FEDERAL COURT OF AUSTRALIA Brasington v Overton Investments Pty Ltd [2003] FCA 1523 RITA BRASINGTON v OVERTON INVESTMENTS PTY LTD & ANOR N878 OF 1999 EMMETT J 18 DECEMBER 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N878 OF 1999 BETWEEN: RITA BRASINGTON APPLICANT AND: OVERTON INVESTMENTS PTY LIMITED FIRST RESPONDENT JOHN EDWARD JAMES SECOND RESPONDENT BETWEEN: OVERTON INVESTMENTS PTY LIMITED CROSS-CLAIMANT AND: RITA BRASINGTON and the other persons identified in Schedule A to the First Cross-Claim FIRST CROSS-RESPONDENTS TO THE FIRST CROSS-CLAIM CUZENO RVM PTY LIMITED SECOND CROSS-RESPONDENT TO THE FIRST CROSS-CLAIM BETWEEN: CUZENO RVM PTY LIMITED SECOND CROSS-CLAIMANT AND: RITA BRASINGTON and the other persons identified in Schedule 1 to the Second Cross-Claim CROSS-RESPONDENTS TO THE SECOND CROSS-CLAIM JUDGE: EMMETT J DATE: 18 DECEMBER 2003 PLACE: SYDNEY REASONS FOR PRELIMINARY CONCLUSIONS Preliminary Relationship Between Overton And The Residents The Trust Deed The Leases Standing To Sue Issue Estoppel Legal Assistance Under Fair Trading Act Freedom Of Information Application Defamation Advice Proceedings For Recovery Of Arrears Of Outgoings Proceedings Under Fair Trading Act Consultation Process Under The Code Interaction Between Codes Of Practice And Leases Budget Disputes Trust Deed Dispute Audit Queries Categories Of Legal Expenses In Issue Undertaking As To Damages Costs Of Mr And Mrs Murphy's Proceedings Financial Hardship Compensation For Resumption Incidental Advice Other Issues Liabilities In Respect Of Premises Inconsistency With Court Orders For Costs Operation Of Legal Profession Act 1987 (Nsw) Costs Incurred After 3 December 1999 Section 14a Of The Retirement Villages Act 1989 (Nsw) Conclusion PRELIMINARY 1 I have embarked on the hearing of a further aspect of the long lasting dispute between Overton Investments Pty Limited ('Overton') and the residents of the Heritage Retirement Village at Padstow ('the Village'): see Murphy v Overton Investments Pty Ltd [2000] FCA 801, Murphy v Overton Investments Pty Ltd (2001) 112 FCR 182, Murphy v Overton Investments [2001] FCA 1725, Murphy v Overton Investments Pty Ltd [2002] FCAFC 129 and Murphy v Overton Investments Pty Ltd [2002] FCA 921. One area of dispute between the residents of the Village ('Residents' or 'Lessees') and Overton concerns the extent of Overton's entitlement to recover from the Residents contribution towards Outgoings (as that term is defined in the leases granted by Overton to Residents). Mrs Rita Brasington brought a proceeding against Overton claiming damages in respect of the conduct of Overton prior to the grant to Mrs Brasington of her Lease of a Unit in the Village: see Brasington v Overton Investments Pty Ltd [2002] FCA 1495. In that proceeding, Overton has filed a cross claim against certain of the Residents for recovery of unpaid arrears of Outgoings claimed by Overton to be owing by the Residents. 2 The dispute concerning the liability for Outgoings raises a number of issues, many of which involve detailed examination and analysis of accounting records. The parties have proposed a number of separate question for consideration by the Court, with the expectation and hope that, once those questions are determined, much of the detailed examination and analysis can be carried out extra-curially. The formulation of the questions has itself proved difficult and the parties have not been able to reach agreement on the formulation of the precise questions. However, I am satisfied that is appropriate to accede to the request of the parties that I express my views on several matters prior to the determination of all other questions raised in the cross-claims. It is also appropriate that those views be expressed prior to determination of any further questions raised in the proceeding brought by Mrs Brasington. However, I will not make an order under O 29 of the Federal Court Rules in respect of any questions at this stage. 3 Most of the issues are concerned with the extent to which legal expenses paid by Overton to Gadens, solicitors, should properly be characterised as 'Outgoings' within the meaning of that term when used in leases to Residents ('Leases' or 'Lease'). Those issues turn on the proper construction of cl 5 of the Leases, which is in identical terms in the Leases to most Residents. However, there are several Residents whose Leases are in different terms, although the differences are not material for present purposes. It will be necessary to describe in reasonably specific terms the nature of the legal services furnished to Overton by Gadens for the provision of those services. 4 Some of the issues, however, are concerned with the extent to which, even if the legal expenses paid to Gadens are Outgoings, Overton is precluded from recovering them from the Residents. Those issues include questions as to the effect of the Legal Profession Act 1987 (NSW), the Retirement Villages Act 1999 (NSW) ('the 1999 Act') and the Retirement Villages Act 1989 (NSW) ('the 1989 Act'). I shall deal first with the questions of construction of cl 5 but, before doing so, I propose to say something about the legal relationship between Overton and the Residents. RELATIONSHIP BETWEEN OVERTON AND THE RESIDENTS 5 The Village was constructed by Overton on land owned by Overton. Because Overton desired to invite the public to lease Units in the Village from it, Overton established a trust to afford some protection to intended residents. On 31 December 1985, Overton entered into a deed of trust ('the Trust Deed') with Perpetual Trustee Company Limited ('the Trustee') to establish the Heritage Retirement Village Trust for the benefit of the Lessees of Units in the Village. It is desirable to say something about the Trust Deed and the trust thereby established, since that will have a bearing on the approach to be taken to the construction of cl 5 of the Leases. THE TRUST DEED 6 By the Trust Deed it was recited that: * Overton was the owner and developer of a parcel of land located at Padstow; * on 27 November 1984, Overton had obtained development consent ('the Development Consent') for the erection of a retirement village comprising 112 self-contained units and 48 serviced hostel apartments for the accommodation of 'Qualified Persons', together with a number of communal facilities and services for the benefit of such persons. The term 'Qualified Person' was relevantly defined as a person whose age is the qualifying age for the old age pension or 55 years, whichever is higher; * the Development Consent provided for the construction on part of that land of a retirement village to be implemented in up to five stages and Overton proposed to develop that part of the land in accordance with the Development Consent. 7 The Trust Deed contains provisions relating to the receipt and disbursement of monies paid by prospective residents as consideration for the grant of Leases of Units in the Village. Clauses 4, 6 and 10 of the Leases deals with 'Rent', 'Lease Deposit' and 'Surrender'. Clauses 10, 11, 12, 13, 14 and 15 of the Trust Deed deals with 'Payment and Acceptance of Lease Price', 'Loan to Manager', 'Retained Monies held by Trustee', 'Refund of Lease Deposit and Refunded Rent', 'Manager's Option to pay out Lease Deposit' and 'Accrued Rent'. 8 The net effect of those provisions of the Trust Deed and the Lease was as follows: * a Lessee pays a total consideration, being the Lease Price for the grant of a Lease; * Total Rent is 25% of the consideration paid for Lease; * the Lease Deposit is 75% of that consideration; * Overton is entitled to appropriate 10% of the Total Rent every six months until, after five years, the Total Rent has been fully appropriated; * after five years, no further rent is payable by a Lessee; * cl 10 of the Trust Deed provided for the Lessee to lend interest free to Overton 97.5% of the Lease Deposit and the amount of the Total Rent, 2.5% of the Lease Deposit being 'Retained Monies' to be invested by the Trustee in an 'Authorised Investment'; * in the event of a surrender of a Lease, the Lessee would receive 'one-half of the excess', if any, of the Lease Price paid by any new Lessee for the grant of a new Lease of the outgoing Lessee's unit, over the Lease Price originally paid by the outgoing Lessee. Overton was required to re-pay to the Lessee the amount ('Refunded Rent'), if any, of the Total Rent which had not been appropriated pro rata to the end of the month in which the refund became payable ('Accrued Rent'), plus the Lease Deposit adjusted in accordance with the provisions of the Trust Deed. The 'one-half of the excess' was called the 'Lessee's Capital Gain'; * if the Lease Deposit was the same as the Lease Deposit payable by the incoming Lessee, the Outgoing Lessee would receive a refund of the Lease Deposit adjusted in accordance with the provisions of the Trust Deed, plus any unappropriated amount of the Total Rent; * if the original Lease Deposit was more than the Lease Deposit paid by the incoming Lessee, the outgoing Lessee would receive the Lease Deposit adjusted in accordance with the provisions of the Trust Deed, less the whole of the difference between the original Lease Deposit and the Lease Deposit paid by the incoming Lessee ('Lessee's Capital Depreciation'), plus any Refunded Rent. 9 Article I of the Trust Deed deals with applications for Units. Under cl 36(1), Overton was to advertise Units as being available for lease at such prices as were determined by Overton from time to time. Under cl 37(1), any Qualified Person might apply to lease a Unit from Overton. Clause 38 provided for acceptance by Overton of any application lodged in accordance with cl 37. Upon acceptance of an application by Overton, the applicant was to be deemed to be a party to the Trust Deed. Further, the acceptance by Overton of an application was, ipso facto, to constitute a contract between the applicant as lessee and Overton as lessor for the grant of a lease by Overton to that applicant in respect of the Unit in the Village described in the application. 10 The Trust Fund that is subject to the trust constituted by the Trust Deed does not include any part of the land on which the Village is constructed. The Trust Fund consists of an initial gift of $10 together with Retained Monies and income and accretions. Retained Monies are derived from the consideration payable by Residents upon the grant of Leases. By cl 19 of the Trust Deed, Overton was appointed as manager of the Trust Fund. However, that appointment has nothing to do with the management of the Village. 