New South Wales Supreme Court CITATION : Eric & Valerie Coffey & Ors v Fernbank Management Pty Ltd & Anor [2001] NSWSC 192 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2985 of 1999 HEARING DATE(S) : 9, 10, 11, 12 and 13 October and 11, 12 and 13 December 2000, 23 March 2001 and 4 April 2001. JUDGMENT DATE : 23 April 2001 Eric Coffey & Valerie L Coffey (First Plaintiffs/First Cross Defendants as representatives of the Plaintiffs/Cross Defendants) PARTIES : Fernbank Management Pty Ltd (First Defendant/Cross Claimant) Fernbank Developments Pty Ltd (Second Defendant) JUDGMENT OF : Bergin J COUNSEL : S Robb QC/M Meek (Plaintiffs/Cross Defendants) R McDougall QC/MD Young (Defendants/Cross Claimant) SOLICITORS : Stewart Cuddy & Mockler (Plaintiffs/Cross Defendants) Tress Cocks & Maddox (Defendants/Cross Claimant) CATCHWORDS : CONTRACT - Previous Court of Appeal finding that "web" of agreements of no force or effect - Whether an agreement executed subsequently purporting to replace one of the agreements in the web renders other agreements enforceable. - ESTOPPEL - Whether plaintiffs estopped by reason of demands on defendant to provide services under the Agreements and defendants providing those services. - RESTITUTION - Nature of determination - Fair and just remuneration - Whether application of fee stipulated in unenforceable agreements is just - Whether other methods of assessment applicable. LEGISLATION CITED : Real Property Act 1900 Barry v Heider (1914) 19 CLR 197 Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61, 23 March 2001 Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 Davis v Mortgage Acceptance Nominees Limited NSWSC Rolfe J unreported, 20 April 1994 CASES CITED : Gillett & Ors v Halwood Corporation Ltd & Ors NSWSC Rolfe J unreported 25 July 1995 Gillett v Halwood Corporation Ltd & Ors NSWCA, unreported, 26 March 1998 Hungerfords & Ors v Walker & Ors (1990) 171 CLR 125 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 [Mason & Carter Restitution Law in Australia. Butterworths (1995)] DECISION : Declarations in favour of plaintiffs on Statement of Claim. Orders in favour of Cross Defendant on Cross Claim for fee stipulated in unenforceable Agreement. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BERGIN J DATE: 23 APRIL 2001 2985/99 - ERIC COFFEY & ORS v FERNBANK MANAGEMENT PTY LTD & ANOR JUDGMENT Fernbank Retirement Village 2 THE PLAINTIFFS' CLAIMS 5 The Management Agreement 6 The Services Agreement 10 The Gillett Proceedings 13 The New Agreement 17 Status of the Services Agreement 21 Estoppel Defence 24 THE CROSS CLAIM 38 Operation of the Village 40 Nature of the Determination 54 The Agreed Consideration Method 57 The Cash Flow Method 64 Cash Inflows 65 Cash Outflows 65 The Hybrid Method 76 The Budget Method 77 Consideration of Methods 87 The Cash Flow Method 87 The Hybrid Method 88 The Budget Method 89 Agreed Consideration Method 96 Schedule 105 Cash Flow Schedule 110 Fernbank Retirement Village 1 The Fernbank Retirement Village at St. Ives (the Village) is located on approximately 3.8 hectares of land in Kitchener Street, St Ives with frontages to Mona Vale and Roma Roads, St Ives. It comprises 156 self-care units in which residents care for themselves and 41 serviced units which have been referred to as the Hostel. The Village Centre consists of a main lounge area, a sunroom/coffee lounge, an arts and crafts room, a heated spa and swimming pool, a workshop, a billiard room, a barbecue area and an indoor facility. There are some roads within the Village and the grounds are landscaped. 2 The brochure explaining the operation of the Village contains a statement about the Policy of management of the Village as follows: The management at Fernbank St. Ives firmly believe that above all else, this is your home. We are merely employed by you and your neighbours to keep the community running smoothly, make sure that the grounds and common areas are maintained to the high standards you expect, and assist you personally in any way possible. We will at all times respect your individuality and privacy, and, whenever possible, we will involve you in matters concerning the Village as a whole. Our aim is to help you maintain the quality of life that you enjoy now. (Ex. BDW 1) 3 Other relevant statements in the brochure include the following: The concept of "retirement living" is one which seeks to recognise that our accommodation needs vary as our lifestyles change. Retirement brings about a major change to our life-style. It is a period to look forward to, free from the many pressures which are a part of the working environment. It is also a period when "change" not only continues but in many areas increases. To enjoy the freedom of retirement, it is necessary to consider the potential changes that may occur and to plan accordingly. The choice of accommodation in retirement will be an important factor in life-style consideration. Fernbank St. Ives is able to offer a positive accommodation option for people in retirement which increases the opportunity for independence, provides security and peace of mind, is a sound investment and is a home to be proud of. Your life-style is enhanced by knowing that you are amongst people of similar ages and interests, that property and garden maintenance is no longer a worry and that you have the security of a professionally managed residential estate. (Ex BDW 1) 4 The brochure described the layout of the Village and under the heading "Security with Luxury" stated: You may not need the extra services Fernbank can provide for you now, you may never need them, but it is nice to know that whether you live in a unit, villa or assisted care apartment, they're available, just in case. The assisted care apartments at Fernbank St. Ives can give you the extra individual assistance you need to maintain your independent lifestyle. Delicious meals are served in the dining room, heavy housekeeping is done for you, and regular medical attention can be arranged if you require it. At Fernbank St. Ives there's also a 24-hour emergency call system in each apartment, unit and villa, for that added sense of security. (Ex BDW 1) 5 The Village has been the subject of previous litigation in this Court: Gillett & Ors v Halwood Corporation Ltd & Ors NSWSC Rolfe J, unreported, 25 July 1995; Gillett v Halwood Corporation Ltd & Ors NSWCA, Priestley JA, Handley & Powell JJA, unreported, 26 March 1998 (the Gillett proceedings). 6 The Gillett proceedings were brought by two plaintiffs, who were resident proprietors of self-care units in the Village, to challenge the validity of the Agreements entered into by them when they purchased their units at the Village. Rolfe J dismissed their claims and the Court of Appeal set aside his Honour's Orders and ordered a new trial on certain issues, not the subject of the Appeal. Although there was an application for special leave to appeal to the High Court, the parties reached a settlement prior to the hearing of that application. 7 The plaintiffs in these proceedings, Eric and Valerie Lynette Coffey, are resident proprietors of a self-care unit in the Village and bring the proceedings as representatives of other resident proprietors of self-care units in the Village. I shall refer to the plaintiffs and the represented parties together as "the plaintiffs". THE PLAINTIFFS' CLAIMS 8 The plaintiffs are proprietors of lots in a Strata Scheme based on Strata Plan No 30478 within the Village (the Body Corporate). The first defendant is Fernbank Management Pty Ltd (Management) and the second defendant is Fernbank Developments Pty Ltd (Developments). Each of these companies was formerly a subsidiary of Halwood Corporation Ltd (HCL), a defendant in the Gillett proceedings, as were Management and Developments. 9 On 18 February 1987 the Body Corporate and Management purported to enter into a Deed of Management Agreement (the Management Agreement) which provided that Management would perform certain management functions for the Body Corporate. 10 The plaintiffs, as part of their obligations under the Purchase Contracts for their units entered into a Deed of Agreement as to the Provision of Services (the Services Agreement) with Management. 11 Pursuant to the Services Agreement, Management agreed to provide certain services to the plaintiffs and the plaintiffs agreed that upon the completion of the sale of their units, Management would be entitled to retain certain amounts, from the proceeds of sale. These amounts have been referred to as the Deferred Management Fee in the Gillett proceedings and in these proceedings. 12 Also pursuant to the Services Agreement, the plaintiffs were required to and did grant a charge (the Charge) over their lots in the Strata Plan in favour of Management to secure Management's entitlement to the Deferred Management Fee. The plaintiffs were also required to and did execute an irrevocable Power of Attorney in favour of Management for the purpose of effecting and completing the sale of their units. 13 The plaintiffs seek declarations that the obligation to pay the Deferred Management Fee is not enforceable, alternatively, that the Services Agreement has never been of any force or effect. The plaintiffs also seek declarations that the Power of Attorney and the Charge have never been of any force or effect. 14 The history to the Purchase Contracts and their Special Conditions and interrelationship with the Management Agreement and Services Agreement is almost identical to the circumstances in the Gillett proceedings. The Gillett's Purchase Contract was dated August 1987. The Coffey Contract is dated September 1988. The represented parties' Contracts are not in evidence but the dates upon which each purchased their unit range between 1986 and 1998. The Management Agreement 15 The Body Corporate purported to engage Management to manage the common property of the Village and perform the services and functions set out in the Management Agreement. Management purported to accept the engagement and agreed to provide the services and functions set out in the Agreement (cl 1). 16 Management agreed to provide, and the Body Corporate authorised Management to provide, certain support services to occupants of the Village at the cost of the occupants. The payment for those services was to be made by the Body Corporate. The Body Corporate agreed to impose levies on the occupants of the Village to enable it to make payments to Management for those services (cl 4A Services). The cl 4A Services are set out in the Schedule to this judgment. 17 Management also agreed to provide certain other services to the occupants of the Village at the request of the occupants. The payment for the services provided at the request of the occupants was to be made by those occupants directly to Management (cl. 4B Services). The cl 4B Services are listed in the Schedule to this judgment. Management also agreed to utilise the recreational facilities of other Retirement complexes in the general area and to provide transport for the Village occupants to and from those other Retirement complexes. The occupants were required to pay for such transport directly to Management (the cl. 4C Services). 18 There was a prohibition on a person occupying a dwelling in the Village until Management had covenanted with such person for the provision of support services. Any agreement was required to contain provisions whereby Management covenanted to provided the cl 4A Services and the cl 4B Services (cl 5). 19 The Body Corporate agreed that it would not grant licences or rights to any person, other than Management, to carry on certain activities on the common property without the consent of Management (cl 7). It also covenanted to take all reasonable steps to ensure that there was no unreasonable interference with Management in relation to the business carried on by Management in the performance of the services and obligations under the Management Agreement (cl 7). 20 Management was required to engage employees necessary to enable it to provide the services under the Agreement. The Body Corporate was entitled to direct Management to dismiss or replace any employee or vary the wages of employees (cl 8 and 9). 21 Until otherwise agreed Management was required to employ persons to fill the following positions: (i) General Manager; (ii) Live in Administrator experienced in nursing or social work; (iii) Relief Administrator; (iv) Social Co-ordinator; (v) A maintenance team comprising two full-time persons and one part-time person; (vi) A night security team comprising two persons to provide between them seven nights per week cover; (vii) Cleaning persons on part-time basis; (viii) Other staff as required to service apartments in the Hostel which formed part of the Village; and (ix) Relief staff positions for each of the above. The Body Corporate was required to pay out of moneys levied by it upon proprietors in the Village, wages, salaries or other employment benefits, holiday pay, long service pay, superannuation benefits and worker's compensation insurance in respect of the General Manager, the Social Co-ordinator, the maintenance team, the night security team and the relief staff for each of these positions. (cl 10A and 10B). 22 The Body Corporate was also required to pay accountancy fees in respect of all accounts necessarily prepared for the purposes of the Management Agreement (cl 10B(c)). It was also required to pay all costs properly incurred by Management in connection with the performance of its obligations under the Management Agreement and such additional amounts as were required to be expended for the provision of the availability of support services. 23 Clause 10B also provided: For the purposes of this Clause, all amounts payable to the Manager shall be called "operating expenses". A statement in writing signed by a Director or the Secretary of the Manager as to the amount to be paid to the Manager from time to time as operating expenses shall be prima facie evidence that such amount is so due and owing and payable to the Manager. 24 A timetable for the delivery of notification of the operating expenses and payment, with a provision for interest on default of payment is provided in clause 11 of the Management Agreement. The Body Corporate was entitled to have access to and inspect "all separate financial records relating to the management" of the Village kept by Management and related to any matter the subject of the Management Agreement. 25 The Management Agreement was to continue in force until terminated by the parties entering into a further Agreement, unless it was terminated by either party for breach or upon the winding up of Management (cl. 16). The Services Agreement 26 Management agreed to provide the cl. 4A Services to the individual proprietors who agreed to contribute to levies to enable the Body Corporate to pay Management for such support services (cl 2A.I). Management also agreed to provide the proprietors with cl. 4B and cl. 4C Services if they requested such services. The proprietors agreed to pay for those services direct to Management (cl. 2A.II and 2B). 27 The resident proprietors agreed not to lease, licence or part with possession of their unit without the prior written consent of Management (cl 5). The resident proprietors also agreed to maintain their units, not to make structural alterations without Management's consent, to notify Management of any guests staying overnight and gave Management the right to enter the unit in case of an emergency (cl 6). 28 The proprietors agreed not to sell or contract to sell their units without first notifying the manager in writing of a desire to do so (cl 8(i)). They also agreed that their unit would be sold with vacant possession upon their death at a fair market price (cl 8(ii) and (iii)). Any sale was conditional upon the proposing purchaser executing a Services Agreement with Management and providing an executed and registrable charge in favour of Management (cl 8(iv) and (v)). The resident proprietors also gave Management a right to sell their units with vacant possession and agreed to execute an irrevocable Power of Attorney (cl 9). 29 There are two versions of clause 10 of the Services Agreement. Some of the Services Agreements contain the 2.5% version and others the 3.5% version. They are as follows: 10(a) Upon completion of any sale of the said Lot, the Manager shall, out of the proceeds of such sale, be paid or shall be entitled to retain or recover a fee made up as follows: (i) Two point five percentum (2.5%) of the original purchase price paid for the said Lot by the Resident Proprietor as set forth in the Agreement for Sale of Land hereinbefore referred to in respect of each year or part of a year which has elapsed between the date of completion of the aforesaid Agreement for Sale of Land and the date of completion of the resale of the said Resident Proprietor's Lot PROVIDED THAT the sum so calculated shall, if greater than Twenty five percentum (25%) of the said original purchase price, be limited to twenty-five percentum (25%) of the said original purchase price AND (ii) Twenty percentum (20%) of the amount (if any) by which the said resale price exceeds the said original purchase price. (b) The residue of the proceeds of such sale, less all selling and legal costs, fees and expenses, shall be paid to the Resident Proprietor or his Legal Personal Representative. 10(a) Upon completion of any sale of the said Lot, the Manager shall, out of the proceeds of such sale, be paid or shall be entitled to retain or recover a fee made up as follows:- (i) three point five percentum (3.5%) of the resale price paid for the said Lot by any Purchaser from the Resident Proprietor in respect of each year or part of a year which has elapsed between the date of completion of the Agreement for Sale of Land referred to in Recital A hereto and the date of completion of the resale of the Resident Proprietor's Lot (Lot number inserted here) PROVIDED THAT the sum so calculated shall, if greater than thirty five percentum (35%) of the said resale price, be limited to Thirty five percentum (35%) of the said resale price. (b) The residue of the proceeds of such sale, less all selling and legal costs, fees and expenses, shall be paid to the Resident Proprietor or his Legal Personal Representative. 30 The Proprietors also agreed that Management's entitlement to receive the "fee" referred to in clause 10 was to be secured by a registered charge on the title of the Lot (cl 11). The Proprietors also agreed that no interest in the Lot charged would be permitted to become vested by transmission in any person other than the Proprietor's executors or administrators (cl 13). The expenses occasioned by the sale by Management were agreed to be borne by the Proprietor and added to the sum secured by the charge (cl 14). 