeep of any common property;
shall, except to the extent that the by-law otherwise provides, be payable by the proprietors concerned proportionately according to the relevant proportions of their respective lot entitlements.
(7AA) If a by-law does not provide as required by section (7A)(a) or (b), the proprietor or proprietors shall be responsible at his, her or their own expense, for the duties of the body corporate referred to in subsection (7A(a)).”
- It is necessary now to turn to the terms of s 37(1):
“37.(1) A body corporate shall-
…
- subject to section 37A, properly maintain and keep in a state of good and serviceable repair (including, where reasonably necessary, renew or replace the whole or part thereof)-
- the common property;
- any fixture or fitting (including any pipe, pole, wire, cable or duct) comprised on the common property or within any wall, floor or ceiling the centre of which forms a boundary of a lot;
- any fixture or fitting (including any pipe, pole, wire, cable or duct) which is comprised within a lot and which is intended to be used for the servicing or enjoyment of any other lot or of the common property;
- each door, window and other permanent cover over openings in walls where a side of the door, window or cover is part of the common property;
- any personal property vested in the body corporate:”
Section 37A has no particular relevance to this case.
- These by-laws apparently do not comply with s 30(7A), with the consequence that the respondents would be responsible, at their own expense, for carrying out the duties otherwise falling upon the body corporate under s 37(1)(b) and (c) in relation to the areas of common property over which the respondents have been given the right of exclusive use and enjoyment. For the purpose of determining this case, the ultimate question is whether the attenuated cleaning and tidying obligation imposed upon the respondents falls within the maintenance and repair obligation of the body corporate under s 37(1)(c). If it does, then the proprietor of lot 1 should bear the cost of it. Otherwise, it fell, in my view, within the body corporate’s powers itself to pay for the provision of that service, through the caretaking agreement, having regard to the body corporate’s general responsibility for maintenance and administration of the common property for the benefit of the proprietors (s 37(1)(a)), in respect of which it may disburse moneys (s 38(3)(b)).
- My conclusion is that this cleaning and tidying activity does not fall within s 37(1)(c). The obligation under that provision to “maintain and keep in a state of good and serviceable repair (including, where reasonably necessary, renew(al) or replace(ment) (of) the whole or part”, is quite different in kind from mere cleaning and tidying. It centres on the preservation of the fabric of the premises. Section 30(7A), being tied to s 37(1)(c), does not therefore operate to cast onto the respondents any financial burden associated with that cleaning and tidying requirement. It fell within the authority of the body corporate to include the provision of that service within the range of services specified in schedule 1, attracting the annual lump sum payment from the body corporate as provided by clause 4.1 of the caretaking agreement.
- For these reasons, the challenge to the agreement on this account, even as developed on appeal, should not be upheld.
- Payment for cleaning of restaurant
The second contention was pleaded by the appellant in these terms:
“[B]y clause 11(3) of the Agreement the (respondents) are required to provide services to clean and maintain areas of common property of which the (respondents) have exclusive use at the expense of the (appellant).”
Clause 11(3) provides:
“The Resident Caretaker shall at all times ensure that the restaurant and outdoor dining area are maintained in a clear and tidy condition clear of rubbish and vermin and shall ensure that such areas are regularly and thoroughly cleared.”
Clause 11(1) authorised the caretaker to conduct a restaurant, but did not oblige the caretaker to do so.
- The scheme of the agreement is, as I have said, that the remuneration of $11,000 per annum, subject to adjustment, is payable for the provision of the range of services specified in the first schedule (clause 4.1). That schedule does not mention a restaurant, although it does specify “barbecue (sic) area”, an aspect to which I will come.
- The agreement does not provide separately for the appellant to remunerate the caretaker for the performance of the particular obligation under clause 11(3), an obligation which, as I have said, is not mentioned in the first schedule. The learned judge pointed out that the respondents were not obliged to conduct a restaurant business, by way of contrast with other schedule 1 services. Differential treatment of who should bear the cleaning costs may not therefore have been surprising.
- In fact, as the judge found, the respondents at no stage claimed or were paid anything for the performance of the work required of them under clause 11(3).
- The learned judge correctly, with respect, determined this point against the appellant, essentially on the ground that the only services attracting a right to compensation were those listed in the first schedule, the matter of the maintenance of the restaurant area being the subject of quite separate provision in clause 11(3), provision which did not extend to obliging the body corporate to pay for it. It fell to the respondents to meet the costs associated with the restaurant maintenance, and they did so.