11 Clause 21 and cl 22 of the Trust Deed deal with the obligations, powers and duties of Overton. By cl 21, Overton covenants with Lessees that it will: * use its best endeavours to carry on and conduct the Village, the marketing of it and its business in a proper and efficient manner and to ensure that any undertaking, scheme or enterprise to which the Trust Deed relates is carried on and conducted in a proper and efficient manner; * duly pay or cause to be paid, within a reasonable period after they become due and payable, all rents, rates, taxes, duties, assessments, liabilities and 'Outgoings' assessed or levied against it in respect of the Village. The term 'Outgoings' is defined in the Trust Deed as meaning outgoings in respect of the Village as defined in accordance with the form of the Leases; * keep all parts of the Village that are of a repairable nature in proper repair, order and condition and maintain the same in reasonable working order and efficiency; * insure or cause to be insured and to be kept insured to the satisfaction of any mortgagee (if any), for the full insurable value, all parts of the Village as may be of an insurable nature against all risks usually insured against; * duly comply with all requirements of all proper and competent authorities having jurisdiction over the Village. 12 By cl 22(1) of the Trust Deed, Overton was to have the full and complete rights, powers and interests as are conferred upon it or possessed by reason of its right, title, power and interest in the Village and Overton was to exercise those rights, powers and interests and carry out and perform its duties, obligations and functions in good faith and in such a manner as would not substantially reduce or limit the rights and interests conferred upon the Lessees. Clause 22(3) provides that Overton may pay Outgoings from its own funds but would be entitled to claim reimbursement of all amounts so paid from the Lessees by the inclusion of such amounts in the next succeeding contribution by the Lessees to Outgoings. That provision refers, in substance, to cl 5 of the Leases. 13 Article G of the Trust Deed deals with development of the Village. By cl 31(1), the Trustee and the Lessees acknowledged and agreed that Overton was to have the right and power to develop the Village in its absolute discretion, provided that such development was lawful and in accordance with the Development Consent. Under cl 31(2), Overton was to keep the Trustee informed of its proposals regarding commencement and progress of the construction and development of the Village and was to inform the Trustee of all further proposals or developments in connection with the Village. Under cl 31(5), Overton was to be entitled to deal with the 'Common Areas', 'Shops' and any part of the Village designated for the parking of motor vehicles in such manner as it, in its absolute discretion, considers appropriate. The term 'Common Areas' is defined in cl 1(11) as those areas of the Village which are from time to time made available and are intended for use in enjoyment in common by the lessor and by Residents of the Village. The term 'Shops' is defined by cl 1(40) as those areas designated in the relevant plans and specifications for the Village as commercial shopping premises. 14 The provisions of Art G confirm the notion that the Village was to be owned by Overton and that, subject to the rights conferred by Leases on Residents, the manner in which the balance of the land comprised in the Village was to be dealt with was a matter for Overton as owner. The interests of Residents were recognised only to the extent that they were to be consulted. Thus, cl 25 of the Trust Deed provides for the establishment of an Advisory Committee consisting of: * a resident administrator appointed by Overton; * not more than four residents elected by the Lessees; · a representative of Overton. Under cl 25(11), the Advisory Committee was to concern itself with matters relating to the day to day operation of the Village and with any specific matters from time to time referred to it by Overton, the Trustee or by the resident administrator. Under cl 25(13), the Advisory Committee was to have power to advise, but not to instruct, Overton and it was to be in Overton's sole and absolute discretion as to whether or not to act on the advice of the Advisory Committee. 15 Overton's return on investment is derived from two sources. The first is that Overton was entitled to be paid the 'Adjusted Net Income' in accordance with cl 35(1) of the Trust Deed. 'Adjusted Net Income' was defined in cl 1(4) of the Trust Deed as the 'Gross Income of the Trust Fund' less payments and deductions in accordance with the Trust Deed. The 'Gross Income of the Trust Fund' was defined in cl 1(20) of the Trust Deed as all interest and other income accrued, credited or due and payable in respect of the Trust Fund. The second return is that Overton was entitled to one-half of the capital gain on the sale of a leasehold interest in accordance with cl 13(5) of the Trust Deed, as described above (at [8]). 16 Overton did not hold any charge, or other security, over any leasehold interest. Overton was, however, entitled to a set-off in respect of unpaid Outgoings. Thus, the qualifying words to cl 13(5) of the Trust Deed provide: 'PROVIDED HOWEVER that if a Lessee has failed to pay to the Manager its contributions towards Outgoings as and when they fall due and payable then the aggregate of such accrued Outgoings (together with any interest due thereon) in arrears at the time of the said termination shall also be deducted from the amount of the Lease Deposit.' 17 Clause 5(h) of the Lease provides: 'Any contribution in respect of Outgoings levied by the Lessor under this clause shall become due and payable to the Lessor … within seven (7) days of receipt of notice of the levy … . All overdue and unpaid contributions of Outgoings … may be recovered as a debt due to the Lessor in any Court of competent jurisdiction or at the Lessor's election irrevocably deducted from the Monies Owing or Lease Deposit or Refund.' 18 Clause 16(d) of the Lease provides: 'Notwithstanding any provision to the contrary the Lessor shall be entitled to set-off any moneys [sic] (including any interest payable thereon) from time to time owing to it by the Lessee in respect of Outgoings or Outgoings of Apartments or other amounts payable hereunder against the Refund or Monies Owing in respect of that Lessee and to that extent the Lessor is hereby expressly authorized to pay to or otherwise credit the Lessor out of the Lease Deposit or Monies Owing of such amount claimed by way of set-off.' THE LEASES 19 The form of Lease entered into by each Resident recognises the common interest of Lessees in the management of and operation of the Village. Thus, cl 13(a)(i) contains a covenant by Overton, as lessor, that it will conduct, manage and operate the Village as a first class retirement village and will pay the operating expenses of the Village not otherwise payable by a Lessee under a Lease or payable by or the responsibility of any of the Lessees or other occupants of the Village. Clause 13 also constitutes agreement that the Advisory Committee will be established in accordance with the Trust Deed and, subject to the Trust Deed, may make decisions from time to time relating to the day to day administration of the Village. 20 Clause 13(c) contains a covenant by Overton that it will maintain the common areas, including the exterior walls and all parking spaces, roads, pavements, lawns, gardens, water, drainage, lighting, the Village Centre and other common facilities and services and will ensure that there shall always be provided adequate common areas and communal facilities for the continuance of the Village as a first class retirement village. However, the manner in which the common areas and communal facilities were to be maintained and the expenditure thereon was to be determined by Overton having regard to the standard of the Village. Further, Overton was to have the right from time to time to improve, extend, vary, amend or reduce the Village or alter or deal with the Village in any manner whatsoever. By cl 13(d) Overton was to furnish reasonable illuminations to the common areas at all times and had a discretion to furnish such further or other illuminations as it might in its discretion deem to be advantageous to the Village. 21 Thus, the concept of the Village as an asset of Overton, managed and controlled by Overton, is maintained in the forms of Leases to Residents. While the common interests of Residents in the continuing enterprise are recognised, there can be no doubt that the function of Overton as manager and lessor is as a landlord or lessor. It undertakes an obligation to conduct, manage and operate the Village as a first class retirement village, in consideration for which the Residents agree to contribute to the Outgoings in respect of the Premises that are the subject of Leases and the Village and facilities thereof, in accordance with cl 5. It is against that background that the construction of cl 5 must be approached. 22 The consideration for the grant of a Lease is the payment by a Lessee of the Lease Price. The scheme concerning the Lease Price has been described above. However, it is significant that the Lease Price represents the consideration for the exclusive right of occupation conferred by a Lease. To the extent that rent is reserved by a Lease, it is contained in the Lease Price. The contribution to Outgoings contemplated by cl 5, therefore, is not the consideration for the right to occupy the Premises that are the subject of a Lease. Rather, the obligation imposed on a Lessee by cl 5 to contribute to the Outgoings in respect of the Premises and the Village and facilities thereof in accordance with cl 5, is the consideration for the covenants on the part of Overton contained in cl 13, that is, to conduct, manage and operate the Village as a first class retirement village and to pay the operating expenses of the Village not otherwise payable by Lessees, and to maintain the common areas and to ensure that there will always be adequate common areas and communal facilities for the continuance of the Village as a first class retirement village. 23 Clause 5(b) of the Lease provides that Overton may from time to time notify a Lessee of Overton's current estimate of that Lessee's contribution to the Outgoings in respect of the Premises of that Lessee and the Village and facilities thereof in relation to a particular period. The Lessee is thereupon required to make payment of the amount of such estimated contribution, either monthly or at such other intervals as Overton determines. As soon as practicable after the end of each period in respect of which contribution has been levied, an adjustment is to be made between Overton and the Lessee. All amounts payable by a Lessee pursuant to cl 5(b) are to be paid to Overton or as Overton may direct. 