31 Clause 16 of the Deed provided: The Resident Proprietor hereby acknowledges that should he transfer the Lot otherwise than in accordance with the provisions herein contained, then the fee shall be that defined in clause 10 hereof multiplied by a factor of four (4). It is apparent from correspondence that the parties may have agreed that this clause was not to be enforceable. The Gillett Proceedings 32 Priestley JA said in the Gillett proceedings: In effect the additional clauses in the Sale Agreement signed by the appellant required her to acquiesce in the existence of the Management Agreement between Management and the Body Corporate, and required that she and Management both execute the Deed embodying the Services Agreement. The Services Agreement, as well as providing that Management should make available to Resident Proprietors services and facilities of the same kind as it had undertaken to do in the Management Agreement, also imposed the obligations and restrictions upon the appellant upon sale of her lot earlier summarised. The situation thus was that HCL by itself and its subsidiary Developments brought the Village into being; HCL made an agreement with Management pursuant to which very significant parts of the management of the Village would be carried out by Management; HCL organised the coming into existence of the Body Corporate; Developments sold lots to the persons who became proprietors in the Body Corporate, by contracts of sale obliging the purchasers (1) either to take part in making the Body Corporate a party to the Management Agreement in place of HCL, or to acquiesce in the continuation of that Management Agreement on that footing, and (2) to enter into a Service Agreement with Management under which, inter alia, Management would become entitled, upon sale of any lot by a proprietor, to portion of the sale price. Considerable parts of the Service and Management Agreements were in identical terms; the two Agreements were designed to work together as part of one integrated scheme of conducting the Village for, inter alia, commercial purposes, originally of HCL and later of Developments and Management. The appellant, by becoming the purchaser of a lot and then a proprietor necessarily became one part of the whole scheme. From the point of view of the appellant, the web of contractual arrangements by which she became bound upon entering into and then fulfilling the requirements of the contract by which she purchased her unit was one single web. (Ex.A p 96-97) 33 Priestley JA concluded: 1. The provisions of the Management Agreement required and empowered Management to perform functions for the Body Corporate; 2. The way in which Management was required and empowered by the provisions of the Management Agreement to perform Body Corporate functions amounted to a delegation within the meaning of s78(1) of the Strata Titles Act 1973 (NSW) as amended; 3. The Management Agreement therefore, if it had been valid, made Developments a managing agent within the meaning of that expression in s78; 4. Such an appointment of a managing agent by delegation could only be made by the Body Corporate in general meeting and by instrument in writing; 5. The fixing of the common seal of the Body Corporate to the Management Agreement was not made by the Body Corporate in general meeting; 6. Therefore the Body Corporate did not become a party to the Management Agreement on 18 February 1987 when the seal of the Body Corporate was affixed; 7. The Body Corporate did not become a party to the Management Agreement by later ratification of it, or by other means; 8. The actions of Management in performing its functions under the Management Agreement were not lawful because Management was not licensed under the Auctioneers & Agents Act 1941. (Ex. A p115-116) 34 As to the status of the Services Agreement, the Charge and the Power of Attorney, Priestley JA said: The provisions of the Management Agreement are inextricably bound up with those of the other documents. In my view, it is plain that all documents were intended to operate together and it was not contemplated (and would be unreasonable) for some only of the documents to be held binding on the parties to them when the Management Agreement, which seems to me to be basic to the whole scheme embodied in the documentation, is unenforceable . (Ex.A p.114) And: Because the Management Agreement is not on foot between the Body Corporate and Management, and because the Services Agreement and ancillary documentation were never intended to be operative unless the Management Agreement were enforceable against the Body Corporate, the unenforceability of the Management Agreement against the Body Corporate requires that the other documentation also be treated as unenforceable. (Ex.A p.116) 35 Handley JA said: It is evident that by-law 33(b) gave the body corporate power to enter into the management agreement in the schedule, and imposed on it the obligation to execute the management agreement under seal when presented to it. However in terms it did not ratify the earlier agreement and of its own force did not operate as a fresh execution of that agreement. There is no evidence that the management agreement was ever re-executed after 15 June 1989. It follows in my opinion that the management agreement never came into force so as to bind the body corporate. (Ex.A p 130) Handley JA agreed with Priestley JA's conclusion that the Management Agreement was "inextricably and inseparably linked with agreements" which purported to bind the appellant personally (Ex.A p 131). This view was also expressed by Rolfe J at first instance and Cole J in an interlocutory hearing (Ex A. p 188). 36 Mr McDougall QC, who appeared for the defendants in these proceedings, submitted that the defendants accepted that absent some differentiating factor, I would not depart from what the Court of Appeal has held on identical documents. However, he submitted that there is an important differentiating factor in this case which is that a new Management Agreement has been entered into between Management and the Body Corporate on 19 April 1999 (the New Agreement). 37 Mr McDougall QC submitted that although it is not the Management Agreement that the parties contemplated when they entered into their respective Purchase Contracts and Services Agreements, it is none the less an Agreement that supplies the hitherto missing basis for the operation of the "web" of contractual documents. It is submitted that in these circumstances, the plaintiffs are unable to make good their claim, as the plaintiffs in the Gillett proceedings could, that the Services Agreements are unenforceable. 38 Mr McDougall QC submitted that the New Agreement makes those otherwise previously unenforceable Agreements now enforceable. The New Agreement 39 The New Agreement (Ex. B p 1-19) recites that the Management Agreement had been entered into on 18 February 1987 and defined Management's role in the provision of services to residents as required by the Ku-ring-gai Council Development Consent. It also recites that management of the Body Corporate had "decided to replace" the Management Agreement with the New Agreement. Clause 2 of the New Agreement provides: 2 Termination of Deed of Management Agreement 2.1 The owner and Fernbank Management acknowledge that they each hold different opinions regarding the legal efficacy of the Deed of Management Agreement and the facts and circumstances of its execution. 2.1.1 The owner refers to the Judgment of the NSW Court of Appeal involving the parties and others and contends that the Deed of Management Agreement was executed other than in accordance with the provisions of the Strata Title Act 1973 and is unenforceable by virtue of that fact and otherwise. 2.1.2 Fernbank Management disputes this contention and hereby asserts that it is entitled to terminate the Deed of Management Agreement pursuant to Clause 16(a) of that Deed. 2.2 In any event upon execution of this Deed and the expiry of the cooling off period provided for in paragraph 14 of this Deed any previous Deed or Agreement for Management Services between the parties whether oral or written or both shall be or deemed to be terminated. 40 Clause 6 of the New Agreement provides: 6 DEVELOPMENT CONSENT - KU-RING-GAI COUNCIL: RESIDENT SERVICES 6.1 Fernbank Management hereby covenants with the Owner that it will provide and will have facilities available to enable it to provide the services to residents set out in the Development Consents issued by Ku-ring-gai Council and referred to in Recital C for so long as Fernbank Management has exclusive use of the Exclusive Use Areas as defined in clause 7. 6.2 The Owner acknowledges that the cost of fees payable to Fernbank Management and the obligations of Fernbank Management under this Deed are separate, independent, distinct and in addition to the costs or fees payable to Fernbank Management and the obligations of Fernbank Management pursuant to any agreement for services with residents. 6.3 The obligations of this Deed are principal obligations and are not ancillary or collateral to any other obligations, including obligations under any agreement for services with residents. This Deed is enforceable notwithstanding the fact that any or all agreements for services with residents are or become wholly or partly unenforceable for any reason. 41 The Management Agreement required Management to provide to the Body Corporate and the Body Corporate to pay for, staff and/or contractors to repair and maintain all the buildings in the Village, all landscaped common areas and communal facilities and equipment in the Village (cl 4A(d)). It also required Management to provide staff and/or contractors to clean all common areas and communal facilities of the Village (cl 4A(e)). 42 The New Agreement provides: 3 REPAIR AND MAINTENENCE OF COMMON PROPERTY NOT BEING EXCLUSIVE AREAS 3.1 The Owner in its absolute discretion and upon its written request may engage Fernbank Management to provide one or more of the following services to the Owner and Fernbank Management shall at the direction of and in the manner specified by the Owner: (a) Repair and maintain the common property including, buildings and landscaped and improved common areas and all communal facilities, plant and equipment at Fernbank; (b) Clean all common areas and communal facilities at Fernbank; (c) Carry out such further work as the Owner may consider necessary. The period of such engagement shall after the 30th of June 1999 be twelve months as prescribed by clause 4.1. Fernbank Management will implement any decisions made by the Owner in regard to the matters listed in this Clause 3.1 and will report to the Owner on the implementation of such decisions. 3.2 Fernbank Management shall comply with and carry out directions given by the Owner to Fernbank Management provided always that the said directions are reasonable and relate to matters properly the subject of or incidental to this Deed. … 3.8 The Owner may, in its absolute discretion, increase or decrease the amount of work to be carried out by Fernbank Management pursuant to Clause 3.1 hereof at any time subject to the terms of this Deed. 3.9 If the Owner does not engage Fernbank Management as provided in clause 3.1 and clause 4.1 nothing in this deed shall prevent the Owner from engaging another contractor to provide such services. And: 7.0 MAINTENANCE OF EXCLUSIVE USE AREAS At no cost or any liability to the Owner Fernbank Management shall: (a) In accordance with the by-laws ("the By-Laws") applicable to the Strata Scheme created on registration of strata plan no 30478 ("the Strata Scheme"), shall cause the repair and maintenance of those parts of the common property of the Strata Scheme for which Fernbank Management has exclusive use pursuant to the By-laws ("the Exclusive Use Areas"). (b) Provide services from the Exclusive Use Areas for the benefit of the residents of Fernbank and/or the Owner. (c) Manage, operate, repair and maintain the furniture, fittings and equipment contained in the hostel community building (which is the building containing lot 2 in strata plan no.30478 and which contains most of the Exclusive Use Areas), and contained in those areas of the common property of strata plan no. 30478 within this building. 43 The Body Corporate has far more control of what Management does in respect of maintenance and cleaning and what it has to pay under the New Agreement than it did under the Management Agreement. Management and the Body Corporate together decide the scope of work Management is to undertake pursuant to clause 3.1 no later than 30 days prior to the commencement of each financial year (cl 4). There are also provisions dealing with the estimate of the cost, any increases and the invoicing to the Body Corporate on a monthly basis. Clause 4.7 provides: 4.7 Fernbank Management agrees that it will, each year, pay the following expenses which might otherwise be payable by the Owner: (a) Should the owner direct Fernbank Management to engage a social co-ordinator for Fernbank in accordance with Clause 3.1(c) then Fernbank Management shall pay 15% of the wages and on-costs of the social co-ordinator and shall charge the balance of the wages and on-costs to the Owner. (b) Fernbank Management shall pay 2/3 of the total costs of the operation of the fire services line and the monitoring of the fire alarm at Fernbank and shall pass on the remaining 1/3 of the costs to the Owner. (c) Fernbank Management agrees that it shall pay 15% of the amount charged to the Owner for water usage. (d) Fernbank Management shall pay 100% of all costs charged to the Owner for the disposal of trade waste or greasy waste emanating from the kitchen located in the hostel community building at Fernbank for so long as Fernbank Management has exclusive use of that location. Status of the Services Agreement 44 No authority was cited by Mr McDougall QC in support of his submission that the New Agreement could make an inoperative contract operative. Mr McDougall QC emphasised Priestley JA's words that "it was not contemplated (and would be unreasonable) for some only of the documents to be held binding on the parties to them" and submitted that it would be unreasonable to have a binding New Agreement and a Services Agreement which is not binding. 45 The New Agreement was "approved" at an Extraordinary General Meeting of the Body Corporate on 9 April 1999 and was executed on 19 April 1999. This postdates all of the Purchase Contracts and all of the Services Agreements of the plaintiffs in these proceedings. It is significant that in July 1999 Management sent each resident a new Services Agreement. I understand that none of the plaintiffs who are cross defendants executed that Agreement. Although the new Services Agreement is not in evidence the covering letter to each resident states relevantly as follows: RE: NEW PERSONAL SERVICES AGREEMENT The Deed has been drafted having considered the numerous discussions with residents that have taken place since 1991, the arguments presented and ruled upon in the Courts, the recent mediation and the input from the Department of Fair Trading. The Department has indicated that it has no objection to the distribution of the new Services Deed. As you will recall from the Department's briefing note prepared in March 1999, the Department said that: "Of course, whether each resident proprietor wishes to sign the new Deed is solely a matter for that resident and you may wish to take your own advice on this". Fernbank Management Pty Ltd encourages resident owners to seek legal advice before entering the agreement. With respect to this Fernbank Management Pty Ltd has, to save time and money for residents, provided information about this matter to two independent firms of solicitors, Baldwin Tidbury & Oates and Atkinson & Vinden. You will be able to retain either of these firms and have Fernbank Management reimburse you for costs incurred up to a maximum of $250.00 (approximately 1 hours worth of time). The new services Deed has been drafted with the offer of a 12.5% discount on the current fee eventually payable on the resale of your unit. The 12.5% discount is only applicable to those resident owners who actually sign the Deed within a six week period i.e. by 23 August 1999. This discount is offered in recognition of our genuine desire to put this litigation behind us once and for all. 46 The liability for payments by the Body Corporate for certain services rendered by Management has been changed by the terms of the New Agreement. Body Corporate control over Management's scope of works and estimate of fees has been introduced. It is thus a different contractual environment to that which the Management Agreement contemplated and to which the Services Agreement was "inextricably and inseparably linked". Although those changes are in the New Agreement as between the Body Corporate and Management rather than the individual resident proprietors, I am satisfied that these differences are of significance in deciding whether the New Agreement can render the Services Agreement enforceable. 47 Management's request of the resident proprietors to sign a "new personal services agreement" is couched in equivocal terms which do not necessarily lead to a conclusion that it recognised the incapacity of the New Agreement to make the Services Agreement enforceable. However Management did not claim in its letter to the resident proprietors that the New Agreement rendered the Services Agreement enforceable. 48 The Services Agreement required Management to provide support services to the occupants at the Village which included the provision of staff and/or contractors for repair, maintenance and cleaning (cl.2(d)&(e)). The way in which those services are to be provided and/or paid for has now been changed and is the subject of the New Agreement. The liability for the payment for the repair and maintenance of some areas of the common property - the Exclusive Use Areas - have been removed from the Body Corporate completely under the New Agreement (cl.7). 49 In my view the New Agreement creates quite different responsibilities and entitlements to those that existed in the Management Agreement. The other contractual documents in the "web" would therefore need to be amended to reflect the changes in the New Agreement before they could be regarded as operative or enforceable in the light of the findings of the Court of Appeal in the Gillett proceedings. 50 I am not satisfied that in purporting to "replace" the Management Agreement with a quite different agreement, the New Agreement, Management can make the inoperative Services Agreement operative. I am therefore not persuaded that there is a differentiating factor that would or should lead me to a different conclusion to that reached by the Court of Appeal in the Gillett proceedings. Estoppel Defence 51 Management makes a number of claims in support of its defence that the plaintiffs are estopped from denying the enforceability of the Services Agreement, Power of Attorney and the Charge or the obligation to pay the Deferred Management Fee. 52 The first claim is that the plaintiffs knew, or ought to have known, that the defendants relied upon the assumption that the Agreements entered into were valid. In particular that the defendants relied upon the assumption that they would be entitled to a fee equivalent to the Deferred Management Fee in consideration of making services available and providing services to the plaintiffs from time to time in circumstances in which the plaintiffs took the benefit of the services. 53 Management claims that the services would not have been provided except for the assumption that the Agreements were valid and the assumption that the plaintiffs would perform the obligations under the Services Agreement and pay the Deferred Management Fee. 54 Management also relies upon the plaintiffs' conduct in calling upon Management to make available and provide services under the Services Agreement. Management claims it has responded to the "calls" in making available and providing such services and has acted to its substantial detriment in reliance upon the assumption that the plaintiffs would perform their obligations under the Services Agreements. 55 Management also claims the plaintiffs are estopped by the conduct in calling upon Management to provide such services, standing by whilst such services were provided and refraining from commencing these proceedings in circumstances where they knew that Management would not have provided the services except in reliance upon the assumption as to the validity of the Agreements. Management also claims that the plaintiffs' conduct amounts to an election not to make the claims made in these proceedings or alternatively a waiver of their entitlement to make such claims. 56 Management claims that the plaintiffs are not entitled to the relief they seek because they are guilty of laches, acquiescence and delay. Additionally Management relies upon s 42 of the Real Property Act 1900 in respect of the registered charge over the plaintiffs' Lots in the Village. 57 Finally Management claims that if the plaintiffs are to obtain the relief sought, such should be conditional upon them doing equity by terms being imposed for the payment of reasonable remuneration for the services provided. 58 The brochure provided to prospective purchasers of units in the Village contained the following: The longer a resident lives at Fernbank, the more likely that the need for use of management services will arise. The continuity and stability of management services to be provided by Fernbank Management Pty Ltd throughout the occupancy of a resident is therefore extremely important. Fernbank Management Pty Ltd has undertaken the responsibility for the on-going management on the basis that it will be remunerated when the resident (or their estate) sells the unit in due course. The remuneration so received is referred to as a "deferred management fee" (see details Financial Aspects). The "deferred management fee" is therefore in essence, an incentive for the Manager to maintain a high standard of management services on an on-going long term basis. (Ex BDW 1) The Financial Aspects portion of the document stated as follows: As indicated, the "deferred management fee" is an incentive for the Manager to provide a continuity of services during their period of occupancy. The fee only becomes payable on the resale of the unit and thus does not involve a drain on weekly income of residents. If the experience of other retirement living projects is a guide, the "fee" will be well covered by the appreciation in the value of the unit. The "deferred management fee" is an amount which accrues at a rate equal to 2.5% per year or part thereof and is calculated on the price the resident paid for the unit. - maximum deduction 25% Plus 20% of the amount by which the resale price exceeds the purchase price. 59 There was further reference to this fee in the section of the brochure as follows: The Manager shall be entitled to a "deferred management fee" from the proceeds of the sale, such fee shall be calculated - (i) 2.5% of the purchase price paid by the selling resident for each year or part thereof since the date of the purchase, subject to a limit of 25%. Plus (ii) 20% of the amount by which the resale price exceeds the purchase price paid; NOTE: Thus the proprietor receives the greater majority (80%) of any appreciation in value. 60 The history of the communications between the plaintiffs, as members of the Body Corporate and as members of a group known as the Fernbank Resident Proprietors Group ( the Residents Group) and Management is relied upon by Management in support of its defence. This history is contained in hundreds of pages of letters (including Ex 1A, 1B and 7). 61 The first plaintiff, Eric Coffey (Mr Coffey), moved into the Village with his wife, the second plaintiff, in December 1989. Prior to his retirement in the late 1970s, Mr Coffey held various statutory appointments including Director and Deputy Chairman of the NSW State Pollution Control Commission, Director of NSW Department of Environment and Chairman of the Energy Authority of New South Wales. 62 Mr Coffey has been actively involved in the affairs of the Village since 1989 and was Chairman of the Body Corporate in the years 1990 to 1991 and 1992 to 1997. He has been the President of the Residents Group since its inception in October 1991. 63 The defendants have stated that it was their intention to manage and help run the very best Retirement Village and try to ensure the proprietors are happy in the environment in which they live (ex 7 p 127). That aim, at least to some extent, seems to have been frustrated for the last eleven years. 64 In November 1990 the Body Corporate alleged that there was "widespread dissatisfaction" in the Village because of the "cavalier attitude" Management had chosen to adopt in respect of its dealings with the Body Corporate. The Secretary of the Body Corporate itemised a number of areas which the Body Corporate claimed it wished to "resolve" with Management. These included what the Body Corporate described as a requirement for a "fair division" of charges. 65 These included the costs of employing the General Manager and the Social Co-ordinator, the desire in the Body Corporate to monitor in "much greater detail" the charges made to the Body Corporate for operating expenses, and a suggested procedure for maintenance staff to prepare dockets to be signed by the Body Corporate for work done in the Village. The Body Corporate reminded Management that "deferred management fees of the order of $1.5 million per year are accruing" from the proprietors of Fernbank and "there is no tangible benefit evident to the proprietors, other than an occasional relatively small handout" (Ex. 7. P. 7). 66 In December 1990 a meeting was held between Management and the Council of the Body Corporate which demonstrates a level of frustration in Management and stated mistrust by Mr Coffey of Management (ex 7 p 9-14). After that meeting the Body Corporate wrote to Management making a number of requests in respect of the future management of the Village. That letter stated that such requests were made "without prejudice to matters which we may wish to raise in the future, but nevertheless in the expectation that their resolution will establish a climate for fruitful cooperation between us in the future" (ex 7 p 16). The letter concluded: We also are conscious of the fact that Fernbank Management Pty Ltd has an agreement with each individual proprietor to provide them with services, and that this agreement is none of the concern of the Body Corporate as such. (Ex 7 p 19) 67 It is also apparent that by 1990 there had been a hearing before the Strata Titles Commissioner, an Inquiry by the Council of Auctioneers and Agents and correspondence between the Village residents, the Body Corporate and the Minister for Housing, the Member for Ku-ring-gai and the Premier of New South Wales (Ex 7 p 23). It is apparent that such hearing, inquiry and correspondence related to allegations by the Body Corporate and residents of the Village that the Agreements into which they had entered were at least unfair and perhaps invalid. 68 In late January 1991 Management advised the Body Corporate that it would continue to abide by the contractual obligations in accordance with the Management Agreement. The complaints continued. Letters were written complaining about substantial fees and operating expenses; allegations were made that levies had been illegally struck; there was a rejection of any future budgets or variance reports without agreed levels of breakdowns; allegations were made that Management was dealing with irrelevant matters and there were complaints about late supply of material that could have allegedly been supplied in a matter of "minutes". Further letters demanded improved management and supervision, and contained a refusal to be responsible for $86.72 in relation to the employment of a particular employee, and a myriad of other claims. This continued for months and indeed years. 69 In April 1991 Management, via its Company Secretary Mr Nick Reid, wrote a very detailed letter responding to the various claims in letters written to Management by the Body Corporate. One week later Mr Coffey issued what was referred to as the "Chairman's Report to Council" for a meeting of the Body Corporate on 26 April 1991. The report contains what is described as a "story of a developer's dream of a remarkable business opportunity" and includes the following: We will arrange the documents for the sale of every Lot in the Village: …. (b) so that each individual proprietor is committed to enter into an agreement with us and the Manager. We will call it a service agreement, but it mostly will be an agreement to give us total control over the disposal of the proprietor's lot. This agreement will control the terms of any lease, licence or mortgage on the lot, and will not allow the lot to be given away. When the lot is sold, and we will require that it must be sold on the death of a proprietor, we will sell it, nobody else, and we will collect the normal commission, with all selling and legal costs, fees and expenses, and something we will call a deferred fee. We don't have to say what the fee is for, and we won't offer anything. This fee will keep growing for ever, because we will structure the agreements so that every purchaser must accept the terms entered into by his predecessor, and he will not be able to sell to anyone who will not also accept these terms. … No, this is not a developer's dream. It is Fernbank…The deferred fees from the self-care units currently accruing to Fernbank Management are at least $1,500,000 per year. We haven't got the data to estimate the return accruing to Fernbank Management from the Hostel. The Body Corporate gets no part of it, although it owns a significant part of the Hostel. (Ex. 7. p. 51-52) This document demonstrates Mr Coffey's awareness and understanding of the concept of the Deferred Management Fee clause. 70 On 26 April 1991 the Body Corporate advised Management that it was "clearly necessary that the legality of the Deed of Management Agreement be tested and that the issues in contention be resolved in that way". The letter went on to say: In the interim our position is clear. We will determine our actions in conformance with the responsibilities imposed on us by the Strata Titles Act. Insofar as the Act permits or does not constrain us, we will also conform with the provisions of the Deed of Management Agreement. 71 It is apparent that as and from April 1991 the Body Corporate took the view that the Management Agreement was to be the subject of a legal challenge. Further correspondence between the Body Corporate and Management stated that the Body Corporate was paying the claims made pursuant to the Management Agreement "under protest and without prejudice to its right to seek future redress" (Ex. 7. p. 67). 72 In October 1991 the Residents Group was formed and commenced corresponding with Management. All resident proprietors were members of the Group unless they opted out. On 26 May 1992 the Residents Group advised Management of legal advice it had received that convinced it that it had "a case to present" that the Management Agreement and the Services Agreement were illegal and unjust (Ex. 7. p. 140). In July 1992 the Residents Group advised Management that it considered "the Fernbank documentation to be illegal and unjust". 73 By this time the Department of Consumer Affairs had convened two meetings for the purpose of dealing with complaints by the Residents Group. Attempts at compromise were unsuccessful. It is apparent that application for Legal Aid was made and ultimately granted for the Gillett proceedings. The correspondence also suggests that the Gillett proceedings were regarded by some as a "test case". 74 In July 1994 the Body Corporate informed Management that it regarded the Management Agreement to be "void for illegality". It also stated that "pending resolution of its legal status" it would continue to "conform to its provisions only to the extent that they do not conflict with the Body Corporate's responsibilities under the Strata Titles Act" (Ex. 7 p. 270). 75 The Gillett proceedings were commenced in 1993 and heard by Rolfe J in 1995. Rolfe J delivered judgment on 25 July 1995. The Appeal from Rolfe J was heard on 1 and 2 May 1996, 24 March 1997, 27 to 29 August 1997 and judgment was delivered on 26 March 1998. The Special Leave Application was pending in the High Court until October 1999 when the matter was settled. These proceedings were commenced on 30 August 1999. 76 The correspondence demonstrates that the Body Corporate or the Residents Group demanded the provision of services identified in the Management Agreement and the Services Agreement. It also demonstrates that the Body Corporate refused to comply with some of its responsibilities under the Management Agreement. It advised Management that it would not pay the full amount of the operating expenses in respect of the costs of employing the Manager and the Social Co-ordinator. It advised that it would only pay 75% of the costs of the former and 60% of the costs of the latter (Ex. 7 p. 38). After much letter writing and further discussion Management agreed to reduce these operating costs to 85% of the costs of employing both. The Body Corporate continued to argue for a reduction to 75% and 60% respectively (Ex. 7 p. 2491). 77 I am satisfied that the history to which I have just referred does not amount to a proper basis upon which the plaintiffs should be estopped from seeking the relief in these proceedings. I am also satisfied that notwithstanding the demands made upon Management by both the Body Corporate and the Residents Group, steps appropriate to and without prejudice to challenging the Agreements were taken concurrently with those demands. I am not satisfied that the plaintiffs have waived their entitlements to make the claims they make in the these proceedings. 78 These proceedings were commenced reasonably promptly after the Gillett proceedings were finalised in this Court and whilst the High Court application was still pending. I am satisfied that the defendants should not be precluded from making the claims for any delay acquiescence or laches. I am also satisfied that s 42 of the Real Property Act 1900 does not preclude the plaintiffs from seeking the relief in respect of the Charge: Barry v Heider (1914) 19 CLR 197 per Griffith CJ at 213. 79 It was submitted that if I am persuaded that the Services Agreement is unenforceable I should only grant relief to the plaintiffs on certain conditions, having regard to (a) their knowledge of and acceptance of the Deferred Management Fee clause at the time they each purchased their units at the Village, and (b) the fact that there has been no finding that the clause is unenforceable by reason of any finding that it is unjust or unconscionable. The evidence as to this first matter is dealt with in my consideration of the Cross Claim. 80 A particular condition sought by Management is that the Charge over the plaintiffs' units should remain until the payment is made under the Cross Claim. If this were not to happen Management would be at a very much greater disadvantage, having acted to its detriment in allowing the deferral of payment of management fees, and would have no security for the payment of them, whatever method is chosen. 81 I am of the view that the plaintiffs are not estopped from obtaining the relief they seek in respect of the unenforceability of the Services Agreement and the Power of Attorney. However in the circumstances of this case I am satisfied that it is just that the Charges should remain in place until the plaintiffs comply with the orders to be made under the Cross Claim. 82 The defendants' estoppel defence is slightly different in respect of one of the represented plaintiffs, Mrs Cox. Mrs Cox and her late husband were previously residents of Pittwater Palms Retirement Village. When they moved to the Village it was agreed that the Deferred Management Fee payable upon the sale of their unit at Pittwater Palms was not to be paid on that sale and that it would not be collected until the sale of their unit at the Village. It was agreed that both Deferred Management Fees would become payable at that time. The Deferred Management Fee in respect of the Pittwater Palms Village, which was not the subject of challenge and which was otherwise payable at the time of the sale of that unit, is charged upon Mrs Cox's unit at the Village. 83 Those arrangements are contained in a Deed entered into by Mrs Cox and her late husband with Pittwater Palms Management Pty Ltd and Management dated 28 June 1996. Mr and Mrs Cox agreed that upon completion of the sale of their unit at Pittwater, Pittwater was to inform Management and Mr and Mrs Cox in writing of the amount of the Deferred Management Fee payable by Mr and Mrs Cox to Pittwater and that such a payment would be deferred until the sale of their unit at the Village. The Deed further provided: 3. In consideration of Pittwater agreeing to the further deferral provided for in clause 1, and to secure the payment required under clause 2, Jeanne Mary Cox hereby charges Unit 26 with the payment of an amount equivalent to the deferred management fee referred to in clause 1 above. 4. Fernbank shall be entitled to recover on behalf of Pittwater the payment required under clause 2 and Jeanne Mary Cox or her legal personal representative (as the case may be) shall not be concerned to ensure that any moneys received by Fernbank are paid to Pittwater and to the extent of any such moneys received by Fernbank, Jeanne Mary Cox or her legal personal representative (as the case may be) shall be discharged in respect of the obligation to make the payment required under clause 2. 84 The defendants submitted that if the Court finds that the plaintiffs are entitled to the relief sought in the Amended Statement of Claim, it should not be granted to Mrs Cox because these circumstances estop her from asserting any invalidity in the Services Agreement. Alternatively it was submitted that no relief should be granted to her that would have the effect of setting aside or causing or permitting cancellation of the registration of the charge because it secures the unchallenged Pittwater Palms Deferred Management Fee. 85 It is true that Pittwater acted to its detriment in agreeing to further defer the collection of the fee and to that extent I am satisfied that the charge contained in the further Deferral Deed should not be cancelled or set aside. I am satisfied that such charge should remain uneffected by these proceedings. Indeed because of the view I have taken in respect of the maintenance of the Charges until compliance with orders to be made under the Cross Claim, Mrs Cox's position is the same as all the other plaintiffs. 86 I am satisfied that the plaintiffs are entitled to the relief sought in paragraphs B and C of the Amended Statement of Claim. The Charges are to remain until compliance with the orders to be made under the Cross Claim. THE CROSS CLAIM 87 Management, as cross claimant, claims that each of the plaintiffs, as cross defendants, have accepted and benefited from services provided by Management without making any or any adequate payment for those services. It claims that the cross defendants have been unjustly enriched at Management's expense. 88 Management makes a claim for restitution and/or reasonable remuneration for the services provided to the plaintiffs. There are separate and different claims in respect of the 11th cross defendant, Jeanne Mary Cox (Mrs Cox), the 17th cross defendant, John Jamieson Eggleston as executor of the estate of the late Isabel Eugenie M. Eggleston (deceased) (the Eggleston Estate), and the 25th cross defendants, Bruce Hocking and Barry Hocking as executors of the estate of the late Freda C. Hocking (deceased) (the Hocking Estate). 89 The claim against Mrs Cox includes the amounts alleged to be owing pursuant to the Deferral Deed referred to earlier. The claims against the Eggleston Estate and the Hocking Estate are for damages for leasing their units without Management's consent and failing to take any steps to sell the unit in the time frame provided in the Services Agreement. Having regard to my findings in respect of the plaintiffs' claims the cross claims against the seventeenth and twenty fifth cross defendants must fail. They are dismissed. 90 In respect of each of the other plaintiffs, Management puts its case in alternative ways. The first basis is the formula reflected in the Deferred Management Fee clause of the Services Agreement which has been referred to as the agreed consideration method. The second basis is the cash flow method. The third basis is part cash flow and part profit and loss, referred to as the hybrid method. The fourth and final basis is the budget model. 91 The plaintiffs concede and accept that Management is entitled to an order that they pay a reasonable remuneration for services provided to them by Management. The only issue between the parties on the cross claim is the approach that should be adopted in determining such reasonable remuneration and its amount. In these circumstances it is not necessary to analyse the structure of the law of restitution, which appears to be thought in need of some conceptual discipline: Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61, Mason P, Heydon JA and Ipp AJA, 23 March 2001, per Mason P at par [2]. Operation of the Village 92 To enable an analysis of the various approaches for which Management contends, it is necessary to consider a number of general matters in relation to the operation of the Village and the infrastructure to support the provision of the services to the residents in the Village and, in particular, to the plaintiffs. 93 From 1987 to about 1992 Management provided a range of services to the residents of the Village. Those services included services in respect of the common property from which the residents obtained a benefit indirectly and personal services to the residents from which they obtained a direct benefit and for which they did not pay a separate fee. In addition there were of course the services of a personal nature (the cl 4B Services) for which fees were paid directly to Management by the residents. 94 The services which Management provided included the employment of staff including maintenance staff, security staff, the General Manager and the Social Co-ordinator. The terms of the Management Agreement required the Body Corporate to pay the costs of employing those persons to Management. It is apparent that up to about 1992 such costs were paid, however the situation changed after 1992. 95 In the years prior to 1992 there were two full-time and one part-time maintenance employees. In addition to their duties in respect of the common property, these employees would also carry out small maintenance tasks for the residents, such as changing light bulbs, tap washers and other similar tasks. This was apparently done on an ad hoc basis in an atmosphere of cooperation and for which no payment was made at the time by the resident. 96 In 1992 the Body Corporate decided that it would no longer pay the costs of the employment of the part-time maintenance employee and would no longer allow the full-time maintenance employees to carry out the ad hoc personal services for the residents. The Body Corporate correspondence in February 1993 to Management included the following: The Company has undertaken to separately arrange maintenance services to the individual apartments of the Hostel Building and the clients of the Company other than the Body Corporate, and to meet its obligations to proprietors under the Deeds of Agreement for Provision of Services. Since this leaves the Company free to use the services of the Body Corporate's maintenance men within the common property areas of the Building, it is not acceptable to the Body Corporate. By-law 37 provides that the Company is responsible for maintaining the exclusive use areas of the building, and the Company's undertaking to arrange its own maintenance services must also encompass this responsibility. In view of the fact that the Company has already formally acknowledged its moral responsibility for maintenance of the entire common property within the Hostel Building, it would be churlish of it to seek freedom to use maintenance employees paid for the Body Corporate, rather than its own, in the common property areas outside the exclusive use areas. Such demarcation would diminish the otherwise clear cut division of responsibilities and lead to possible disputation. (Ex. 1A p. 120-121) 97 Prior to 1993 the maintenance staff also assisted with the transportation of some of the residents around the village, for instance, driving them in an electric cart from their units to the restaurant for a meal. The Body Corporate issued a direction of which Management advised the residents in the following terms: On the written instructions of the Council of the Body Corporate the maintenance staff are no longer permitted to transport people via the "people mover" around the Village unless such activity can be justified by particular proprietors to the Council of the Body Corporate on humanitarian grounds. 98 The burden on a resident, who is temporarily debilitated and in need of assistance to move around the Village, was further increased by the requirement to justify a trip in the "people mover" from their unit to the restaurant on "humanitarian grounds". This created distress in some of the residents of the Village who perceived the changes as having an adverse impact on their quality of life (Ex. 7 p 233-235). 99 In March 1995 the Body Corporate instructed Management that it would take over the supervision of the maintenance staff. Since that time Management has had limited involvement with the supervision of the maintenance staff but continued to maintain an administrative role of payroll responsibility for the maintenance staff. 100 For a number of years Management employed all security personnel. Those personnel had to be licensed to provide security services and were also required to have first aid skills. Those employees were required to patrol the Village and to carry out four patrols per night. They commenced work at 4.30 pm and finished their shifts at 7 am. In 1992 the Body Corporate instructed Management to cease employing security personnel. 101 Management employed the General Manager of the Village who, amongst other duties, implemented and monitored the decisions of the Body Corporate. The General Manager was responsible for ensuring that the cl 4B Services were provided to the residents of the Village. The General Manager resigned in 1995 and on 17 January 1995 the Body Corporate wrote to Management in the following terms: The Body Corporate will appoint as soon as possible a person to the position of Maintenance Superintendent. The duties of the position are to plan, organise and supervise all maintenance work associated with the common property, subject to the direction of the Council of the Body Corporate. This includes supervision of contractors to the Body Corporate for security services, gardening services, painting services and maintenance of lifts, fire equipment and air conditioning, as well as routine day to day maintenance of the common property. Pending the appointment, the Council will carry out these duties. In these circumstances, the Body Corporate requires no services from Fernbank Management other than provision of the services of the Social Co-ordinator, the two maintenance employees and a casual security/ cleaning employee, and provision of joint services associated with telephones, fire systems and vitalcall equipment. Arrangements for payments for these services and the associated $500 per month fee remain unchanged. The Body Corporate will, of course, not be liable to pay any part of the cost of any general manager your company may care to employ. Since the full cost of the maintenance and security/cleaning employees will continue to be charged to the Body Corporate, the Maintenance Superintendent will be responsible for planning, organising and supervising their work. Fernbank Management will only be responsible for payroll and associated matters connected with their employment by your company. The Body Corporate will continue to pay 60% of the costs of the Social Co-ordinator and, accordingly she will be expected to liaise appropriately with the Secretary of the Body Corporate. 102 A Maintenance Superintendent was employed by the Body Corporate but resigned in December 1997. After the resignation of the Superintendent the burden of the duties previously carried out by the General Manager and the Maintenance Superintendent were placed upon the Executive Committee of the Body Corporate. 103 Between 1992 and 2000 there was a shift away from Management providing services for which the Body Corporate had to pay. The Body Corporate took upon itself more and more of the management of the Village as time passed. This seemed to create a burden on the residents of the Village and the Body Corporate, particularly when the majority of residents have apparently moved into the Village on the basis that the management would be provided in a manner that would not require them to become involved in the detail of the day to day operation of the Village. 104 In April 2000, after the execution of the New Agreement, the Body Corporate directed Management to employ a Property Services Manager. The Body Corporate also agreed to reimburse Management for the salary and on costs in relation to that employment. This may be a step towards returning the Village to its previous apparent settled and amicable environment, prior to this litigation and the Gillett proceedings. The duties of the Property Services Manager include areas within General Management, Financial Services, staff liaison, repairs and maintenance, garden and lawn maintenance and security and safety. 105 Management also employs a Social Co-ordinator for the Village. The Social Co-ordinator is responsible for planning and implementing activities for the residents as well as attending to some of their daily requirements. Management, at its own cost, makes available a bus to enable residents to be transported to and from local and regional shopping centres. The Social Co-ordinator is responsible for arranging such visits and is also responsible for arranging theatre parties, various tours and harbour cruises and issuing circulars to the residents advising them of such activities. 106 There has been much communication between the Body Corporate and Management in respect of the amount the Body Corporate would pay towards the salary and on costs of the employment of the Social Co-ordinator. At the time of the hearing, although the evidence is not clear, it seems that 15% of the salary of the Co-ordinator is paid by Management and 85% is paid by the Body Corporate. 107 In the earlier years of the operation of the Village the Body Corporate paid for 25% of the cost of employing a receptionist and the balance was paid for by Management. The receptionist answered the telephones, directed visitors, such as tradesman and others, around the site and was generally available as a contact point for the residents. The receptionist also had the responsibility of compiling and processing time sheets of the employees at the Village and ensuring that invoices and time sheets were processed promptly. 108 In 1992 the Body Corporate decided to make no further payments in respect of the receptionist's salary. Management took the view that the position of receptionist was essential to the running of the Village particularly because the receptionist is often the first point of contact in ensuring the cl 4B Services are provided. Management has funded the whole of the costs of the receptionist since 1992. 109 Management has also paid for the purchase, maintenance and replacement of the furniture, fixtures and fittings within the Hostel and Administration building. 110 The Hostel consists of 42 units and large areas of common property. Developments owns the units and leases them to the occupants of the Hostel. The Lessees pay a premium to Developments which has the use of that premium during the Lease and on termination of the Lease and re-lease of the unit the then "going rate" premium is paid by the incoming Lessee to Developments. Developments then pays that premium less the amounts referred to in cl. 13 of the Lease to the former Lessee. 111 Clause 13 of the Lease provides: (a) Upon the term of this Lease or this Lease ceasing and determining or being terminated pursuant to the provisions hereof, the lessor shall use its best endeavours to lease or cause to be leased the Premises at the best market premium reasonably obtainable and upon terms and conditions similar to those contained within this Lease. (b) Upon the payment of a premium to the Lessor, in consideration of the grant by the Lessor to a subsequent lessee of a new Lease of the Premises as in the last clause contemplated, the Lessor shall, and out of the amount of such premium when paid to it, be entitled to retain a sum made up as follows: (i) Two point five percentum (2.5%) of the premium paid in respect of the grant of this Lease (the "original premium") in respect of each year or part of a year (calculated on a daily basis) which has elapsed between the date of this Lease and the date upon which any premium is paid (the "subsequent premium") in consideration of the grant by the Lessor of a subsequent lease as herein contemplated PROVIDED THAT the sum so calculated shall, if greater than twenty five percentum (25%) of the original premium be limited to twenty five percentum (25%) of the original premium BUT PROVIDED ALWAYS that such sum shall not in any circumstances be a sum less than ten percentum (10%) of the original premium; and (ii) eighty percuntum (80%) of the amount (if any) by which the subsequent premium exceeds the original premium. (c) The residue of the proceeds of any subsequent premium so received, less releasing expenses of the Lessor in the sum of three thousand five hundred dollars ($3,500) and less any amounts owing to the Lessor under the terms of this Lease, or to Fernbank Management Pty Ltd under the terms of the Deed as to the provision of Lessee Services, shall be paid to the lessee. 112 As a condition of the Lease, the Lessees entered into a Services Agreement with Management (the Lessee Services Agreement). The Lessee Services Agreement provides for the provision of services to the lessee "for a weekly lump sum fee" which is able to be varied from time to time by notice in writing from Management to the Lessee (cl. 2A and 4). The Lessee Services Agreement provides that "some only" of Management's costs and expenses of the employees identified in the Management Agreement (cl. 10A) "are intended to be passed on to the lessees" so that "only portion of such passed on costs shall be borne by each separate lessee" (cl. 2A). 113 The Lessees agreed to be responsible for the wages, salaries or other employment benefits, holiday pay, long service pay, superannuation benefits and worker's compensation insurance for the employees for which the Body Corporate was not responsible under the Management Agreement. Therefore the Lessees agreed to be responsible for the Administrator, the Relief Administrator, the part-time cleaners and other staff required to service the apartments in the Hostel and the relief staff for each of those positions (cl. 2A -C). 114 The Lessees also agreed to be responsible for the operating expenses in respect of the provision of services by Management under the Lessee Services Agreement including the accountancy fees and other costs incurred by Management in delivering the services. Management agreed to provide what was referred to as the services "within the weekly service fee structure". Those services are set out in the Schedule to this judgment. 115 Clause 4B Services to be provided to the self-care residents of the Village are reflected in the Services Agreement. Management employs approximately 24 full-time and part-time staff for the purposes of providing these services. A suitably qualified member of the nursing profession is on duty or on call 24 hours per day 7 days a week, 52 weeks of the year. A fully qualified registered nurse is employed as a Nurse Manager. The Nurse Manager is the co-ordinator of the nursing staff and provision of nursing/personal care services to all residents of the Village. The Nurse Manager also ensures that the Vitalcall emergency response system is monitored by appropriately trained staff. 116 Each resident has a wall-mounted emergency call device and a pendant. When the system is activated by a resident, the signal is received on the monitor located in the office area and by the pagers carried by the staff. Each time an emergency call is received, staff have been trained to go through a number of procedures in order to properly respond to the call. 117 The nursing staff work from an office made available to Management pursuant to a by-law passed and registered by the Body Corporate. Detailed residents' files which contain relevant medical history and up-to-date relevant medication and details of consultations and visits are kept and maintained in that office. 118 Management also offers nursing packages to the residents of the Village who require short or long term care from the nursing staff. These services include personal care assistants, for such activities as bathing and dressing. Management also provides personal care services through its employees which do not fall into the category of nursing services, for example, emotional support and mobility assistance. 119 Management owns Lot 1 of the Strata Scheme which is used as sleep-over quarters for the nursing staff. The staff are off duty from 9 pm until 7 am but are on call to respond to the emergency call system. It is apparent that this accommodation has the effect of reducing the cost of providing this service because the on call allowance is paid instead of an hourly rate which would otherwise be required under the relevant Award. 120 There is a full commercial-standard kitchen available to provide catering services to the residents. The cost of repairs, maintenance and replacement of all equipment within the kitchen is paid for by Management. It employs chefs, cooks, kitchen hands and wait-persons to provide catering services primarily in the dining room for midday and evening meal services. Management also provides a meal delivery service to those residents who are too ill or unable to attend the dining room. Additionally there is an electric golf cart to deliver meals around the site if the resident's unit is some distance away from the kitchen and the resident is unable to attend the dining room. 121 From time to time Management puts on social functions catered for from the kitchen, such as Melbourne Cup lunches, bridge functions, Easter and Christmas luncheons, three monthly dinners and various other theme evenings. 122 There is a laundry facility that launders items for Management such as the dining room linen. It is also available to the residents should they require Management staff to do their personal washing. Management charges a "nominal" amount to residents for this service which is provided by domestic staff employed by Management. The maintenance and replacement of equipment within the laundry is paid for by Management. 123 Management permits a related company, Gandel Asset Management, to utilise office space within the Village of which Management has exclusive access by reason of the exclusive-use By-Law. This office is used to enable the prompt sale of units within the Village. In conjunction with the reception staff these employees ensure that all sales enquiries that come to the Village are dealt with and recorded. A full marketing program with regular advertising in local newspapers and relevant magazines, together with handout material and brochures, are produced by Gandel Asset Management. 124 The ad hoc private maintenance work that was previously done by the maintenance staff is now formalised. Maintenance staff are permitted to provide maintenance services for residents after hours which are paid for directly by the residents to the maintenance staff. The cost of the previous ad hoc arrangements and an interim arrangement for a local handyman to attend the Village twice a week, was met by Management. The cost was an availability cost as Management did not recoup all the employment and related costs from billings to the residents. 125 Upon entering the Village residents are given a medical questionnaire to complete, one copy of which is provided to Management and the other copy is placed on the back of the residents' bedroom door. This facilitates efficient communication of information to doctors and ambulance officers should an emergency arise. 126 Management also has exclusive use of a medical consulting room pursuant to the exclusive-use by-law. Management co-ordinates visits from doctors, podiatrists and physiotherapists who provide their services from this area. Management also has exclusive use of an infirmary which is made available to and is used by residents as short term respite, for example, after surgery. A number of staff are located within this area enabling the efficient delivery of a range of services including nursing, personal care, catering, domestic and emotional support, medical and paramedical services. The majority of services provided to residents utilising the infirmary are provided by staff employed by Management. Nature of the Determination 127 The question to be determined is what is fair and just remuneration for the benefits provided: Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 263. 128 Management's claim is for reasonable remuneration for the services provided to the plaintiffs. It claims that the plaintiffs would be unjustly enriched if the Deferred Management Fee clause is unenforceable because they will have received benefits of the Services Agreement without the obligation to pay for them. 129 The identification of the enrichment in this case is a little more elusive than in Pavey & Matthews Pty Ltd v Paul or in Davis v Mortgage Acceptance Nominees Ltd NSWSC Rolfe J unreported, 20 April 1994. This is not simply a case of the use of money loaned or materials and/or services provided. This is a case in which services have been provided in an environment which has an infrastructure to support not only the provision of specific services but also the requirement to have services available which may or may not be utilised. 130 A retirement village is an environment in which the residents commit themselves to become members of a community sharing certain costs and participating to differing degrees in the lifestyle of the village. One of the attractive features to such a village is the capacity to move into a welcoming and friendly community with a lifestyle which provides ease of social interaction with others of similar age and with similar interests. 131 Other attractive features of a village life include the security of a 24 hour emergency call facility with medical, nursing and other health worker support; the physical security of an estate that is patrolled by security officers; the capacity to dine at "home" without the need to cook meals; the pleasant surroundings and landscaped gardens cared for by others; the availability of companionship with others if that is what is desired with the capacity for a lifestyle independent of the village; the comfort of having others nearby when one is frail and/or ill or in need of company; the availability of social activities planned and organised by others and the combination of all of these features with the capacity to maintain one's independence. 132 Management in this case has created such an environment. It may well be that some members of the Village will not take advantage of the activities and services immediately and may gradually ease themselves into the participation in the Village lifestyle. 133 These aspects of a village environment have a value. Those who regard these aspects as necessary for their lifestyle may place a higher value upon them than those who do not see them as essential. The capacity to use the services - particularly the emergency call with urgent access to professional health workers -is a security, the value of which may be difficult to quantify. The cost of providing the service can be quantified, taking into account numerous matters including the various professionals who will have to be rostered to be available urgently, but it seems to me that the value of such a service will differ from resident to resident. This will probably apply to a number of the aspects of the village. 134 This is not a case in which it is appropriate to assess what is fair and just remuneration on the basis of the plaintiffs purchasing a home without consideration of the Village environment. That would be to ignore the identifiable real detriment to Management in providing the Village environment and its services in circumstances where the Services Agreement is unenforceable. Each of the plaintiffs must accept that they have become part of this Village lifestyle with the infrastructure created by Management to provide the services and the availability of services referred to above. The assessment of what is fair and just remuneration must take all of these costs into account which enable Management to provide the environment, the aspects to which residents will appreciate or value in differing degrees. 135 Although the respective experts, Mr Adrian Kelly relied upon by the plaintiffs, and Mr John Banks relied upon by Management, met on a number of occasions and resolved a number of issues between them, it is necessary to consider each of the methods propounded by Management. The first of those is what has been referred to as the Agreed Consideration Method. The Agreed Consideration Method 136 Mr McDougall QC submitted that the Services Agreement may be looked at to assess what is a proper restitutionary amount, or a reasonable remuneration for services provided to date as between the parties. He submitted that the bargain of the parties was that the Deferred Management Fee would represent compensation, including an element of profit, for Management's unrecouped costs of providing services. It was submitted that the unrecouped costs includes a costs of funds element because, although the expenses were incurred by Management from time to time, the compensation was not to be received until the Deferred Management Fee became payable on the sale of the unit. 137 It was submitted that the Court should not go beyond the bargain of the parties in determining what is appropriate reasonable remuneration in this case. In support of its claim Management relied upon the evidence of Dr Ian Pollard, an Actuary, with relevant experience in the Retirement Village Industry since 1993 (Ex. 8). 138 Dr Pollard was asked to value the Deferred Management Fee which would be payable now, by taking into account the fact that Management would receive the payment ahead of the time that it would otherwise have received it, had the Services Agreement been enforceable. Dr Pollard's evidence is not challenged. 139 Management submitted that as Dr Pollard's figures are based upon the present value of the Deferred Management Fee, such a method of assessment is inherently fair. It is submitted that it is probable that before the plaintiffs purchased their units, each must have been well aware of the incidence and method of calculation of the Deferred Management Fee. 140 Mr Coffey was cross examined on this aspect and gave evidence that he read the Contract and Special Conditions carefully (tr. 9). He subsequently said that before he signed the Contract he did not read it "in great detail" (tr. 10). He said that his Solicitor did not explain the Contract to him "in any great degree" (tr. 11). He was unable to confirm or deny whether he was told that there was an eight day cooling off period in the Contract (tr. 14). 141 Mr Coffey said he presumed that he read the Services Agreement but could not recollect an explanation of it by his Solicitor, Mr Gillies (tr. 14). He was asked: Q At the time you signed the Deed of Agreement for provision of services you understood that it contained a number of provisions including some relating to the resale of your unit, didn't you? A No. Q You understood, did you not, that it provided, among other things, for the payment of a fee on resale of the unit? A No, I don't specifically recall that at that particular time, I am thoroughly aware of that fact now. Q Don't you recall the sales representative for Fernbank Developments explaining to you when you were considering the purchase of your unit that a deferred management fee would be payable? A No. I could certainly attest that I do not believe any such advice was given me by the person selling me the unit. Q Do you recollect any such advice as to the terms of the services deed being given to you by Mr Gillies? A I do not recollect it. It could well be Mr Gillies did but I can attest to the fact that I had never had this explained to me by the salesman for Fernbank Developments. Q Do you have any recollection now of understanding from your own reading of the deed, I'm talking about September 1988 or thereabouts, an understanding of the payment or the circumstance in which a deferred management fee would be payable? A No. (Tr. 14-15) 142 As to the particular clause containing what has been referred to as the Deferred Management Fee, Mr Coffey gave the following evidence: Q Are you telling us that at the time you signed this document you did not read and understand that clause? A No, I can only say at the time I did much of this transaction on faith. (Tr. 16) Q You have held a number of senior positions in the administration of this State before your retirement, hadn't you? A Yes. Q I take it you had become well aware of the importance of reading and understanding significant documents before you signed them, hadn't you? A Yes. Q And you regarded documents relating to the purchase of a residence for you and your wife as being significant documents, did you not? A Yes. Q You would not have signed a document relating to such a purchase without reading it or understanding it in some way, would you? A I might have if I was given advice which I would have faith in. Q Are you saying you did not ensure, as best you could before you bought it, that you had an understanding of the documentation relating to the purchase? A No, my principal interest was to ensure I had a clear understanding of what I was purchasing as a future home for me and my wife. (Tr. 17) Q You are not prepared, are you, to deny that back in September 1988 you did have an understanding that such a fee would be payable upon the resale of the unit. A I do deny that. I might have but I have no way of saying I did have. (Tr. 18) 143 Mr Coffey gave evidence that up until the time that he purchased the unit in the Village he had never had any association with property transactions and regarded himself as a complete novice (Tr. 62). He agreed that he had seen a document that purported to summarise the Agreements and in particular made reference to the Deferred Management Fee. He said he did not recollect reading that document prior to signing the Contract for the purchase of his unit (Tr. 64). When counsel revisited the question as to whether Mr Coffey read the Contract carefully he admitted that he probably would have because most things he reads, he reads carefully (Tr. 66). After admitting that he did not seek to take the benefit of the cooling off period to rescind the Agreement he was asked: Q And you did not do so, I suggest to you, notwithstanding that within the eight day cooling-off period you knew of the obligation on resale to pay a deferred management fee? A That particular matter hadn't necessarily occurred to me. It may or may not have. I decided to go ahead and purchase for the very reason that the particular lot that I was intending to purchase precisely fitted what I believed was the need for my wife and myself, and I was satisfied that I should proceed to pay the price that was being asked for it and go ahead and sign the agreement, which I did. Q And on the basis of that belief and satisfaction you were also, on 9 September 1988, prepared to accept the ultimate obligation for payment of a deferred management fee, weren't you, Mr Coffey? A Having signed the Agreement, if it said that, well then surely by signing it I accepted it. If you are asking me was that particular consideration foremost in my mind in respect of the transaction the answer is no. My answer is that I was more concerned with purchasing a unit, which was satisfactory for the future life of myself and my wife and that was the basis on which I proceeded. Now I only realised at a much later stage that I hadn't been as wise as I might have been if I had known a lot of things before the event that I came to have knowledge of later. (Tr. 67) 144 I am satisfied Mr Coffey was aware of the existence of the Deferred Management Fee clause at the time he entered into the Contract. Certainly the correspondence between the Body Corporate and Management in 1990 evidences in at least the office bearers of the Body Corporate a clear understanding of the Deferred Management Fee. 145 Nothing in the evidence suggests the plaintiffs were not aware of the Fee at the time they entered into their Contracts. The correspondence suggests otherwise with an expressed attitude that it was unjust. Each purchaser of a unit at Fernbank was required to instruct a solicitor to act for them on the purchase. Mrs Wright's unchallenged evidence was that her standard practice was to go through with the prospective purchasers the document summarising the various Agreements, in particular the parts referring to the Deferred Management Fee. 146 In those circumstances I am of the view that it is reasonable to conclude that the Deferred Management Fee clause was explained to the plaintiffs. I am satisfied in all the circumstances that the plaintiffs purchased their units with knowledge of the obligation to pay the Fee. 147 Another matter upon which Mr McDougall QC relied was the fact that the unenforceability of the Services Agreements had not been caused by the existence of the Deferred Management Fee clause. There has been no finding that the clause is unfair or unconscionable. In those circumstances Management submitted that the assessment of the reasonable remuneration is appropriately reached by having regard to and applying the formula within the Deferred Management Fee clause. 148 The plaintiffs submitted that a careful reading of the Services Agreement does not lend itself to the "gloss" that has been placed on the clause to suggest that the fee agreed to is in fact a Deferred Management Fee. It is submitted that there is no discernible reason from the terms of the Deeds that such an amount is to make up for any shortfall in receipts of proper reasonable fees for services provided by Management under the various Deeds. 149 It is submitted that as Management was entitled to fix the fees payable for the services it delivered, the extent to which it may need to call upon the entitlement under such clause to recover shortfalls will depend upon the fees actually set by it over a period. It is submitted that the entitlement under the clause could not logically be regarded as an agreed amount to cover such shortfalls. 150 The plaintiffs submitted that the "fee" is more probably a benefit negotiated by Management at the beginning of the Contract. It was submitted that any calculation of the net present value, as Dr Pollard had done on an actuarial basis, does not strictly measure the reasonable cost shortfall to date because it is measuring quite a different thing. Such an approach is looking at the whole of the period and reflects the computation back into today's value. It was submitted that this is not an appropriate measure of what a reasonable remuneration is for services that have been provided in the structure within which those services have been provided under the Management Agreement and Services Agreement. 151 The application of this method involves either the payment now on Dr Pollard's valuation or the payment at the time of the sale of the unit at the rate in the Deferred Management Fee clauses in the now unenforceable Services Agreement. The next approach for which Management contends is the cash flow method. The Cash Flow Method 152 This method involves the assessment of a Cash Flow Schedule (the Schedule) prepared by Mr Steven Green, Chartered Accountant, and Financial Accountant of the Retirement Division of the holding company of the defendants. A copy of a version of the Schedule is contained in the Schedule to this judgment. 153 The cash flow method purports to involve the identification of each element of cash inflow and cash outflow relating to the Village, the elimination of cash flows that are solely referable to the Hostel, the calculation of a net cash surplus or deficit on an annual basis, the addition of a cost of funds factor to any deficit, and the division of any cumulative cash deficit between the cross defendants on various bases. Those bases are unit entitlement, a per unit basis and a per head basis. 154 Mr Green gave evidence that he prepared the Schedule for the purpose of identifying cash inflows and cash outflows in the period 1 July 1986 to 30 June 2000, relating to the provision of services to resident proprietors of the Village pursuant to the Management Agreement, the New Agreement and the Services Agreement. Cash Inflows 155 The cash inflows section of the Schedule contains two items, 1A, DMF Unit Resales and 2A, Monies Recovered ex Owners Corporation. Item 1A only includes the Deferred Management Fees received in respect of the self-care units and none of the DMF Fees received from the Lessees of the Hostel. Item 2A includes all amounts received from the Owners Corporation, formerly the Body Corporate, for expenditure for services associated with the Owners Corporation. 156 The plaintiffs claim that if the Cash Flow Method is to be adopted to determine Management's reasonable remuneration, the fees received from the Hostel Lessees should be brought to account in the cash inflow section of the Schedule, notwithstanding that such fees are paid to Developments, the owner of the Hostel units. Cash Outflows 157 The cash outflows section of the Schedule contains sixteen (16) items. Mr Green gave evidence in his affidavit (19 May 2000) that this section of the Schedule identifies "the expenses of Management in providing services pursuant to the Services Agreement", the Management Agreement and the New Agreement. 158 Item 1 is the cost of the relief sleepover unit. In the original contract for the purchase of the Village property Management acquired certain assets including apartments. Management internally allocated the purchase price of the assets and recorded the total cost of the Hostel, comprising 42 units, as $3,126,060. The relief sleepover is one such unit. The cash outflow for this item is calculated as one forty-second of the total recorded costs of the Hostel which is $74,430. That cost is listed in the Schedule in the 1986/1987 year. 159 Item 2 is the cost of the live-in administrators lot which is listed at $133,041 in the 1986/1987 year. This is the cost of the lot specified in the original Contract for the purchase of the land. 160 In the 1986/1987 year there were no amounts in the cash inflow section of the Schedule. The cash outflow totalled $517,858 of which Items 1 and 2 together made up approximately 40% of the costs. Mr Nick Reid admitted that although the Lessees in the Hostel received a benefit from the use of the relief sleepover unit and the live-in administrators's Lot, there had been no apportionment of the cost to the Lessees. 161 Item 3 is "legal expenses incurred at time of unit resales". This figure fluctuates between $811 (1988/1989) to $11,088 (1993/1994), $20,592 (1994/1995) to $27,549 (1999/2000). 162 The inclusion of these expenses in the Schedule is puzzling having regard to the evidence given by Mr Green that Management, through its "operational people", made a decision not to enforce the clause in the individual Agreements whereby residents were required to pay the legal fees for the sale of their units. In those circumstances these costs do not seem to me to be appropriate to include in any figure which is to be part of the expenses the plaintiffs should have to pay to Management. 163 Item 4 is the "cost of plant, equipment, furniture, etc". Mr Green has provided a detailed breakdown of this cost in annexure G to his affidavit of 4 October 2000. A review of that material demonstrates that some of those costs are of plant, equipment and furniture in areas that service the Hostel. Mr Green admitted (tr. 115) that there would be some use of these facilities by the Hostel residents and that no apportionment, allocation or deduction has been made in respect of those amounts to the Hostel residents/lessees. 164 Item 5 is the "utility deposits". Mr Green conceded that the initial fees for connection of power and gas to the Village as a whole would provide benefit to the Hostel. He also conceded that no apportionment, deduction or allocation had been made in respect of these amounts to residents/lessees of the Hostel. 165 Item 6 is "support service availability/provision". These costs are claimed to be for the provision of services under the Services Agreement and unrecovered costs of having the services available in case they are required. The costs include the costs of having nursing staff and catering facilities available for the residents; Management share of the salary of the Manager, the Social Co-ordinator and the Registered Nurse; the cost of transporting residents around the Village in the electric cart and the cost of answering emergency calls outside ordinary hours. 166 Once again although the Hostel residents/lessees are able to use the services for which this cost has been incurred no apportionment has been made. 167 Item 7 is "consulting fees". These fees total $118,083, $115,856 in 1991/1992 and $2,227 in 1992/1993. Mr Reid gave the following evidence in respect of that cost: Q. What were the consultancy services that cost $118,000? A. We employed a public relations company to try and get us out of the very low ebb that was created by the type of correspondence that's before you, the type of chitter chatter that was going around the community. We were trying to honour our obligations to the majority of people because despite what has been put before you, the vast majority of people at Fernbank are happy with the services we have provided over the years and we have continually been belted over the ears for people's assets being eroded for what's been happening at the village. (Tr. 79) 168 Mr Reid conceded that this was a cost for a service from which the Hostel occupants receive a benefit (Tr. 79). He also gave evidence that only certain elements of the cost had been apportioned. 169 Item 8 is "other legal expenses". Those expenses are $1,402,001 over the period 1986 to 2000. The evidence is that by far the "lion's share" of those costs are the costs of the Gillett proceedings. The plaintiffs in the Gillett proceedings lost at first instance but were successful on appeal and finally settled the matter prior to the Special Leave Application hearing. Although Priestley JA expressed the view that it was impossible to arrive at scientifically precise costs orders in the circumstances of that case, Management and Developments were ordered to pay the costs of the Appeal. The Body Corporate was ordered to pay Management's and Development's costs of a Notice of Motion for leave to cross appeal out of time. Management and Development were ordered to pay 50% of the costs and 50% of the Body Corporate's costs in respect of the proceedings before Rolfe J. It is apparent that Management now seeks to recover the whole of its costs, including the costs that the Court ordered it should pay the plaintiffs/appellants on a proportionate basis from the plaintiffs in these proceedings. 170 I find it difficult to understand why it would be fair or reasonable to burden the residents of the Village with these costs. It would mean that not only would they have to contribute to costs in the Gillett proceedings, by way of levies to the Body Corporate, but contribute to the payment of Management's costs for losing a case in which other residents achieved success. I am not satisfied that this an appropriate cost with which to burden the plaintiffs. 171 The next Item is Item 9, "Insurance-ISR". There is no issue about the propriety of the inclusion of these costs. 172 The next Item is Item 10 "unrecovered repairs and maintenance". These costs relate to the unrecovered costs in respect of the repairs and maintenance to the Body Corporate's common property. Once again Mr Green conceded that the residents/lessees of the Hostel receive a benefit and for which there has been no apportionment of the costs. 173 The next Item is Item 11, "other costs" which include courier fees, travel expenses and similar costs associated with services to the Body Corporate and Residents. Although Mr Green was of the view that the "majority" of these costs would relate to self-care units, it is obvious from that evidence that some, perhaps the minority, would relate to the Hostel. Once again no allocation, apportionment or deduction has been made of these costs. 174 Item 12 is "subsidy". In the initial years when purchasers were taking up residence in the Village, the Fernbank companies paid the difference between the inflows and the outflows of the Village and showed it as a subsidy. Mr Green gave the following evidence: Q Item 12, the subsidy. Have you made any allocation between self-care apartments and hostel for that? A No. Q Does any part of those expenses or outflows relate to the hostel. A Yes. Q On what basis? A The cost would or the item would reflect a contribution by the Fernbank companies to the loss of the hostel. (Tr. 116-117) 175 These costs were incurred in the period 1986 to 1990. True it is that it was part of the development of the Village as a whole but to attribute the whole of the cost to cash outflows in a Schedule that does not apportion any of those fees to the Hostel is in my view unreasonable. 176 Item 13 is "head office overhead". The overhead costs commenced in 1986/1987 at $26,109 and increased in 1987/1988 to $39,771. The following year (88/89) they increased to $251,056. Subsequently they were $323,319 (89/90), $376,804 (90/91), $302,477 (91/92), $306,118 (92/93), $232,669 (93/94), $232,929 (94/95), $260,493 (95/96), $191,663 (96/97), $201,704 (97/98), $277,237 (98/99) and $372,780 (99/100). Mr Green was asked about these costs: Q Do you agree that the village operated in 1986/87, going into 1987/88, 1988/1989, 1989/1990, and there was no fundamental change in the way that the village was operated such that a huge increase in head office overhead expenditure was required? A Yes, I would agree with that. Q Do you agree with me that nothing happened in relation to the actual operation of the Fernbank village which, in point of fact, increased the need for head office services to that degree as between the first two years and subsequent years? A Not at the village itself but the Gandel group at 1988/1989 made the decision to transfer all of the accounting responsibility up to Sydney rather than to do it in Melbourne. Q You would agree with me, would you not, that on the assumption that Her Honour finds that Fernbank Management has suffered a short fall in recoveries for services actually provided for which the self care unit owners should pay, Fernbank Management should only charge the cost, plus reasonable overheads and profits, for the services actually provided? A Well that is one way of doing it. (Tr. 140) Q With due respect to my clients, what they are living in is a reasonably substantial block of home units, albeit with certain additional services because they are elderly people. In those circumstances, one does not need a huge number of people to run the head office function of that business, does one? A No. Q There are bills to be paid, for which one needs somebody to run the books and ensure that the bills are paid. Correct? A Yes. Q Indeed, in the ordinary course, if you increase the number of residents of the village who are sharing the cost of the head office function it will actually become more efficient because you will use the services of individual employees more efficiently, until you get to a point where their marginal utility is exhausted and you have to employ someone else? A That's correct, yes. Q It follows from what you have said earlier that no exercise has been done from Fernbank Management to actually assess what, on a period to period basis, was required and applied for the head office function of the Village? A That's correct. (Tr. 141) 177 Mr Reid gave evidence that in his experience it was "common practice" for a company at the head of the Group to charge its subsidiaries an appropriate amount for the cost of providing the services to and on behalf of that subsidiary. That does not seem to be the issue here. The problem with the quantification of the overhead cost is that no specific breakdown or detailed evidence has been provided of what costs were actually incurred in providing services to operate the Village. A formula has been applied to the total cost of running a number of Retirement Villages with a division of the total cost by the number of units at the various Villages. There are obvious differences from Village to Village including the number of staff and self-care to hostel type accommodation ratio. 178 The plaintiffs complain that all of the information to provide that detail is in the hands of or easily available to Management. It is submitted that there is an onus on Management to justify that amount of head office overhead which is $3,395,129 over the period and that this has not been done. 179 Once this criticism gained momentum in the cross examination of Management's witnesses, Mr Reid swore a further affidavit. The affidavit (13/10/2000) does not provide evidence of the actual costs that were incurred and does not provide any detail of the breakdown of costs of the head office function of the business. 180 What Mr Reid has done is to draw upon his experience over the last "dozen or so years" in the industry and make an estimate of the costs to provide the head office function as a "stand alone" operation at the Village. He excluded on-site staff at the Village supplying services such as nursing, reception and catering services. He focused on the staff which would replicate the functions and services provided in respect of the head office overhead in Item 13. He said: I set out the staff which, in my view, would be required, together with my estimate of their remuneration package cost, derived from my 12 years experience in the industry, and of the salaries and wages paid in it. I have also included other expenses of such operation as I can best assess them from my experience. I have included in my figures a cost of renting the additional office space which would be required to accommodate this staff, furniture, equipment and the storage of records etc. 181 The estimate Mr Reid made was $360,013. This figure is approximately $12,000 less than the overhead cost in the 1990/2000 year in the Schedule. Mr Reid was of the view that the estimate he made was a "minimum" and claimed it would not be as good a service as that provided by head office because it would not have the "range of specialist employees" that are currently enjoyed by reason of having a larger staff dealing with a number of retirement villages. 182 Mr Reid also highlighted the more complex functions and obligations that have more recently been imposed on Management, including having to deal with the introduction of the GST and recent legislation which imposed increased responsibilities on managers of retirement villages. 183 Mr Reid said his estimate made no allowance for profit and that it was simply an estimate of the cost of running an independent stand alone head office which would undertake all tasks and services necessary to provide such services to the Village. 184 The main complaint the plaintiffs make is that an estimate is not an appropriate method in this case because records would be available whereby actual costs could be identified. This has not been done so I am not aware of the actual costs that have been incurred in the Head Office function of operating the Village. 185 Item 14 is "Expenditure on behalf of Owners Corp". These are costs incurred by Management in providing services for the benefit of or on behalf of the Body Corporate 186 Item 15 "bus costs" is not in issue between the parties. 187 Item 16 is "head office capital expenditure" which amounts represent the capital costs incurred by the head office allocated on a proportional basis. This has been calculated as a percentage of the number of units at the Village to the total number of units under Management by head office. The plaintiffs claim that if applicable, depreciation would be an appropriate method of measuring the annual cost. 188 Item 17 is "cost of funds". This represents the cost to the Gandel Group of financing the cash flow deficiency from the services provided at the Village. The rates applied represent the Gandel Group's own internal cost allocation rate which is applied to the relevant year's opening balance plus 50% of the net cash deficiency incurred during the year. It is conceded to be a matter relevant to the Hostel residents/lessees but in respect of which no apportionment or deduction has been made. The Hybrid Method 189 Mr Kelly commented upon the Schedule and produced a revised Schedule showing a surplus rather than a deficit. This resulted from Mr Kelly's disallowance of a large number of the items in the Schedule. Mr Kelly admitted that, in the absence of further information, his Schedule was "a bit of a hybrid between a pure cash flow model and a profit and loss method" (tr. 292). He agreed it did not present a net cash position or a profit and loss position at any given time. 190 Mr McDougall QC submitted that there are three fundamental defects in this method. The first is that the model does not achieve its stated objective, namely to identify the actual loss incurred by Management and Developments for the relevant period. It is submitted that it purports to be a cash flow analysis but includes non-cash items and at the same time it is not an analysis of profit and loss in the accounting sense. 191 The second defect is that it ignores the matching principle which requires cash outflows to be recognised on the basis of a direct association between cash outflows and cash inflows. The third defect is that this method does not make any allowance for profit and thus is based on an apparent assumption that Management is obliged to provide services at cost with no expectation of profit. The Budget Method 192 This method was not identified until Mr Kelly had produced his "hybrid" Schedule on 4 October 2000. Mr Kelly and Mr Banks met subsequently to discuss the issues and Mr Banks produced a further report dated 6 December 2000. 193 The starting point for the budget method is "a notional" or "base" budget for the services provided by Management. A profit margin is added to the base budget and notional budgets for prior years are established. It is submitted that once these budgets are established it is possible to calculate the required contribution from each proprietor on a unit entitlement basis. 194 As certain costs are not recovered, it is necessary to add a cost of capital factor to recognise the circumstance that Management has had to carry the costs until they are recouped. Mr Banks assessed this factor in the range 15% per annum to 25% per annum. 195 Mr Banks described the budget method as an attempt to look now at what would be a budget for Management to provide services, the costs of which are not recouped through Deferred Management Fees and to project it back in time. In describing the difference between the budget method and the cash flow method Mr Banks said: The cash flow was looking at the costs by way of cash incurred by Fernbank Management over time and adding an interest component which was a cash cost to its figures. The budget based approach is looking at a fair charging method, what is fair to actually charge for it and includes in concept a profit component based on fair return to an investor. (Tr. 250) 196 The budget method excludes extraordinary items, such as the consulting fee of approximately $118,000 and the legal expenses relating to the Gillett proceedings and the unrecouped legal costs of prior sales of units. Mr Banks agreed that other Items should not be included in the base budget for the future but should be included on an historical basis. These were Item 12, "subsidy" and Item 14, "expenditure on behalf of the Owner's Corporation". Mr Banks' rationale for including these on an historical basis was his opinion that they were costs appropriately incurred. Mr Kelly disagreed with such an approach. 197 Mr Kelly and Mr Banks agreed that the costs of the sleepover apartment (Item 1), the live-in administrator's Lot (Item 2), the plant, equipment, furniture etc (Item 4), the utility deposits (Item 5) and Head Office capital expenditure (Item 16) should be removed and replaced with a notional rental figure on the basis of a sale and lease back. Although Mr Kelly was originally of the view that such should be at 6% and Mr Banks was of the view that it should be 8%, subsequent meetings apparently facilitated an agreement at 8%. 198 Mr Kelly and Mr Banks agreed that a figure of $300,000 should be included in the base budget for Head Office overheads (Item 13), however Mr Kelly did not agree to the appropriateness of the figure and had not formed a view on the appropriate method of allocation. Mr Banks accepted Mr Reid's estimate of $360,000 and discounted it by approximately 20% to reach the figure, $300,000. Mr Banks was of the view that such a discount reaches a most reasonable figure having regard to the fact that if a stand alone function was provided it would be higher than that figure. Notwithstanding this approach Mr Banks gave the following evidence: Q Do you agree with me that if you just look at the part of Fernbank devoted to self-care units as a whole, but allow for the fact that there is both a body corporate, which functions in the ordinary way and a strata management company which provides the usual services by such companies, there is relatively little extra that is required to do for the ordinary operation for that part of that village? A I would have thought that to be true. (Tr. 272) Q I suggest to you that on its face $300,000 is an excessive amount for overheads, taking into account the historical level of annual expenditure on behalf of the Owners Corporation and the various costs that you allow in addition in the base budget? A I think there are a number of areas - $300,000 was allowed for the base budget, even though the Owners Corporation has had some work done for them. No profit component is shown for the year; it has been part managed over the years; at times $400,000 has been expended and managed on behalf of the Owners Corporation. (Tr. 273) 199 A further matter of controversy in relation to the historical figures of the head office overheads was that the amounts included Management Fees charged as an expense, the detail of which was unspecified. Apart from the first two years of operation the head office functions have been provided by the Gandel Enterprise Retirement Trust (the Gandel Trust). The Gandel Trust also provides Head Office functions for a number of other retirement villages. 200 The Management Fees range from $618,000 in 1988/1989 down to a figure of $343,087 in 1992, to $267,020 in 1998 and to $468,412 in 1999. Mr Banks did not see the supporting documents in relation to the Management Fees but when he made enquiries about the amounts he was informed that they "related to salaries and on-costs of a number of executives". 201 The accounts also revealed inter-company lending and borrowing of substantial amounts of money and the charging and payments of interest. Mr Banks conceded that he was not aware of the amount of time head office employees would have spent in relation to these activities. 202 The approach adopted in respect of allocation of overheads in the historical budgets is a formula of taking the total amount of costs and dividing them by the number of apartments at the Village and each of the other Retirement Villages operated by the Gandel Group. It was suggested to Mr Banks that an alternative, and more appropriate, approach would be to have regard to the number of staff employed at each of the villages rather than the number of units at each of the villages. Mr Banks did not have any information about the number of staff or the operating costs of the other villages. He did not have any information about the level of services provided at each of the other villages to enable a comparison of those levels to be made. 203 Mr Banks accepted that the approach which has been adopted of apportioning overheads with reference only to the number of units in each Village, does not take into account the prospect that head office costs of managing some of the villages may be greater than others. Whatever be the historical costs and their allocation, Mr Banks' firm view was that $300,000 as a base budget was in the circumstances a most reasonable charge upon which to base an assessment of reasonable remuneration for Management. 