- Under the first schedule, the respondents were obliged to clean the barbeque area, for which they would notionally be recompensed from the annual fee. Mr Savage contended in argument that the “restaurant and outside dining area” referred to in cl 11(3) were likely the same as the barbeque area referred to in the first schedule. But there was no evidence to which he could point establishing that. The issue was not pleaded on that basis, nor was it argued in that way before the learned judge – as is apparent from his reasons. This avenue cannot therefore at this stage lead to a successful outcome for the appellant in relation to this issue.
- Payment for provision of PABX
The third contention concerns the respondent’s obligation under the first schedule “to provide day and night PABX answering services”.
- The appellant’s submission before the learned judge was that requiring the respondents to provide such a service was not authorised by the by-laws, and conflicted with s 37(2)(a) of the Act. The judge held, however, that by-law 33(a)(xii) provided sufficient justification for this aspect of the agreement, because “the provision of the PABX service (was) part of the business activities of the (respondents)”. Under that by-law, the proprietor of lot 1 was entitled to carry on a range of activities from lot 1 or any other area over which it had been granted rights of exclusive use. Those specified activities included the hiring of television sets, the conduct of the business of selling and letting the lots provided for in the plan, the business of providing service to “partners” (sic) in respect of the lots, and, under subclause (xii), “any other related service or activity”. His Honour, in my view, reasonably observed that providing the PABX answering service “would be of particular importance to the letting business”.
- Reference was made to s 37(2)(a) of the Act which empowers a body corporate to enter into an agreement with a proprietor of a lot for the provision of services by the body corporate to the lot or to the proprietor. But that provision was inapplicable here. That is because the provision of this service was potentially more broadly beneficial, to all proprietors. The provision of the agreement establishing the requirement was consistent with the by-law, on the basis expressed by his Honour.
- On the hearing of the appeal, the appellant again sought to advance a different case: not that the PABX service was not an activity authorised by the by-law, but that there was no by-law authorising its being paid for by the appellant. That case was not pleaded, and was not argued before the learned judge – as may be gathered from his reasons. I doubt it should be entertained for the first time on appeal. The by-law in terms authorises the body corporate to enter into reasonable agreements governing the provision of such services, and evidence may have borne on the reasonableness of a provision for recompense by the body corporate.
- In any case, the learned judge held, alternatively, that the provision, if invalid, could be severed. Mr Owen, whose evidence the judge in other respects accepted, said that had this provision become problematic, the respondents would not have quarrelled with its deletion (p 30). The finding of severability was in those circumstances, and in the alternative, justified (see para 41 below), so that this aspect of the appellant’s challenge should also fail.
- Granting of “special privileges” without authority/severance
The fourth and fifth contentions concern clauses 9.2 and 9.5 of the caretaking agreement, said to offend against s 30(7) of the Act. That subsection provides that in certain circumstances a body corporate may make a by-law conferring, on the proprietor of a lot, “special privileges in respect of the whole or any part of the common property …”. These two provisions of the agreement had that effect.
- Clause 9.2 of the agreement is in these terms:
“The Body Corporate will not interfere with, hinder or compete with the Resident Caretaker in the running or operation of the Resident Caretaker’s Business or any part thereof and without limiting the generality of the foregoing the Body Corporate will not lease, agree to lease, grant a licence or agree to grant a licence in respect of any part of the Common Property and will not enter into any agreement with or permit any person (other than the Resident Caretaker) to provide for any service or activity which the Resident Caretaker may or is obliged to perform under this Agreement.”
- Clause 9.5 says:
“The Body Corporate covenants with the Resident Caretaker that should any person other than the Resident Caretaker use or attempt to use any part of the building for the purpose of conducting a business or rendering a service in the nature of the Resident Caretaker’s Business (or any part thereof) or in competition with the Resident Caretaker in respect of any service or activity provided under this Agreement then it will at its own expense take all practicable steps to bring about the immediate termination of that use.”
- Contrary to the requirement of s 30(7), there was not, at any material time, a by-law which would authorise the body corporate to grant such “special privileges”. So much was common ground. The learned judge held, however, that the provisions could be severed from the agreement, leaving the balance enforceable.
- His Honour made the following findings:
“Mr Owen, giving evidence on behalf of the (respondents), regarded these privileges as of no moment. The letting of the lots other than Lot 1 was to tourists on short stay, typically let for a period less than one week. The likelihood of business competition in a resort of only nine units, to quote Mr Owen, was “irrelevant” and “immaterial”. Naturally, the privilege expressed in clause 9.5 was similarly regarded.
Clauses 9.2 and 9.5 appear to me to have little relevance to the situation that existed at these premises. In larger resorts such a clause may have some importance and for that reason has probably become a standard provision in agreements of this kind.”
- The learned judge referred to Humphries & Anor v The Proprietors of “Surfers Palms North” Group Title Plan 1955 (1992-4) 179 CLR 597, and McHugh J’s reference to the general test for severability laid down by Jordan CJ in McFarlane v Daniell (1938) 38 SR (NSW) 337, and additionally, as particularly relevant , to the observation by the Judicial Committee of the Privy Council in Carney v Herbert (1985) AC 301, 310 that in the case of “an ancillary provision which is illegal but exists for the exclusive benefit of the plaintiff”, “the court may and probably will, if the justice of the case so requires, and there is no public policy objection, permit the plaintiff if he so wishes to enforce the contract without the illegal provision”.
- As his Honour concluded:
“Clauses 9.2 and 9.5 are clearly for the exclusive benefit of the (respondents). But the (respondents) see no worth in either clause and none was expressly identified by the (appellant). The severing of these clauses would make no perceptible change to the general nature of the agreement.
In conclusion, with clauses 9.2 and 9.5 deleted I have come to the view that the caretaking agreement is enforceable.”
- That reasoning is, with respect, unexceptionable. The respondents alternatively contended, on the appeal, that the appellant is estopped from raising the unlawfulness of the agreement in those respects. But because of the view I take on subsequent issues, there is no need for me to express any conclusion about that.
- Acceptance of repudiation.
The appellant’s challenge proceeded to the learned judge’s finding that the appellant repudiated the agreement, the respondents’ acceptance of that repudiation effectually terminating the agreement. Relying on DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1977-8) 138 CLR 423, 431-2, the appellant submitted that the respondents’ contention that the agreement was valid in its entirety precluded their terminating the agreement, its having been found partly invalid, in reliance on any repudiatory conduct on the part of the appellant: the respondents, it was submitted, were, by holding to that position, themselves in breach, with the consequence that they could not rely on the appellant’s contention that the agreement was wholly invalid, as amounting to repudiation.
- It is trite law that a party who is not ready willing and able to perform a contract is not entitled to terminate for the other party’s breach (DTR , supra, p433; Foran v Wight (1989) 168 CLR 385, 398-402, 451; Segacious Pty Ltd v Fabrellas [1991] 1 QdR 471, 478).
- On any reasonable view, the appellant’s conduct was repudiatory, in that it evinced in clear, express terms an intention not to be bound by the caretaking agreement. The contrary position maintained by the respondents was marginally in error, in light of the learned judge’s conclusions. But especially in view of the evidence of Mr Owen which the judge accepted, there is no reason for not thinking that had the unlawfulness of clauses 9.2 and 9.5 been established prior to the appellant’s repudiation, the respondents would readily have conceded that position in the interests of maintaining the balance of the agreement in which they had a real interest. So far as the respondents were concerned, the case comfortably falls within the following situation as described by the High Court in DTR (p432):
“… there are other cases in which a party, though asserting a wrong view of a contract because he believes it to be correct, is willing to perform the contract according to its tenor. He may be willing to recognise his heresy once the true doctrine is enunciated or he may be willing to accept an authoritative exposition of the correct interpretation. In either event an intention to repudiate the contract could not be attributed to him.”
The position with the appellant was, by contrast, plainly repudiatory.
- Termination under s 50(9) Building Units and Group Titles Act.
The appellant’s resolution of 3 April 1997 was in terms that the caretaking agreement be terminated “pursuant to s 50(9) of the Building Units and Group Titles Act 1980”. That subsection provides:
“Notwithstanding any agreement between a body corporate and a body corporate manager, there shall be implied in the agreement or instrument of appointment of a body corporate manager appointed pursuant to this section who is the body corporate manager at the expiration of a period of 3 years from the date of the first annual general meeting of the body corporate a term that the body corporate, within 30 days after the expiration of that period, may terminate the body corporate manager’s appointment as body corporate manager.”
- The first annual general meeting of the body corporate was held on 7 March 1994. The appellant accordingly submitted that it was entitled to terminate within 30 days after the third anniversary of that meeting, and that it did so.
- The learned judge declined to entertain this argument, in view of the way the case had been conducted. He made the following observations:
“Counsel, on behalf of the body corporate, submitted (presumably seeking a finding from me) that … the body corporate was entitled to terminate the agreement without penalty and without giving reasons 30 days after the third anniversary of the original meeting on 7 March, 1994. That is not a matter which was raised on the pleadings nor in the statement of issues which was presented to me by consent at the commencement of the trial. The factual question of whether this agreement was indeed one which came within the purview of s.50 was not canvassed in the evidence. In those circumstances it would not be appropriate for me to make a determination on that issue first raised in addresses. I do however note the consideration by the Court of Appeal of a similar argument in Humphries … “
- While the issue was mentioned during addresses, it was not mentioned in the context of any acceptance by the learned judge that it was an issue truly arising in the case. Counsel for the appellant submitted on appeal that the issue was raised in precise terms in the pleadings. The only reference to the section in the pleadings is to be found in paragraph 21 of the amended statement of claim, where the respondents pleaded the terms of the resolution of 3 April 1997. That was insufficient to raise the matter for determination. It fell to the appellant to plead this matter distinctly by way of defence, if it wished to rely upon it. There was no application before his Honour for leave to amend. The important question whether the caretaking agreement fell within s 50, in view of the Court of Appeal’s analysis in Humphries, Appeal 105/1992, 29 October 1992, unreported, was not canvassed before his Honour, and embraced factual as well as legal considerations. No ground has been shown which would warrant departing from the learned judge’s approach to this aspect of the matter.
- I may add that it seems highly unlikely that this caretaking agreement fell within the purview of s 50, which concerns agreements between bodies corporate and body corporate managers, characterised by the delegation to the body corporate manager of the body corporate’s powers. On the hearing of the appeal, we were taken to evidence (p 650) of a resolution, apparently as contemplated by s 50(1), authorising an agreement between the body corporate and another entity as “body corporate manager”, an agreement which subsisted throughout the period of this caretaking agreement.
- I set out the terms of that resolution:
“That Cairns Strata Management (herein called “the manager”) be appointed as the Body Corporate Manager of the Body Corporate “Be-Bees Tropical Apartments” in Building Units Plan No 71593 and that the common seal be affixed to an instrument in writing pursuant to the provisions of Section 50(1) of the Building Units and Group Titles Act 1980-1990 appointing the manager and delegating all the powers authorities, duties and functions of the Body Corporate and its committee and the chairman, secretary and treasurer of the committee and of the Body Corporate, other than the power to make a decision on a restricted matter within the meaning of Section 46 and the power to make a delegation under Section 50(1) at a cost of $1,300.00 per annum in the first year for a period of three years from 7th March 1994 as per the attached agreement.”
- That strongly suggests this caretaking agreement was of a different species, with s 50 inapplicable.
Damages
- There was separate challenge to his Honour’s not having made findings in relation to damages. The judge remitted the assessment of damages to the District Court. He made clear from the outset that he would follow that course. What loss can be established will fall for determination in the District Court. It was not necessary for his Honour to make further findings in that area.
- Mr Savage submitted that because certain matters of principle may have to be resolved as part of that process, it was not properly styled an “assessment of damage”. Assessments not uncommonly, indeed usually, involve determination of both factual and legal issues, passing beyond mere arithmetic computation. His Honour’s course was in my view appropriate, even though another judge may have felt it expeditious to resolve the whole matter, comprehensively, at once.
Costs
- There is no ground on which this court should interfere with his Honour’s exercise of discretion in relation to costs. It was appropriate that the costs of determining these issues, concerning the validity of this agreement and its termination, follow the event. As pointed out by Mr Carrigan, who appeared for the respondents, the learned judge effectively determined the issue of liability separately from and in advance of any determination on issues of quantum. His determination concluded the proceedings in this court. There is no reason why those costs need not have followed the event. The determination of who should bear those costs need not in my view have awaited the outcome on damages, or been substantially influenced by the quantum of any damages awarded.
- We were informed that when the learned judge pronounced his judgment on 23 March 2000, which included the costs order, the parties made further submissions in writing in relation to costs. Mr Savage informed us that the judge did not subsequently communicate with the parties. If that is so, it would obviously have been better had the parties been expressly informed of the outcome. But it must be taken that having considered the further submissions, the judge determined not to vary the costs order made on 23 March. It fell to the solicitors for the appellant to make inquiry of the judge’s associate if in doubt as to whether the judge had considered the further material, or as to the outcome.
Orders
- I would order that the appeal be dismissed, with costs to be assessed. I would also order, as sought by Mr Carrigan pursuant to s 124 of the Act, that the costs so payable by the appellant be paid only by the proprietors of lots 2-10 inclusive.
- CHESTERMAN J: I agree with the Chief Justice that, for the reasons given by his Honour, the appeal should be dismissed. I wish to add some brief observations on one point.
- The distinction drawn by the Chief Justice between the obligation found in s 37(1) of the Building Units and Group Titles Act 1980 (“the Act”) to:
“. . . properly maintain and keep in a state of good and serviceable repair (including, where reasonably necessary, renew or replace the whole or part thereof) –
- the common property;
- any fixture or fitting . . . on the common property . . .”
and the obligation imposed on the respondents by the care-taking agreement to clean walls and surfaces and to remove rubbish, is correct.
- An understanding of what is meant by maintaining and keeping the common property, its fixtures and fittings, in a state of good and serviceable repair is assisted by s 38(4), (5) and (6) and s 38A(2) of the Act.
These first mentioned provisions oblige a body corporate to establish and maintain a sinking fund the money in which may be used to discharge the liabilities referred to in s 38A(2). These are:
“(a) painting or treating of any part of the common property which is a structure . . . for the preservation and appearance of the common property; and
- . . .
- . . .
- the renewal or replacement pursuant to s 37 of parts of the . . common property, fixtures and fittings which the body corporate is required . . . to maintain and keep in good and reasonable repair . . .
There is obvious duplication between some of the activities in (a) and in (d).
- The Act contemplates that as part of maintaining the common property and keeping it in good repair a body corporate will have to renew or replace parts of it. There is a reference to such activity both in s 37(1)(c) as well as s 38A(2). This activity is to be funded inter alia from contributions paid regularly by the proprietors of lots. The repair and maintenance referred to in s 37 is clearly a more substantial operation than cleaning and tidying.
- The Concise Commercial Dictionary by Osborne & Grandage relevantly defines maintenance as:
“The keeping of fixed assets in good order to enable them to discharge the function for which they are required, eg premises plant and machinery.”
An Engineering Contract Dictionary by Powell-Smith, Chappell & Simmonds define it as:
“The carrying on of or keeping up to a particular standard. In relation to civil engineering works, for example, the word may refer to the resurfacing of roads, in mechanical engineering works it would include the repair and possible replacement of pipe work and fittings over a period of time . . .”
The same work defines “maintenance period”, a term which appears in standard form building and engineering contracts, as the time after works are complete during which the contractor is to make good defects which appear in the newly built structure.
The underlying notion is that the function of maintenance of plant or equipment is to avert or remove defects which would prevent their functioning as intended.
- There is a passage in a judgment by Jessel MR in Sevenoaks Maidstone and Tunbridge Railway Co v London Chatham and Dover Railway Co [1879] 11 Ch D 625 at 634-5 which is to the same effect. The passage is lengthy but worth quoting in full because it gives flavour to the concept.
“It is very difficult to define what works of maintenance are. It is a very large term, and useful or reasonable ameliorations are not excluded by it. For instance, if a company had power to maintain the banks of a river which were faced in a particular way, could it be supposed that they were restricted under the words of maintenance to keeping up the banks in precisely the same way, when the mode which might have been very good when the banks were originally formed had been very much improved on by the subsequent advance of science? So where a railway company have to maintain a railway, I should not at all doubt that in maintaining it they might use any reasonable improvement. If, for instance, the railway were originally fenced with wooden palings, and it were sought when they decayed to replace them by an iron fence, I should say that was fully within their powers. If the railway originally was made in a deep cutting, and it was thought desirable to face the cutting with brick to make it more secure, I should say that was fair maintenance. And if a railway station were found inconvenient, and it was desirable when it required repairs to alter the arrangement of the rooms, or to alter the access or form of access, and so to ameliorate it at the same time that it was put in repair, I should say all that was within the powers of maintenance given by the Legislature; that is, you may maintain by keeping in the same state, or you may maintain by keeping the same state and improving the state, always bearing in mind that it must be maintenance as distinguished from alteration of purpose.”
- Maintenance, so understood, is different in kind and degree from the services which the respondents had to perform in and about the reception area. Those services were concerned with the appearance of that part of the common property. They are not the activities which s 37(1)(c) of the Act compels a body corporate to undertake. Those activities are concerned to preserve the integrity of the physical structure of the common property. Accordingly payment for the services by the body corporate did not have to be the subject of a by-law. There is no substance in the appellant’s point. The appeal should be dismissed.
- ATKINSON J: I agree with the orders proposed by de Jersey CJ and with His Honour’s reasons.