24 Under cl 5(h), any contribution in respect of Outgoings levied by Overton under cl 5 was to become due and payable to Overton within seven days of receipt of notice of the levy. In respect of any monies not paid on or before the day appointed for payment, the Lessee was obliged to pay interest on the overdue sum. All overdue and unpaid contributions of Outgoings, including interest, are recoverable as a debt due to Overton in any court of competent jurisdiction. 25 Under cl 5(g), in addition to the Outgoings referred to in cl 5, Overton was to be entitled to require a Lessee to pay and discharge and to keep Overton indemnified against all other outgoings, charges and liabilities for which Overton might determine the Lessee to be separately liable in 'respect of the Premises', including any liability arising from any requirement of any competent authority or other body where such requirement applies to or in respect of the Premises that are the subject of a lease. It appears that the obligation under cl 5(g) relates to expenses that are not Outgoings within the meaning of that term when used elsewhere in cl 5. 26 Clause 5(i) of the Leases provides that, except in the case of 'manifest error', a Lessee is to be bound by the determination of Overton as to the amounts payable by that Lessee in terms of cl 5. That does not have the effect of imposing upon a Lessee an obligation to pay a contribution to Outgoings otherwise than according to the proper construction of cl 5. Where a question of judgment is involved, in determining the quantum of Outgoings, the provision may well preclude second guessing the exercise of such a judgment. However, the provision would not preclude a challenge to a determination by Overton where the determination was subject to a clear arithmetical error. Nor would the provision preclude a challenge by a Lessee to a determination by Overton of an amount based upon a wrong interpretation of cl 5 as a matter of law. Even if the question of interpretation required some considerable legal analysis before the correct interpretation became apparent, once a view is reached that the interpretation adopted by Overton is wrong, there would be manifest error. I propose to approach the issues concerning the proper construction of cl 5(c) accordingly. 27 The term 'Outgoings' is defined in cl 1 of the Lease as meaning the outgoings and expenses levied in respect of the Village in accordance with cl 5. Clause 5(c) provides that, '[w]ithout in any way limiting the generality of the foregoing', the Outgoings in respect of which Overton may levy contributions shall include some 21 different items. It is unclear what is intended by the statement that 'the generality of the foregoing' is not to be limited. Neither cl 5(a) nor cl 5(b) specifies in any way the expenses that are to be the subject of contributions by Lessees. The structure of the Lease in general, and cl 5 in particular, makes it clear that cl 5(c) is, in effect, a definition of the expenses intended to constitute Outgoings for the purposes of cl 5. 28 Most of the items in cl 5(c) are clearly unconnected with expenses in the nature of legal fees. However, the following paragraphs of cl 5(c) could relate to expenses in the nature of legal fees: ' (v) expenditure incurred in carrying on the operations of the Village; … (x) payment of amounts relating directly to the running of the Village comprising salaries and wages of staff of the Village and all fees and sums payable to persons not being staff of the Village who provide … services to the Village or to the Lessor or to the Trustee in relation to the operation of the Village including … legal charges …; (xiv) any such other reasonable and proper expenses and outgoings as the Lessor may from time to time decide'. (Emphasis added). 29 While the other items in cl 5(c) could not conceivably relate to legal fees, they throw light on the way in which pars (v), (x) and (xiv) should be construed. The other items might be summarised as follows: (i) rates, charges, impositions and fees payable to a relevant body or authority; (ii) premiums for any insurance; (iii) expenditure for cleaning, repairs, renovations, renewals and maintenance generally; (iv) expenses for complying with any requirement of any relevant body or authority; … (vi) interest on monies borrowed for the administration of the Village; (vii) amounts to provide for future repairs, renovations and other contingencies; (viii) expenditure incurred in providing meals and other services to occupiers; … (ix) gardening and landscaping expenses; … (xi) amounts payable in respect of ventilation, air conditioning, cooling and heating; (xii) fees payable to the Trustee; (xiii) amounts that are an incident of the administration and investment of the Trust Fund; … (xv) all taxes including land tax but excluding income tax; (xvi) all insurance premiums; (xvii) expenses for water, gas, electricity, telephone, sewerage, garbage and other services or requirements furnished or supplied for the general benefit or purpose of running and maintaining the Village; (xviii) 10% of monies expended by the Lessor in carrying out work required by any competent authority; (xix) maintenance, replacement and repairs of furniture, equipment and furnishings in units; (xx) cost of lighting and cleaning common areas; (xxi) expenditure in providing bus or other transport facilities to Lessees. 30 All of those items, apart from items (i), (xii), (xiii) and (xv), relate to the day to day operation of the Village. Items (i), (xii), (xiii) and (xv) relate to the legal infrastructure for the operation of the Village. Paragraphs (v), (x) and (xiv) of cl 5(c) must be construed in the context of those provisions. 31 The phrase 'in relation to' is satisfied by a connection or association between the two things in question: R v Murphy (1985) 158 CLR 596 at 611. The context or the purpose may require that the link, association or relationship be of a particular kind, sometimes described as an appropriate or relevant relationship: R v Ross-Jones (1984) 156 CLR 185). Thus, the phrases 'relating directly to the running of the Village' and 'in relation to the operation of the Village' in cl 5(c)(x) must be construed in the light of the context and purpose of that provision in the overall scheme of the operation of the Village as gleaned from the Trust Deed and the Lease. The character of the other items in cl 5(c) indicates that, before legal expenses can be treated as Outgoings, they must be shown to be involved in the direct running and operation of the Village. It is not sufficient that they are expenses incurred by Overton simply because it has undertaken the enterprise of managing and operating the Village. STANDING TO SUE 32 On 29 June 2000, Overton completed the sale of the reversion in respect of each of the Leases and of the common areas to Cuzeno RVM Pty Limited ('Cuzeno'). It is common ground that Overton has no standing to claim any arrears of contributions to Outgoings, by reason of the operation of s 117(1) of the Conveyancing Act 1919 (NSW) in relation to those Leases that were still on foot as at the date of completion. Section 117 provides that rent reserved by a lease, and the benefit of every covenant on the lessee's part to be observed or performed, shall be annexed and incident to, and shall go with the reversionary estate in the land expectant on the term granted by the lease, and shall be capable of being recovered, received, enforced and taken advantage of by the person from time to time entitled to the income of the whole or any part, as the case may require, of the land leased. 33 However, there is no dispute that Cuzeno is entitled to recover any such arrears as are payable. Cuzeno has been joined as a second cross-respondent to Overton's cross-claim. In addition, Cuzeno has filed a second cross-claim against the same Residents as are cross-respondents to the Overton cross-claim. It is also common ground that, in relation to those Leases that came to end before 29 June 2000, Overton has standing to claim any arrears that may be payable. ISSUE ESTOPPEL 34 In proceeding 1181/97 brought by certain of the Residents against Overton in the Equity Division of the Supreme Court of New South Wales ('the Equity Proceeding'), Overton filed a cross-claim for recovery of alleged arrears of contributions to Outgoings. Windeyer J made orders under Pt 72 of the Supreme Court Rules (NSW) for the determination of all of the issues relating to the amount of Overton's claims against Residents for unpaid contributions to Outgoings. On 19 November 1998, Mr Peter Taylor SC ('the Referee') reported to Windeyer J pursuant to that reference. Ultimately, Windeyer J adopted the Referee's report: see Murphy v Overton Investments Pty Ltd (Supreme Court of New South Wales, Windeyer J, 10 December 1998, unreported). 35 In connection with the motion for adoption of the report, Windeyer J was asked to rule on a number of questions concerning the liability of Residents to contribute to Outgoings. As his Honour said, there was debate before him as to the proper construction of cl 5(c) and whether or not legal fees incurred by Overton in relation to the operation of the Village had to relate directly to the running of the Village. His Honour considered that amounts relating directly to the running of the Village would include fees payable to persons who provide services to the Lessor in relation to the operation of the Village. His Honour said: '… It is necessary to show some relevant connection between the fees the subject of the claim and the operation of the [V]illage, but the words read in the context in which they appear would, I consider, readily embrace the expenses in question, or at least most of them.' 36 His Honour was referring to legal charges in connection with a number of files opened by Gadens in connection with the provision of advice to Overton. Ultimately, his Honour considered the decision of the Referee on the claim for legal expenses should be confirmed. Overton contended that many of the issues raised for consideration by me were already the subject of decision in the Equity Proceeding and therefore gave rise to issues estoppel. 37 Counsel for the Residents made a number of concessions in relation to categories of legal expenses that are the subject of dispute in the proceeding before me. In relation to those Residents who are cross-respondents in the present proceeding and who were parties to the proceeding before Windeyer J, it was conceded that they are precluded from raising a number of issues by reason of the determinations made by Windeyer J. However, in relation to those cross respondents who were not parties to the proceeding before Windeyer J, there is strictly no issue estoppel because of the lack of identity of parties. 38 Nevertheless, I consider that, unless I were persuaded that Windeyer J was clearly wrong, it would be a misuse of the resources of the Court to re-litigate, on behalf of some of the Residents, the very same issues that have already been determined in relation to the great majority of the Residents. No submissions were made on behalf of the few Residents for whom the issue estoppel is not strictly a bar as to why I should conclude that Windeyer J was clearly wrong in relation to the conclusions reached by him. It follows, therefore, that significant numbers of the categories of disputed fees do not arise for determination by me. I should say that, had the concessions made on the final day of the hearing been made at an earlier stage, considerable time and effort would have been saved. 39 In relation to the categories of legal expenses that the Residents claim are not governed by Windeyer J's determination, Overton relies on the following observation made by Windeyer J in relation to the various legal expenses that were the subject of the dispute before him and the Referee: '… I do not think it possible to hold the charges had no connection with the operation of the [V]illage on the information before me. On one basis, the matters for which the charges were incurred, could all have been for the operation of the [V]illage. There is no reason to say that the $150.00 charge for defamation advice was not referable to the operation. For instance had someone been making defamatory comments about Overton and its operations, that could have borne on the financial position of the [V]illage to the detriment of Overton and residents alike. … I do not think that the evidence shows that any of … files … 970646, 974066 … do not refer to matters for which charges could properly be claimed as [O]utgoings. [Files 970647, 970728] seem to me to relate to the operation of the [V]illage or its running. [File 967747] proceedings, on the basis of the referees report, are proceedings against individual [L]essees for amounts said to be due under those Leases. While they may be separate claims, the proper operation of the [V]illage is dependent upon the residents meeting their obligations. It has not been shown the charges are not properly claimed as [O]utgoings. Of course, any costs recovered from individual [L]essees would have to be brought to account in due course, as is obviously intended under Clause 5(b) of the [L]ease. It is said that the costs incurred in connection with the challenge to the validity of the Code, could not properly be claimed as [O]utgoings.' 40 The Referee also expressed views concerning the extent to which legal expenses were capable of being treated as Outgoings for the purposes of cl 5(c). Since the Referee's report was adopted by Windeyer J as, in effect, the decision of the Supreme Court, any determination made by the Referee would give rise to an issue estoppel as though it were a determination made by the Court. 41 The Referee observed that the powers conferred by cl 5(c)(v) and cl 5(c)(x) are wide. The Referee went on to observe as follows: '… Their apparent width is increased by the fact that "the Village" is defined in the [L]ease as including not only the land but also the "buildings, improvements and structures" on the land. When clause 5(c)(xiv) is added as an additional power, the cumulative effect of the three clauses is to include within the meaning of "Outgoings" all expenditure relating to the operation of the Village and its general administration. … [W]hilst virtually all expenses of the Village potentially fall within the description of "Outgoings", Overton has a discretion about the kinds of expenses that it will include in any particular levy. Moreover, Overton clearly has a discretion about the amounts that are to be levied. The existence of these discretions is significant because it can be taken as an indication that the [L]essees were not necessarily required to meet all of the expenses of the Village. Certainly, Overton is free to absorb some of the expenses of a Village if it so choses. The more difficult question to answer is whether the proper exercise of the discretions might, in some circumstances require Overton to bear a part, or all, of a particular expense.' 42 The Referee considered some 34 separate claims. Claims 16, 17 and 19 related to auditing and accounting charges. Claims 18 and 20 to 24 inclusive related to legal expenses. In dealing with Claim 16 for auditing and accounting charges, the Referee observed as follows: 'It is true that most of the amounts paid to [the accountants] do not relate to the usual, day to day and uncontroversial, aspects of the operation of the Village. However, they do relate to the present dispute and its predecessors in other courts. The dispute is, at bottom, about the level of charges that Overton is entitled to recover from residents in connection with providing the services that are required, or desirable, for the operation of the Village. Given that subject matter of the dispute, it is difficult to accept that the accounting costs incurred in the course of it are not sufficiently related to the operation of the Village as to be recoverable under [clause 5(c)(x)].' In dealing with legal expenses, the Referee said that the claims raised the same issues of construction as Claim 16 and did not require separate consideration. 43 Thus, in effect, Overton says that the Referee's report is decisive as to the criteria for treating legal expenses as Outgoings. That is to say, if legal expenses relate to a dispute as to the level of charges that Overton is entitled to recover from Residents in connection with providing the services that are required or desirable for the operation of the Village, they will properly be characterised as Outgoings. Overton contends that the Referee's observations apply a general principle that, so long as the legal expenses in question had some connection with the operation of the Village, that is sufficient to attract cl 5(c). 44 However, the legal expenses that were in issue in the proceeding before Windeyer J were not of a character identical to the expenses now left in issue. I do not consider that those observations should be treated as governing the questions raised in relation to all of the categories of expenditure presently in dispute. It is still necessary to determine whether particular expenses now identified have such a connection with the operation of the Village that they can fairly be said to be expenditure incurred in carrying on the operation of the Village or legal charges payable for the provision of services in relation to the operation of the Village. 45 Before dealing with the issues that are still live, I shall describe the legal expenses that the Residents concede are governed by the determinations made in the Equity Proceeding. LEGAL ASSISTANCE UNDER FAIR TRADING ACT 46 File 981369 was opened by Gadens in March 1998, when Overton instructed Gadens to advise on the proper representation by The Agedcare Rights Service ('TARS') provided to Residents pursuant to the Fair Trading Act 1987 (NSW) ('the Fair Trading Act'). The question was whether there was a contravention of s 12 of the Fair Trading Act in respect of the funding of legal costs of Residents by TARS. The work and advice undertaken by Gadens was aimed at reducing the Outgoings payable by all Residents by seeking to 'shortcut' the litigation that had been on foot for some time between Overton and the Residents. FREEDOM OF INFORMATION APPLICATION 47 File 970646 was opened by Gadens in January 1997. On 20 January 1997, the Director-General of the Department of Fair Trading made a request pursuant to s 76 of the Fair Trading Act to Overton for Overton to execute an undertaking to reinstate services for residents that were curtailed in November 1996. Overton declined to execute the undertaking. On 26 February 1997, the Director-General commenced a proceeding against Overton in the Commercial Tribunal of New South Wales pursuant to s 78 of the Fair Trading Act, seeking orders that Overton provide the undertaking previously sought. Overton then instructed Gadens to make a freedom of information application to obtain documents held by the Department in support of its decision to prosecute and commence the proceeding in the Commercial Tribunal. Gadens were instructed to make the freedom of information application so that Overton could ascertain how it was that Overton was not complying with the Retirement Villages Act 1989 (NSW) and the Retirement Village Industry Code of Practice, as asserted by the Department. The fees charged by Gadens were treated as Outgoings for the purposes of cl 5. DEFAMATION ADVICE 48 Files 974066, 995481 and 995482 relate to advice given by Gadens to Overton in respect of comments made by various parties alleged by Overton to be defamatory. File 974066 related to comments made by Residents, file 995481 related to comments made in the Torch Newspaper and file 995482 related to comments made by the Trustee to solicitors and third parties alleging breaches by Overton of the Trust Deed. 49 Overton instructed Gadens to provide advice to Overton as to whether the comments made in the Torch Newspaper were defamatory and what steps Overton could take to protect the reputation of the Village. Overton also sought advice from Gadens on Overton's prospects of recovery of damages that may flow from the alleged defamatory comments. Gadens were also asked to advise Overton as to whether the comments made by the Trustee were defamatory and what steps Overton could take to protect the reputation of the Village. Overton's advice was also sought of prospects of recovery of damages that may flow from the alleged defamatory comments. 50 Finally, Overton also instructed Gadens in June 1997 to provide advice to Overton as to whether the comments made by Residents were defamatory and what steps Overton could take to protect the reputation of the Village and Overton. Overton also sought Gaden's advice on Overton's prospects of recovery of damages that might flow from the alleged defamatory comments. The fees charged by Gadens in relation to all three files were treated as Outgoings under cl 5. PROCEEDINGS FOR RECOVERY OF ARREARS OF OUTGOINGS 51 Some 29 Gadens files have been opened on instructions from Overton in connection with the recovery of arrears of contributions to Outgoings from various Lessees. Some files relate to specific Lessees. Other files are concerned with a multiplicity of Lessees. In some cases, the relevant Lessees have disputed liability for the amounts claimed. If Overton has wrongly claimed contribution to Outgoings from Lessees or has claimed excessive amounts, the costs incurred by Overton will not be Outgoings within the meaning of cl 5. However, where the costs have been incurred in pursuing the recovery of Outgoings payable by Lessees they clearly represent expenditure incurred in carrying on the operations of the Village. 