REALM PROPERTY MANAGEMENT PTY LTD v COMMUNITY CORPORATION NO 42055 INC [2025] SASC 172

First Applicant: REALM PROPERTY MANAGEMENT PTY LTD Counsel: MR R WHITINGTON KC WITH MR T KENTISH - Solicitor: GRIFFINS LAWYERS Second Applicant: EKLIPSE CAPITAL PTY LTD (IN LIQUIDATION) No Attendance Second Respondent: COMMUNITY CORPORATION NO 42055 INC Counsel: MR T DUGGAN KC WITH MR E BELPERIO - Solicitor: PIPER ALDERMAN Hearing Date/s: 19/02/2024 to 21/02/2024, 28/02/2024, 17/12/2024 to 20/12/2024, 21/02/2025 File No/s: CIV-22-001951 B SUPREME COURT OF SOUTH AUSTRALIA (Civil) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment. The onus remains on any person using material in the judgment 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 in which it was generated. REALM PROPERTY MANAGEMENT PTY LTD & ANOR v COMMUNITY CORPORATION NO 42055 INC [2025] SASC 172 Judgment of the Honourable Justice Kimber 21 October 2025 EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY - ACCOUNT FOR BENEFITS GAINED EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY - DISCLOSURE EQUITY - EQUITABLE REMEDIES - EQUITABLE COMPENSATION - BREACH OF FIDUCIARY OBLIGATIONS EQUITY - EQUITABLE REMEDIES - RESCISSION - BREACH OF FIDUCIARY OBLIGATIONS CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - DUTIES AND LIABILITIES OF AGENT TO PRINCIPAL - DUTIES AND LIABILITIES ARISING OUT OF FIDUCIARY CHARACTER OF RELATIONSHIP - CONFLICT BETWEEN DUTY AND INTEREST - RECEIPT BY AGENT OF SECRET PROFITS AND BRIBES CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - DUTIES AND LIABILITIES OF AGENT TO PRINCIPAL - DUTIES AND LIABILITIES ARISING OUT OF FIDUCIARY CHARACTER OF RELATIONSHIP - CONFLICT BETWEEN DUTY AND INTEREST - STATUTORY PROVISIONS RELATING TO SECRET COMMISSIONS -- 1 of 119 -- These proceedings relate to a building in Austin Street, Adelaide known as the Realm Building (the Realm Building). Eklipse Capital Pty Ltd (now in liquidation) (Eklipse or the second applicant) was the developer of the Realm Building. The proceedings were commenced by the first applicant, Realm Property Management Pty Ltd (RPM or the first applicant), and Eklipse to restrain two community corporations from amending their respective by-laws (the amended by-laws) to prohibit the letting of apartments in the Realm Building for periods of less than two months (short-term letting). The two community corporations are the first respondent, Community Corporation No 42054 Inc (the Low-Rise Corporation or LRC), and the second respondent, Community Corporation No 42055 Inc (the High-Rise Corporation or HRC). Before trial, and with respect to the second respondent, a motion to amend the by-laws to prohibit short-term letting was passed. However, subject to any contrary order made in these proceedings, the second respondent is restrained from acting on the amended by-laws. With respect to the first respondent, the proceedings involving it have been discontinued. The second applicant did not appear at trial. Default judgment was entered against the second applicant in respect of its statement of claim. RPM seeks an order that the second respondent continue to be restrained from acting on its amended by-laws on the grounds that to do so will be in breach of contract and/or unlawfully interfering with contractual relations. For its part, the second respondent seeks a declaration that the by-laws before the amendment (the existing by-laws) are invalid to the extent that they permit short-term letting and resists any order that might restrain it from acting on its amended by-laws. During the developer control period for the Realm Building, and when Eklipse held all the lots in the Realm Building, Eklipse caused the second respondent to enter into certain Letting and Caretaking Agreements with RPM (the agreements) and ensured that the by-laws of the second respondent would permit short-term letting. The agreements were for an effective period of 25 years. The second respondent contends that, at least in part in return for the foregoing, Eklipse was paid a procurement sum, the payment of which was not disclosed to the second respondent. The second respondent contends that the procurement sum was a ‘secret commission’ and contends that entitles the second respondent to recission of the agreements between it and RPM and/or to the procurement sum. In addition, the second respondent alleges that by accepting the procurement sum, and in other ways, Eklipse breached both its statutory duty to the second respondent and the no conflict and/or no profit rule/duty. The second respondent alleges that one or both of those breaches entitle it to an order that the agreements be rescinded. The second respondent further alleges that when Eklipse acted in breach of its duty to the second respondent, RPM knowingly procured that breach and/or knowingly participated in a fraudulent and dishonest design by Eklipse. On that basis, the second respondent also contends that it is entitled to recission of the agreements. Held, inter alia: 1. The application of the second respondent for a declaration that its existing by-laws prohibit short-term letting is refused. 2. The application of the second respondent for a declaration that the existing by-laws are invalid to the extent that they permit short-term letting is refused. 3. The application of the second respondent for an order pursuant to s 142 of the Community Titles Act 1996 (SA) that the agreements between it and the first applicant be varied, avoided or terminated is refused. 4. The application of the second respondent that the agreements between it and the first applicant be rescinded is refused. 5. The first applicant paid a secret commission to the second applicant. As a result, the second respondent is entitled to an order that the benefit obtained by the second applicant because of the receipt of that secret commission be accounted to the second respondent. The first applicant and the second applicant are jointly and severally liable for that benefit. However, -- 2 of 119 -- on the evidence and submissions to date, the precise sum to which the second respondent is entitled cannot be determined as it is not the whole of the procurement sum. Further submissions, at least, will be needed before that sum may be determined. 6. The application of the first applicant for an order that the second applicant continue to be restrained from acting upon its the amended by-laws is refused. 7. The parties will be heard as to any further orders which may be appropriate. Community Titles Act 1996 (SA) ss 3, 7, 11, 13, 14, 30, 34, 41, 47, 49, 71, 75, 76, 78A, 79, 80, 89, 90, 92, 93, 94, 95, 142, 142B, referred to. Aequitas v AEFC [2001] NSWSC 14; Allianz Australia Insurance Ltd v Delor Vue Apartments (2022) 277 CLR 445; Attorney-General v Reid [1994] 1 AC 324; Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509; Barnes v Addy (1874) LR 9 Ch App 224; Breen v Williams (1995-1996) 186 CLR 71; Boardman v Phipps [1967] 2 AC 46 ; BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266; Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd [2020] NSWSC 1778 ; Cartwright v MacCormack Trafalgar Insurance Co Ltd [1963] 1 WLR 18; Chan v Zachariah (1984) 154 CLR 178; Elders Trustee v EG Reeves (1987) 78 ALR 193; Farah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd (2007) 230 CLR 89; Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd [2002] FCA 1156; Grimaldi v Chameleon Mining (No 2) (2012) 200 FCR 296; Gwembe Valley Development Co Ltd v Koshy (No 3) [2003] EWCA Civ 1048; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310; Industries & General Mortgage Co Ltd v Lewis [1949] 2 All ER 573; Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance in Hopcraft & Anor v Close Brothers Limited & Ors [2025] UKSC 33; Mahesan S/O Thambiah v Malaysia Government Officers’ Cooperative Housing Society [1979] AC 374; Murad v Al-Saraj [2005] EWCA Civ 959; Neat Holdings v Karajan Holdings (1992) 110 ALR 449; O’Keefe v Williams (1910) 11 CLR 171; Regal (Hastings) Ltd v Gulliver [1967] 2 AC 137; South Steyne Hotel Pty Ltd v Commissioner of Taxation [2009] FCA 13; Swindle v Harrison [1997] 4 All ER 705 ; Tang Man Sit (Deceased) v Capacious Investments Ltd [1996] AC 514; Williams v Hursey (1959) 103 CLR 30, applied. Community Association DP No. 270180 v Arrow Asset Management Pty Ltd [2007] NSWSC 527; Daraydan Holdings Ltd & Ors v Solland International Ltd & Ors [2004] EWHC 622; Grant v The Gold Exploration and Development Syndicate Ltd [1900] 1 QB 233; Great Investments Ltd v Warner (2016) 243 FCR 516; Industries & General Mortgage Co Ltd v Lewis [1949] All ER 573; Meriton Apartments Pty Ltd v The Owners Strata Plan No. 72381 [2015] NSWSC 202; Taheri v Vitek (2014) 87 NSWLR 403; Vic Beef Holdings Pty Ltd v Chen [2021] VSC 546, distinguished. Deputy Commissioner of Taxation v Clark (2003) 57 NSWLR 113; Griggs v Noris Group of Companies (Including SA Helicopters Pty Ltd and Captured Pty Ltd) (2006) 94 SASR 126; Howard v Federal Commissioner of Taxation (2014) 253 CLR 83; Lumley v Gye (1853) 118 ER 749; Pilmer & Ors v Duke Group Ltd (in liq) & Ors (2001) 207 CLR 165; Ultra Tune Australia Pty Ltd v McCann (1999) 30 ACSR 651, considered. -- 3 of 119 -- -- 4 of 119 -- REALM PROPERTY MANAGEMENT PTY LTD & ANOR v COMMUNITY CORPORATION NO 42055 INC [2025] SASC 172 Civil KIMBER J: Introduction/background .................................................................................... 4 The Realm Building ............................................................................................. 5 The marketing of the Building .......................................................................... 6 Documents deposited pursuant to the CT Act .................................................. 7 The meeting on 1 July 2020 .............................................................................. 8 An overview of the agreements ....................................................................... 10 The Procurement Agreement ........................................................................ 11 The resolution of the HRC on 23 December 2022 ......................................... 12 Short-term letting .............................................................................................. 12 The first issue: is short-term letting already prohibited? ............................... 12 The way the Realm Building was promoted and the indicative by-laws....... 13 The indicative scheme documents ................................................................. 13 The discretion reserved to Eklipse to amend the indicative documents ....... 14 The existing by-laws – cl 28.1 ....................................................................... 16 The amended by-laws ...................................................................................... 16 The contentions of the second respondent ....................................................... 16 The first contention ......................................................................................... 16 The second contention – is the existing by-law invalid? ................................ 18 The CT Act .................................................................................................... 18 Discussion ..................................................................................................... 19 The second issue – was the meeting on 1 July 2020 a meeting held in pursuance of s 79(1) of the CT Act such that the resolution passed has no cause and effect?........................................................................................................... 22 Characterisation of the meeting on 1 July 2020 ............................................ 22 Section 79 of the CT Act .................................................................................. 22 The meeting on 1 July 2020 – not ‘the first statutory meeting’ ..................... 23 Division 1 and Division 3 of the CT Act ......................................................... 24 Division 1 of Part 9 .......................................................................................... 25 Division 3 of Part 9 .......................................................................................... 26 Further discussion ........................................................................................... 28 Conclusion ....................................................................................................... 29 The statutory duty – s 142B of the CT Act ...................................................... 30 Further background to the entry into the agreements ................................... 31 The initial involvement of Imagine Hotels and Resorts before RPM ........... 31 The involvement of Mr Song and RPM .......................................................... 32 The zoom teleconference on 9 April 2020 ...................................................... 35 Events after 9 April 2020................................................................................. 35 Due diligence ................................................................................................... 37 -- 5 of 119 -- [2025] SASC 172 Kimber J 2 The Due Diligence Report............................................................................. 37 Mr Song was aware of a risk of the agreements being set aside .................. 45 Communications about the provision of only indicative by-laws to purchasers .......................................................................................................................... 45 The initial Procurement Agreement ............................................................... 47 Advice about planning ..................................................................................... 47 Other events before 1 July 2020 ...................................................................... 50 The meeting on 1 July 2020 ............................................................................ 52 The duration of the Caretaking and Letting Agreements .............................. 52 Other key terms of the Letting Agreement .................................................... 52 Other key terms in the Caretaking Agreement .............................................. 53 2 July 2020 – 21 August 2020 ......................................................................... 53 Did Eklipse breach its fiduciary duty? ............................................................ 57 Eklipse was in a fiduciary relationship with the HRC ................................... 57 Section 142B – the statutory duty..................................................................... 59 The submissions about breach of the no profit and no conflict rules ........... 59 Consideration................................................................................................... 61 The first alleged breach ................................................................................ 61 The second alleged breach............................................................................ 63 The third alleged breach ............................................................................... 65 Summary of findings about breach of fiduciary duty .................................... 65 Did Eklipse also breach the statutory duty? ................................................... 66 The remedies for the breach of fiduciary duty and of s 142B(2) by Eklipse 66 Breaches of fiduciary duty – general law ....................................................... 66 Breaches of s 142B(2) ..................................................................................... 67 Section 142 of the CT Act ................................................................................ 67 The submissions............................................................................................... 68 Consideration................................................................................................... 69 Recission of the Caretaking and Letting Agreements without payment of a secret commission; without knowing assistance in a dishonest and fraudulent design; or without inducing or procuring a breach of fiduciary duty .......... 70 Eklipse – Fraudulent and dishonest design ..................................................... 70 The first matter ................................................................................................ 71 The second matter............................................................................................ 72 The third matter ............................................................................................... 72 The fourth matter ............................................................................................ 73 The fifth matter ................................................................................................ 74 The sixth matter ............................................................................................... 75 The seventh matter .......................................................................................... 76 The eighth matter ............................................................................................ 76 Conclusion ....................................................................................................... 77 Bribery/secret commission – the common law – no accessorial liability ...... 78 Bribes and secret commissions ..................................................................... 78 -- 6 of 119 -- [2025] SASC 172 Kimber J 3 The elements of a secret commission ............................................................ 80 The submissions ............................................................................................ 81 Was the procurement sum a secret commission? ......................................... 81 The payment was secret .................................................................................... 83 Other contentions with respect to proof of a remedy of recission – equity ... 86 The first and second contentions – accessorial liability ............................... 86 The submissions of the second respondent ................................................... 87 Knowledge of Development Approval – ‘residential purposes’ only ........... 