204 Another area of controversy in the budget approach is Item 6 "support services availability/provision". This cost in the base budget is $65,000. Mr Banks conceded the historical figure over the period 1986 to 2000 of $1,081,330 included a figure of approximately $850,000 representing the shortfall in recovery of operating expenses of the Hostel. Mr Banks gave the following evidence: Q Did you utilise the $1.08 million in the way it was accumulated in any manner in determining this figure of $65,000 under the column "Base Budget"? A I did, by division, to get what the average was, but in my mind it had nothing to do with the actual historical figures. I was just trying to get some estimate of support figures or some minimum figure of the support figures. Q I just haven't had time to do the arithmetic but the $65,000 is that some arithmetical derivation for the total for the period, taking into account the number of years? A Yes. Q And so it follows, does it, that in your $65,000 estimate as the base budget, that will have a substantial component which is attributable to and, if I might put shortly, shortfalls in recovery from the hostel occupants by reason of vacancies? A That is how it was originally calculated but that is not the purpose of putting it in the budget. Q No, do not worry about the purpose. We are just worrying about the figures for the moment? A The figures, that is where the figures came from. Q On what basis did you use the historical data which included any shortfalls in determining an ongoing base budget for support services? A I did a division to get the figure of $65,000. On those figures, I looked at them and said in my mind, "What is an appropriate figure for going forward"? Q Could you just tell me how you did the division? A I put this 12 years into $1 million. Q So you divided the $1,080,330-odd by 12? A That was how it was to be spent. That was a figure, when I thought there's seven nurses full-time employed, there would need to be some proportion, and I heard people talk of half their time would be spent with the lot proprietors and half with the hostel, but when I looked at the costs for them of getting an emergency button and I got two or three quotes and I put them in my affidavit. It was $1 a day for a phone call not to just get the nurses there. I thought the $65,000 was a reasonable figure and that was for service and I thought I would adopt it for the purposes of the exercise. Q But did you actually, when you were determining the $65,000 figure, have in front of you and take into account evidence about the extent to which historically nurses have been paid for by the hostel? A Sir, to me that is an irrelevance. An irrelevant cost if somebody else - you know, whatever they are paying for in the hostel has no relevance to what the lot proprietors are paying. It cannot be a comparison. If the lot proprietors are using a service, I tried to work out a fair charge for those services. You should be trying to work out a fair charge without saying someone else should be paying for it. This is a different exercise. They are using nurses and they are using support services, they should pay a fair charge. Any charge under $65,000 is a fair figure. I only got the figure because of what has been charged in the past. Q You have not set out in your report, correct if I am wrong, any detailed assumptions about the proportionate use of nurses by self-care unit owners, the hostel occupants, have you? A No, I have only heard it, I haven't seen the evidence. Q When you say you have only got that figure because of what has been charged in the past, what you are referring to there is the figures that appear in line 6, correct? A That is correct, your Honour. Q Now if my statement is correct, that of $1.08 million-odd, in the order of $850,000 is a shortfall in operating recoveries from the hostel, that would lead to some figure approximately $200,000 for the period for other support services - that is correct, simply as a matter of arithmetic? A It doesn't account for doing the base budget. I probably should have, in all honesty, started with a clean sheet and said forget the previous figures and start from scratch with what sort of rates they had and add them all up, one by one, and go through an interrogation exercise and have to prove it in court. What I did, I divided that $1.08 million and got $65,000 and said, is it a reasonable figure, it has to be something more than that and therefore I will accept $65,000 for it. Q But why as I understand the question, if you got 65 from the historical figures, it has nothing to do with what services were used and it has nothing to do with whether a room was occupied or not. How does it have any bearing on what the residents use at that place? A Your Honour it hasn't. Q It is unhelpful isn't it, Mr Banks? A As a minimum figure it is. I think it is helpful as a minimum figure. Q Assume the hostel had been full, the figure in the final column would be zero. A I should have come along, your Honour, and actually worked out that if we were working at base budget, we should have started with a clean sheet and worked out all the services they were really using. (Tr. 257-259) 205 If one divides $1,080,330 by 12 or even by 14 or 15,taking into account the years 1986 to 1999 /2000, the outcome is higher than $65,000, being $90,027, $77,166 and $72,022 respectively. It therefore does not seem that the $65,000 could be reached by a simple division of the total of the overheads over the years. 206 Mr Banks' alternative suggestion that the $65,000 represented $1 per day per unit for having the emergency call button available does not seem to be sustainable. The arithmetic is $365 per annum ($1 per day), multiplied by 197 (156 self-care units and 41 Hostel units) which gives a total of $71,905. If the Hostel units are excluded and $365 is multiplied by 156 a figure of $56,940 is reached. The method of achieving a figure of $65,000 therefore remains a puzzle. 207 I am of the view that it would be inappropriate to include the $850,000 in the historical figures in the budget method. If one removes that proportion from those figures a total of $231,330 is reached and if one then utilises the original approach claimed to have been adopted by Mr Banks in his evidence by dividing it by twelve, a figure of $19,277.50 is reached. Thus a reasonable base budget would be to round the figure up to $20,000. That would reduce the total figure in the base budget by $45,000. 208 A further matter of controversy between Mr Banks and Mr Kelly was the subsidy (Item 12). Mr Banks' evidence on this topic included the following: Q Is it the case, notwithstanding your reference in your report that you have referred to, that is, 6.41.1 you simply do not know what those items are in the first four columns in line item number 12? A That is correct. ………. Q But you cannot tell me, a simple question, you cannot tell me what the figures relate to? A No. (Tr. 264-265) 209 The cost of capital component is also included in the base budget. Mr Banks expressed the opinion that if a business is going to operate profitably over the long term, it needs to recover required rates of return acceptable in the market place. Mr Banks was of the view that at the time of the hearing 18% was an acceptable rate of return but that it had been higher during the years that the Village has operated. Mr Banks understandably stated that if one didn't recover that return the value of the business would reduce year by year. 210 As to the compound interest claimed by Management, Mr Banks gave the following evidence: Q Am I correct in understanding your opinion that you say it is necessary to compound the rate of return to Fernbank Management over the period, the historical period? A Yes. I will give you an example sir. If you have some shares and you are earning a 15 percent dividend and you get paid every year and you put it in your pocket, spend it or invest it. If you don't get it for 10 years, it is not logical only to give you $150 dividend on your thousand. You need to get some compound. Are you reinvesting your money every year. That is what Fernbank Management is required to do. It is required to put $1,000 in the first year, get some profit margin from it, reinvest it into money next year and next year and next year because it hasn't got any return for that lot proprietor for an average 12 years. When you get to the end of it, then they get a profit out of it. They have to pay tax on it and everything else goes and they can recover everything. If you don't compound it, it is like an investment which you are just accumulating a single figure each year. Q In answering that question are you directing your mind to the task that her Honour might face in various eventualities of determining a reasonable remuneration each year in the past for the services provided by Fernbank Management? A If you came to have to do a reasonable remuneration in one year, you may add a profit margin and say that's the remuneration for that year. You could do that with a profit margin every year. If you try to look at a reasonable return for the investment, you should go back one step before the profit margin. That's the investment you had before the profit margin, it is the cash invested and that cash each year should be treated as an investment that compounds at your required rate of return, cost of capital. (Tr. 281-282) CONSIDERATION OF METHODS The Cash Flow Method 211 The cash flow method has many problems. There is no doubt that although the costs include costs for services that have been provided to the Hostel Lessees, there is no matching by way of income or cash inflow from the Lessees in the Hostel. The point has been made that the income from the Lessees is paid to Developments, not Management, and it is therefore not appropriate to include such amounts in the cash inflow section of the Schedule. That point seems to me to weigh in favour of rejecting this method. 212 There is also the problem with the very large amount of losses suffered in the operation of the Hostel ($850,000) attributed to vacancies in the Hostel during the period. I am satisfied that Management was not required to keep any vacancies for the possibility of a resident proprietor requiring accommodation in the Hostel. I am also satisfied that the burden of that loss should not be included in the cash outflow in the Schedule. 213 There is the further problem of the overhead figures and the complaints made that the formula utilised to assess the overhead figure is unsatisfactory. There is some evidence in relation to the differences between the villages, the differences between the staff numbers at the villages and the services provided at the villages but it is certainly not detailed. 214 It is necessary to make an assessment on the available evidence of what is a fair and just amount to be included by way of overhead costs. It is not appropriate to simply exclude some of these costs and not provide a reasonable amount for the appropriate overhead functions that must be carried out by Management to provide services and have services available at the Village. The Hybrid Method 215 In proposing the hybrid method, Mr Kelly was attempting to deal with the Schedule provided by Mr Green and to exclude some of these costs. Mr Kelly did not include any alternative amounts once he excluded what he saw as unacceptable amounts. Mr Kelly accepted that neither the cash flow or profit and loss section of this method was an accurate reflection of either situation. In those circumstances I do not intend to consider it further. The Budget Method 216 The approaches adopted by Management have effectively been reacted to by the plaintiffs. The plaintiffs have not propounded a positive case for a method different from those put forward by Management. It is, or was at least until April 2001, apparent that the most agreeable method to the plaintiffs is the budget method. Indeed Mr Banks' report of 6 December 2000 stated that, subject to what was contained in the earlier section of the report: Banks and Kelly have agreed that an annual budget for Fernbank Management could be an appropriate method to assess the cross defendants' responsibility for ongoing management fees. 217 However the plaintiffs also make complaints about the budget method. Mr Robb QC in final address submitted that if Management takes a course with an object of achieving a larger number upon unsatisfactory evidence and there is reason to suspect the claim is overstated, the Court should use the evidence to obtain a figure "not in the nature of general calculation" but as part of the function to "pick a figure which is the fairest figure apparently on the evidence". 218 Mr Robb QC also submitted that an alternative approach would be to refer the matter to a referee for the purpose of fixing a base budget, giving the parties the opportunity to obtain the evidence that he submitted should have been called and was not available before me. Although recognising it as an alternative Mr Robb QC submitted that his clients were not supporting such an approach. That is understandable having regard to the costs of this litigation thus far, the burden of the various enquires and disputation that has occurred in respect of these Agreements and the fact that this matter has been expedited. 219 Mr Banks and Mr Kelly have agreed on all aspects of the base budget but for: (i) the support service availability/provision (Item 6); (ii) subsidy (Item 12); (iii) expenditure on behalf of Owners Corporation (Item 14); (iv) the apportionment basis of head office overheads and head office capital expenditure; (v) an appropriate profit margin for Management; and (vi) an appropriate interest rate to be charged by Management on the accumulated Management Fees unpaid by the Cross Defendants. Item 6 220 I am not convinced that the whole of the amounts in the historical support services availability provision figures should be included in any assessment of Management's remuneration. Indeed Mr Banks admitted that he should have started with a clean slate. Had he done that and calculated a figure in the realms of $65,000, the Court could have a great deal more comfort than in the circumstances in which he did reach that figure. He obviously took the historical figures into account, including the very large loss contained within those figures which was attributable to the vacancies in the Hostel during the relevant period. 221 As I have indicated earlier if one were to remove the amount of the loss and divide the residuum by the number of years in the period the figure is reduced by $45,000 giving a rounded base budget figure for this Item of $20,000. Indeed in written submissions filed by Management on 15 December 2000, a "reworking" of the way in which it put its case on the budget method included the "reversing out" of the loss leading to a figure of $20,000. This might be a fair figure if this method were to be adopted, however it is very arbitrary and one could not have a great deal of confidence in the fairness of applying such a figure. Item 12 Subsidy 222 The plaintiffs rely upon Mr Kelly's report of 1 September 2000 in particular his statement that he was unable to identify the applicable costs and believed that the costs representing the net loss before depreciation for the years 1987 and 1988 should be removed from the amount claimed. He also refers to an amount of $700 being a travel cost of the General Manager which related to a reimbursement by the Gandel Trust to the Body Corporate. Mr Kelly was also of the view that it did not seem appropriate for the refund of the Body Corporate insurance to be claimed back against the plaintiffs. He was of similar view in respect of the amounts relating to a subsidy of the Body Corporate. 223 When Messrs Banks and Kelly discussed the base budget method the figure was excluded from the base budget only. The subsidy in historical figures are still claimed by Management. It may well be that these are costs that were necessarily incurred by Management in respect of the establishment of the Village and the creation of the environment to which I have referred earlier, however that is not clear on the evidence before me. Item 14 Owners Corporation Expenditure 224 Management has made claims against the Owners Corporation in District Court proceedings (Ex.3. Ex. 11). The claimed costs not recovered from the Owners Corporation have resulted from the Owners Corporation refusing to pay the amounts to which it had agreed in what is now the unenforceable Management Agreement. 225 These costs were incurred by Management in providing services from which the plaintiffs obtained either a direct or indirect benefit. Mr Kelly accepted that these costs were properly referred to in both the cash flow statement and profit and loss accounting process (tr. 350). 226 It is not clear on the evidence before me whether the plaintiffs were levied to enable the Body Corporate to pay these amounts which have not been paid. However I am of the view that the Body Corporate should remain the party responsible for the payment of these amounts. Head Office Overheads 227 As I have indicated earlier much of the controversy in relation to these costs has arisen by reason of a failure to call any detailed evidence of the processes within the head office. Indeed at one stage during the course of the evidence it was suggested that a time and motion study might occur so that relevant costs of providing the head office function could be ascertained. 228 The attack made upon these costs has not been countered with any positive proposition or case as to what the amount of overhead should be. As I have indicated earlier Mr Robb QC submitted that I should use the evidence that is available to fix a figure that is fair and reasonable. Mr Reid, in my view, did his best to estimate a reasonable figure for a stand alone head office function at the Village. That has been discounted and the historical figures suggest a further discount to $250,000 may be warranted. The evidence does not provide a satisfactory basis upon which a confident conclusion could be reached that such an amount is just, to either Management or the plaintiffs. Profit Margin 229 Commercial good sense requires a recognition that Management only incurred the costs that it did with the expectation of benefit and income to be received in the future. Mr Kelly's assessment of a 15% "mark up" seems to me to be too low. I accept that if the costs had been recovered by Management annually, together with an appropriate profit margin, such profit margin would be within the range 15% to 25%. When one takes into account the interest rates that have prevailed over the years in question (Ex 12 table 5) and the need to allow for an inflation component over those years 20% seems justified. Interest Rate 230 A further matter of controversy is whether the funding cost should be compounded. Management submitted that it was a classic situation for the application of the principle explained in Hungerfords & Ors v Walker & Ors (1990) 171 CLR 125. Mr McDougall QC referred me to the following portion of the judgment of Mason CJ and Wilson J at 143: The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss may arise in the form of the borrowing cost, i.e., interest payable on borrowed money or interest foregone because an existing investment is realised or reduced. 231 Although the original Agreements between the parties would have had the effect of keeping Management out of its money until the unit was sold, the formula utilized for the Deferred Management Fee does not indicate unequivocally that such amount would reflect a compounding factor. 232 The plaintiffs submitted that generally there is no power in restitutionary claims to award interest on a compounding basis unless some equitable jurisdiction is invoked. For this proposition reliance was placed upon a statement in Mason and Carter Restitution Law in Australia Butterworths (1995) at paragraph [2805]. The learned authors state that on the present state of the law in Australia, compound interest is unavailable with respect to restitutionary claims unless the equitable jurisdiction is engaged. For that proposition a portion of Mason J's judgment in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1981-1982) 149 CLR 337 at 370 - 371 was relied upon. 233 I agree with Management's submissions that this is not a claim for compound interest in the conventional sense. In this case the consideration is what is fair and reasonable remuneration in circumstances where the contract deferring the payment is unenforceable and may well give rise to the application of the principle in Hungerfords. Agreed Consideration Method 234 The agreed consideration method does not involve the dissection of the minutiae of the costs of the operation of the Village. This method advocates the adoption of the bargain of the parties at the time they entered into the Contract for the purchase of the units, which was the now unenforceable Deferred Management Fee clause in the Services Agreement. 235 Mr Kelly was cross examined in respect of the agreed consideration method as follows: Q And the point that I am putting to you is that where the agreement, in essence, is that unrecouped costs plus profit margin are to be paid for by a percentage deferred management fee? A (Witness nodded). Q Payable upon the occurrence of defined events which will occur at an undefined time in the future? A Yes. Q The risk of the adequacy of that as compensation for the unrecouped expenses and the cost of capital and profit recovery lies entirely with the service provider? A Yes. Q And what I am putting to you is that if halfway down the track, as we are, you seek to establish, in the events that we are contemplating, an alternative basis that looks at costs that have actually been incurred, the risk of which before was borne by the service provider, you are now shifting or changing that risk allocation, are you not? A No. I think I can't see that. I mean - I think both parties are still carrying a risk under both alternatives. Q Let us take an example where, unexpectedly, the cost of being able to provide services was higher than the Gandel Group had internally budgeted for? A Yes. Q Under the existing arrangement that is a risk that the Gandel Group would bear? A Yes. Q If we now, in the circumstances under contemplation, go back and look at the cost of providing services and we say, okay, there has been a high service availability factor and we charge that to the residents, that has shifted the risk of that change from the Gandel Group to the residents, hasn't it? A Yes. Q And what I want to put to you is that any attempt to assess a fair remuneration, whether by a cash flow method or by a profit or loss method or a hybrid of those two, or by a budget method, that takes account of actual now known circumstances, inevitably carries the risk of some re-allocation of risk, in the way I have just described? A Yes. Q Whereas if you look at a form of compensation which is based purely on the net present discounted value of the expected ultimate fee then, in effect, you are leaving the risk allocation where it was originally? Would you agree with that? A Yes. (Tr 344-345) 236 In submitting that I would not go beyond the terms of the bargain struck between the parties as contained in the Deferred Management Fee clause in the Services Agreement, Management relied upon Rolfe J's approach in Davis v Mortgage Acceptance Nominees Limited NSWSC 20 April 1994, unreported. 237 In that case the plaintiffs borrowed money with the intention of investing in certain horse syndicates and repaying that money. His Honour was satisfied that the plaintiffs appreciated that there was a real element of risk in making the investment which would have required the plaintiffs to repay the borrowed money from their own funds rather than from any profit or proceeds of the investment. The venture failed for reasons which his Honour found were not attributable to the defendant. The plaintiffs derived financial benefits from the investment in the form of income tax advantages, prize winnings and the proceeds of sale of the horses, the subject of the syndicates. 238 His Honour said at p 112 -113: The plaintiffs maintained their entitlement to the tax advantages, the prize money and, eventually, the proceeds of the sale of the horses. Further, they sought to enter into negotiations with (the defendant) either to have the terms of the original contract varied or for an overall settlement. In my opinion the receipt of the money for the purpose the plaintiffs required it, and the application of it to that purpose, coupled with their original promises to repay, which have not been fulfilled, makes their present refusal to repay the money borrowed unjust. They will, if ordered to repay the money with interest, retain the advantages of the benefits received. The two figures should not be set-off against each other because, insofar as there is a shortfall, it represents the risk they were, I am satisfied, prepared to undertake in entering into the syndicates. 239 His Honour was asked to calculate the liabilities for repayment in a particular way, a method which he rejected. His Honour referred to the following portion of Deane J's judgment in Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 257: In many cases, such as where the claim is for money lent or paid, the obligation to make restitution will plainly involve the obligation to pay the precise amount advanced or paid. 240 Rolfe J concluded that the ultimate result must be "just" and said at p 114: The way in which that can be achieved, on the facts of this case, is by ordering the plaintiffs to repay all money borrowed with interest at the contractually stipulated rates. 241 In reliance upon this portion of Rolfe J's judgment Management submitted that I should apply the contractually "stipulated rates" contained in clause 10, the Deferred Management Fee clause, of the Services Agreement. Clause 10 does not refer with any precision to the amounts of fees that have allegedly been "deferred". The amounts to be received under the clause would depend upon the market forces present at the time of the sale of each unit. 242 In some of the Agreements the "stipulated" fee was the equivalent of 2.5% of the original purchase price per annum for the period between the completion of the purchase and the completion of the resale, capped at an amount equivalent to 25% of the original purchase price, plus 20% of the difference between the purchase price and the resale price. It also included the selling legal costs, fees and expenses incurred by Management in the resale of the unit. The fee was payable on completion of the resale (2.5% clause). 243 In the other Agreements the "stipulated" fee was the equivalent of 3.5% of the resale price per annum for the period between the purchase and the resale capped at 35% of the resale price. To this was added the selling legal costs, fees and expenses incurred by Management on the resale of the unit. This fee was payable on completion of the resale (3.5% clause). 244 I am satisfied that the plaintiffs accepted and agreed that the Deferred Management Fee was to be paid at the time they sold their units. I am also satisfied that the prospect of the fairness of the application of this method is enhanced by reason of the fact that the other provisions of the Services Agreement are unenforceable. For instance, the sale of the plaintiffs' units are not dependent upon the prospective purchaser agreeing to sign a Services Agreement in the form of the Agreement into which the plaintiffs entered. 245 In considering what is fair and just remuneration in this case I have had regard to the fact that Management has continued to provide services to the residents of the Village, including the plaintiffs, notwithstanding (a) a number of services for which the Body Corporate agreed to pay have not been paid for by it, and (b) the enormous amount of time, and no doubt costs, that have been spent in dealing with the numerous complaints over many years. 246 The plaintiffs submitted that the agreed consideration method should not be accepted. Indeed in final written submissions (9/4/2001) the plaintiffs seemed to change their position and argue for the adoption of the cash flow method. This was a very curious development having regard to the prior reliance upon Mr Kelly's evidence which was very critical of such method. 247 These final submissions were delivered after I listed the matter in March and April 2001 and requested confirmation from the plaintiffs that they were each aware of the consequence that, if I accepted their submissions to adopt the budget method, some of them would have to pay more to Management than if I adopted, for instance, the Pollard valuation in the agreed consideration method. 248 They submitted that if the Services Agreements are unenforceable they will not have any right after the date of judgment to receive services unless there is agreement reached with Management in that respect. The plaintiffs submitted that this is an important consideration because Dr Pollard's calculations of a net present value includes a component for future services. Dr Pollard was not challenged in respect of his evidence and there does not seem to be a proper basis for this submission. 249 In any event, if I understand the submission correctly the plaintiffs fear they would be paying for future services without an entitlement to receive them. Management has offered to all residents of the Village a new personal services agreement. It seems to me that irrespective of the method I adopt in this case the parties will have to adjust their relationship accordingly if the plaintiffs intend to remain in the Village. That will require a cessation of the litigation mode of life and a return to a sensible and co-operative relationship between the parties. 250 Each of the other methods have aspects to them which cause me to conclude that it is not just to apply them. The quite critical problems identified by Mr Kelly in relation to the cash flow method persuade me to reject it. These include the absence of any apportionment of the cost to the hostel in circumstances where it is obvious that those residents obtain a benefit from the services for which the cost was incurred and the inclusion of the $850,000 over the period which was attributable to the Hostel vacancies. The hybrid method is flawed for the reasons admitted to by Mr Kelly. I could not be satisfied that its application would be just or represent fair and reasonable remuneration. 251 The budget method has the very arbitrary approach which might or might not turn out to be fair. I simply do not know, for instance, whether a figure of $250,000 or $300,000 for overheads is fair or reasonable to fix as a "just" figure in the circumstances. Other figures within this method are also arbitrary and it appears now that the method has been rejected by the plaintiffs in their latest submissions. Although I have dealt with each item as best I could in considering this method above I am not satisfied that its application would achieve a just result or fair and reasonable remuneration for Management. 252 I am comfortably satisfied that the application of the stipulated "fee" in the unenforceable Services Agreements which each of the plaintiffs agreed to pay to Management at the time of the resale of their units is just and represents fair and reasonable remuneration for Management in the circumstances of this case. 253 Those plaintiffs/cross defendants who at the time of their purchase agreed to a 2.5% clause, are to pay on a per unit basis, to Management at the time of the sale of the unit a fee equivalent to 2.5% of the original purchase price of their unit per annum between the date of completion of the purchase of the unit and the date of completion of the resale of the unit capped at 25% of the original purchase price, plus 20% of the difference between the original purchase price and the resale price. Mrs Cox is to pay this fee and the deferred Pittwater Palms fee pursuant to the Deferral Deed referred to earlier in this judgment. The fee is not to include the selling legal costs, fees and expenses. That may be the subject of a separate agreement if any plaintiff requests Management to sell the unit on their behalf. 254 Those plaintiffs/cross defendants who at the time of the purchase of their unit agreed to a 3.5% clause, are to pay on a per unit basis, to Management at the time of the sale of their unit, a fee equivalent to 3.5% of the resale price per annum for the period between the completion of the original purchase and the completion of the resale, capped at 35% of the resale price. Once again the fee is not to include the selling legal costs, fees and expenses. 255 In March and April 2001, when the matter was listed for the earlier mentioned confirmation, I raised the prospect of providing the plaintiffs with an option to elect between the two alternative applications of the agreed consideration method. Management opposed providing the plaintiffs with such option. It submitted that as this is a representative action there should not be the capacity to choose between methods as it would deprive Management of its proper remedy. 256 That submission may have some force if that is what is permitted by the election. I am of the view that it is not. The election only allows the plaintiffs a choice of paying the fee now or later. It does not allow choosing between methods. It is the application of the agreed consideration method with a mechanism to accommodate payment now or later - it is not a different method. 257 I am of the view that I should allow the plaintiffs/cross defendants the option to elect between making the payment now, according to a valuation to be made by Dr Pollard applying the 2.5% clause and 3.5% clause relevantly, or making the payment at the time of the sale of their units. 258 I order that a valuation be made, as at 30 June 2001, by Dr Pollard, or by utilising Dr Pollard's valuation method, applying the 2.5% clause and 3.5% clause relevantly and supplied to the plaintiffs' solicitors by 30 April 2001. I order that each of the plaintiffs/cross defendants make an election by notifying to Management's solicitors by 21 May, 2001 their election to pay the fee either, by 30 June 2001 on the Pollard valuation, or on the calculation as set out in paragraphs 253 and 254 of this judgment at the time of the sale of their unit. 259 I fix the matter for further mention on 25 May 2001 at 9.30 for the filing of Short Minutes of Order reflecting these findings and the respective elected positions of the plaintiffs. I will also hear argument in relation to costs should the parties not have reached agreement on a costs order. SCHEDULE A. Management Agreement Support services pursuant to clause 4A (a) Provide guidance, staff instruction and systems to assist the Live-In Administrator and Staff employed by the Management in duties of 24 hour monitoring of emergency call button service, receiving and recording of requests for maintenance of buildings and grounds of the subject land and the development thereon, supervision of security and use by occupants of the development and their authorised invitees of communal facilities of the subject land and the development thereon, generally assisting occupants of the development when requested, carrying out such other duties as the Management may assign; (b) Provide a Relief Administrator to carry out the duties of the Administrator hereinbefore referred to whilst such Administrator is on holiday or sick leave; (c) Generally to ensure that the emergency call button of the development is monitored continually 24 hours a day, to enable a staff member employed by the Management to attend promptly in response to any emergency call, render such first aid or immediate assistance as can be provided and thereafter summon such medical assistance, ambulance transport or other assistance deemed necessary; (d) Provide staff and/or contractors to repair and maintain all buildings in the development, all landscaped common areas and communal facilities and equipment contained in the development and on the subject land; (e) Provide staff and/or contractors to clean all common areas and communal facilities on the subject land and in the development; (f) Provide a qualified nurse at regular appointed times and if necessary, daily to consult with occupants of the development needing medical or other assistance to occupants as and when required by reason of illness or disability and to liaise with such occupants' doctors, to arrange specialing nursing care to use their best endeavours to gain priority for occupants of admission to suitable nursing home accommodation off-site as and when required; (g) To arrange and minute meetings of the Management of the development; (h) To conduct, manage and administer the development as a first class retirement village; (i) To apply for and maintain current any licence required by any applicable legislation in relation to the development; (j) To supervise and ensure that all proper payments due by the Management are paid by due dates including: (i) rates, taxes, fees due to any public municipal or government authority; (ii) insurance premiums for policies of insurance on all buildings, fittings and fixtures in common areas, public risk, workers compensation; (iii) all charges for electricity light power, fuel, telephone, garbage or other services supplied to common areas but excluding any payments payable directly by occupants of the development; (iv) all costs of repairs, maintenance of buildings and grounds; (v) all costs of cleaning of common areas; (vi) all salaries and allowances payable to staff employed at the development. (k) Adequate arrangements shall be made for the provision of medical home nursing services to residents, as and when required. Permanent arrangements shall be made to have a medical practitioner on call for emergencies and a Physiotherapist to visit as needed. (l) At least one (1) live-in administrator shall be resident on site such administrator to be experienced in nursing and social work. (m) All the Community Centre facilities being made available to all residents of the development . Support Services pursuant to Clause 4B (a) Meals at all reasonable cost when an occupant is suffering from illness or incapacity which prevents the occupant preparing meals or, in the case of a couple, where the person who normally prepares such meals is prevented from preparing meals. Where such occupant is able to walk unaided to the common dining room, meals shall be served there, but if such occupant is unable to walk unaided then meals shall be delivered to the occupant's unit. (b) Hairdressing service in an occupant's own unit by appointment. (c) Podiatry service in an occupant's own unit by appointment. (d) Specialised Nursing care when requested by an occupant's doctor. (e) Domiciliary services including cleaning of units within the development, cleaning of windows of units in the development, laundry of bed linen and towels. (f) On each occasion an occupant of the development requires nursing home accommodation and his/her own doctor and the Government assessment unit so certifies, the Management will use its best endeavours to gain priority for occupants of admission to suitable nursing home accommodation off-site. The Management shall; (a) give to occupiers of self-care units priority access to Hostel Units as they become available; (ii) (a) Provide a two-bed infirmary ward with bathroom, for the short-term needs of the self-care occupants as and when required. Such accommodation to be in addition to the forty-two (42) approved Hostel Units. (b) The infirmary ward being kept as such and not being used for any other purposes or use. (iii) A majority of the Hostel Units shall be occupied only by persons who have been certified by a qualified medical practitioner or social worker as being in need, due to health or other factors, of hostel accommodation and the care and supervision provided therewith. (g) Mini-bus or coach transport from and to the development to organised outings and the theatre exhibitions and the like. The Lessee Services Agreement Services within the weekly service fee structure 1. Daily A. Supply 3 nutritious wholesome meals. Breakfast Continental style. Two other meals (i) Light, 2-course meal will be available on a self-service basis in the dining-room. (ii) Full 3-course meal will be served to you in the dining room. Note: (i) Tea/coffee making facilities are also adjacent to each lounge area for your own use. (ii) Timing of meals will be determined by consultation between Residents and Management. Generally meals will be supplied in dining-room unless medical reasons require special consideration. Special diets can be catered for upon Physician's request. B. Monitoring of Emergency Call Service 24 hour monitoring service. Should you require urgent assistance, you have only to press the button conveniently located in your Apartment. C. Personal Companion Services. Limited personal needs can and will be attended to by our staff whilst you are temporarily incapacitated. 2. Weekly Servicing of Apartment - (a) Vacuum carpets, wet mop all other flooring (b) Dust walls ledges, etc. (c) Clean and disinfect: Toilet, shower, vanity unit in bathroom. (d) Clean sink, vanity top and tiles in kitchenette. Note: Lessee is expected to generally keep Apartment dusted and tidy. (e) Spot clean windows and mirrors. (f) Launder two (2) sheets, two pillowcases, two (2) towels. Note: A fully equipped laundry is available for you to attend to your other laundry requirements. 3. Periodically, as required, we will clean outside windows and perform other duties to increase your enjoyment of living at Fernbank. 4. M aintain all communal areas in the Village and supply electricity for your lighting, heating and other domestic use. 5. Generally to do all things which will create the living environment you deserve. 6. The payment of all Municipal and Metropolitan Water Sewerage and Drainage Board Rates, maintenance costs in your Apartment as well as the Village generally, replacement of your carpet when appropriate. 7. Organise social functions and gatherings for your enjoyment. Cash Flow Schedule ********************** Last Modified: 04/30/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.