Strata Plan 67246 v Oaks Hotels & Resorts (NSW) No.1 Pty Ltd [2017] NSWSC 299

Supreme Court New South Wales

Medium Neutral Citation: Strata Plan 67246 v Oaks Hotels & Resorts (NSW) No.1 Pty Ltd [2017] NSWSC 299 Hearing dates: 20, 21, 22, 23, 27 March 2017 Date of orders: 27 March 2017 Decision date: 27 March 2017 Before: Hammerschlag J Decision: Declaration as to breach of contract. Verdict for the plaintiff in the amount of $3,400. Catchwords: CONTRACT – Breach of contract where no damage is established – appropriateness of making a declaration of breach – assessment of nominal damages. Legislation Cited: Civil Procedure Act 2005 (NSW) Category: Principal judgment Parties: Strata Plan 67246 - Plaintiff Oaks Hotels & Resorts (NSW) No. 1 Pty Ltd - First Defendant Oaks Hotels & Resorts (NSW) No. 2 Pty Ltd - Second Defendant Representation: Counsel: A.J. Greinke - Plaintiff J.K. Kirk SC with R.A. Yezerski - Defendants

Solicitors: Auyeung Hencent & Day - Plaintiff Corrs Chambers Westgarth - Defendants File Number(s): 2013/212796 Publication restriction: Nil