89 Scheme Descriptions and development contract .......................................... 89 The indicative by-laws .................................................................................. 89 Property management appointments ............................................................ 91 Knowledge that Eklipse was not engaged in bona fide negotiations because of Mr Pattinson’s email on 10 April 2020 ........................................................ 92 Negotiations not bona fide – no quote and the duration of the agreements . 94 Knowledge of impact on lot holders ............................................................. 95 Knowledge that RPM did not intend to seek informed consent about the Procurement Sum .......................................................................................... 96 Intention to influence .................................................................................... 96 Dishonesty – conclusion with respect to RPM ................................................ 97 Recission if RPM merely knew that Eklipse was in breach of its fiduciary duty. ....................................................................................................................... 98 VicBeef .......................................................................................................... 99 RPM’s claim ..................................................................................................... 100 Breach of express and implied terms ............................................................. 100 The submissions .......................................................................................... 102 Discussion ................................................................................................... 103 Express term................................................................................................ 103 Implied term ................................................................................................ 103 Ambulatory or static ................................................................................... 105 Discussion ................................................................................................... 106 Unlawful inference with contractual relations .............................................. 107 Affirmation of the agreements ........................................................................ 108 The offer to purchase the agreements ......................................................... 108 The position of RPM ................................................................................... 110 Discussion ................................................................................................... 110 Remedy given payment of the secret commission ......................................... 112 The remedies available to the second respondent ........................................ 112 Equity .......................................................................................................... 112 Common law – the tort of bribery ............................................................... 113 Summary of relevant remedies .................................................................... 113 Restitutio in integrum – the submissions of RPM ....................................... 113 Discussion ......................................................................................................... 114 Summary of orders/decisions.......................................................................... 115 -- 7 of 119 -- [2025] SASC 172 Kimber J 4 Introduction/background 1 These proceedings relate to a building at 9 to 19 Austin Street, Adelaide which is known as the Realm Building (the Realm Building). 2 The proceedings were commenced by the first applicant, Realm Property Management Pty Ltd (RPM or the first applicant), and the second applicant, Eklipse Capital Pty Ltd (in liquidation) (Eklipse or the second applicant), to restrain two community corporations from altering their respective by-laws to prohibit the short-term letting of apartments in the Realm Building for periods of less than two months (short-term letting). Subject to any order made by me, that restraint is in place as the result of an order made in the District Court on 28 February 2022. The two community corporations are the first respondent, Community Corporation No 42054 Inc (the Low-Rise Corporation or LRC), and the second respondent, Community Corporation No 42055 Inc (the High-Rise Corporation or HRC). Both corporations were established pursuant to the Community Titles Act 1996 (SA) (CT Act). 3 The second applicant did not appear at trial. Default judgment was entered against the second applicant in respect of its statement of claim. The proceedings against the first respondent have been discontinued. 4 RPM is a subsidiary of a group now called CLIIX. CLIIX has extensive experience in the letting and caretaking of large-scale apartment complexes, particularly interstate. RPM’s core business is the management of apartments for short-term rental. Mr Tianyi Michael Song (Mr Song) is the sole director and secretary of RPM. RPM first became involved in the Realm Building in late March 2020. At that time, RPM became involved in negotiations with Eklipse to enter letting and caretaking agreements, including such agreements with the HRC. Such agreements were ultimately executed on 1 July 2020. At that time, Eklipse held all relevant lots as the developer of the Realm Building. 5 During the negotiations with RPM, and at the time of the execution of the relevant agreements, Eklipse owed a fiduciary duty to the HRC. The agreements between the HRC and RPM are contracts for services. As a result, pursuant to s 142B of the CT Act, Eklipse was also obliged to exercise reasonable skill, care and diligence and to act in the best interests of the HRC (the statutory duty). Among the issues in the proceedings is whether Eklipse breached its fiduciary and/or statutory duty and, if so, what remedy is available against Eklipse. 6 The agreements just mentioned were part of a set of agreements negotiated at the same time. Also negotiated between RPM and Eklipse was a Procurement Agreement, pursuant to which RPM paid Eklipse consideration of about $1,760,000 (the procurement sum). There were two such agreements, both of which were between Eklipse and RPM. The first Procurement Agreement (the initial Procurement Agreement) was executed on 17 April 2020 and during negotiations with respect to the Caretaking and Letting agreements. Although executed, the initial Procurement Agreement was, at least to a degree, treated as a -- 8 of 119 -- [2025] SASC 172 Kimber J 5 working instrument. The second Procurement Agreement (the final Procurement Agreement) was executed on 21 August 2020. Neither the existence of the Procurement Agreement, nor the payment of the procurement sum, was disclosed to the HRC. Among the issues is whether the procurement sum was a ‘secret commission’ and, if so, whether that gives the HRC a remedy of recission of the agreements with RPM to which it is a party and entitles the HRC to an order that the procurement sum be paid to it by Eklipse and/or RPM. Among the other issues are, if it is established that Eklipse breached a duty to the HRC, whether RPM knowingly procured that breach and/or knowingly participated in a fraudulent and dishonest design by Eklipse and, if so, what remedy is available to the HRC. The standard of proof 7 The standard of proof is on the balance of probabilities. As set out immediately above, some aspects of the claims in this matter involve allegations of knowing breaches of fiduciary duty by Eklipse and dishonesty on behalf of Eklipse and/or RPM. Findings that such allegations have been proved must not be made lightly. Notwithstanding, the standard of proof remains on the balance of probabilities and that is the standard that has been applied when determining whether the claims made by a party have been made out and in making findings. 8 In Neat Holdings v Karajan Holdings,1 the High Court stated:2 The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary “where so serious a matter as fraud is to be found”. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct. (citations omitted) The Realm Building 9 For the purposes of the issues in these proceedings, there is no relevant dispute about the following matters with respect to the Realm Building; its development; and the creation of the relevant lots and community corporations within the Building. 10 The Realm Building has 39 stories above ground and two levels below ground. It is predominantly comprised of apartments from Levels 8 to 39, with a provision for retail use at ground level. Levels 1 to 7 comprise a podium car park. 1 (1992) 110 ALR 449. 2 Ibid, 449-450 [2]. -- 9 of 119 -- [2025] SASC 172 Kimber J 6 Levels 8 to 20 comprise residential apartments in what is sometimes called the ‘Low Rise’ or ‘Park’ section of the Building. Levels 21 to 39 comprise apartments in what is sometimes called the ‘High Rise’ or ‘Sky’ section of the Building. Level 8 also accommodates an amenities area for the use of all residents. Level 39 accommodates an amenities area for the use of the residents of the High-Rise section, as well as accommodating a portion of the penthouse apartments. 11 At ground level, there is a residential entry which includes what has been described as a concierge desk and an open foyer or meeting area adjacent to the lifts. There are two sets of lifts, one of which accommodates the car park and the Low-Rise floors and the other of which accommodates the car park and the High- Rise floors. The entrance to the lifts to the High-Rise section on the ground floor is behind a set of security doors which can only be accessed by individuals with access to the High-Rise section of the Building. 12 The Building was constructed by the developer (i.e. – Eklipse) over the land comprised in six certificates of title which were then incorporated in a community title scheme, established pursuant to the CT Act. Section 14 of the CT Act allows for the registered proprietor of an estate in fee simple in land comprising allotments to apply to the Registrar-General for division of the land by a plan of community division. The application must be accompanied with that plan, the scheme description, the first by-laws of the scheme and, in certain cases, a development contract. 13 Once the application is accepted by the Registrar-General, the Registrar- General is to file the community plan together with the scheme description, the by- laws and any development contract. Thereafter, the existing certificates of title for the land the subject of the plan are to be cancelled and new certificates of title issued. 14 By s 30 of the CT Act, a scheme description is required to describe the purpose or purposes for which the lots and common property may be used. The scheme description of any secondary or tertiary scheme must not be inconsistent with the scheme description or by-laws of any underlying scheme. 15 By s 34 of the CT Act, the by-laws must, inter alia, regulate the use and enjoyment of the community lots to the extent necessary to give effect to the scheme description. Further, in certain cases provided for in s 13, a developer must execute a development contract and, by s 49, where that is done, the developer, by s 47, comes under a binding obligation to develop a community lot in accordance with the scheme description. The marketing of the Building 16 There is no dispute that on or about 15 June 2016, Eklipse engaged Urban Activation Pty Ltd (UA) to act as its agent to market the Building. For reasons to be given, I am satisfied that, with the knowledge of Eklipse but not with the -- 10 of 119 -- [2025] SASC 172 Kimber J 7 knowledge of RPM, the Building was marketed as one which would not involve short-term letting. Documents deposited pursuant to the CT Act 17 It will be necessary to refer in more detail later to the terms of some of the documents deposited with the Registrar-General but, by way of background, there is no dispute about the following matters. 18 The Community Plan in respect of Community Corporation No. 42055 was deposited on 30 June 2025, establishing the HRC and the LRC. At this time, Eklipse was the owner of all the lots. On the same day, the Development Contract, Scheme Description and Tertiary by-laws were deposited. 19 The Scheme Description relevant to the Realm development in providing for the purposes for which the community lots and common property could be used declared that ‘[t]he lots may only be used for residential purposes (including residential serviced apartments) car parking and storage subsidiaries, and common property’.3 20 The by-laws, as deposited with the Registrar-General, provided by by-law 28 that ‘[t]he Tertiary Lots may only be used for residential accommodation (long term or short term including serviced apartments)’.4 21 In this case, the scheme description applicable to the High-Rise apartments had attached to it an endorsement by the relevant development authority (i.e. – the State Commission Assessment Panel) dated 4 April 2019, in accordance with s 14(4) of the CT Act. The attached Decision Notification Form dated 4 April 2019, and revised on 17 December 2019, described the proposed development as comprising ‘community strata allotments for residential purposes’.5 22 The scheme of division pursuant to s 7 of the CT Act allows for division by a method of stratification. At the first level, land comprised in existing allotments may be divided into two or more community lots (in addition to common property). Here, the original allotments were initially divided into Lot 11, which was designated for retail purposes, and Lot 12, which was designated for residential purposes. Lots so created at the first stage are called primary lots. At the second stage, a primary lot may be divided into two or more community lots designated as secondary lots (in addition to common property). Here, Lot 12 was designated as residential and, at the second stage, was divided into Lot 21 and Lot 22, with both lots designated as residential. Lot 21 was designated on a secondary plan of community division as comprising the lower section of a high-rise building and Lot 22 comprising the higher section of that high-rise building. Section 7 then 3 Core Bundle (Court Version) (Core Bundle), Exhibit A20, tab [4]. 4 Ibid, tab [5]. 5 Tender Book (Court Copy) (Tender Book), tab [42]. -- 11 of 119 -- [2025] SASC 172 Kimber J 8 provides for a tertiary plan of community division by which a secondary lot created by a secondary plan is divided into two or more community lots. In this case, Lot 21 was divided into 150 tertiary community lots and Lot 22 was divided into 160 tertiary community lots. 23 The ultimate result of the lodged plan of community division was the creation of titles to sections of the Realm Building comprising 150 apartments in the Low Rise or Park section, 160 apartments in the High-Rise or Sky section, together with lots comprising common property essentially made up of the car park and amenities section on Level 8. This includes a swimming pool, which was available to all persons entitled to access the apartments, and a further amenities section on Level 39, which was available to persons entitled to access the High-Rise part of the Building. 24 By s 71 of the CT Act, the deposit of a plan of community division in the Lands Titles Registration Office establishes a community corporation comprised of the owners for the time being of the community lots into which a community parcel has been divided. Hence, when the deposited plan established primary Lots 11 and 12, a Primary Corporation was established which was comprised of the owners of Lots 11 and 12. That was designated Community Corporation No 42052. The owner or member of that corporation comprised of Lot 12 is the Secondary Corporation. There is another community corporation that owns Lot 11, the lot designated for retail purposes. In turn, the Secondary Corporation is comprised of Lots 21 and 22. The Secondary Corporation was designated Community Corporation No 42053. The owners of the Secondary Corporation are the Tertiary Corporation designated Community Corporation No 42054 (i.e. – the LRC) which owns Lot 21 and the Tertiary Corporation designated Community Corporation No 42055 (i.e. – the HRC) that owns Lot 22. At the time of incorporation all lots in the LRC and HRC were held by Eklipse as the developer. The current owners of those two tertiary corporations are respectively the lot owners or holders of apartments in the Park section and the lot owners or holders of apartments in the Sky section. 25 Hence, there are, in all, four community corporations involved in the operation of the Realm Building: the Primary Corporation (No 42052), Secondary Corporation (No 42053) and two Tertiary Corporations (Nos 42054 and 42055). The meeting on 1 July 2020 26 There is no dispute that on 1 July 2020 a meeting was held. This was the day after the above documents were deposited and following negotiations that commenced on about 26 March 2020 between Eklipse and/or its agent, UA, on the one hand, and RPM on the other. Present at the meeting on 1 July 2020 were Messrs Anthony Pattinson, Paul Smith and Eric Breda. Messrs Pattinson and Smith were present on behalf of Eklipse. Mr Breda is a body corporate manager with Whittles Body Corporate Management Pty Ltd (Whittles). -- 12 of 119 -- [2025] SASC 172 Kimber J 9 27 The Minutes of the above meeting describe the meeting as the ‘Inaugural General Meeting’ of the second respondent.6 There is no dispute that, at this time, Eklipse held all the lots within the Realm Building, including within the HRC. What occurred at the meeting is set out in the Minutes and what follows is drawn from those Minutes. 28 The Minutes set out that Mr Breda conducted the meeting. Under the heading ‘Declaration of Interest’, the following appears:7 All owners or their nominees, were reminded that they are required to advise the meeting if they have any direct or indirect pecuniary interest in any matter to be considered by the meeting. Whittles refers all Members to the Corporation's Agreement for disclosure of all its relevant interests. 29 The Minutes do not record that any interest was disclosed. 