52 Legal charges paid for recovery of contributions to Outgoings are amounts relating directly to the running of the Village. The essence of the scheme of the arrangements between Overton as manager of the Village, on the one hand, and Lessees or Residents, on the other hand, was that Overton would conduct, manage and operate the Village as a first class retirement village in consideration for which the various Residents would contribute to Outgoings. To the extent that there is a shortfall in the recovery of contributions to Outgoings, there would be a detriment to Residents. It was in the interests of all Residents that each Resident or Lessee pay the contribution to Outgoings that is properly levied on that Resident or Lessee. 53 The Residents contend that certain costs incurred by Overton in proceedings for recovery of unpaid contributions to outgoings are not the subject of the determination by Windeyer J. They refer to an observation made by Windeyer J in the following terms: 'The Local Court proceedings, on the basis of the referee's report, are proceedings against individual [L]essees for amounts said to be due under those [L]eases. While they may be separate claims, the proper operation of the Village is dependent upon the residents meeting their obligations. It has not been shown the charges are not properly claimed as [O]utgoings. Of course, any costs recovered from individual lessees would have to be brought to account in due course, as is obviously intended under Clause 5(b) of the [L]ease.' Thus, the Residents say that Windeyer J concluded that costs incurred in recovering arrears are Outgoings only to the extent that the costs were incurred in the recovery of expenses that are properly to be characterised as Outgoings. In so far as the files relating to recovery of unpaid contributions to Outgoings involve costs that would not have been incurred if Overton had not made a claim for expenses that were not properly characterised as Outgoings, those costs themselves are not Outgoings. There may be some substance in the Residents contention that Windeyer J did not determine that such costs are Outgoings. In so far as it might be possible to demonstrate that Overton incurred legal fees in the pursuit of the recovery of expenses that were not Outgoings within the meaning of cl 5(c), there may be a good basis for concluding that those expenses are themselves not Outgoings. However, the material before me does not indicate that there are any expenses that fall within such a category. PROCEEDINGS UNDER FAIR TRADING ACT 54 File 980194 was opened in December 1987 when Gadens were instructed to act in connection with an appeal from a decision of the Commercial Tribunal of 10 December 1997. On 26 February 1997, the Director-General of Fair Trading commenced a proceeding against Overton in the Commercial Tribunal. The proceeding was brought under s 78 of the Fair Trading Act to require Overton to reinstate the level of services at the Village to their pre-November 1996 level and to establish appropriate consultative structures for resident input as required by the Retirement Village Code of Practice of 1995 ('the 1995 Code'). Overton instructed Gadens to commence proceedings to challenge the Commercial Tribunal's decision as to the validity of the 1995 Code and the order that Overton reinstate the services offered to Residents to the pre-November 1996 level. CONSULTATION PROCESS UNDER THE CODE 55 Files 983614 and 994964 were opened by Gadens following instructions to advise and assist in drafting the proper forms and procedure for the consultation process required under the 1995 Code for the preparation of budgets. The first file related to the 1998/1999 financial year and related to instructions given in June 1998. The second file related to the 1999/2000 year and resulted from instructions given in June 1999. The work involved related to Overton's compliance with the 1995 Code and its obligations under the Lease and Trust Deed. Under the 1995 Code, consultation with Residents was required in connection with the preparation of the annual budgets. INTERACTION BETWEEN CODES OF PRACTICE AND LEASES 56 File 970647 was open in January 1997 when 111 residents commenced the Equity Proceeding seeking, amongst other things, injunctive relief restraining Overton from continuing proceedings in the Local Court for recovery of arrears of Outgoings. In the course of the Equity Proceeding, Windeyer J determined separate questions that had arisen as to the interaction between the Retirement Village Industry Code of Practice of 1989 and the 1995 Code, on the one hand, and the terms of Leases, on the other. On 23 December 1997, Windeyer J determined that the contractual effect of the Leases was not over ridden by the Codes. The Residents appealed to the New South Wales Court of Appeal from those determinations. In January 1998, Gadens received instructions to act in connection with the appeal and file 980565 was opened. The appeal was heard on 2 July 1998 and, on 2 September 1998, the Court of Appeal dismissed the appeal by the Residents. BUDGET DISPUTES 57 Files 987274 and 996496 were opened in January 1999 and August 1999 respectively following receipt by Gadens of instructions on behalf of Overton concerning draft budgets for the 1998 and 1999 financial years. File 987274 related to the 1998 budget and file 996496 related to the 1999 budget. Each related to an application brought by a Resident of the Village before the Residential Tenancies Tribunal in connection with the relevant budget. The budget for each financial year was prepared in connection with the operation of the Village. The budget reflected and explained the level of contributions to Outgoings that were expected to be the subject of levies to residents under cl 5(b). TRUST DEED DISPUTE 58 File 981617 was opened by Gadens in connection with advice furnished to Overton concerning a dispute with the Trustee as to the operation of the Trust Deed. The advice related to the operation and effect of Leases and cl 13 of the Trust Deed. Gadens gave Overton advice concerning the legal effect of the Trust Deed and the contractual obligations of Overton and the Trustee under the Trust Deed and Leases. Clause 13 is concerned with the Refund of the Lease Deposit and Refunded Rent by the Manager on termination of a Lease. AUDIT QUERIES 59 File 997426 was opened in October 1999 following instructions from Overton to advise Overton on queries in relation to the audit of the Village maintenance account for the 1998/1999 financial period. CATEGORIES OF LEGAL EXPENSES IN ISSUE 60 I shall deal separately with each of the disputed categories of legal expenses that remain for consideration, following the concessions made on behalf of the Residents. UNDERTAKING AS TO DAMAGES 61 In the Equity Proceeding, the Residents obtained interlocutory injunctions restraining Overton from prosecuting proceedings in the Local Court for recover of arrears of contributions. Those injunctions were granted upon giving the usual undertaking as to damages. The injunctions were dissolved in March 1999 when the Court ordered that Overton may proceed to determine and assess any loss suffered by reason of the injunctions. File 993368 was opened by Gadens in May 1999 when Overton instructed them to advise and enquire into and ascertain what damages Overton had sustained by reason of the injunction granted on 27 February 1997. 62 The Equity Proceeding involved legal expenses that, according to determination made by Windeyer J and the Referee, are properly to be treated as Outgoings. On the other hand, the loss or damage suffered as a consequence of the injunctions was loss or damage incurred by Overton as a consequence of an unsustainable claim being made by the Residents. The legal expenses incurred in endeavouring to recover that loss or damage were not expenses incurred in the operation of the Village. Nor were they legal charges for providing services to Overton in relation to the operation of the Village. They were charges made in connection with the recovery by Overton of loss or damage resulting from the unsustainable claim made by the Residents. To treat those expenses as Outgoings involves manifest error. COSTS OF MR AND MRS MURPHY'S PROCEEDINGS 63 John James Murphy and Daphne Murphy claimed damages and other relief against Overton in respect of conduct alleged to have been engaged in by Overton prior to the grant of a Lease to Mr and Mrs Murphy (see the cases referred to in [1] above). Substantial costs were incurred by Overton in the defence of those proceedings. Hitherto, Mr and Mrs Murphy have been unsuccessful, although an appeal to the High Court has been argued but not yet decided. Orders for costs against Mr and Mrs Murphy have been made in favour of Overton. The question, however, is whether the costs incurred by Overton in defending the proceedings brought by Mr and Mrs Murphy are properly to be regarded as Outgoings for the purposes of clause 5 of the Leases. Gadens have opened five different files in relation to the original proceeding and the appeals that have taken place in relation to the proceedings. 64 On 23 February 1999, Federal Court proceeding N159 of 1999 was commenced by Mr Murphy against Overton ('Mr Murphy's Proceeding'), as a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth) ('the Federal Court Act')on behalf of a majority of the cross-defendants in the Equity Proceeding. In Mr Murphy's Proceeding, the Residents alleged misleading and deceptive conduct by Overton, estoppel by representation, unconscionability under the unwritten law, unconscionability under s 51AA of the Trade Practices Act 1974 (Cth) ('the Trade Practices Act'), negligent advice and fraud. The Residents sought declarations concerning contraventions of s 52 and s 51AA of the Trade Practices Act, damages, injunctions restraining Overton from recovering certain Outgoings and from recovering any amount for legal or accounting costs and ancillary orders. 