ex tempore Judgment 1. HIS HONOUR: Maestri Towers comprises two 26 storey strata apartment buildings which stand on the block at 298 – 304 Sussex St, in the City of Sydney. One of them, the Sussex Tower, fronts Sussex and Bathurst Streets and has 275 apartments. The other, the Kent Tower, fronts Kent St and has 84 apartments. The plaintiff (the Owners) is the owners corporation. 2. From December 2005 until December 2012, the first defendant (Oaks 1) was the caretaker for Maestri Towers pursuant to a written Caretaker Agreement with the Owners. 3. The Caretaker Agreement was originally made on 19 February 2002 between the Owners and the Oaks Apartment Management Pty Ltd. On 16 April 2002, it was assigned to Centrepoint Holdings Pty Ltd, and on 20 December 2005 Centrepoint assigned it to Oaks 1. 4. Oaks 1 and the second defendant (Oaks 2) are wholly owned subsidiaries of Oaks Hotels and Resorts Limited, which holds itself out as one of Australia's largest hotel and resort operators. At all material times, Mr Brett Pointon was the chief executive officer of the holding company and a director of both Oaks 1 and Oaks 2. 5. The Caretaker Agreement contemplated that the caretaker would perform certain sales and letting functions in respect of individual apartments at Maestri Towers. These functions were performed by Oaks 2. 6. In addition to the Caretaker Agreement, under a written Licence Agreement dated 7 February 2005, the Owners granted to Oaks 1 a licence to occupy a designated Licence Area of 63 square metres which comprised part of the mail room and part of the community games room in the Sussex Tower. 7. The development approval for the Sussex Tower prohibited the use of the residential apartments as a hotel or serviced apartments, except for 24 lots which could lawfully be used for serviced apartments. The approval for those 24 lots was revoked on 9 February 2010. The development approval for the Kent Tower prohibited the use of the accommodation portion of the building (levels 5 – 26) as a hotel or serviced apartments. 8. Notwithstanding these prohibitions, from at least 2006 until the end of 2012, Oaks 2 conducted a business operating hotel-style serviced apartments in apartments which could not lawfully be used for that purpose. There is no evidence of any formal arrangement between Oaks 1 and Oaks 2. However, they had the same controlling minds, and it is safe to infer that Oaks 2 conducted the serviced apartments business with the cooperation and assistance of Oaks 1. 9. In 2009, the City of Sydney commenced proceedings against Oaks 2 in the Land and Environment Court. Not long thereafter, Oaks 2 applied for development consent to use 142 apartments as serviced apartments. This application was declined on 5 February 2010. Oaks 2 appealed this decision but on 1 March 2011 its appeal was dismissed. On 30 September 2011, the Land and Environment Court gave judgment finding that Oaks 2 had breached development approvals by operating its serviced apartments business. Final injunctive orders were made by that Court on 7 December 2011. The Owners terminated the Caretaker Agreement on 29 August 2012, and Oaks 1 and 2 left Maestri Towers in November 2012. These proceedings were commenced on 12 July 2013. 10. It is not in dispute that Oaks 1 was under an implied obligation to comply with applicable local government planning instruments in exercising its rights and performing its obligations under the Caretaker Agreement. Oaks 1, as I think it was compelled to do, admits that it breached that obligation. Oaks 1 first admitted breach in its amended Commercial List Response filed on 1 September 2014. 11. In the course of its serviced apartments business, Oaks 2 made use of areas of the common property, including a combined office and baggage room adjoining the Sussex Tower foyer and part of the community games room and a storeroom, both in the basement. At no time did the Owners grant Oaks 2 any lease or formal licence to occupy common property. 12. In these proceedings, the Owners sued Oaks 1 for damages for breach of the Caretaker Agreement; Oaks 2 for intentionally inducing Oaks 1 to breach the Caretaker Agreement; and both Oaks 1 and 2 for damages for trespass to the common property. 13. As to contract, the Owners asserted that it suffered loss by the breach by Oaks 1 of the Caretaker Agreement because the running of Maestri Towers as, in effect, a hotel, caused excessive use of the lifts with resultant excessive wear and tear and increased electricity consumption (both in respect of the lifts and as a consequence of the use of the common areas). It claimed various other heads of damage which it abandoned early in the hearing. It also abandoned a claim for exemplary damages and the claim against Oaks 2 for allegedly inducing Oaks 1 to breach. 14. As to trespass, the Owners claimed compensation for the alleged unauthorised use by Oaks 2 of the common property. 15. As the hearing progressed, it became clear that the Owners' position was untenable. It could not establish that it suffered any loss, let alone any attributable to the serviced apartments business. It also could not establish that the common property would have been differently used had the alleged trespass not occurred. Moreover, it is clear that whatever Oaks 2 did, it did with the implicit, if not explicit, consent of the Owners (admittedly under the stewardship of an executive committee differently constituted from its present one). 16. Indeed, the Owners never brought proceedings against Oaks 2. This was left for the local authority to do at the urging of residents apparently, in particular, Dr Michael Heaney, who acquired an apartment in 2007 and unwittingly found himself living in a hotel. His annoyance at this, especially given that the hotel was being operated contrary to the laws of the land, was entirely understandable. 17. This morning, after a valiant effort, counsel for the Owners candidly and appropriately conceded that the Owners had failed to make their case, with the consequence that the Owners are restricted to a damages verdict in a nominal sum for breach of the Caretaker Agreement. 18. As at February 2010, Oaks 2 had an average inventory of about 170 apartments. To my mind, an appropriate nominal figure for Oaks 1 to pay for the breach is $20 per apartment. There will accordingly be a verdict for the Owners in the amount of $3,400. 19. Section 90(1) of the Civil Procedure Act 2005 (NSW) provides: The Court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such order as the nature of the case requires. 1. Although the Owners did not in their Summons include a prayer for a declaration of breach by Oaks 1 of the Caretaker Agreement, I consider that the nature of this case requires, to mark the Court's disapproval of the clear and persistent breach by Oaks 1, the making of a declaration. Counsel for Oaks 1 correctly did not contest the appropriateness of making such a declaration. The parties agreed on the form of the declaration to be made. 2. The orders of the Court will be: 1. The Court declares that on or around 13 July 2007 until on or around 29 August 2012, Oaks Hotels and Resorts (NSW) No 1 Pty Ltd breached the Caretaker Agreement with the plaintiff dated 19 February 2002 by breaching, or permitting the breach, of the planning laws of this State as they apply to the property known as Maestri Towers (298 – 304 Sussex Street, Sydney). 2. The first defendant, Oaks Hotels and Resorts (NSW), is to pay nominal damages to the plaintiff in the amount of $3,400. 3. The Amended Summons is otherwise dismissed.