30 According to what appears on the face of the Minutes, purportedly pursuant to s 76(9) of the CT Act, a motion was carried that Whittles be appointed as Manager. A motion was carried that Eklipse, represented by either Mr Pattinson or Mr Smith, be appointed as interim office bearers and committee members designated as Presiding Officer, Secretary and Treasurer. 31 Motions were also carried with respect to a Caretaking Agreement and a Letting Agreement. The motions carried were in the following terms:8 16. Caretaking Agreement That the Community Corporation enter into and execute under common seal with Realm Property Management Pty Ltd ACN 640 099 485 (the 'Caretaker') the Caretaking Agreement which is in substantially the same form as that tabled with this motion for an initial period of 5 years commencing on the date this motion is passed ('Commencement Date') and ending on the date 5 years from the Commencement Date with four automatic options of 5 years each and for an initial remuneration of $122,320 plus GST for the first year of the term and that Mr A Pattinson and Mr P Smith as the authorised representative of Eklipse Capital Pty Ltd (the 'Developer') and sole member of the Community Corporation be authorised to affix the common seal of the Community Corporation thereto. MOTION CARRIED … 18. Letting Agreement That the Community Corporation enter into and execute under common seal with Realm Property Management Pty Ltd ACN 640 099 485 (the 'Letting Agent') the Letting Agreement which is in substantially the same form as that tabled with this motion for an initial period of 5 years commencing on the date this motion is passed ('Commencement Date') and ending on the date 5 years from the Commencement Date with four automatic 6 Tender Book, tab [207]. 7 Ibid. 8 Ibid. -- 13 of 119 -- [2025] SASC 172 Kimber J 10 options of 5 years each and for no fee, and an associated Deed relating to the Letting Agent's Lot (Deed) in substantially the same form as tabled with this motion and grant to the party to the Letting Agreement the licence to use the area/s of common property described in and on the basis set out in the Letting Agreement in common with others and that Mr A Pattinson and Mr P Smith as the authorised representatives of Eklipse Capital Pty Ltd (the 'Developer') and sole member of the Community Corporation be authorised to affix the common seal of the Community Corporation to the Letting Agreement. MOTION CARRIED 32 No reference appears in the Minutes to a Procurement Agreement. As set out above, the initial Procurement Agreement had been executed on 17 April 2020. I find that it was not raised during the meeting. 33 On the same day, further caretaking agreements were entered into with the two other community title schemes within the Realm Building in respect of the common areas. Those caretaking agreements, and a letting agreement with the LRC, were entered into following resolutions made at like meetings of the other relevant community corporations. An overview of the agreements 34 There were several caretaking agreements ultimately executed on 1 July 2020 (the Caretaking Agreements). 35 There is a caretaking agreement between RPM and the primary corporation which relates to caretaking activities to be performed in certain areas of the common property within the Realm Building. The initial annual contract price was $43,120.00. The caretaking agreement with the secondary corporation relates to caretaking activities in other areas of common property belonging to the secondary corporation, including – most significantly – the foyer at ground level and the pool and other facilities on Level eight. The initial contracted price was $213,400.00. The caretaking agreements with the HRC and the LRC involved the performance of caretaking activities in and about the common areas of both, including the corridors. In addition, in the case of the HRC, it involves the performance of caretaking activities in and about the common amenity area on Level 39. The initial contracted price was $61,160.00 for the LRC and $122,320.00 for the HRC. The Caretaking Agreements are for 25 years (an initial term of five years with provision for four extensions of five years, with the power to extend being held by the caretaker). In these proceedings it is the caretaking agreement with the HRC which is in issue. 36 Two letting agreements were executed, one between RPM and the HRC and one between RPM and the LRC (the Letting Agreements). In these proceedings, it is the letting agreement with the HRC which is in issue. The Letting Agreements are also for 25 years (an initial term of five years with provision for four extensions of five years, with the power to extend being held by the letting agent). A practical effect of the Letting Agreements is to give RPM the exclusive right of a physical presence in the Realm Building. The Letting Agreements do not prohibit owners -- 14 of 119 -- [2025] SASC 172 Kimber J 11 of apartments from using other agents, but RPM is the only agent which can facilitate leasing from within the Building. RPM does so utilising a concierge desk on the ground floor. RPM obtained rights to occupy the concierge desk through the purchase of a lot on Level 19 (Lot 1911), in which associated subsidiary rights were attached to that lot as part of the purchase agreement. The lot subsidiaries thereby attached to Lot 1911 include the area occupied by the concierge desk, the right to a storage cage within the carpark and the right to occupy a storage area on Level 15. To facilitate or augment its caretaking activities under the Caretaking Agreements, RPM also entered a 25-year lease of Apartment 805 on Level 8. RPM uses that apartment for the storage of cleaning equipment and linen. The Procurement Agreement 37 The entry by RPM into the Caretaking Agreements and Letting Agreements came as part of an arrangement or agreement struck between RPM and Eklipse, the centrepiece of which was a Procurement Agreement. As mentioned, the initial Procurement Agreement was entered into by a document in writing on 17 April 2020. It was treated by the parties as a kind of working instrument for their negotiations and not as a final agreement. This was the result of the inclusion in the initial Procurement Agreement of a due diligence clause in cl 18.1, the effect of which was to permit RPM and its solicitors to satisfy themselves of all aspects of the proposed arrangement and, absent such satisfaction, to terminate the agreement. 38 RPM held copies of the Caretaking Agreements and the Letting Agreements executed on about 1 July 2020 by the respective corporations. However, RPM did not deliver up those agreements as executed by it until there was a final agreement that the Procurement Agreement had become unconditional, something which came to be reflected in the final Procurement Agreement executed on 21 August 2020. 39 The essential effect of the final Procurement Agreement was that Eklipse agreed to cause the relevant community corporations at their first general meeting to resolve to enter into the Caretaking Agreements and the Letting Agreements and, further, Eklipse agreed to assist RPM entering into letting appointments with owners of apartments in the Realm Building in consideration of RPM paying Eklipse an amount described as the ‘Procurement Sum’, being a minimum sum of $1,363,636.36 plus GST (i.e. – $1.5 million inclusive of GST, apparently representing the rounded value of 68 letting appointments at $22,000 per appointment), but in total equal to the number of such letting appointments held by RPM on what was designated the ‘Adjustment Date’ multiplied by $20,000 plus GST per appointment. Effectively, that meant that RPM was to pay for each appointment which it had secured by 30 September 2021. 40 RPM paid the procurement sum in instalments. The sum of $1,363,636.36 plus GST of $136,363.64 (i.e. – $1.5 million inclusive of GST) was paid by way of the release to Eklipse of the deposit sum paid by RPM on 17 April 2020 to -- 15 of 119 -- [2025] SASC 172 Kimber J 12 ClarkeKann Lawyers in two tranches. First, on 21 August 2020 in the sum of $500,000 and, second, on 19 October 2020 as to the remaining sum of $1,000,000. A further sum of $160,000 (apparently erroneously charged as inclusive and not exclusive of GST) was invoiced and paid on 20 January 2021 in respect of a further eight letting appointments. A final sum of $100,000 (apparently inclusive and not exclusive of GST) was invoiced and paid on 7 April 2021 in respect of a further five letting appointments. The resolution of the HRC on 23 December 2022 41 As set out above, by an order made in the District Court, the HRC is currently restrained from giving effect to a resolution passed to amend its by-laws in a way which would expressly prohibit lots being used for short-term letting. 42 In December 2021, the HRC took steps to hold an Extraordinary General Meeting (EGM) for the purpose of passing a special resolution to introduce such a by-law. A meeting was held on 7 December 2021 but for reasons which are not relevant, that meeting did not proceed. There was a further attempt to hold an EGM on 1 March 2022, but on 28 February 2022 orders were made in the District Court which, among other things, restrained the HRC from holding the EGM on 1 March 2022 and from altering its by-laws until further order. On 17 November 2022, this Court removed the injunction with prevented the EGM being held. 43 An Annual General Meeting (AGM) was held on 23 December 2022. At the AGM, a special resolution was passed to alter what may be described as the existing by-laws which had been filed with the community plan. There were 103 votes in favour and 35 votes against. The special resolution was that the existing by-laws be amended with the effect that the owner of a lot ‘may only use a Lot or allow a Lot to be used for residential accommodation’ and must not grant a right of occupation ‘in respect of the Lot for valuable consideration for a period of less than [two] months’.9 44 There is no longer any opposition by the first applicant to the by-laws as amended by the special resolution at the AGM on 23 December 2022 being lodged pursuant to s 39(2) of the CT Act. To the extent necessary, I order that can occur. Importantly, the order prohibiting effect being given to the by-laws as amended by the resolution on 23 December 2022 remains in place. Whether that prohibition should be removed is one of the issues to be determined in these proceedings. Short-term letting The first issue: is short-term letting already prohibited? 45 Among the issues in the proceedings are whether the by-laws, as lodged on 30 June 2020 (the existing by-laws), already prohibit on their terms short-term 9 Tender Book, tab [390]. -- 16 of 119 -- [2025] SASC 172 Kimber J 13 letting and, if the existing by-laws do not prohibit short-term letting, whether those by-laws are invalid to the extent that short-term letting is permitted. 46 At this point, it is helpful to set out that, relevant to these proceedings, there are, in effect, three sets of by-laws. First, the by-laws as apparently provided to purchasers at the same time as the sales contracts and before 30 June 2020 (the indicative or sample by-laws). Second, the by-laws deposited on 30 June 2020 with the community plan, development contract and scheme description (the existing by-laws). Third, the by-laws as amended following the resolution on 23 December 2022 (the amended by-laws). 47 Before turning to whether short-term letting is already prohibited by the existing by-laws, I give some further background to the three sets of by-laws. That background begins with the way in which the Realm Building was promoted and repeats some matters outlined above. The way the Realm Building was promoted and the indicative by-laws 48 This period pre-dates any involvement of RPM in the Realm Building. RPM only became involved on about 26 March 2020. 49 Pre-sales of apartments in the Realm Building commenced in around mid-2016. As mentioned, in June 2016, Eklipse appointed UA as its agent to manage the sales process. The Building was marketed both in Australia and overseas. The first applicant submits that it was envisaged from the outset by Eklipse and UA that a substantial proportion of the apartments in the Realm Building would be sold to overseas investors, with sales activities apparently undertaken in Hong Kong and Singapore. 50 There is no dispute, and I find, that during the pre-sales process the Building was marketed by UA to at least some purchasers as being ‘residential only’, with no hotels or Airbnb accommodation permitted. For reasons to be given, I find that Eklipse was aware of that at all relevant times. The indicative scheme documents 51 There is no dispute that sales contracts had attached within the appendices what was described as ‘indicative scheme documents’.10 The indicative scheme documents included by-laws (i.e. – the indicative or sample by-laws) and a copy of the Scheme Description (the indicative Scheme Description). An example of the sales contracts is the contract dated 27 November 2017 with Mr and Mrs Hendrick (or nominee).11 The contract is in the standard form Law Society of South Australia Contract, with substantial special conditions and appendices. 10 See, for example, Core Bundle, tab [1]. 11 Ibid. -- 17 of 119 -- [2025] SASC 172 Kimber J 14 52 Clause 28 of the indicative by-laws was in the following terms:12 28.1 Subject to the provisions of these By-Laws, the Scheme Description and the Development Plan for the Corporation of the City of Adelaide and any other relevant statutory enactments: 28.1.1 the [lots] will only be used for residential accommodation. other than the use specified in By-Law 28.1, an Owner or Occupier is prohibited from leasing or granting rights of occupation in respect of a Lot for valuable consideration for a period of less than 2 months. 28.2 This By-Law 28 does not preclude an Owner entering into a lease, licence or management agreement on normal commercial terms for use of that Lot in accordance with a use authorised by a relevant development authority. 53 It may be observed that the above clause may be read in a way that permits the grant of a lease for less than two months. On one reading, such a lease is permitted provided the lot is being used for residential accommodation. 54 As to the permitted use of the Realm Building, the indicative scheme description states in cl 2.1 that:13 The lots may only be used for residential purposes (including residential serviced apartments) and common property and car parking subsidiaries. The discretion reserved to Eklipse to amend the indicative documents 55 The special conditions to the contracts, however, reserved substantial discretion to Eklipse as the developer. The special conditions made clear to purchasers that the indicative documents were subject to change by Eklipse ‘in its absolute discretion’.14 56 In Appendix 1 – Special Conditions, cl 1.1.11 contained a definition of ‘by-laws’ to the following effect:15 any by-laws of the Primary Scheme, Secondary Scheme (Residential) and Tertiary Scheme (Residential) as the Vendor declares from time to time and; [sic] sample By-Laws are contained in Appendix 5A and 5B as may be varied by the Vendor in its absolute discretion. 57 Clause 11.1 of the Special Conditions then included the following:16 11.1 The Purchaser expressly acknowledges and agrees with the Vendor as follows: … 12 See, for example, Core Bundle, tab [1]. 13 Ibid. 14 Ibid. 15 Ibid. 16 Ibid. -- 18 of 119 -- [2025] SASC 172 Kimber J 15 11.1.12 the Purchaser acknowledges that the Purchaser has received and read a copy of the Scheme Documents which are annexed to the Agreement at Appendices 5A and 5B; 11.1.13 the Purchaser agrees to be bound by the By-laws of the Scheme and the provisions of the Act and agrees not to attempt to vary the By-laws until after settlement of the sale of all community lots comprising the Scheme referred to in the Community Plans; 11.1.14 notwithstanding anything expressed or implied to the contrary in Special Condition 11.1.12 prior to the deposit of each of the Community Plans the Vendor shall be entitled to alter or amend any of the sample Scheme Documents (including, without limitation, by adding further by-laws) in such manner as the Vendor shall reasonably determine in order to ensure that the by-laws are appropriate for: (a) the safe efficient and harmonious administration management and control of the Common Property and other common areas; (b) the regulation of the use and enjoyment of the primary, secondary and tertiary Common Property and other common areas; (c) the regulation (to the extent necessary to give effect to the Scheme Description) of the use and enjoyment of the Land; and (d) dealing with any other issues covered by s 34 of the Community Titles Act 1996 (SA), by the Corporation having regard to the nature of the Development and the Purchaser shall have no claim or recourse against the Vendor or the Vendor’s agents in respect of any such alteration or amendment and must not delay or refuse to settle by reason of such alteration of [sic] amendment. 58 The first applicant submits that the extent to which representations made during the period of promotion and/or the documents attached to the sales contracts were relied upon is unclear. Evidence adduced by the HRC of at least five witnesses to the clear effect that they relied upon such matters in informing their purchase decision17 is not challenged by the first applicant. Nevertheless, the first applicant submits that there may be a question as to how the Building was marketed to overseas buyers purchasing as investors and as to whether any given purchaser read and relied upon the indicative by-laws. In my view, those matters are not necessary to determine. I simply observe at this point that, on the evidence adduced, for reasons to be given, I find the Realm Building was marketed locally on the basis that short-term letting would not be permitted. On the evidence, I see insufficient reason to conclude that a different approach might have been taken overseas. However, that is not necessary to decide, and I have made no finding. 