WALDORF APARTMENT HOTEL v OWNERS CORPORATION SP 71623 [2009] NSWSC 882

New South Wales Supreme Court

CITATION : WALDORF APARTMENT HOTEL v OWNERS CORPORATION SP 71623 [2009] NSWSC 882

HEARING DATE(S) : 10-13 August 2009

JUDGMENT DATE : 28 August 2009

JUDGMENT OF : Bryson AJ at 1

DECISION : I give Judgment for the Defendant with costs.

CATCHWORDS : STRATA TITLES - execution of deeds - deed executed by Strata Managing Agent without complying with s238(3) of Strata Schemes Management Act and attesting date of affixing seal did not bind the Owners Corporation - CONTRACT - repudiation - Building Manager used electricity through the meter of the Owners Corporation for five years without installing its own meter and without paying - HELD repudiatory conduct termination was effective

PARTIES : Waldorf Apartment Hotel, The Entrance Pty Ltd - Plaintiff Owners Corporation Strata Plan 71623 - Defendant

FILE NUMBER(S) : SC 2543/09

COUNSEL : Mr A Whitlam QC with Mr M Izzo - Plaintiff Mr G Sirtes SC with Dr E Peden - Defendant

SOLICITORS : HWL Ebsworth Lawyers - Plaintiff Verekers Lawyers - Defendant

- 27 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRYSON AJ

Friday, 28 August 2009

2543/09 Waldorf Apartment Hotel, The Entrance Pty Ltd & ors v Owners Corporation Strata Plan 71623 JUDGMENT 1 HIS HONOUR: These proceedings relate to the affairs of the Owners Corporation of Strata Plan 71623 and the claim by the first plaintiff Waldorf Apartment Hotel, The Entrance Pty Ltd ("WAHTE") for remedies relating to the termination of the Building Management Agreement dated 13 December 2003 by which the Owners Corporation appointed WAHTE to be its building manager for an initial term of ten years. 2 Strata Plan 71623 was registered on 10 December 2003 and the Owners Corporation then came into existence. Strata Plan 71623 relates to a large part, but not all, of a building called the Waldorf on a site in The Entrance. The main entrance is accessible from the frontage to Duffys Lane and there are also frontages to Coral Street and Wilfred Barrett Drive. There are seven levels in the building. Two of them are owned by Wyong City Council and used for public parking. SP 71623 includes several parts of the ground floor and several parts of level three, including car parking spaces most of which form parts of lots which also include residential apartments, and residential apartments on levels four, five and six; and also the roof parts, of level seven. The Owners Corporation owns common property on each of these levels. 3 In all there are 108 strata lots. 103 are apartments and most or all apartments have car spaces. Lot 104 includes three spaces on the ground floor near the entrance lobby used by WAHTE in various ways; one part of 12 square metres adjacent to the entry foyer has been used as a reception area, and another part containing 44 square metres also adjacent to the foyer has been used as a breakfast room, sometimes spoken of as a restaurant. Another part comprising 18 square metres is also adjacent to the foyer. Lot 104 also includes the laundry on level 3, 12 square metres. Lot 104 does not contain a dwelling. Lots 105, 106, 107 and 108 are small areas suitable for various non-residential uses, an example being Lot 108, a display area on the Coral Street frontage. 4 The three plaintiffs are closely associated and Mr Avi Rubinstein is a director of each and the principal figure in their affairs; he speaks of these companies as part of the Waldorf Group. The second and third plaintiffs own lots in SP 71623. 5 Other strata plans also relate to parts of this building. Strata Plan 71770 relates to a number of residential units. Strata Plan 69927 relates to three shops and Strata Plan 74486 relates to a re-subdivision of four lots in SP 71623. 6 WAHTE also functions as the building manager of SP 71770. Access and management of shared facilities among strata schemes is regulated by a Strata Management Statement dated 3 November 2003 and signed by Wyong Shire Council on 18 November 2003. The Strata Management Statement provides for a committee representing each strata plan and the Council. This committee has not done very much. 7 The owners of residential units in SP 71623 can be categorised in various ways. Many are investment units, lettings and management of which are carried out by the Waldorf Group. This category included many owners who had the benefit of a rental guarantee given by the Waldorf Group when they purchased the units; but these guarantees have now expired. There are also many investor/owners who manage lettings themselves, or through other managers; and there may be some owners who live in their units. 