65 In about February 1999, instructions were given to Gadens on behalf of Overton to act in the defence of Mr Murphy's Proceeding and file number 991637 was opened. Between February 1999 and 17 August 1999, various motions were heard by me concerning the Residents' statement of claim and competence of the action as a representative proceeding under Pt IVA of the Federal Court Act. On 17 August 1999, I ordered that Mr Murphy's Proceeding no longer continue under Pt IVA of the Federal Court Act. I gave leave to Mr Murphy to file a second further amended application and second a further amended statement of claim. The pleadings were further amended in January 2000 and May 2000. 66 In Mr Murphy's Proceeding, as amended, Mr Murphy claimed relief under the following heads: (a) damages under s 82 of the Trade Practices Act by reason of contravention of s 52 and s 51AA of the Trade Practices Act; (b) orders pursuant to s 87 of the Trade Practices Act by reason of contravention of s 52 and s 51AA of the Trade Practices Act; (c) damages under the general law for negligent advice; (d) declarations that as a consequence of representations made by Overton relating to the outgoings under the lease, Overton is estopped from claiming contribution to outgoings in excess of a particular level; (e) orders under s 7 of the Contracts Review Act 1980 (NSW) in respect of provisions of the lease relating to recovery of outgoings generally and relating to recovery of outgoings in the nature of legal and accounting costs and interest. On 31 and 30 August 1999, the Residents filed 94 fresh applications (Proceedings N852-N920, N930-N952 and N956 of 1999) claiming relief similar to that claimed in Mr Murphy's Proceeding. Proceeding N946 of 1999 was commenced on behalf of Mrs Murphy ('Mrs Murphy's Proceeding'). 67 On 7 March 2000, I began the hearing of Mr and Mrs Murphy's Proceedings, together with Proceedings N857 of 1999 and N878 of 1999 brought on behalf of Mr Neville Carnegie and Mrs Brasington respectively. During the hearing, it became clear that the hearing of the claims brought on behalf of Mr Carnegie and Mrs Brasington added unnecessary complication. Evidence had been taken from Mr Carnegie but not from Mrs Brasington. On 16 May 2000, I ordered that the further hearing of those proceedings be adjourned until after the completion of Mr and Mrs Murphy's Proceedings. The hearing of Mr and Mrs Murphy's proceedings continued on 7, 8, 9, 10, 16, 17, 21, 23 March, 7 April, 5, 16, 17, 18 and 19 May 2000. 68 Mr John Edward James, a director of Overton, was, at relevant times, the chief executive of Overton. As he received invoices from Gadens in relation to file 991637, he treated the expenses involved as expenses incurred by Overton in the operation of the Village. He therefore levied the Residents pursuant to cl 5(b) of the Leases on the basis that the expenses were Outgoings within the meaning of cl 5. 69 File Number 996284 was opened in August 1999 in connection with the preparation of a bill of costs for assessment pursuant to costs orders made in favour of Overton in Mr and Mrs Murphy's Proceedings. Mr James treated the fees payable in respect of invoices received from Gadens on that file in the same way as for file 991637. 70 File 996287 was opened in June 1999 in relation to a notice of motion filed by Mr Murphy seeking orders that leave be granted to join Mr James as a respondent in the proceeding. Once again, Mr James treated the invoices received in respect of that file as Outgoings under cl 5. 71 File 996790 was opened by Gadens in September 1999 when they were instructed by Overton in relation to an appeal brought by Mr and Mrs Murphy from orders made in their proceedings. Once again, Mr James treated the fees payable to Gadens in respect of that file as Outgoings under cl 5 of the Leases. 72 File 2000285 was opened on the instructions of Mr James to Gadens to act to recover costs ordered to be paid to Mr James on the motion for joinder of Mr James as a respondent. Mr James treated the fees payable as expenses of Overton and treated them as Outgoings under cl 5 of the Leases. 73 The question is whether it can be said that the legal expenses incurred by Overton in defending the claims made by Mr and Mrs Murphy and the ancillary matters arising out of those claims can fairly be said to be: * expenditure incurred in carrying on the operations of the Village; * fees or sums payable for the provision of services to the Village or Overton in relation to the operation of the Village; * reasonable or proper expenses or outgoings decided upon by Overton. 74 The legal fees in question were not incurred in carrying on the operations of the Village. They were incurred in resisting claims made by Mr and Mrs Murphy that Overton and Mr James engaged in conduct in contravention of Pt IVA and Pt V of the Trade Practices Act and acted in breach of its general law duty, in giving advice to a Lessee, to take care in the giving of that advice. Overton was found to have engaged in such conduct, although it was found not to have any liability for various reasons, including the operation of limitation periods. 75 I do not consider that Gadens were providing services to the Village or to Overton in relation to the operation of the Village in acting for Overton and Mr James in the defence of claims made by reason of wrongful conduct on the part of Overton. The legal charges made by Gadens are not amounts relating directly to the running of the Villages. They are expenses incurred by Overton and Mr James in looking after their own interests in resisting claims for damages. I consider that the treating of the fees charged by Gadens in respect of the five files in question as Outgoings under cl 5 involves manifest error. FINANCIAL HARDSHIP 76 File 981501 was opened in March 1998 when Mr James instructed Gadens to make a financial hardship application on behalf of Overton to the Residential Tenancy Tribunal. The application was for financial support for Overton from the Government of New South Wales. Mr James says that the application was made in order to explore ways to reduce the financial burden on Residents and on Overton at a time when the Residents were refusing to pay contributions to Outgoings. Overton was incurring significant legal expenses in connection with the litigation commenced by Residents and Mr James was concerned that, without financial support from the Government, the Village may not be able to meet expenses when they fell due. Mr James treated the fees as an Outgoing under cl 5. 77 If the legal expenses for which Overton was seeking financial assistance from the Government were properly regarded as Outgoings, any expenses incurred in obtaining government assistance in order to reduce the level of those Outgoings would themselves be fairly regarded as Outgoings. That is to say, the expenditure incurred in endeavouring to reduce Outgoings for the benefit of Residents can fairly be regarded as expenditure incurred in the operation of the Village. However, the precise statutory framework under which the application was made is not apparent and, accordingly, it is not clear whether or not the expenses in respect of which Overton was seeking financial assistance were themselves Outgoings within the meaning of cl 5(c). I am not persuaded that treating these expenses as Outgoings involved manifest error. COMPENSATION FOR RESUMPTION 78 In August 1995, the Minister administering the Environment Planning and Assessment Act 1979 (NSW) resumed part of the land included in the Village. At the date of resumption, the Village was in the process of being erected on the balance of the land. File 994438 related to instructions given by Mr James on behalf of Overton to Gadens to recover compensation. Overton elected not to accept the statutory valuation of the resumed land made by the Valuer-General in 1995 and commenced a proceeding in the Land and Environment Court of New South Wales for an amount of compensation to be determined under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW). A judge of that Court determined compensation far below the valuation made by the Valuer-General. Overton then appealed on a question of law to the Court of Appeal of New South Wales. Mr James treated the fees paid in connection with the proceeding as Outgoings. 79 Clearly, the expenses incurred on this file were incurred by Overton in the pursuit of its own interests. They were not incurred in carrying on the operations of the Village. They were not expenses relating directly to the running of the Village and they were not fees or sums payable for the provision of services to Overton in relation to the operation of the Village. They were expenses incurred by Overton in endeavouring to obtain compensation for the resumption of its land, from which the Residents would have gained no benefit. Treating those expenses as Outgoings entailed manifest error. INCIDENTAL ADVICE 80 File 995824 was opened by Gadens in 1999 to advise and consider a Hansard report in which references were made to Overton in the context of its operation of the Village. The file also related to the provision of comments to industry groups seeking information as to Overton's conduct and operation of the Village. Certain of the information related to Overton's accreditation as the operator of a retirement village. Mr James considered that statements reported in Hansard could have an effect on the reputation of the Village. 81 I do not consider that legal expenses incurred in relation to those matters are expenses incurred in carrying on the operations of the Village. Nor are they legal charges for the provision of services in relation to the operation of the Village. They are more fairly characterised as expenses incurred by Overton in the protection of its own reputation rather than expenses in the operation of the Village. They are not fairly to be regarded as Outgoings for the purposes of cl 5(c) and treating them as such involves manifest error. OTHER ISSUES 82 Apart from questions of categorisation of legal expenses incurred by Overton as Outgoings, the Residents have raised other issues concerning their liability to contribute to expenses that are properly characterised as Outgoings. I shall deal separately with each issue. LIABILITIES IN RESPECT OF PREMISES 83 Clause 5(g) provides that, in addition to the Outgoings, Overton may require a Lessee to pay liabilities for which Overton shall determine a Lessee to be separately liable 'in respect of the Premises'. In each Lease, the demised premises are referred to as 'the Premises'. In relation to some files opened by Gadens following instructions from Overton, fees charged have been treated as liabilities falling within cl 5(g). 84 Clause 5(g) must be understood in the context of cl 5(f). For the purposes of cl 5, a distinction is drawn between 'Floor Area Outgoings' and 'Per Unit Outgoings'. Per Unit Outgoings are defined as Outgoings referred to in all of the subparagraphs of cl 5(c) other than subpar (i) and subpar (xv). Floor Area Outgoings are defined as all Outgoings other than those defined as Per Unit Outgoings. Thus, effectively, Floor Area Outgoings are: '(i) all rates, charges, impositions and fees payable to any relevant body or authority in respect of the Village or any part thereof; … (xv) all taxes including any land tax calculated on the basis that the Village is the only land owned by the Lessor (but excluding income tax payable by the Lessor on its income).' 85 Under cl 5(f)(i)(1), a Lessee's contribution to Floor Area Outgoings is that proportion of the total Floor Area Outgoings that the floor area of the Premises of that Lessee bears to the total floor area of the Village. Under cl 5(f)(i)(2), Per Unit Outgoings are to be divided into a number of parts equal to the number of Units in the Village and the Lessee of each Unit bears one such part. 86 The rationale for the distinction between Floor Area Outgoings and Per Unit Outgoings appears to be that taxes are to be borne by Units according to floor area. All other Outgoings, however, are to be borne in equal shares by the Lessee of each Unit in the Village. That suggests that the expenses referred to in cl 5(g) are additional outgoings, charges and liabilities that are attributed to Premises, that are not otherwise Outgoings within the meaning of cl 5(c). 87 There are 124 Units in the Village. Lessees in respect of approximately 90 of the Units have participated in disputations. The rest of the Residents have not participated in the disputation with Overton concerning Outgoings. Where Overton has treated abnormal legal costs as Outgoings, it has treated those costs as Floor Area Outgoings only in respect of those Units whose Lessees have participated in the disputation. Overton contends that cl 5(g) confers power on Overton to apply and charge costs incurred in the operation of the Village to a particular Lessee or particular Lessees where it would not be appropriate for Lessees who have not participated in disputation to bear those costs. Overton says that such an apportionment arises from the obligation imposed upon it to act in good faith. 88 However, cl 5(g) is limited to outgoings, charges and liabilities for which the Lessor determines a Lessee 'to be separately liable in respect of the Premises'. The clause goes on to include, but not by way of limitation, 'any liability arising from any requirement of any competent authority or other body where such a requirement applies to or in respect of the Premises'. The language of cl 5(g) suggests that the 'other outgoings, charges and liabilities' to which the clause relates are not expenses that would otherwise be 'Outgoings' within the meaning of cl 5(c). That seems to follow from the introductory words of clause 5(g), namely, 'In addition to the Outgoings … in this clause'. The limiting words are that the Lessor must determine that the Lessee is to be separately liable 'in respect of the Premises'. Overton gives as an example of such an expense the costs incurred by the Lessor in defending vexatious litigation brought by a Lessee. Overton says that, while those costs are properly incurred in the operation of the Village, they are costs that the Lessor, in exercising its obligations to use its best endeavours and exercise good faith, can be passed on to a particular Lessee or particular Lessees. 89 If the abnormal legal expenses in question are Outgoings within the meaning of cl 5(c), they must be dealt with as Per Unit Outgoings under cl 5(f)(i)(2). If they are not Outgoings, the question of whether they can be treated as 'other outgoings, charges and liabilities' within cl 5(g) will depend upon the precise nature of the expenses in issue. That question is not presently before me. INCONSISTENCY WITH COURT ORDERS FOR COSTS 90 The Residents raised as an issue for separate determination the question of whether abnormal legal costs were recoverable by Overton as Outgoings to the extent that they are inconsistent with an order for costs of a court or tribunal. However, in the course of argument, the Residents abandoned that contention. Accordingly, the Residents accepted that, for the purpose of the proceeding before me, the making of orders for costs by a court or tribunal had no bearing on the recoverability of legal expenses incurred by Overton as Outgoings under cl 5(c), assuming such legal expenses are properly to be characterised as Outgoings. OPERATION OF LEGAL PROFESSION ACT 1987 (NSW) 91 Section 199(1) of the Legal Profession Act 1987 (NSW) provides that a client who is given a bill of costs may apply for an assessment of the whole or any part of those costs. Such an application may be made even if the costs have been wholly or partly paid. The Residents contended that Overton is not entitled to treat expenses incurred in connection with the provision of legal services as Outgoings unless and until it has exercised its rights under s 199. The contention has no substance. 92 In so far as Overton had any obligation under the Leases and the Trust Deed not to incur expenses unreasonably or otherwise than in good faith, the question of whether Overton had exercised its rights under s 199 may have some relevance. However, the mere fact that Overton has not exercised a right to apply for an assessment of expenses charged by Gadens for the provision of legal services, cannot affect the question of whether or not the expenses, if they are otherwise Outgoings within the meaning of cl 5(c), are Outgoings for which contributions may be recovered from by Residents. COSTS INCURRED AFTER 3 DECEMBER 1999 93 The 1999 Act was enacted: * to set out particular rights and obligations of residents and operators of retirement villages; * to facilitate the disclosure of information to prospective residents of retirement villages; * to require contracts between residents and operators of retirement villages to contain full details of the rights and obligations of the parties; * to facilitate resident input into management of retirement villages; * to establish appropriate mechanisms for the resolution of certain disputes between residents and operators of retirement villagers. 94 In pursuance of those objects, detailed provisions were enacted dealing with such questions as the apportionment of legal expenses between operator and residents. The provisions did not come into effect, for the most part, until after Overton ceased to be manager of the Village, following the sale to Cuzeno. 95 However, in the course of the parliamentary debate relating to the enactment of the 1999 Act, amendments were made to deal specifically with aspects of the dispute between Overton and the Residents. Section 207 of the 1999 Act provides that Sch 4 'has effect'. Section 2(2) provides that cl 14 of Sch 4 was to commence on the date of assent to the 1999 Act. The 1999 Act was assented to on 3 December 1999. 96 Clause 14 of Sch 4 relevantly provides as follows: '(2) If, before the commencement of this clause, any legal proceedings in relation to a retirement village had been commenced but were not finally determined (being proceedings to which the operator and a resident or residents of the village are parties), the resident or residents concerned are not liable to pay such part of the operator's costs in relation to the proceedings as are incurred, or may reasonably be apportioned to such of the proceedings as take place, after that commencement. (3) Subclause (2) has effect despite the provisions of any village contract, whether entered into before or after the commencement of this clause. (4) However, subclause (2) does not apply in respect of any costs awarded in favour of the operator and against a resident or residents of the retirement village in legal proceedings.' (Emphasis added.) Under s 4(1), the term 'village contract' includes a 'residence contract' and a 'residence contract' is defined as meaning a contract that gives rise to a 'residence right'. A 'residence right' means a right to occupy residential premises in a retirement village, being a right arising from contract in the form of a lease. Thus, the Leases are 'village contracts' for the purposes of cl 14. The Residents contend that, in so far as any of the abnormal legal expenses that are the subject of the present dispute are Outgoings within the meaning of cl 5(c), Overton is precluded from treating those expenses as Outgoings. 97 I do not consider that there is any substance in the contention. Clause 14(2) refers to legal proceedings to which an operator and a resident or residents of a village are parties. The exemption from liability is then conferred on 'the resident or residents concerned'. I consider that that phrase clearly refers to the resident or residents who are parties to the proceedings in relation to which the costs have been incurred. Otherwise, the phrase has no meaning at all. 98 The language of cl 14 is not entirely felicitous. Clause 14 was inserted in Committee stage in the Legislative Council. It is clear from the proceedings in Committee that the amendment was directed expressly to the dispute between Overton and the Residents. To the extent that the observations made in Committee stage are relevant to the construction, the observations are unhelpful. Thus, it was said that the clause: '… will ensure that residents such as those at the Heritage Retirement Village will be protected from the date of assent to the Bill. This will mean that any costs incurred by residents in obtaining legal advice for, or undertaking, legal proceedings that they win cannot be lumped onto the residents. The amendment … will ensure that residents who are already involved in disputes with operators are also protected from future financial liability from the date of assent.' (Parliamentary Debates, Legislative Council, 23 November 1998 at 3571). A further observation was to the effect that the thrust of the amendment is to add: '… a provision that the resident or a group of residents to avoid payment of legal fees where the operator of a retirement village is ordered to pay costs in an action by or against that resident or group of residents.' No relevant comment was made by the Minister on the speech given on the second reading of the Bill for the 1999 Act. 99 I do not consider that the effect of cl 14 is to limit the entitlement of Overton to treat legal expenses as Outgoings for which contribution by Residents may be levied under cl 5(b). On the other hand, it may be that the Residents who were actually parties to particular proceedings would gain some benefit from cl 14 of Sch 4. That is a matter for examination in relation to any particular Resident or Residents who were parties to the relevant proceeding. That issue is not presently before me. SECTION 14A OF THE RETIREMENT VILLAGES ACT 1989 (NSW) 100 Part 7 of the Fair Trading Act 1987 (NSW) provided for codes of practice. Section 74(1) provided for the preparation for consideration by the Minister of a draft code of practice for fair dealing between a particular class of suppliers and consumers. Section 75 provided for the prescription of a code of practice that had been submitted to the Minister and approved by the Minister. A retirement village industry code of practice was so prescribed in 1995, namely, the 1995 Code. 101 Part 5 of the 1995 Code dealt with 'Village Management'. Clause 41, which was within Pt 5, was concerned with 'Resident input into budget'. Clause 41 relevantly provided as follows: '41 (1) Management must supply residents with information on financial performance in the current financial year together with a draft budget for the coming financial year within a reasonable time prior to the beginning of the relevant financial year. (2) The draft budget should contain at least the following: (a) sufficient information to explain any increase in fees; (b) information about the costs of services; … (3) The final budget must be developed out of consultations between management and residents. (4) Village management must operate the village on the basis on the last approved budget until any proposed budget has been the subject of reasonable consultation and has been agreed to by the residents of the village.' 