17 See Affidavit of Kerrie Woodards dated 21 November 2022 (Exhibit R24); Affidavit of John Richard Green dated 22 November 2022 (Exhibit R25); Affidavit of Margaret Beryl Clunies Ross dated 22 November 2022 (Exhibit R26); Affidavit of Michael John Haynes dated 22 November 2022 (Exhibit R27); Affidavit of Patricia Buhagiar Nisbett dated 22 November 2022 (Exhibit R28); and Affidavit of Keryn Jane Hendrick dated 23 November 2022 (Exhibit R30). -- 19 of 119 -- [2025] SASC 172 Kimber J 16 59 Through the pre-sales process, purchasers entered contracts with Eklipse. Pre-sales occurred substantially in late 2017 and into 2018. By April 2018, contracts or reservations in respect of 85 per cent of the apartments across the Realm Building had been entered, with most buyers being overseas. The existing by-laws – cl 28.1 60 The existing by-laws were deposited on 30 June 2020, which was after RPM became involved in negotiations with Eklipse with respect to the agreements earlier mentioned. RPM became involved in negotiations on about 26 March 2020. However, as will be seen, that the indicative by-laws might be amended in a way consistent with those deposited on 30 June 2020 had been raised before RPM became involved and during negotiations between Eklipse and another party, Imagine Hotels and Resorts (Imagine), which had an interest in caretaking and letting agreements like those ultimately entered by RPM. 61 The existing by-laws are different to the indicative by-laws. For present purposes, it is not necessary to detail the circumstances in which that came to be so. 62 Clause 28 of the existing by-laws provides:18 The … lots may only be used for residential accommodation (long term or short term including serviced apartments). 63 Also deposited on 30 June 2020 was the Development Contract and the Scheme Description. 64 In cl 4.2, the Development Contract provided that the relevant lots were ‘intended for residential purposes’.19 In cl 2.1, the Scheme Description provided that the relevant lots ‘may only be used for residential purposes (including residential serviced apartments)’.20 The amended by-laws 65 The relevant terms of the special resolution passed on 23 December 2022 is set out above. In short, the amended by-laws would prohibit letting for a period of less than two months. The contentions of the second respondent The first contention 66 The second respondent’s first contention is that existing by-law 28.1 already prohibits short-term letting. The second respondent contends that a lease of less than two months does not come within a use described in the existing by-laws as 18 Core Bundle, tab [5]. 19 Ibid, tab [3]. 20 Ibid, tab [4]. -- 20 of 119 -- [2025] SASC 172 Kimber J 17 ‘residential accommodation (long term or short term including serviced apartments)’. 67 For two reasons, I reject the first contention of the second respondent. 68 First, I reject that the words ‘residential accommodation’ denotes only accommodation of more than two months or any other fixed or minimum period. To find that ‘residential accommodation’ only denotes accommodation of a greater permanence than some fixed minimum period and/or a permanence of at least two months would be inconsistent with authorities which have found that ‘residential accommodation’ should not be given such a meaning. 69 In South Steyne Hotel Pty Ltd v Commissioner of Taxation,21 Stone J reviewed authorities which had considered the term ‘residential accommodation’ and held that it was not a term to be construed as meaning accommodation for a fixed or minimum period. Stone J referred to three authorities which were summarised in the following way:22 In Denman College the issue before the Tribunal was whether accommodation provided for students at the college was correctly described as residential accommodation. The Tribunal described the accommodation thus: “Each study-bedroom has a single bed, desk and at least one arm chair and a bathroom or shower room. … Although each room has a kettle, teapot and cup and saucer and tea and coffee, there are no other cooking facilities in either building. The college has a dining room in which students attending courses can eat.” The Tribunal accepted that the building was not a “residence” but said that it did not follow that it was not “residential” accommodation. Urdd Gobaith Cymru concerned the same statutory words as Denman College. The accommodation was for students attending for short periods (the average period was four days) mainly to learn the Welsh language. The Tribunal chairman agreed that “a residence” clearly implied a building with a significant degree of permanence of occupation but added: “However, the word loses that clear meaning when used as an adjective. In ordinary English ‘residential accommodation’ merely signifies lodging, sleeping or overnight accommodation. It does not suggest the need for such accommodation to be for any fixed or minimum period.” In Owen the Court of Appeal expressed a similar view as to the meaning of “residential accommodation” used in the context of the Capital Gains Tax Act 1979. The position was put succinctly by Leggat LJ who said: “In my judgment the expression ‘residential accommodation’ does not directly or by association mean premises likely to be occupied as a home. It means living accommodation, by contrast, for example with office accommodation.” 21 [2009] FCA 13. 22 Ibid, [36]-[38]. NB: This judgment omits citations. -- 21 of 119 -- [2025] SASC 172 Kimber J 18 70 Second, and separately, the words ‘residential accommodation’ must be construed in the context of the words ‘long term or short term including serviced apartments’. I find that the words ‘short term’ denote that a stay can be of a period that is less than at least two months. Further, in my view, the reference to ‘serviced apartments’ only further confirms this. To my mind, those words should not be construed in a way which would prohibit letting for a designated period, let alone one that must be at least two months. 71 For the above reasons, I decline to declare that the existing by-laws prohibit short-term letting of less than two months. The second contention – is the existing by-law invalid? 72 The second contention of the second respondent is that existing by-law 28.1 should be declared invalid. 73 That contention has several limbs, namely: 1. that the by-laws must be consistent with, and give effect to, the scheme description pursuant to ss 11(4), 34(2)(d), 41(1)(b) of the CT Act; 2. that by cl 2, the Scheme Description provides that the lots (i.e. - apartments) ‘may only be used for residential purposes (including residential serviced apartments)’; 3. that ‘residential purposes’ in the Scheme Description is to be given the same meaning as in the CT Act, the negative definition in s 3(1) of the CT Act being that, in relation to the use of land, it does not include the use of land for the purposes of a hotel, motel or hostel or to provide any other form of temporary residential accommodation for valuable consideration; and 4. that the use of apartments for short-term stays (of less than two months) is within the excluded category (i.e. – it is not within ‘residential purposes’). The CT Act 74 Section 11(1) of the CT Act obliged Eklipse to lodge the Scheme Description. 75 Section 11(3) and (4) provide: 11—The scheme description … (3) Its purpose is to provide a brief description of the nature of the scheme to which the relevant development authority has given its consent for the benefit of persons considering purchasing or entering into any other dealing with a lot created by the scheme. -- 22 of 119 -- [2025] SASC 172 Kimber J 19 (4) The by-laws of the scheme and a development contract (if any) relating to the scheme must be consistent with the scheme description. 76 Section 34(2)(d) provides that the by-laws must ‘regulate the use and enjoyment of the community lots to the extent necessary to give effect to the scheme description’. 77 Section 41(1)(b), (c) and (f) of the CT Act provide that by-laws are invalid to the extent to which they are inconsistent with the scheme description or development contract filed. Section 41(2) provides: (2) A by-law will be taken to be inconsistent with a scheme description, the by-laws of another scheme or a development contract if, and only if, there are no circumstances in which the by-law can operate consistently with the scheme description, by-laws or development contract. Explanatory Note— 1 For instance if the scheme description provides that the community lots will be used for residential purposes without specifying the kinds of residential use, the by-laws may prohibit some kinds of residential use such as flats or boarding house accommodation but cannot prohibit all kinds of residential use. 78 Section 3(10) of the CT Act provides that the explanatory note is not part of the provision to which it relates.23 79 The relevant terms of the scheme description as lodged are set out above. Namely, that the use of the lots was for ‘residential purposes (including residential serviced apartments)’. 80 Section 3(1) defines the meaning of ‘residential purposes’ as used in the Act and, unless a contrary intention appears, in the following way: Residential purposes in relation to the use of land does not include the use of land for the purposes of a hotel, motel or hostel or to provide any other form of temporary residential accommodation for valuable consideration. Discussion 81 The issue is not how guests and others might, in practice, be using the Realm Building. The issue is whether the existing by-law 28 is inconsistent with the Scheme Description. 82 The second respondent submits the words in the Scheme Description (i.e. – ‘residential purposes (including residential serviced apartments)’) must be construed bearing in mind the negative definition in s 3(1). The second respondent 23 It may be noted that, although not part of s 41(2) of the CT Act, the explanatory note contemplates that ‘boarding house accommodation’ is a form of residential use. In my view, a boarding house is accommodation that may be short term. -- 23 of 119 -- [2025] SASC 172 Kimber J 20 submits that so construed, the words ‘residential purposes’ in the Scheme Description are not to be construed as permitting the uses described in s 3(1) (i.e. – ‘a hotel, motel or hostel or to provide any other form of temporary residential accommodation for valuable consideration’). That is, the Scheme Description should be construed as not permitting short-term letting. Construed in that way, the second respondent submits that the Scheme Description is inconsistent with the existing by-laws and the existing by-laws are, to the extent of that inconsistency, invalid pursuant to s 41(2) of the CT Act. 83 With respect to s 3(1), the first applicant submits that the words ‘any other form of temporary residential accommodation’ are to be construed ejusdem generis with the class of accommodation established by the expression ‘hotel, motel or hostel’. 84 In Deputy Commissioner of Taxation v Clark,24 Spigelman CJ discussed the ejusdem generis rule in the context of the phrase ‘other good reason’25: …It is essential for the application of the ejusdem generis rule that some common characteristic capable of being described as a genus is able to be identified. (See, eg, R v Regos and Morgan (1947) 74 CLR 613 at 624; Cody v J H Nelson Pty Ltd (1947) 74 CLR 629 at 648.) I agree with Lord Diplock that unless at least two different species are identified it is not possible to determine a relevant genus which may be used to read down the general words which follow. (See Quazi v Quazi [1980] AC 744 at 807-808.) Some have left open the possibility, however unusual its application may be, that a genus may appear from a statutory provision where only one word precedes the general formulation. (See, eg, Lake Macquarie Shire Council v Ades [1977] 1 NSWLR 126 at 129; Director of Public Prosecutions v Williams (1998) 104 A Crim R 65 at 73 and 75; F A R Bennion, Statutory Interpretation, 4th ed (2002) London, Butterworths, at 1060.) In the field of statutory interpretation it may be best never to say ‘never’. The process of reading down general words in a statute is a frequently recurring issue in statutory interpretation. (See, for example, the authorities I referred to in R v Young (1999) 46 NSWLR 681 at 689 [23]-[29].) Application of the ejusdem generis rule is a specific example of this process. The application of this rule, in substance, gives the immediate verbal context determinative weight in the process of construing general words. In my opinion, this is rarely justified. Whether or not general words ought be read down is to be determined by the whole of the relevant context, including other provisions of the statute and the scope and purpose of the statute. As Dixon J said in Cody v J H Nelson (at 649): ‘But the truth is that it is wrong to use the rule for an ejusdem generis construction as a piece of abstract or mechanical reasoning. It must be applied not simpliciter but secundum quid. It should be used as a guide in a process of interpretation which takes into account the whole instrument and the subject matter. “As Lord Diplock said in Quazi v Quazi (at 808): 24 (2003) 57 NSWLR 113. 25 Ibid, 143-144. -- 24 of 119 -- [2025] SASC 172 Kimber J 21 ‘The fact that the ejusdem generis rule is not applicable does not, however, necessarily mean that where the expression “other” appears in a statute preceded by only one expression of greater specificity its generality may not be cut down if to give it its wide prima facie meaning would lead to results that would be contrary to the manifest policy of the Act looked at as a whole or would conflict with the evident purpose for which it was enacted. “ … What can be regarded as ‘good reason’ in one statute will not necessarily be acceptable as ‘good reason’ in another statute. The context provides the relevant limitation. For this reason I do not agree with Palmer J that the words in s 588H and s 588FGB(5) are ‘as wide as they could be in order that the court may determine each case on its own particular facts’. 85 In my view, the words ‘hotel, motel or hostel’ have a common characteristic capable of being described as a genus. That is, the characteristic of a singularly run commercial operation involving the provision of short-term accommodation for valuable consideration. In this case, while some lot holders choose to use the same letting agent, there is no commercial operation in which all lot holders permitting short-term letting utilise the same operator. In my view, the words ‘any other form of temporary residential accommodation’ should be read down to accord with the type of accommodation identified by the words ‘hotel, motel or hostel’. The words just mentioned are not defined in the CT Act. 86 The Macquarie Dictionary definitions of hotel, motel and hostel are as follows:26 hotel a building in which accommodation and food, and sometimes other facilities, are available. motel a roadside hotel which provides accommodation for travellers in self-contained, serviced units, with parking for their vehicles. hostel a supervised place of accommodation, usually supplying board and lodging, provided at a comparatively low cost, as one for students, nurses, etc. 87 I reject the second contention of the second respondent. I decline to declare that the existing by-law is inconsistent with the Scheme Description. I decline to do so as I find that there are circumstances in which the existing by-law can operate consistently with the Scheme Description in a way permitted by s 41(2) of the CT Act. That the existing by-law permits an individual lot to be used for short-term residential accommodation does not mean that the by-law is invalid as it is permitting the lot to be used as a hotel, motel or hostel or other form of temporary residential accommodation of that genus for valuable consideration. 26 Macquarie Dictionary (online at 29 April 2025) “hotel” (def 1); “motel” (def 1); “hostel” (def 1). -- 25 of 119 -- [2025] SASC 172 Kimber J 22 The second issue – was the meeting on 1 July 2020 a meeting held in pursuance of s 79(1) of the CT Act such that the resolution passed has no cause and effect? 88 As set out above, the relevant agreements between the HRC and RPM were entered into on 1 July 2020 following motions passed at what the Minutes describe as the ‘Inaugural General Meeting’ of the HRC the same day. 89 The second respondent contends that the relevant motions were not valid resolutions and so have no cause and effect. This is said to be the case for three reasons. First, that Messrs Pattinson and Smith purported to enter into the agreements as officers of the HRC but were in fact employees or agents of Eklipse. Second, that the meeting on 1 July 2020 which purported to authorise the HRC to enter into the agreements was not one authorised by the CT Act (i.e. – as it did not comply with s 79(1) of the CT Act as there was then only one member of HRC, not two members as required).27 Third, contrary to s 95(1) of the CT Act, Messrs Pattinson and Smith failed to disclose that Eklipse had a direct pecuniary interest in the relevant motions by virtue of the initial Procurement Agreement.28 Characterisation of the meeting on 1 July 2020 90 Given the contentions of the second respondent, it is necessary to characterise the meeting on 1 July 2020 and, more specifically, to determine if a finding should be made that it was one to which either ss 79 or 95 applied. Section 79 of the CT Act 91 Section 79 of the CT Act provides for the convening of a ‘first statutory meeting’ and s 80 stipulates what must occur at that meeting. The terms of those two sections are as follows: 79—First statutory general meeting (1) The developer must convene a general meeting of the community corporation within 3 months after the day on which there are at least 2 different members of the community corporation (not including the developer or any person who the developer knows, or ought reasonably to know, is an associate of the developer). Maximum penalty: $15 000. (2) A member of the corporation may convene the meeting required under subsection (1) if the developer fails to do so. 80—Business at first statutory general meeting (1) The developer must deliver to the corporation at the first statutory general meeting— (a) a copy of the plan of community division deposited in the Lands Titles Registration Office which shows the service infrastructure by which the lots 27 Second Respondent’s Defence – Revision 4 (FDN 197, filed 1 October 2024), [13.5]. 28 Ibid, [13.6]. -- 26 of 119 -- [2025] SASC 172 Kimber J 23 and common property are provided with water, gas, electricity and other services; and (b) a copy of— (i) the scheme description (if any); and (ii) the by-laws; and (iii) the development contract or contracts (if any), filed by the Registrar-General with the deposited plan; and (c) a copy of specifications, diagrams and drawings relating to the buildings or other improvements (if any) on the community parcel; and (e) all policies of insurance taken out by the developer; and (f) a statement of the corporation's assets and liabilities; and (g) an expenditure and contribution statement complying with section 113; and (h) books of account and other records relating to the corporation; and (i) the corporation's common seal; and (j) a copy of all other documents in the developer's possession that are likely to be of use to the corporation. Maximum penalty: $15 000. (2) The following matters must be addressed at the first statutory general meeting— (a) the appointment of the presiding officer, treasurer and secretary; (b) the custody of the corporation's common seal and the manner of its use; (c) the corporation's recurrent and non-recurrent expenditure in its first financial year and the amount to be raised by contributions from owners of community lots to cover that expenditure; (d) the appointment of an auditor of the corporation's accounts in its first financial year or a special resolution that the accounts for that year need not be audited; (e) such other matters as are required by regulation. (3) If a document of a kind referred to in subsection (1) comes into the possession of the developer within 12 months after the corporation's first statutory general meeting, the developer must deliver it, or a copy of it, to the corporation. Maximum penalty: $15 000. The meeting on 1 July 2020 – not ‘the first statutory meeting’ 92 There is no dispute that on 1 July 2020 Eklipse, as the developer, held all the lots of the second respondent. I reject that the meeting on 1 July 2020 was the -- 27 of 119 -- [2025] SASC 172 Kimber J 24 ‘first statutory meeting’. That characterisation cannot apply to a meeting at which the developer holds all the lots of the community corporation. At that time, there are not ‘at least 2 different members of the community corporation’ as required by s 79. Division 1 and Division 3 of the CT Act 93 The second respondent further contends that the meeting on 1 July 2020 was a ‘management committee meeting’ pursuant to Division 3 of the CT Act. On that premise, the second respondent contends that, pursuant to s 95 of the CT Act, there was a duty upon Eklipse or its representatives to disclose a direct or indirect pecuniary interest. It is submitted that if s 95 was breached, then the second respondent may apply for relief under Part 14 of the CT Act on that basis.29 94 On the face of the Minutes, there is some ambiguity as to the proper characterisation of the meeting on 1 July 2020. First, the Minutes refer to both s 76 and s 90 of the CT Act. Section 90 is within Division 3 of Part 9 which deals with the establishment of a management committee as is s 95 which mandates disclosure of an interest at a meeting. However, s 76 is not within Division 3 of Part 9. Section 76 is within Division 1. Second, the Minutes record that the meeting was the ‘Inaugural General Meeting’, which is not a term within Division 3 of Part 9 within which s 95 appears. Indeed, that term is not found elsewhere in the CT Act. 95 The Minutes also record the following with respect to the appointment of office bearers and committee:30 8. Election of Office Bearers and Committee In accordance with Section 76(1) & 90 (1) of the Community Titles Act 1966, the meeting appointed the following Interim Office Bearers and Committee Members: Presiding Officer Eklipse Capital Pty Ltd, Rep'd by Mr A Pattinson Lot 2101 - 3802 [ ] Secretary Eklipse Capital Pty Ltd, Rep'd by Mr P Smith Lot 2101 - 3802 [ ] Treasurer Eklipse Capital Pty Ltd, Rep'd by Mr P Smith Lot 2101 - 3802 [ ] Limitations Imposed The Corporation Manager advised that the Management Committee and officers of the Corporation do not have powers to resolve matters subject to special or unanimous resolutions. Committee Meetings should be conducted in accordance with Sections 91 to 99 of the Community Titles Act 1996. An agenda should be forwarded to all committee 29 CT Act, s 141(1)(a). 30 Tender Book, tab [207]. -- 28 of 119 -- [2025] SASC 172 Kimber J 25 members and decisions at the meeting minuted, copies of which are to be included with the Corporation's records. MOTION CARRIED 96 Further, the Minutes record that the motion that Whittles be appointed was pursuant to s 76(9) of the CT Act was carried. Division 1 of Part 9 97 Section 76 of the CT Act is within Division 1 of Part 9. That Division does not deal with the creation of a management committee or its obligations. Section 76 provides: 76—Presiding officer, treasurer and secretary (1) A community corporation must, by ordinary resolution, appoint a presiding officer, treasurer and secretary. (2) Subject to this section, the offices of presiding officer, treasurer and secretary must be held by natural persons who are members of the corporation. (3) In the case of a community scheme— (a) comprising ten community lots or less—two or all of those offices may be held by one person; (b) comprising eleven or more community lots—two of those offices may be held by one person. (4) A person for the time being appointed by a body corporate that is a member of a corporation to attend and vote at meetings of the corporation is a member of the corporation for the purposes of subsection (2). (5) If the community parcel is subject to a leaseback arrangement the corporation may appoint a person, or persons (who need not be a member, or members, of the corporation), nominated by the lessee to hold one, two or all of the offices of presiding officer, treasurer and secretary. (6) The presiding officer, treasurer and secretary must be appointed for a term that expires at or before the next annual general meeting of the corporation. (7) The office of a person appointed under this section becomes vacant if he or she— (a) dies; or (b) completes his or her term of office and is not reappointed; or (c) in the case of a person who was a member of the corporation when he or she was appointed to the office—ceases to be a member of the corporation; or (d) in the case of a person appointed by a body corporate that is a member of the corporation to attend and vote at meetings—ceases to hold that appointment; or -- 29 of 119 -- [2025] SASC 172 Kimber J 26 (e) resigns by written notice to the secretary or, in the case of the secretary, to the presiding officer; or (f) becomes bankrupt or applies to take the benefit of a law for the relief of insolvent debtors; or (g) is convicted of an indictable offence or sentenced to imprisonment for an offence; or (h) is removed from office by special resolution of the corporation. (8) A resolution referred to in subsection (7)(h) can only be passed on one or more of the following grounds— (a) misconduct; (b) neglect of duty; (c) incapacity or failure to carry out satisfactorily the duties of the office. (9) A community corporation may appoint or engage a person to assist the presiding officer, treasurer or secretary. Division 3 of Part 9 98 Sections 90, 92 and 95 are within Division 3 of Part 9. It is necessary to give attention to the terms of several sections within Division 3 of the CT Act. 99 Section 90 provides that a community corporation may, but is not obliged to, establish a management committee provided that such a committee is established by ordinary resolution of the corporation. Section 90 further provides that members must be natural persons and must include the Presiding Officer, the Treasurer and the Secretary of the corporation. 100 Section 92 establishes the functions and powers of the management committee. It states: 92—Functions and powers of committees (1) Subject to any limitations imposed by the corporation, it is the function of a management committee to carry out the functions and perform the duties of the corporation within the limits of the committee's powers. (2) Subject to this Act and to any limitations imposed by the corporation or by the by-laws of the community scheme, a management committee has full power to transact any business of the corporation. (3) A committee cannot delegate its functions or powers but a community corporation may appoint or engage a person to assist the committee in the performance of the committee's functions. (4) A committee does not have power to do anything for which a special or unanimous resolution of the corporation is required. -- 30 of 119 -- [2025] SASC 172 Kimber J 27 101 Section 93 provides for the convening of a management committee meeting. It states: 93—Convening of committee meetings (1) A meeting of a management committee may be convened by the presiding officer, treasurer or secretary of the corporation or by any two members of the committee. (2) A meeting is convened by giving written notice of the day, time and place of the meeting to all members of the committee at least three days before the date of the meeting. (3) The day, time and place of the meeting must be reasonably convenient to a majority of the members of the committee. (4) The notice convening a meeting must set out the agenda for the meeting. 102 Section 94 provides for the procedure at meetings. It reads: 94—Procedure at committee meetings (1) The presiding officer will preside at committee meetings but in his or her absence the members present may appoint a member to preside at that meeting. (2) The quorum for the transaction of business at a committee meeting is determined by dividing the number of members of the committee by two, disregarding any fraction and adding one. (3) A decision supported by a majority of the members present at a management committee meeting is a decision of the committee. (4) A member of a committee may appoint another person to act as his or her proxy at a committee meeting that the member is unable to attend. (5) The person appointed must, if each of the community lots is used, or is intended to be used, solely or predominantly for residential purposes, be another member of the committee or a member of the community corporation. (6) A decision is made by a committee without meeting if— (a) written notice setting out the proposed decision is served on every member of the committee; and (b) within seven days after the notice is served on all members of the committee a majority of the members give written notice to the secretary setting out the proposed decision and expressing their agreement with it. (7) A management committee must cause accurate minutes to be kept of proceedings at its meetings. (8) Subject to this Act, the by-laws and to any direction of the community corporation, a committee may regulate procedures at its meetings as it thinks fit. -- 31 of 119 -- [2025] SASC 172 Kimber J 28 103 Section 95 then provides: 95—Disclosure of interest (1) A member of a committee who has a direct or indirect pecuniary interest in a matter under consideration by the committee— (a) must disclose the nature of the interest to the committee; and (b) must not take part in any deliberations or decisions of the committee in relation to that matter. Maximum penalty: $15 000. (2) It is a defence to a charge of an offence against subsection (1) to prove that the defendant was not, at the time of the alleged offence, aware of his or her interest in the matter. (3) A disclosure under this section must be recorded in the minutes of the committee. (4) In this section— pecuniary interest of a member of a committee does not include an interest arising solely from the fact that the member is also a member of the community corporation Further discussion 104 I find that at the meeting on 1 July 2020, Messrs Smith and Pattinson, on behalf of Eklipse, did not disclose that they had a pecuniary interest in, at least, the Letting Agreement the subject of a motion at that meeting. Messrs Smith and Pattinson had a pecuniary interest in at least the Letting Agreements. As mentioned above, Eklipse was to be paid based upon the number of letting appointments provided to RPM. That there was no disclosure of that is obvious from the Minutes. However, in the context of the pleadings of the second respondent, the second respondent seeks to establish that the meeting on 1 July 2020 was one to which s 95(1) applied. 105 I accept that the Minutes may not support, in some respects, that it was a management committee meeting. As mentioned, the Minutes refer to s 76. Further, aspects of Division 3 may not have been the subject of compliance. At the same time, as mentioned, the Minutes also refer to s 90. Section 93 of the CT Act provides for how a meeting of the management committee may be convened. There is no express reference in the Minutes to such a meeting being convened and given that, at best for the second respondent, the management committee was formed the same day, the process for convening such a meeting set out in s 93 was not followed. In addition, the Minutes refer to it being an ‘Inaugural General Meeting’. 106 At the same time, s 90(1) was referred to in the Minutes and the Minutes are strongly suggestive of a management committee having been established given the -- 32 of 119 -- [2025] SASC 172 Kimber J 29 reference to the Corporation Manager having given certain advice. There would be no need to refer to a management committee if one had not been created. Conclusion 107 The characterisation of the meeting is attended by several difficulties. The meeting has features of a first statutory meeting as office holders were appointed.31 However, as mentioned, such characterisation cannot accommodate there not being two different members of the community corporation.32 The meeting has features of a management committee meeting. The Presiding Officer, the Treasurer and Secretary of the corporation were present;33 s 90 is expressly referred to in the Minutes; there is also reference within the Minutes to the Corporation Manager providing advice about what the management committee did not have the power to do.34 At the same time, the procedure for convening such a meeting was not the subject of compliance35 and a Presiding Officer; Treasurer and Secretary were appointed at the meeting and that may occur outside of a management committee meeting. 108 I do not overlook that it is not essential that the meeting be characterised as being either the first statutory meeting or a management committee meeting. I do not overlook the possibility of it being neither. However, I find that this meeting was a management committee meeting. I do so because of the features of such a meeting outlined immediately above. It follows that Messrs Pattinson and Smith breached s 95 of the CT Act. 109 It follows that the applicant may seek relief under s 142 of the CT Act on the ground of a breach of the Act. However, even if I am wrong that s 95 of the Act was breached, for reasons to be given, that breach does not entitle the contracts to be rescinded pursuant to s 142 of the Act. Before further considering that, I turn to whether Eklipse breached its fiduciary duty and/or whether Eklipse breached the statutory duty in s 142B of the CT Act (the statutory duty). I do so as even if the meeting on 1 July 2020 was neither the first statutory meeting nor a management committee meeting, there can be no doubt about the following. Eklipse owed both a fiduciary duty to the HRC and the statutory duty pursuant to s 142B of the CT Act. If the statutory duty was breached, s 142B provides the remedies in s 142 of the CT Act may be available regardless of how the meeting on 1 July 2020 is properly characterised. It follows that, if the statutory duty was breached, how the meeting on 1 July 2020 is characterised is not material to whether s 142 may provide the statutory remedies for which the second respondent contends. Further, as will be seen, s 142(18) does not limit the potential remedies for a breach of fiduciary duty or for the payment of a secret commission to those set out within s 142. 31 CT Act, s 92(2). 32 Ibid, s 79(1). 33 Ibid, s 90(4). 34 Ibid, s 92(4). 35 Ibid, s 93. -- 33 of 119 -- [2025] SASC 172 Kimber J 30 The statutory duty – s 142B of the CT Act 110 As mentioned, the Caretaking Agreements and Letting Agreements are contracts for services. The CT Act contemplates that a developer which holds all the lots of a community corporation, such as Eklipse, will enter contracts for services. 111 Section 142B of the CT Act provides: 142B—Developer stands in fiduciary relationship with community corporation (1) For the avoidance of doubt— (a) the developer stands in a fiduciary relationship with the community corporation and, before the community corporation is established, with the proposed community corporation; and (b) the duties owed by the developer under this Act are in addition to, and do not derogate from, the duties arising out of that fiduciary relationship. (2) Without derogating from subsection (1), where the community corporation intends, during the developer control period, to delegate functions or powers to a body corporate manager or to enter into a contract for services, the developer must exercise reasonable skill, care and diligence and act in the best interests of the community corporation (as it will be constituted after the developer control period ends). Explanatory Note— An application may be made under section 142 if the developer contravenes this subsection. (3) In this section— developer control period means a period during which— (a) the community corporation is constituted solely by the developer; or (b) the developer owns the majority of lots in the community scheme or in any other way controls the voting of the corporation. 112 The second respondent contends that Eklipse breached the statutory duty. On that premise, the second respondent further contends that it is entitled to an order terminating the contracts either pursuant to s 142 of the CT Act or at law or in equity. 113 Before turning to whether Eklipse breached its fiduciary duty or the statutory duty – and the remedies available with respect to any such breach – it is necessary to set out in greater detail what occurred during the process of negotiations with respect to the Letting Agreements and Caretaking Agreements. -- 34 of 119 -- [2025] SASC 172 Kimber J 31 Further background to the entry into the agreements The initial involvement of Imagine Hotels and Resorts before RPM 114 There is no dispute that before RPM became involved in any negotiations with respect to agreements relating to the Realm Building, Eklipse had been engaged in negotiations with Imagine with a view to Imagine being approved as the letting agent and caretaker for the Realm Building. Imagine operated serviced apartments and, at all relevant times, Mr Song knew that Imagine operated a similar business model to that of RPM (or CLIIX). That is, a business model with a specific focus upon short-term letting.36 115 During the negotiations with Imagine, and later with RPM, Eklipse was represented by solicitors, Lynch Meyer. Imagine was represented by its solicitors, Mahoneys. By no later than 30 March 2020, the negotiations between Eklipse and Imagine had reached the stage of draft Letting, Caretaking and Procurement Agreements being proposed.37 Like the agreements the subject of these proceedings, those draft Caretaking Agreements and draft Letting Agreements provided for, in effect, four automatic renewals of the initial five-year agreement, each renewal for a period of five years.38 Also, by no later than 30 March 2020, Mahoneys had prepared and sent to Lynch Meyer draft suggested motions for the ‘inaugural EGMs’ with respect to the entry into the Letting and Caretaking Agreements by all community corporations within the Realm Building.39 116 I am also satisfied that, by no later than 25 March 2020 and before RPM became involved in any discussion about by-laws, the indicative by-laws and what became the existing by-laws had been the subject of discussion and/or negotiations between Lynch Meyer and Mahoneys. On 25 March 2020, Mr Appleyard of Lynch Meyer sent an email to Mahoneys in which Mr Appleyard attached marked-up copies of the indicative by-laws for the LRC and the HRC. The marked-up copies of both sets of indicative by-laws drew a line through substantial aspects of the indicative by-law 28 and made other amendments which matched the existing by-laws as later deposited with the Registrar-General. Within the email to Mahoneys dated 25 March 2020, Mr Appleyard gave an explanation about why the amendments to the indicative by-laws had been made. That email made clear that the indicative by-laws had been marked-up with changes to permit short-term letting because the intention of Imagine was to conduct short-term letting. Mr Appleyard wrote:40 To assist your consideration, we have left the documentation in mark-up format to reflect the changes of relevance to your clients [sic] proposed operations …. 36 T447; T530. 37 Email from Mr Song to Mr Pevy dated 26 March 2020 (Exhibit R37). 38 Tender Book, tabs [56] and [59]. 39 Ibid, tab [56]. 40 Tender Book, tab [78]. -- 35 of 119 -- [2025] SASC 172 Kimber J 32 117 The marked-up by-laws attached to the above email were also marked-up with amendments providing for the corporation to enter into an agreement with a caretaker and an agreement with a letting agent.41 118 Consistent with the above, and given the draft motions sent on 30 March 2020 to Lynch Meyer by Mahoneys, Imagine was, at least in its view, still involved in negotiations with respect to the Realm Building on 30 March 2020. I mention this as although Imagine was still corresponding with Lynch Meyer on 30 March 2020, as will be seen, Mr Song of RPM had been approached before 30 March 2020. There is no direct evidence from Imagine, Mahoneys, UA or Eklipse as to why Imagine ceased negotiations, including that, to my understanding, there is no written communication from Imagine or Mahoneys on that issue. 119 On the evidence, I cannot find that Imagine ceased negotiations because of any concern about the legality of any amendment to the indicative by-laws to accommodate its business model or because of any concern about the legality of draft agreements negotiated at the time Imagine ceased negotiations. That is so for two reasons. First, it is insufficient in the evidence, if there is indeed anything, which permits an inference that Imagine had expressed such a concern. As mentioned, the marked-up by-laws were sent on 25 March 2020, and negotiations were continuing five days later. Further, as mentioned, there is no written communication, or other direct evidence, about why those negotiations came to an end. Second, I cannot exclude that Imagine may have withdrawn from negotiations because of the COVID-19 pandemic and the anticipated impact upon travel and short-term letting. It is not disputed that on 20 March 2020 the Australian government banned incoming travel for non-residents and, on 25 March 2020, substantially banned all outgoing travel. Travel within Australia was restricted, with the South Australian border being closed to non-essential interstate travel from 24 March 2020. The involvement of Mr Song and RPM 120 Mr Song is the chief executive officer of Song Properties Pty Ltd, trading as CLIIX Apartments and Hotels (formerly Arise Hotels and Apartments (Arise)). As mentioned, Mr Song is the sole director and secretary of the first applicant, RPM. RPM is a wholly owned subsidiary of Arise. 121 RPM, through Mr Song, did not become involved in the Realm Building until about 26 March 2020. On about 26 March 2020, Mr George of UA contacted Mr Song to ascertain his interest in providing caretaker and letting services in the Realm Building. The evidence of Mr Song included that Mr George put to him that:42 41 Ibid, tab [78], see marked-up by-laws 45 and 46. 42 Closing Submissions of First Applicant (FDN 221, filed 6 February 2025), [105.1]-[105.5] citing Tender Book, tab [105]. -- 36 of 119 -- [2025] SASC 172 Kimber J 33 …the developer of the Realm building was Eklipse; Eklipse was offering a rental yield guarantee of 5% to purchasers who bought for investment purposes and would be renting out their apartment, which meant that professional management services were required for the building. Under the terms of the rental guarantee, purchasers were required to appoint Eklipse’s nominated agent to arrange and manage the letting of their apartments; the purchasers were often based overseas in particular in Hong Kong as there had been sales efforts focused on the Chinese market; Eklipse had reached an agreement with Imagine for the provision of management and letting services in respect of the Realm building, but Imagine was looking to pull out of the deal because of the impact of COVID which was such that Imagine was concerned that it would make significant losses as a result of taking responsibility for rental guarantees that had been given to purchasers of units by Eklipse; and there was urgency to the situation as the building was nearing completion. 122 Mr Song and RPM were experienced operators in the short-term letting business and caretaking business interstate. Mr Song and RPM had not previously been involved in caretaking and letting agreements in South Australia. Nevertheless, I accept that what was proposed was a transaction like that previously negotiated by Mr Song and RPM in other buildings in other states. That is, the acquisition of property management appointments and assistance from the developer in providing such appointments (e.g. – through rent roll information and restraints upon the developer or its agents competing for such appointments) combined with entry into the letting and caretaking agreements with the owners’ corporations.43 123 Having been approached by Mr George, Mr Song acted quickly. By no later than 27 March 2020, Mr Song had engaged his solicitors, Pevy Lawyers, to provide advice. It must be that by no later than 27 March 2020 Mr Song had been provided with a copy of a draft Procurement Agreement as, towards the end of that day, Mr Pevy of Pevy Lawyers provided advice by email with respect to a draft of that agreement. 124 On 1 April 2020, Mr George sent Mr Song several documents by email which included documents that had been the subject of negotiations with Imagine. They included the indicative by-laws but with the tracked amendments to by-laws 28, 45 and 46; and draft Letting and Caretaking Agreements. In evidence I have not rejected, given that Mr Song was likely dealing with the COVID-19 pandemic and as he had engaged Pevy Lawyers, Mr Song says that he did not read the documents carefully.44 Nevertheless, Mr Song did comment on what his view would have been had the indicative by-laws been in place. In evidence I accept, at least because long-term letting is not a focus of the business of RPM, Mr Song said he would not have been interested in entering contracts with respect to the Realm Building had the indicative by-laws become the existing by-laws.45 125 There is no dispute that Mr Song sent the documents received on 1 April 2020 to Mr Pevy to review. 43 Fourth Affidavit of Tianyi (Michael) Song dated 3 December 2024 (Exhibit A35),[9]. 44 T455-T457. 45 T603.22-27. -- 37 of 119 -- [2025] SASC 172 Kimber J 34 126 As of 1 April 2020, the terms being negotiated between Mr George and Mr Song with respect to a Procurement Agreement was consideration based upon $22,000 per short-term letting appointment and $6,000 per each long-term letting appointment with a minimum payment of $1,500,000. UA was to be responsible for the management of leases and have responsibility for rental guarantees for the first 12 months. 127 On 3 April 2020, Mr Pevy forwarded to Mr Song a marked-up copy of the draft Procurement Agreement. An aspect of the redrafting done by Mr Pevy was to include that the procurement sum was based on a payment of $22,000 (inclusive of GST) for each letting appointment which was defined to be ‘an appointment of RPM by an owner as agent to let out the owner’s lot on a short-term basis’.46 On 7 April 2020, in an email to Mr Song, Mr George provided comments on the suggested re-drafting which included ‘Letting Agent delete reference to short term basis…’.47 Mr Song and Mr George must have discussed the email as, later the same day, Mr Song replied by email ‘Refer [sic] our phone conversation…’ attaching Mr George’s email of 7 April and commenting within that email that, contrary to the aspect of the email of Mr George about deleting reference to ‘short- term basis’, ‘We need to have the short term in there as we [sic] paying for short term keys’.48 128 Later the same day, Mr George sent to Mr Song a draft proforma document headed ‘Rental Guarantee Agreement’, which was six pages in length, and another draft proforma document headed ‘Property Management Agreement – Realm Adelaide – Long term tenancies’, which was five pages in length.49 Mr Song forwarded the email and other documents to Mr Pevy later that day. 129 Within the proforma Rental Guarantee Agreement, cl 3 provided that as the vendor, Eklipse was to guarantee an annual rental return of 5 per cent of the purchase price, payable in equal monthly instalments across a 24-month period from 90 days after settlement. The guaranteed amount was payable on the condition that the purchaser appointed the vendor’s nominated agent to secure a tenant under a lease in terms set out in cl 6.2. The terms within cl 6.2 are not consistent with the sorts of terms that would be appropriate in the case of short-term letting. As set out above, the proforma Property Management Appointment included the heading ‘Long term tenancies’. 130 On 9 April 2020, Mr George emailed Mr Song with changes to the draft Procurement Agreement as it existed at that time. Within the email, Mr George wrote that ‘Key bits are references to short term letting…’ and that in the definition of Letting Appointment he had deleted reference to ‘short term basis’.50 Mr Song immediately forwarded that email to Mr Pevy. Mr Pevy replied to Mr Song by 46 Tender Book, tab [64] (emphasis added). 47 Ibid, tab [65] (emphasis added). 48 Ibid, tab [65]. 49 Ibid, tab [66]. 50 Ibid, tab [72] (emphasis added). -- 38 of 119 -- [2025] SASC 172 Kimber J 35 email later that day. Among other things, the advice of Mr Pevy was that reference to ‘short term letting is essential as that is what the [procurement sum] is based on’ and that the deletion of reference to ‘short term basis’ in the definition of Letting Appointment ‘can’t work for the reasons noted [earlier in the email]’.51 The zoom teleconference on 9 April 2020 131 Following the above emails, Mr Pattinson suggested a teleconference to ‘clarify items rather than going round in circles’.52 That Zoom teleconference was held later that day. The participants were Mr Song, Mr Pevy and Mr Pattinson. 132 I find that whether short-term letting was to be referred to in the Procurement Agreement was discussed in the teleconference given the emails just mentioned and as, following that teleconference, Mr Pevy emailed Mr Song:53 Further to the teleconference, I’ll make some further amendments to the contract draft to remove the references/concepts concerning short term letting. (emphasis added) 133 Mr Song did not admit in his evidence that removing reference to short-term letting from the Procurement Agreement was discussed in the meeting on 9 April 2020. Mr Song said about what was discussed:54 A. I recall there was a Zoom call around that time, was between all of us. Q. When you say 'all of us', Kelsey Huebner wasn't on the call, was she. A. No, she wasn't. I think Trent Pevy, Anthony, yeah, Trent Pevy, Anthony, Matt, me, the most and we had to discuss all the critical points, which is rental guaranteed starting time, who is covering rental guaranteed starting time, who is actually paying for what and then because of COVID, because of COVID, I'm not able to actually take short-term letting, there's no business for short-term letting. I'm not able to take the letting from it. Eklipse was worry, Eklipse would worry about, you know, matters of Urban Activation, if they only paying long-term agency and they only know how to manage long-term rental – 134 Nevertheless, Mr Song was aware that short-term letting would not appear in the Procurement Agreement because of the communication from Pevy Lawyers to which I have just referred. Events after 9 April 2020 135 On 10 April 2020, Mr Pattinson emailed the Scheme Descriptions for each of the Primary, Secondary and two Tertiary Schemes and the Development Approval to Mr Pevy. The Scheme Descriptions provided at cl 2.1 and cl 2.2 that the lots could only be used for ‘residential purposes (including residential serviced 51 Tender Book, tab [72] (emphasis added). 52 Ibid, tab [74]. 53 Ibid, tab [76]. 54 T466.15-30. -- 39 of 119 -- [2025] SASC 172 Kimber J 36 apartments) and … common property and car parking subsidiaries’.55 The Development Approval contained within the draft Scheme Description for what became the HRC that the nature of the development was the division of one allotment into two community strata allotments for ‘residential purposes’.56 136 As earlier set out, the Letting Agreements and Caretaking Agreements were entered into for terms of, in effect, 25 years. On 10 April 2020, Mr Pattinson communicated with Mr Pevy about that and copied to him legal advice Mr Pattinson had received from Lynch Meyer about s 142B of the CT Act. That email was as follows:57 Trent This is one the reasons we a (sic) must act carefully in particular stating upfront 25 year term (even though it essentially is but eh (sic) manger (sic) can be terminated prior to the full 25 year term. The current Motions already email (sic) to you have not be (sic) vetted as yet and are subject to change. To overcome this position our legal advice is noted in the last 2 items. COMMUNITY TITLES ACT 1996 - SECT 142B 142B—Developer stands in fiduciary relationship with community corporation (1) For the avoidance of doubt— (a) the developer stands in a fiduciary relationship with the community corporation and, before the community corporation is established, with the proposed community corporation; and (b) the duties owed by the developer under this Act are in addition to, and do not derogate from, the duties arising out of that fiduciary relationship. (2) Without derogating from subsection (1), where the community corporation intends, during the developer control period, to delegate functions or powers to a body corporate manager or to enter into a contract for services, the developer must exercise reasonable skill, care and diligence and act in the best interests of the community corporation (as it will be constituted after the developer control period ends). Note— An application may be made under section 142 if the developer contravenes this subsection. (3) In this section— "developer control period" means a period during which— (a) the community corporation is constituted solely by the developer; or 55 Tender Book, tab [79]. 56 Ibid. 57 Ibid, [82]. -- 40 of 119 -- [2025] SASC 172 Kimber J 37 (b) the developer owns the majority of lots in the community scheme or in any other way controls the voting of the corporation. You may have formed the view that in (sic) to maintain the high standards of the development and expectations of purchasers • it is necessary to enter into such Agreements with an experienced operator for the ongoing benefit of the proposed Corporations, and that the Corporations are otherwise entitled to determine the Agreements if the Caretaker fails to remedy breaches (as in Clause 9 you adverted to), and • as experienced developers have exercised reasonable skill, care and diligence in your judgement of entering the agreements. Due diligence 137 Also on 10 April 2020, UA provided several documents to Mr Pevy for the purposes of conducting due diligence. An attempt was made to address the email to Mr Song, but his email address was misspelt. I do not find that Mr Song received the email and its attachments. 138 On 11 April 2020 at 9.52am, Mr Song emailed Mr Pevy and instructed him to attend to due diligence. Mr Song stated in that email:58 It is the only project we properly want at Adelaide at this stage. Even we risk ourselves a bit. We do have buyers [sic] information and if we can made [sic] the workable areas for our use only. And make sure Brett can’t be in the building in any form then I think we are ok with take (sic) the risk as long as we can get 68 or 100 letting appointments. 139 On 11 April 2020 at 2.32pm, Mr Pevy emailed a solicitor within his firm, Ms Huebner. Ms Huebner was also engaged in work for RPM. Mr Pevy stated in his email to Ms Huebner:59 By-laws going to be crucial. PLs (sic) keep an eye out for any possible restrictions on conducting a short term letting operation. … In summary, Michael wants to buy this and is happy to take risks to achieve this. So we need to cover backsides to protect us in the likely event he goes ahead even though we might not be 100% onboard. The Due Diligence Report 140 On 15 April 2020, Pevy Lawyers provided Mr Song with a legal due diligence report (the Due Diligence Report).60 In the opening ‘Disclaimer’ section 58 Tender Book, tab [90]. 59 Ibid, tab [88]. 60 Ibid, tab [104]. -- 41 of 119 -- [2025] SASC 172 Kimber J 38 of the Due Diligence Report, the first applicant emphasises that the following points were made:61 1 the report had been prepared for RPM as purchaser of the proposed off the plan management rights business in the Realm building; 2 the purpose of the report was said to be to draw the client’s attention to matters of a material nature that relate to the business, and which may influence the decision as to whether to proceed with the purchase but with a focus on issues which might impact upon the operation of the business and its eventual sale; 3 the general nature of the risks to such a business were adverted to; 4 no advice was given in relation to planning permits of the building or the management rights business; 5 no advice was given in relation to the viability of the long-term make-up and size of the letting pool. 141 The first applicant also places emphasis upon the following risks identified in the Due Diligence Report:62 1 a risk that market reviews of salary under the caretaking agreements could see revenue decrease; 2 that the obligations under the caretaking agreements as to staffing could become onerous if short term letting were not able to commence in the future; 3 the risk that owners might band together and seek to pass resolutions to have the effect of reversing previous decisions of the community corporations to enter into agreements with RPM; 4 a recommendation that Mr Song might consider purchasing property in the building to better protect his rights in the event of adverse conduct by the corporations; 5 that the by-laws might be changed adversely to RPM; 6 that the sample property management agreements contemplated a structure whereby properties would be leased long-term to an associate of the manager, who would then sub-let or sub-license the properties for short-term usage, and queried whether this structure was the most efficient from a tax and accounting perspective. 142 The first applicant submits there is nothing in the Due Diligence Report to suggest that there was ‘anything possibly untoward with the transaction as regards the acquisition of property management appointments and associated [L]etting and [C]aretaking [A]greements pursuant to the proposed [P]rocurement [A]greement’.63 The first applicant submits that there is nothing in the Due Diligence Report to suggest that Eklipse was in breach of a fiduciary or other duty, or that there might be a dishonest and fraudulent design at play. That being so, the 61 Closing Submissions of First Applicant (FDN 221, filed 6 February 2025) at [215.1]-[215.5]. 62 Ibid, [123.1]-[123.6], referring to Tender Book, tab [104]. 63 Ibid, [124]. -- 42 of 119 -- [2025] SASC 172 Kimber J 39 first applicant submits that Mr Song had no reason to consider that there might have been a breach of fiduciary or other duty and no reason to consider that there was any fraudulent or dishonest design on behalf of Eklipse. 143 In the ‘Summary of Findings’ section, the opening statement of the Due Diligence Report states:64 Subject to the qualifications set out in this report, our report has identified no issues or defects in title which we believe would cause you to reconsider your proposed purchase. 144 Mr Song said that this was the advice that mattered to him and that he did not read any further and it, in effect, gave him the comfort he needed. 145 The Report at page 4 referred to legislative protections for community corporations to set aside some contractul arrangements, either because that contract arose via a developer during the developer control period or because the contract amounted to a particular kind of delegation. It also referred to a right for community corporations to reverse resolutions under s 89 of the CT Act. In this context, the Due Diligence Report advised that there was a genuine risk that a lot owner could try to mobilise support amongst other owners for setting aside a management rights arrangement merely by ordinary resolution, something which highlighted the importance in having owners on-side and supportive of the services provided by RPM and the value they offered. The Report went on to explain that that risk placed a significant concern on the value of agreements given the uncertainty of their term. The Report further explained that uncertainty could affect or reduce value on resale, unlike the position in Queensland and Victoria. 146 Mr Song accepted in cross-examination that, while he had no recollection, it was possible that his solicitors may have raised with him a concern about the possibility of the Caretaking Agreement and Letting Agreements being terminated.65 However, he expressly rejected that the risk of termination was to do with the length of the agreements and said the only risks he could recall being raised was the commercial risk and that lay in the fact that RPM may not do a good job.66 147 The Report noted at page 5 that the solicitors had reviewed proposed by-laws with tracked amendments for the four community corporations. 148 It was observed at page 12 that the termination provisions in cl 9 of the Caretaking Agreements were commercial and standard for management rights arrangements, but it was also suggested that, under s 142B of the CT Act, the agreements would constitute a contract for services under the developer control period and that an application could be made under s 142 if there was a concern the developer had contravened the legislative requirements under s 142B to act in 64 Tender Book, tab [104]. 65 T515.19-33. 66 See, for example, T566.18-19. -- 43 of 119 -- [2025] SASC 172 Kimber J 40 the best interests of the community corporation in putting in place the Caretaking and Letting Agreement arrangements. I pause to observe that there is a dispute between the parties about whether that is correct. 149 The Report noted at page 13 that the effect of cl 4.2 of the Letting Agreement was that RPM could ‘carry on a letting business for permanent, short term and holiday letting in the development’.67 The first applicant emphasises that there was no suggestion in the Report that this precluded short-term letting for less than two months and submits that what later appears in the Report at page 16 is to the contrary. 150 The Report noted at page 14 that lot owners were free to engage external agents to let their lots and this was confirmed by cl 4.6 of the Letting Agreement. 151 Having noted at page 5 that the solicitors had reviewed the by-laws with tracked amendments which were proposed for the four community corporations, the Report went on at pages 15 and 16 to expressly address the by-laws of the Secondary and Tertiary Schemes and stated that ‘they are relatively standard and do not contain anything unusual’ and that they were ‘consistent with what a prudent management rights purchaser would expect to see’.68 The Report nonetheless noted that they could be changed at any time by a special resolution at a general meeting or by way of a court order. The Report said at page 16 that the draft by-law 28.1 confirms that the tertiary lots may only be used for residential accommodation ‘which includes letting for permanent or short-term and serviced apartments, which is consistent with your intended operations in Low Rise and High-Rise’.69 152 At page 16, the Report drew specific attention to five by-laws in particular and added that RPM should be aware that, under s 37(2) of the CT Act, the corporation could resolve to put in place a by-law ‘restricting letting operations of less than two months by way of special resolution’ as a result of which RPM was to be cautious of any proposed amendment to the by-laws and to be ready to counter any such motion put forward at a general meeting.70 153 The Report at pages 17 and 18 also gave advice about existing rental guarantee agreements associated with property management appointments. It was noted that:71 It is a term of the rent guarantee that the lot owner must enter into an agreement with the developer’s chosen agent. We understand this will not be your entity to begin with. Rather the developer will approach lot owners to appoint your entity at some time in the future when it is expected you will take on the liability for the rent guarantee. 67 Tender Book, tab [104]. 68 Ibid. 69 Ibid. 70 Ibid. 71 Ibid. -- 44 of 119 -- [2025] SASC 172 Kimber J 41 154 As a result, it was suggested that when lot owners were approached, they should be given a hybrid proposal which included a facility for both permanent letting and short-term letting. It was said that the solicitors were ‘comfortable with you looking to take on the liability of the arrangement when you are confident that trading conditions will allow you to generate returns in excess of the rental guarantee amount’.72 155 The Report also noted that the sample property management agreement of Imagine made no mention of short-term letting but did make provision for the owner to enter into a long-term tenancy agreement and for the lessee then to have the right to sub-let out the apartment for short-term or permanent stays. 156 For its part, the second respondent places emphasis upon the following aspects of the Due Diligence Report. Some, but not all, have already been outlined above:73 1. There was noted to be a ‘genuine risk here that a lot owner could try and mobilise support amongst other owners for setting aside the arrangement,’ and that relatedly, ‘an application can be made under section 142 if there is a concern the developer has contravened their legislative requirements under section 142B to act in the best interests of the community corporation in putting in place the caretaking and letting agreement arrangements.’ 2. It was recommended that RPM protects its investment by obtaining freehold ownership over real estate in the scheme to the areas which would otherwise be common property. 3. Lot holder investors had been entering into Property Management Agreements, which only permitted long term letting and that there would be a need to convert them into short term letting appointments. 4. The by-laws are capable of amendment to restrict or eliminate short- term letting. 157 On 15 April 2020, Mr Song discussed the Due Diligence Report with Pevy Lawyers. Pevy Lawyers prepared the following file note of the telephone discussion with Mr Song:74 Spoke to Michael and we raised our concerns arising from the legal due diligence in relation to the legislation under sections 75, 78A and 142 of the Community Titles Act 1996 (SA) allowing the Community Corporations to terminate the caretaking and letting agreements for the four schemes by pursuing an application under section 142 or passing an ordinary 72 Closing Submissions of First Applicant (FDN 221, filed 6 February 2025), [226]. 73 Second Respondent’s Written Closing Submissions (FDN 220, filed 6 February 2025), [52.1]-[52.4]. 74 Tender Book, tab [105]. -- 45 of 119 -- [2025] SASC 172 Kimber J 42 resolution and that the protection mechanisms in SA are not as good as Victoria and definitely not as good as those in QLD. Given Michael is not purchasing any real estate, we consider it would be prudent for Michael to own a lot in the Community Corporations or to own a retail lot in the complex to shore up and protect his operation of his letting business if the agreements were terminated in the future. Michael understands the risks associated with the termination of the agreements and will consider looking into obtaining a retail lot, although it doesn’t appear it is likely the developer will sell a retail lot to him for his use. Michael still wishes to proceed with the purchase irrespective of the risks raised in the legal due diligence report and also raised with him by phone. 158 Mr Song said about the Due Diligence Report that the advice that mattered to him was that Pevy Lawyers had identified no issues or defects in title which it believed would cause him to reconsider the proposed purchase.75 Mr Song said:76 A. In this document I browsed through, I didn't read line by line. I read - particularly I remember I read the 'Summary of Findings', especially the third paragraph. After that I basically - where is the 'Summary of Findings'? Yeah, I read - if you go to… 'Summary of Findings', I read the first two paragraph, 'Subject to the qualification set out in this report, our report has identified no issue or defect in title which we believe would cause you to reconsider your proposed purchase'. This, I remember this sentence very well. Q. Where are you reading from. A. This is [the Summary of Findings at page 4 of the due diligence report]. Q. Yes, and which - A. 'Summary of Findings'. I normally just go to 'Summary of Findings'. Q. Yes. What were you reading out then. A. I'm reading out 'Subject to the qualifications set out in this report, our report has identified no issue or defects in title which we believe would cause you to reconsider your proposed purchase'. Q. You're in the witness box just selecting those words because you think it's helpful to your case. I want to suggest to you that you read the report and also that Mr Pevy took you through the report. What do you say to that. A. No, I do this every single deal. Q. I want to suggest to you that you are deliberately understating the extent to which you read this due diligence report. A. I said I browsed through but I'm not understating, that I don't go line by line. Yes, I may have read - this is about four, five years ago, but basically in my mind I knew, after that, you know, I know all the lawyers as well, all lawyers want to protect 75 T498-T499; T520; T522; T566. 76 T498.32-T499.29. -- 46 of 119 -- [2025] SASC 172 Kimber J 43 themself as well. So, but after I read that particular sentence, I'll be relaxed and that's in my mind. 159 Given the content of the file note dated 15 April 2020, I find that Pevy Lawyers discussed with Mr Song the key aspects of the following part of the Report:77 … (c) there are legislative protections for community corporations to set aside some contract arrangements either because that contract arose via a developer doing so during the developer control period or because the contract amounts to a delegation of the community corporation’s powers to administer common property and the like. There is also an overarching right for community corporations to reverse resolutions under section 89 of the Community Titles Act 1996. Accordingly, there is a genuine risk here that a lot owner could try and mobilise support amongst other owners for setting aside the arrangement. In most instances, this would require an ordinary resolution at general meeting. This is a risk for most South Australian management rights arrangements, especially those acquired ‘off the plan’ from a developer, and highlights the importance in having owners onside and supportive of the services provided by you and the value they offer. As discussed, the right for a community corporation to set aside long term contracts such as these places a significant concern on the value of the agreements given the uncertainty of their term. This could mean value on resale could be significantly less than hoped for, especially when compared to what can be achieved for equivalent agreements in say the Queensland or Victorian jurisdictions. This should be given strong consideration by you before proceeding. Another factor to consider in contemplating the above is that your rights to common property all extend from the caretaking and letting agreements. The best protection for your investment would be by way of freehold ownership over real estate in the scheme. This would enable you to continue to operate your letting business even if the caretaking and/or letting agreements with the community corporation were terminated. (emphasis added) 160 Mr Song gave the following evidence:78 Q. 'As discussed the right for a community corporation to set aside a long-term contract such as these places a significant concern on the value of the agreements given the uncertainty of their term’. First of all, did you read that particular passage from the due diligence report, Mr Song. A. No, I don't have any recollection of reading that. Q. The paragraph refers to a discussion and I want to suggest that that was a matter that was discussed prior to you being provided with a copy of the due diligence report; do you agree with me. 77 Tender Book, tab [104]. 