8 In the Strata Schemes Management Act 1996 Chapter 2, Part 4 relates to Strata Managing Agents. SP 71623 has always had a strata managing agent; first a firm named Verdun Walsh the principal of which was Ms Deanne Hinton; and then from 1 September 2005 Strata Associates Pty Ltd, which has acted through its associate director Mr Anthony Kioussis. Part 4A contains provisions dealing with caretakers and others assisting in management, referred to in various ways, including (in s40A), on-site residential property manager, caretaker, building manager, resident manager. Section 40B(1) contains provisions about the manner in which a caretaker is to be appointed. The Owners Corporation sought to rely on what was said to be failure to comply with s 40B(1) but in my opinion the requirements of s 40B(1) do not relate to WAHTE's Building Management Agreement because WAHTE is not a caretaker within s 40A(1), one requirement of which is that the caretaker "is a person who is entitled to exclusive possession (whether or not jointly with another person or other persons) of a lot or common property …". There is no evidence that WAHTE has ever owned a lot, or had a lease of a lot, or had any other arrangements which entitled it (in any sense) to exclusive possession of a lot. I do not accept contentions to the effect that an arrangement between WAHTE and a resident employee to occupy a unit fulfil this requirement; necessarily some other unit owner would supply the unit and the entitlement of the employee is not an entitlement of WAHTE. In any event there is no evidence about the entitlements of a residential employee at the relevant early time, up to the first Annual General Meeting; see s 40B(a). The evidence relates to the entitlement of Mr Falzon, who was employed years later. 9 The Building Management Agreement (Exhibit A, page 201) is in purport a deed dated 13 December 2003 between the Owners Corporation and WAHTE. By clause 3(a) the Owners Corporation engages the manager for a term of ten years (with provision for extension) to "undertake the administration, caretaking, security and supervision of the Common Property and the supervision of the general repair and maintenance thereof as provided in this Deed". There are further provisions relating to the building manager's responsibilities and functions; and many related provisions. 10 I set out now some provisions in the Building Management Agreement which are referred to later. 11 Clause 6 Manager's Obligations and Reimbursement, after setting out in Clause 6.1 a number of things which the manager is to ensure provides (j) The Owners Corporation may by written notice to the Manager require that the Manager dismiss or replace any employee or agent (other than a shareholder or principal of the Manager) engaged by the Manager to discharge the Manager's responsibilities under this Agreement. The Manager shall, dismiss or replace the relevant employee as soon as possible after receipt of the notice. The Owners Corporation must act reasonably in exercising its discretion pursuant to this sub-clause; 12 Clause 6.2 is as follows: Reimbursement (a) The Owners Corporation will reimburse the Manager for all of its reasonable and proper fees and expenses incurred in carrying out the Manager's duties, including (without limitation) all overhead expenses out of pocket costs relating to cleaning materials or materials for the replacement of fittings, plant and equipment required in order for this Manager to discharge its responsibilities in terms of this Agreement, PROVIDED THAT the Manager submits claims in writing to the Owners Corporation with copies of invoices for all work done and in respect of which a claim for payment is being made and certifies that the details contained in such invoices are correct. (b) In addition to which re-imbursement the Owners' Corporation shall pay to the Manager by equal quarterly instalments the sum of $35000 per annum by way of remuneration. (c) The sum of $35000 provided in Clause 6.2(b) hereof shall be adjusted annually on the anniversary of he date of commencement of this deed by increasing the remuneration so provided by the annual increase in the Consumer Price Index (Sydney All Groups) for the year immediately preceding the date of adjustment. The review shall be based on the four published quarters immediately preceding the date of review. (d) Should the Australian Bureau of Statistics cease to publish the said Index then the parties shall agree on the index most akin to the said Index for substitution. If they cannot agree they shall refer the dispute to the Commonwealth Statistician whose determination shall be final. 13 Clause 12 provides: DEFAULT BY MANAGER The Owners Corporation may determine the appointment of the Manager under this Deed by notice in writing to the Manager if - (a) the Owners Corporation breaches the conditions of this Deed to be observed and performed by it and such breach continues for a period of thirty (30) Business Days after notice in writing has been given to the Owners Corporation by the Manager specifying the alleged breach and calling on the Owners Corporation to remedy same; or (b) The Building is wholly or substantially destroyed or damaged to such an extent that it may not be occupied for a period of at least twelve (12) months or is condemned or resumed by any competent authority. 14 In Clause 12 (a) the references to the parties are confused but the true meaning is obvious. Clause 17, "Owner of Lot 104 has managerial rights", contains curious provisions about the entitlement of the owner of Lot 104 to be appointed as manager by proprietors of lots in the building; but as WAHTE has never been the owner of Lot 104, this provision has no effect. 15 Clause 23, "Severability" is as follows: