Supreme Court New South Wales Medium Neutral Citation: Gideon Isaac Rathner v AAPC Management Limited [2019] NSWSC 125 Hearing dates: 14 February 2019 Decision date: 22 February 2019 Jurisdiction: Equity - Commercial List Before: Ball J Decision: See paragraphs [46] to [48] of this judgment Catchwords: ESTOPPEL – Estoppel by convention – Mutual assumption – Detriment – whether established as defence to claim for breach of contract RESTITUTION – Mistake – whether payments made – whether evidence of mistake RESTITUTION – Nature of restitutionary liability –unjust enrichment – whether misrepresentation as basis for claim for money had and received Legislation Cited: Australian Consumer Law Cases Cited: Miller Heiman Pty Ltd v Sales Principles Pty Ltd [2017] NSWCA 106 Moratic Pty Ltd v Lawrence James Gordon & Anor [2007] NSWSC 5 Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65 Category: Principal judgment Parties: Gideon Isaac Rathner (in his capacity as Liquidator of Eye Plantain Pty Limited (In Liquidation) (ACN 118 075 237) (Plaintiff) AAPC Management Limited (ACN 086 453 205) (First Defendant) APVC Holdings Pty Ltd (ACN 092 447 955) (Second Defendant) Representation: Counsel: K Knights (Plaintiff) M Jareith (Defendants) Solicitors: Goldsmiths Lawyers (Plaintiff) Webb Henderson (Defendants) File Number(s): 2017/228651 Publication restriction: None Judgment Introduction 1. In these proceedings the plaintiff, Mr Rathner (the Liquidator), in his capacity as liquidator of Eye Plantain Pty Limited (In Liquidation) (Eye Plantain), seeks to recover amounts said to have been overpaid by Eye Plantain to the defendants in respect of electricity charges payable in respect of the Conference Facilities at the Sebel Manly Beach (the Hotel). The total amount claimed from the first defendant, AAPC Management Limited (AAPC), is $103,950. The total amount claimed from the second defendant, APVC Holdings Pty Ltd (APVC) is $33,745. 2. The proceedings were originally commenced in the District Court but were transferred to this Court at a time when the District Court did not have jurisdiction to hear them. Background 1. On 11 May 2006, AAPC (then known as Mirvac Management Limited) and South Steyne Hotel Pty Ltd (South Steyne), then the owner of Lots 3, 4, 6, 7 and 53 in Strata Plan 76027 (the Conference Lots), which formed part of the Hotel, entered into a Conference Facilities Agreement (the CFA) by which South Steyne granted AAPC a licence to use and to occupy the "Conference Facilities", which were defined in the agreement to mean "the conference facilities within or immediately adjacent to the Conference Lots (including the beachside balcony and the poolside deck)" for a term of 80 years. 2. Clause 1.3 of the CFA provides: Operating costs and cleaning 1.3 The Owner is responsible, and must pay, for: 1.3.1 all utility services (including electricity, gas and water) relating to the Conference Facilities; and 1.3.2 any maintenance materials used for the Conference Lots. 1. Clause 3.1 of the CFA provides: Payments to the Owner 3.1 In consideration of the rights granted to the Hotel Operator under this document, the Hotel Operator must: 3.1.1 calculate the Monthly Fees for each month; 3.1.2 create a recipient created tax invoice in respect of the Monthly Fees showing reasonable details of the conferences and events to which the tax invoice relates; and 3.1.3 pay the Monthly Fees for the relevant month to the Owner within 21 days after the end of that month. 1. "Monthly Fees" is defined in cl 13.1 as "the monthly amount payable by the Hotel Operator [that is, AAPC] to the Owner [South Steyne] calculated in accordance with Schedule 1". Schedule 1 contains the following words under the hearing "Monthly Fees": The amount payable by the Hotel Operator to the Owner each month will be the Gross Revenue for the month less the Hotel Operator's commission equal to 30% of the Gross Revenue. 1. "Gross Revenue" is defined in cl 13.1 to mean "… in respect of a period, all income of the Hotel Operator during the period for room hire of the Conference Facilities, less the amount of the GST liability of the Hotel Operator in relation to such income". 2. By a deed poll dated 13 December 2006, Eye Plantain agreed to comply with all South Steyne's obligations under the CFA. On or about 12 October 2007, South Steyne transferred ownership of the Conference Lots to Eye Plantain. 3. Although cl 1.3 provides that "the Owner is responsible, and must pay, for all utility services", that is not in fact what happened in the case of electricity. Instead, the electricity supply to the Hotel including the Conference Facilities was arranged and paid for by AAPC. From at least 2007 to 12 September 2014, Eye Plantain prepared and issued invoices for the Monthly Fees payable under the CFA. Each of those monthly invoices showed a deduction in respect of "utilities" of $1,650 and AAPC paid those invoices. How a deduction for that amount came to be made is not apparent from the evidence, but it is common ground that the deduction covered the cost of the supply of electricity to the Conference Facilities. 4. In the case of gas, water and sewerage, the fees for those services were paid for by the body corporate and the body corporate charged individual lot owners (including Eye Plantain) a proportion of the fees it paid calculated by reference to the interest each individual lot owner held in the strata plan. On that basis, Eye Plantain paid 1.71 per cent of the total fees charged for those services. 5. In September 2014, Keybridge Capital Limited, as mortgagee, took possession of the Hotel including possession of the Conference Lots. 6. On 15 October 2014, Keybridge issued an invoice to AAPC for a proportion of the Monthly Fee for the period 13 to 30 September 2014. That invoice did not record any deduction for utilities. 7. On 3 November 2014, Ms Mie Mie Kyaw on behalf of AAPC sent to Keybridge by email a "Conference Room Reconciliation for Oct 14" together with an invoice that had previously been issued by Eye Plantain. The covering email said: I have also attached the invoice from previous owner in case if you like to invoice us in similar way. 1. Keybridge sent AAPC a further invoice on 4 November 2014. Again, that invoice did not make any deduction for utilities. However, subsequent invoices issued by Keybridge between December 2014 and May 2015 did so. 2. On 14 May 2015, Mr Rathner was appointed as voluntary administrator of Eye Plantain and on 18 June 2015 he was appointed as liquidator. 3. On 6 July 2015, the Liquidator wrote to AAPC asking for recipient created tax invoices for April, May and June 2015 in accordance with cl 3.1.2 of the CFA. Following that request, AAPC sent recipient created tax invoices for the period 30 April 2015 to 17 October 2016 showing a deduction of $1,650 (including GST) for "Utilities". 4. On 11 April 2016, the Liquidator sent an email to AAPC asking for the "actual expenses" for the Conference Facilities for the financial years 2010 to 2015 and the period 1 July 2015 to 31 March 2016 by 14 April 2016. AAPC did not reply to that request. 5. On 15 September 2016, Katz Lawyers, who by that stage acted for the Liquidator, wrote to AAPC specifically asking AAPC to justify the deduction for utilities and threatening to commence court proceedings if the material previously requested by the Liquidator was not supplied. 6. On 18 October 2016, AAPC, in accordance with the terms of the CFA assigned its rights and obligations under the CFA to APVC, a related company. Following that assignment, APVC continued to issue recipient created tax invoices for the Monthly Fees showing a deduction for "Utilities" of $1,650. 7. The Liquidator commenced these proceedings in the District Court on 27 July 2017. The issues 1. The Liquidator put his case in various ways, not all of which are easy to understand. In substance, he advances four reasons why he should be entitled to recover the utilities fees deducted from the Monthly Fees from 1 July 2011. He accepts that any claim to recover the deducted utilities fees before that date is statute barred. 2. First, the Liquidator contends that the money claimed was paid as a result of a mistake and that he is entitled to recover it as money had and received. 3. Second, he contends that in the case of the recipient created tax invoices, the money was paid as a consequence of misrepresentations made by AAPC and APVC and that as a result he is entitled to recover the amount deducted from the invoices as money had and received. 4. Third, the Liquidator claims that AAPC and APVC have been unjustly enriched to the extent that the amount deducted was more than the reasonable costs for the electricity. In his submission, the reasonable cost of the electricity should be calculated or estimated in the same way as the amount paid by Eye Plantain for other utilities – that is, 1.71 per cent of the electricity charges paid by AAPC and APVC in respect of the Hotel. 5. Fourth, the Liquidator contends that AAPC and APVC were in breach of the CFA by not paying the Monthly Fees in accordance with the agreement but instead deducting from the Monthly Fees an amount in respect of utilities – specifically, electricity. Mistaken Payments 1. A fundamental difficulty with the claim based on mistaken payments is that there was no payment by Eye Plantain of the amount claimed. Rather, AAPC and APVC deducted the amount claimed from amounts otherwise payable by them. That provides a complete answer to any claim based on what are said to be mistaken payments. 2. Moreover, there is no evidence of a mistake. Up until the time that the Liquidator requested recipient created tax invoices, the relevant invoices were issued by Eye Plantain. Eye Plantain made the deduction of $1,650. There is no evidence that it did so as a result of any mistake on its part. 3. The Liquidator submits that it can be inferred that Eye Plantain made a mistake because it was not rational for it to pay more than a reasonable price for electricity supplied to the Conference Facilities and the evidence was that the amount that was charged was well in excess of a reasonable price for what was supplied. 4. In my opinion, that inference cannot be drawn. Eye Plantain was responsible for and had to pay electricity charges supplied to the Conference Facilities. Presumably, it could have arranged for its own supply of electricity which was separately metred. It appears instead to have paid a fixed fee to AAPC over an extended period of time for electricity. Even assuming that fixed fee was more than the amount that would have been charged for electricity if it had arranged for its own supply during the period it paid the fixed fee, it does not follow the amount was excessive when compared with the cost of arranging its own supply. Nor does it follow that Eye Plantain deducted the money as a result of a mistake. It may have been content to pay a fixed fee because of the convenience. 5. For those reasons the claim based on mistaken payments cannot succeed. Misrepresentations 1. The case based on misrepresentations is confused. 2. In his Amended Statement of Claim, the Liquidator pleads that by issuing the recipient created tax invoices both AAPC and APVC represented that "the sum of $1,650.00 was a reasonable estimate of the "Utilities" expense incurred by [them] … in relation to the Conference Lots" and that accordingly "Eye Plantain as Owner of the Conference Lots, was contractually bound to pay the $1,650.00 Monthly Deductions". That is somehow or another said to give rise to an action for money had and received. No relief is claimed under the Australian Consumer Law or any other law relating to misleading and deceptive conduct. 3. No attempt was made to explain how misleading and deceptive conduct gave rise to an action for money had and received. 4. In my opinion, in this context, no representation arises from the deduction of $1,650, which was described in the invoices as a deduction for "Utilities". By issuing invoices with those deductions, all AAPC and APVC did, to the knowledge of the Liquidator, was follow the procedure previously adopted by Eye Plantain. No representation can arise from the adoption of a practice that Eye Plantain itself had followed. 5. Moreover, there is no evidence that the Liquidator relied on any representation made by the invoices. On the contrary, the Liquidator did not accept the invoices on their face and sought information that supported the deduction. When he did not get that information, he commenced proceedings to recover the difference between the Monthly Fees owing by AAPC and APVC and the amount they paid. Unjust enrichment 1. It is very difficult to follow the Liquidator's claim based on unjust enrichment. He pleads that a reasonable estimate for the electricity charges payable by Eye Plantain is that proportion of the total electricity costs that corresponds to the proportion that the Conference Lots bear to the total number of lots in the strata development comprising the Hotel – that is, 1.71 per cent. He then pleads that in the event that that amount is to be deducted from the $1,650, "the amount by which the Defendants are unjustly enriched and Eye Plantain has suffered loss and damage by reason of the Defendants having the use of those amounts" is the difference between the total amount claimed less the amount calculated as 1.71 per cent of the total electricity charges. 2. That claim, however, is incoherent. Unjust enrichment itself is not a cause of action and it is difficult to understand how it can be said that the Liquidator is entitled to advance the claim he does. On the assumption that he is entitled to recover the amount withheld by AAPC and APVC from the Monthly Fees, it may be that AAPC and APVC would have some restitutionary claim against Eye Plantain for the money it paid on its behalf; and there would then be a question of how that amount was to be calculated. However, no such claim is advanced by AAPC or APVC. The Contractual Claim 1. There is more force in the Liquidator's contractual claim. Under the terms of the CFA, Eye Plantain and the Liquidator were entitled to be paid the Monthly Fees. To the extent that there has been a shortfall in the amounts payable, in the normal course of events, the Liquidator would be entitled to recover that shortfall as a debt due under the contract. 2. In answer to that claim, AAPC and APVC rely on a conventional estoppel arising from the conduct of the parties. 3. Brereton J set out the requirements of a conventional estoppel in Moratic Pty Ltd v Lawrence James Gordon & anor [2007] NSWSC 5 at [32] in these terms: In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff … That statement of the law has been approved by the Court of Appeal: Miller Heiman Pty Ltd v Sales Principles Pty Ltd [2017] NSWCA 106 at [42]; Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65 at [200]. 1. In my opinion, each of the requirements identified by Brereton J was satisfied in this case as between AAPC and Eye Plantain. There can be no doubt that each of AAPC and Eye Plantain assumed that AAPC was entitled to deduct $1,650 from the Monthly Fees payable by it to reimburse it for the electricity fees that were payable by Eye Plantain under the contract and each party conducted their relationship on that basis. In conducting their relationship on that basis, each must have intended the other would do so. Departure from that assumption now would cause AAPC at least two types of detriment. First, AAPC would have to make a lump sum payment in respect of the Monthly Fees now said to have been under-paid by it, instead of paying the amount claimed over a number of years. In Moratic Pty Ltd v Lawrence James Gordon & Anor [2007] NSWSC 5 at [41], Brereton J accepted that an obligation to make a payment in a lump sum rather than over a period of time was sufficient to constitute a detriment for the purposes of estoppel by convention. 2. Second, AAPC may have lost its rights to recover damages arising from Eye Plantain's failure to comply with cl 1.3 of the CFA. AAPC has now assigned its rights under the CFA to APVC. It is doubtful that that assignment only operated prospectively. However, even if it did, Eye Plantain is now in liquidation. It is unclear what rights AAPC would have to recover damages for past breaches of cl 1.3. It may be that AAPC has a right of set-off against the amount claimed from it. But those rights of set-off have not been pursued, presumably on the basis of the conventional estoppel. 3. It follows that AAPC is entitled to succeed in its defence based on a conventional estoppel. 4. On the other hand, in my opinion APVC is not entitled to rely on a conventional estoppel. That is because APVC and Eye Plantain did not conduct their relationship on the basis of the convention. APVC sought to continue the convention that had applied between AAPC and Eye Plantain. However, at the time of the assignment, it was plain that the Liquidator did not accept the convention and wanted information supporting the deduction. No reason was advanced for why the convention that had been applied between AAPC and Eye Plantain continued to apply between APVC and the Liquidator. 5. As I have said, APVC may have a claim for restitution against the Liquidator or a claim for breach of contract arising from the fact that in breach of cl 1.3 Eye Plantain has not taken responsibility and paid for the electricity supply to the Conference Facilities. However, no claim of that type was brought by APVC. Conclusion and orders 1. It follows that the claim against AAPC must be dismissed and that the Liquidator is entitled to judgment in the sum of $33,745 against APVC together with interest on that amount. 2. That leaves the question of costs. The Liquidator has been partially but not wholly successful. My tentative view is that having regard to the success enjoyed by AAPC, the appropriate order in relation to costs is to order that each party bear his or its own costs. However, if costs cannot be agreed, the parties should be given an opportunity to make submissions in relation to costs before any order is made. 3. The orders of the Court therefore are: 1. The parties are directed to bring in short minutes of order within 14 days of today's date giving effect to this judgment and dealing with the question of costs if costs can be agreed. 2. If the parties cannot reach agreement on the terms of the short minutes of order (including costs), the matter should be relisted by contacting my Associate. ********** 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. Decision last updated: 22 February 2019