102 Section 14A was inserted in the 1989 Act after the prescription of the 1995 Code. Section 14A relevantly provided as follows: '(1) A resident … may apply to the Tribunal for the purpose of resolving a budget impasse. (2) For the purpose of this section, a "budget impasse" occurs if the residents in a retirement village fail to agree to a proposed budget: (a) after all budget consultation processes under any applicable code have been complied with in relation to the budget; … (3) For the purposes of determining an application made under this section, the Tribunal must have regard to the expenses incurred in operating the village in current and previous years. … (5) If an application is made under this section, the Tribunal may do one or more of the following: … (c) to the extent that any applicable code requires a budget to be agreed to by the residents of the village before the budget can operate – approve, for the purposes of satisfying that requirement, a fair and reasonable budget; (d) having regard to its determinations and recommendations about the matter – make an order that the residents' fees must not exceed an amount specified by the Tribunal. (6) An order of the Tribunal made under subsection (5)(d): (a) fixes a maximum residents' fees payable by residents whose residence contracts give the administering authority a discretion in settling residents' fees, and (b) has effect for the period specified in the order, being a period not longer than 12 months. … (11) In this section: "residents' fees" mean fees and charges that are periodically payable by residents under their residence contract and that go towards the operating costs of the retirement village …'. Under s 3(1) of the 1989 Act, 'residence contract' means a contract by which a person obtains a right to occupy residential premises in a retirement village, and may take the form of a lease. 103 Section 31(1) of the 1989 Act provides that the Tribunal must not make orders under the Act that are 'inconsistent with a residence contract'. However, under s 31(2), that section does not apply to a provision of a resident's contract that contravenes s 38. Section 38(1) provides that 'the provisions of this Act have effect despite any stipulation to the contrary in any contract … and no residence contract … operates to annul, vary or exclude any of the provisions of this Act'. 104 In 1999, Mr Neville John Carney, one of the Residents, applied to the Residential Tribunal (now the Consumer Trader and Tenancy Tribunal) ('the Tribunal') for the purpose of resolving a budget impasse. After significant litigation, which entailed considerable delay, the Tribunal made orders on 10 January 2003 pursuant to s 14A(5)(c) and s 14A(5)(d) of the 1989 Act. First, the Tribunal determined 'the fair and reasonable budget in operating the Village for the 1999/2000 financial year, to be as set out' in a schedule to the orders. Secondly, the Tribunal ordered that the residents' fees payable for the year commencing 1 July 1999 and ending 30 June 2000 were not to exceed $385 per calendar month. 105 The schedule attached to the orders showed total expenses allowed of $592,493.60, as against Overton's proposed budget of $920,803.50. The budget propounded by Overton did not include any amount for abnormal legal expenses. The sum of $592,493.60 was then divided by 124 and again by 12, being 124 units and 12 months, giving a result of $384.57, which was rounded up to $385. 106 Overton has made levies on residents for the period 1 July 1999 to 28 June 2000 relevantly under three heads being: * Unit outgoings; * Interest on monies borrowed; · Abnormal legal and accounting expenses. For Mrs Brasington, the monthly levy for unit outgoings was $475. In addition, there were significant levies for abnormal legal and accounting expenses and interest on monies borrowed throughout that period. 107 The Residents contend that the effect of the orders made by the Tribunal is to limit the total contribution to Outgoings that can be the subject of a levy to Mrs Brasington to $385 per month. That raises two questions. The first question is whether the order of the Tribunal was intended to deal with abnormal legal expenses, and interest on borrowings, in so far as those expenses are Outgoings under the Lease. (There is an outstanding dispute concerning the entitlement of Overton to treat interest on borrowings as an Outgoing. That question has not yet been posed for consideration by the Court at this stage.) The second question, irrespective of the proper characterisation of abnormal legal expenses and interest on borrowings, is whether the effect of the order is to limit the entitlement of Overton to levy Mrs Brasington for 'unit outgoings' to $385 per month rather than the $475 per month actually levied by Overton. The first question turns on the proper construction of the reasons of the Tribunal. The second question turns on the proper construction of s 14A(6), in the light of s 31(1) of the 1989 Act. It is convenient to deal with the second question since, the resolution of that one way will obviate the need for consideration of the first question. 108 The term 'budget' is not defined in the 1989 Act. In its ordinary meaning, a budget is an estimate of expected income and expenditure or of operating results for a given period in the future (see The Macquarie Dictionary, Second Revision, The Macquarie Library Pty Ltd, Macquarie University, 1987). It might also be described as a periodic, especially annual, estimate of the revenue and expenditure of an organisation (see Shorter Oxford English Dictionary on Historical Principles, Fifth Edition, Oxford University Press, Oxford, 2002). Thus, the essence of the concept of the budget is that it is an estimate for the future. The actual expenditure and income may produce a result that is different from the budget because either expenditure or income is underestimated or overestimated. 109 In the case of a budget for the Village, the estimate relates only to expenditure, since income by way of contributions levied on Residents is fixed by reference to Outgoings as estimated in the budget. The scheme of cl 5(b) makes clear that levies are to be made on the basis of the estimates contained in a budget prepared by Overton. At the end of the period, an adjustment is to be made between the Overton the Lessees. 110 The concept of 'budget impasse' in s 14A must be considered against the background of that concept of 'budget'. Section 14A(2)(a) clearly refers to cl 41 of the 1995 Code. In so far as s 14A(5) authorises the Tribunal to approve a fair and reasonable budget and fix the maximum resident's fees, that cannot be regarded as intending to limit the entitlement of an operator to recover any excess of actual expenses over the estimate. The budget determined by the Tribunal, of necessity, fixes the resident's fees payable by residents for the period in question. Those are the fees and charges that are to be payable periodically towards the operating costs of the retirement village. However, the determination of a budget or estimate does not operate to extinguish any entitlement of an operator to be reimbursed in respect of expenses that are in fact properly incurred in the operating of a retirement village beyond the amount estimated. 111 Section 31(1)(b), in providing that the Tribunal must not make orders that are inconsistent with a resident's contract, recognises such a scheme. The effect of an order is simply to fix the budget or estimate and, thereby, determine the periodical contributions that residents will make in advance towards the estimated operating costs for the relevant retirement village. Clearly, s 14A contemplated that a budget impasse would be resolved before the commencement of a relevant period. Having regard to the delays that resulted from the litigation between Overton and the Residents in the present case, the order made by the Tribunal can have no real operation. 112 I do not consider that cl 5 of the Lease, and particularly cl 5(b), could be fairly characterised as a stipulation to the contrary of any effect of the 1989 Act. Clause 5 does not purport to annul, vary or exclude any of the provisions of the 1989 Act. It is consistent with cl 14A, construed in the way that I have suggested, namely as the means of resolving a disagreement as to an estimate. I do not consider that the orders made by the Tribunal had the effect of limiting any right vested in Overton to require an adjustment following the end of the 1999/2000 period, in accordance with cl 5(b) of the Leases. CONCLUSION 113 Having expressed my views on the issues argued before me, I propose to stand the proceeding over to enable the parties to consider the conclusions I have reached and to make submissions as to the further conduct of the proceeding. I certify that the preceding one hundered and thirteen (113) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 18 December 2003 Counsel for Mrs Brasington: G A Moore Solicitor for Mrs Brasington: Wendy Fisher (The Agedcare Rights Service) Counsel for Overton: A J McInerney Solicitor for Overton: Gadens Date of Hearing: 24, 25, 26, 27 November and 1 December 2003 Date of Judgment: 18 December 2003