78 T520.12-T521.28; T566.6-19. -- 47 of 119 -- [2025] SASC 172 Kimber J 44 A. I can't remember, I don't have any recollection. Q. Once again, we've got Pevy Lawyers who are the experts in this area, would you not remember a discussion which you had about a concern which they had concerning the length of the agreement. A. It's not their concern, yeah, given I said to you in the first paragraph of the summary of the finding and after I read that I don't think there is any issue. HIS HONOUR Q. Mr Duggan wasn't asking you whether you read those words. He was directing your attention to the reference 'As discussed', and suggesting that those words reflect there had been a discussion about the topic. A. It may have been, but it's that long I can't - I really can't remember what's been discussed. XXN Q. But given the consequences of the letting agreement and caretaking agreement being set aside, the effect of that would be to bring an end to your business; do you agree with that. A. Bring? Q. An end to your letting pool business. If they were set aside then that is something that would bring an end to your business. A. I think what he mean is more like on the commercial side, yeah. So, if you're just reading that sentence, yes. Q. That that would be of real concern; in other words, that that was a major issue for you if there was a risk that they could be set aside; do you agree with that. A. As I said earlier, any business there is a risk and then there's a lot of - I pay more attention, I pay attention on the commercial risk. Anybody can do - if any - any company I know that we will perform our duty in a good standard, yeah, hence why that I don't - yeah, I only consider in the commercial side of the risk, yeah. Q. The effect of your evidence is simply that you don't recall this discussion and what I'm suggesting is that given the nature of the matter that it's the type of thing that you would remember given the consequence it would have on your business. A. Like I said, I don't, I don't remember there was a discussion, yeah, yeah. … Q. In para.9, in the last sentence you say 'As noted in my third affidavit, as a result of my experience with these agreements, I consider that the transactions entered into in relation to the Realm building were lawful and appropriate and nothing was brought to my attention during my dealings with the Realm apartments that led me to doubt this position'. I want to suggest to you that, in fact, Pevy Lawyers did bring to your attention the fact that they were concerned about the length of the letting and -- 48 of 119 -- [2025] SASC 172 Kimber J 45 caretaking agreements and that there might be valid grounds to terminate those agreements, do you agree with that. A. Commercially if I don't do a good job, yeah, there's a risk. But, no, I don't agree. Mr Song was aware of a risk of the agreements being set aside 161 I find that Mr Song was aware in April 2020 that there was a risk of the agreements being set aside due to their length and/or due to the passing of a valid resolution by a community corporation. 162 To the extent that Mr Song suggested that the only risk contemplated was the risk of termination because of the quality of the work performed, I cannot accept that evidence. First, given the reference to ‘As discussed’ within the Report and extracted above, I find that, before being provided with the Due Diligence Report, Pevy Lawyers had raised with Mr Song that a community corporation might be able to set aside contracts of this type. Second, the advice provided in the Report was comprehensive. Given that Mr Pattinson had emailed Mr Pevy in the terms he did on 10 April 2020, it is more likely than not that Mr Pevy raised the effect of that email with Mr Song. Indeed, it is likely that email prompted the discussion referred to in the Report. Third, although in the context of the by-laws, the email of Mr Pevy to Ms Huebner on 11 April 2020 is demonstrative of Mr Pevy being mindful that Mr Song might take a risk which was imprudent. In such circumstances, it is more likely than not that Mr Pevy would have taken steps to ensure that Mr Song could not say he had not been told of the risk of agreements being able to be terminated due to their length, and/or as the result of a valid resolution. 163 Nevertheless, I am not able to reject the evidence of Mr Song that he believed that the Caretaking Agreements and Letting Agreements were lawful. There was nothing in the Due Diligence Report to suggest the contrary. What was raised with him were that there were risks that included the by-laws being amended by a community corporation and of contracts entered during the developer control period being set aside. For Mr Song to be appraised of risks of those types is materially different to him being told that the agreements were unlawful or that they might involve Eklipse breaching a fiduciary or statutory duty. That does not appear in the Report, any email or file note. I do not find that Mr Song was told any such thing. There is a material difference between Mr Song being told of the risks identified in the Report and Mr Song contemplating that anything was unlawful or otherwise improper. I cannot infer that Mr Song contemplated anything beyond the risks which I have identified. Relevant in this context is that he was being given legal advice and the evidence of the terms of that legal advice. Communications about the provision of only indicative by-laws to purchasers 164 During the negotiations between RPM and Eklipse, there is no dispute that Pevy Lawyers became aware that purchasers may not be told that the indicative by-laws were to be amended. -- 49 of 119 -- [2025] SASC 172 Kimber J 46 165 On 17 April 2020, Ms Huebner emailed Mr Smith, Mr Pattinson and Lynch Meyer requesting copies of ‘the latest pro-forma lot contract and disclosure issued to prospective purchasers’.79 That same day, Lynch Meyer emailed Mr Pevy and Ms Huebner a hyperlink to download documents that had been provided to prospective purchasers. Those documents included the indicative Tertiary Strata by-laws and the indicative Scheme Description. 166 Ms Huebner identified the indicative by-laws were different to those after the suggested amendments were implemented during the negotiations with Imagine. Having identified that, Ms Huebner was interested in ascertaining ‘when the marked-up by-laws were disclosed to lot owners (noting the by-laws accompanying the lot disclosure are different to the marked-up by-laws) …’ and emailed Mr Pattinson, Mr Song and others about that.80 167 On 22 April 2020, Lynch Meyer responded on behalf of Eklipse stating that there was no obligation of disclosure to lot owners. Lynch Meyer stated:81 the Contract documentation with a purchaser • included the draft indicative Primary and Tertiary Scheme Documentation (including bylaws) • provides for the vendor/developer to make such changes as it elects to the Scheme Documentation • the Scheme Description(s) had always included use as a serviced apartment There is no statutory requirement to provide (varied) bylaws to a purchaser and the obligation is to provide a copy of the scheme description, bylaws, and development contract filed by the Registrar General with the deposited plan at the First Statutory General Meeting (together with other documentation as set out in the Act). 168 As the first applicant submits, Lynch Meyer’s summary of the statutory requirements was accurate. There is no obligation in the CT Act to provide varied by-laws to a purchaser who has received indicative by-laws. 169 The effect of the evidence of Mr Song was that he could not recall Mr Pevy going through the Lynch Meyer email with him.82 Nevertheless, I find that the email dated 22 April 2020 was discussed with Mr Song. On the same day, Mr Pevy responded to Lynch Meyer that ‘our client is comfortable with the by-law matter based on your email below’.83 The inference I draw is that Mr Pevy communicated that to Lynch Meyer because it reflected his instructions. That email was copied to Mr Song but whether he read it is not crucial as I am satisfied Pevy Lawyers obtained Mr Song’s instructions. As mentioned above, Mr Pevy 79 Tender Book, tab [120]. 80 Ibid, tab [130]. 81 Ibid, tab [139]. 82 Third Affidavit of Tianyi (Michael) Song dated 1 February 2024 (Exhibit A34); T591. 83 Ibid, tab [144]. -- 50 of 119 -- [2025] SASC 172 Kimber J 47 was concerned that the by-laws be closely considered and that his firm ‘covered [its] backside’ in the event Mr Song entered into the agreements. 170 That Mr Song was aware that the indicative by-laws differed to what became the existing by-laws and that the later by-laws had not been provided to purchasers must be put in context of what else I am satisfied Mr Song knew. I infer from the response of Mr Pevy to Lynch Meyer that Mr Song was told of the position of Lynch Meyer. I also infer that Mr Pevy did not seriously question that position when giving Mr Song advice. Had Mr Pevy done so, it is more likely than not he would have made a record. There is no evidence of such a record. Again, this is significant. Mr Song was acting on legal advice and I do not infer that Mr Pevy advised Mr Song that there might have been reasons to doubt what Lynch Meyer had said. The email of Lynch Meyer dated 22 April 2020 did not suggest that there was any impropriety in the indicative by-laws being amended; any obligation to provide amended by-laws to purchasers; nor impropriety in not doing so. The initial Procurement Agreement 171 On 17 April 2020, RPM and Eklipse executed the initial Procurement Agreement. 172 The initial Procurement Agreement defined ‘Letting Appointment’ as:84 a valid letting appointment between an Owner and the Manager whereby the Owner appoints the Manager as its agent to let out the Owner’s Lot on terms no less favourable to the Manager than those set out in the agreement documenting the Rental Guarantees 173 Consistent with what must have been discussed on 9 April 2020, there was no explicit reference to short-term letting. 174 With respect to why consideration would be paid by RPM, and in my view importantly, the initial Procurement Agreement set out:85 The Developer has agreed that in consideration of the Manager paying to the Developer the amount shown in ITEM 6 of the Items Schedule (Procurement Sum) that as original and sole proprietor of all of the Lots, the Developer will cause the Corporations at their first general meetings to resolve to enter into with the Manager and execute the relevant Caretaking Agreement and Letting Agreement. Advice about planning 175 The Due Diligence Report received by Mr Song on 15 April 2020 set out that Pevy Lawyers had not made any investigations or comments with respect to planning permits for the Building or the classification of areas within it. 176 That Report also noted that RPM was obtaining separate advice from planning experts. That was, at least in part, a reference to Mr Pevy having suggested on 11 April 2020 that Mr Song pass on planning documents which had 84 Core Bundle, tab [2]. 85 Ibid. -- 51 of 119 -- [2025] SASC 172 Kimber J 48 been provided by Mr Pattinson to Ms Gemma Greenhalgh and seek her advice ‘on the ability to run a short-term letting operation so far as town planning is concerned’.86 177 Ms Greenhalgh emailed Mr Matthew Glossop of Glossop Town Planning (GTP) the same day. On 11 April 2020, Ms Zhang of GTP referred to having spoken with Mr Song and having advised him that if formally engaged, advice could be provided by the next day. However, later the same day, Ms Zhang emailed Mr Song and advised that he should discuss ‘the proposed change of use with the previous planning consultant on this job’.87 Ms Zhang identified that person as Mr Damian Dawson and provided his contact details. 178 Mr Song said that he could not recall speaking to Ms Zhang. Mr Song denied that he needed to consider a change of use so that he could use the premises for short-term letting. Mr Song accepted that Ms Zhang must have meant a change of use to short-term letting.88 179 I am satisfied that Mr Song had contact with Mr Dawson after 11 April 2020 and before 21 April 2020 as, on 21 April 2021, Mr Dawson emailed Mr Song and referred to a call with Mr Song ‘last week’ in relation to a change of use from residential serviced apartments to serviced/short-term stay apartments within the RPM development.89 180 The email went on:90 As discussed the planning system in South Australia differentiates residential apartments as being a different use than serviced apartments or those that are let out for short term stays (the use of private apartments for Air BnB is still a grey area in Adelaide). In your case you will need approval to change the use over. As discussed going from residential to serviced is more straightforward. All of the apartments in the Realm development would meet the minimum size requirements for serviced apartments so I am confident that there will not be any issues in what you propose. To lodge the application I would need to know the apartment numbers that you propose to use as serviced apartments so that they can be identified on the plans. If you are to use an area on the ground floor as a reception, manager’s office or for housekeeping I would need to know where this space is to be located. We will also need to provide a brief outline of the anticipated management and operation of the hotel in terms of guest booking, check in, check out, cleaning/servicing and hours of operation. I would collating this information on your behalf and present it to Council as a complete application package. 181 Mr Song gave the following evidence about his contact with Mr Dawson:91 Q. Damien says [in his email to Mr Song] 'Hello Michael, I hope you are well. Thank you for your call last week in relation to a change in use from residential apartments 86 Tender Book, tab [87]. 87 Ibid, tab [98]. 88 T532-T533. 89 Tender Book, tab [136]. 90 Ibid. 91 T545.30-T546.28. -- 52 of 119 -- [2025] SASC 172 Kimber J 49 to serviced short-term stay apartments within the Realm development'. Do you see that. A. Where is - yeah, you've taken the second one, yeah. Yep. Q. That's an accurate statement of the telephone discussion which you had with Damien Dawson, isn't it, namely, that you said to him that you wanted to discuss with him a change in use from residential apartments to serviced short-stay apartments. A. It wouldn't be 100% in that context but I do ask him, want to make sure that, yeah, Realm can do short-term from a planning perspective, yeah. Q. This is a little bit different though, not just that you're checking, but that you're ringing him up about a change in use from residential apartments to serviced short- term stay apartments. Do you see how that's different, because he's attributing you to a telephone conversation in which you discussed a change in use, do you see that. A. Change in use. I do see that. Q. And you said that to him, didn't you. A. No, I don't. I don't have a recollection if I said that particular word to him. Q. Might you have said that you wanted to have a discussion with him about changing the use from residential apartments to serviced short-term stay apartments. A. No, I would not say change. I would say that I want to make sure they can do that, yeah. Q. You see the term 'residential apartments' that's used there. A. Yep. Q. You understand that residential apartments don't involve short-term stays. A. No. 182 The first applicant submits that the above evidence about planning is irrelevant; this not being a case about planning approval of a permitted use but about title and what was permitted by the documents accepted for registration by the Registrar-General. The first applicant further submits that there was nothing in the planning advice from Mr Dawson which suggested that anything RPM was proposing was unlawful or improper, or which suggested any dishonest intent or awareness of any impropriety. 183 The second respondent submits that the evidence of Mr Song about his communications was ‘evasive’ and that his evidence about those communications should be rejected. 184 I am not satisfied that Mr Song was evasive. Mr Song was giving evidence about communications which occurred about four years prior to his giving of evidence. The evidence of Mr Song was consistent with him wanting to be sure that there would be no obstacle to the letting business being conducted. There was -- 53 of 119 -- [2025] SASC 172 Kimber J 50 nothing in the advice of Mr Dawson to the effect that he would not be able to do what he planned. Other events before 1 July 2020 185 On 24 April 2020, there was more than one communication variously between Mr Song, Pevy Lawyers, Lynch Meyer and Eklipse with respect to more than one issue, including the finalisation of the Caretaking Agreements, Letting Agreements and the next version of the Procurement Agreement (i.e. – the final Procurement Agreement). In an email dated 24 April 2020, Mr Pevy advised Lynch Meyer of the view of RPM being that it was important that office/licence areas (i.e. – the reception and storage areas to be used by RPM) be put on title as it would protect RPM ‘especially in relation to its letting operations’.92 186 Throughout April, there were several emails, including emails sent to Mr Song, attached to which were draft motions for the meeting that ultimately took place on 1 July 2020. Those draft motions made no reference to the Procurement Agreement nor payment of the procurement sum. 187 In an email dated 15 April 2020, Mr Pevy told Ms Huebner, in what must have been a reference to the draft motions, that ‘the developer does not want to refer to the Procurement Agreement. Otherwise, the motions are fine’.93 188 The second applicant submits that Mr Song and RPM knew that the Procurement Agreement, and the consideration referred to therein, would not be disclosed to the lot holders. The evidence of Mr Song to which the second respondent refers is the evidence given by Mr Song in the context of the email dated 15 April 2020 which he did not receive as it was between his solicitors. Mr Song said:94 Q. In the first paragraph [Mr Pevy] says to [Ms Huebner], who's amended the minutes of the motion, to take out a reference to the procurement agreement and [Mr Pevy] says 'The developer doesn't want to refer to the procurement agreement', do you see that sentence. A. Yep. Q. Were you aware that the developer did not want to refer to the procurement agreement in the minutes of the first meeting. A. No. Q. Reading that now, does that surprise you. A. No, I don't know, that's my solicitor's job, so, yeah, I don't know that means to me. 92 Tender Book, tab [147]. 93 Ibid, tab [99]. 94 T533.23-T534.29. -- 54 of 119 -- [2025] SASC 172 Kimber J 51 Q. Was Mr Pevy speaking directly to the developer at that stage. A. He had emails, yeah. Q. But I'm just wondering if you might have passed that on to [Mr Pevy] through your discussions with [Mr] Pattinson. A. No, I don't even know what's this about. Q. Do you agree with me that it's important that the procurement agreement be disclosed in the first meeting. A. Procurement agreement? Q. Yeah, the procurement, that it was important to - A. No. Q. You don't agree with me. A. No, it's a commercial arrangement between me and a developer. Q. So it's not something that you consider needs to be disclosed to the lot holders, is that right. A. At the time it's not their business, the business belonged to the developer. Q. And so I think the answer to my question is you agree with me that because it's not their business there's no need to disclose it to them, in your mind. A. Other than the legal terms I don't - yeah, in my mind, yeah. Q. I want to suggest to you that it was important that the lot holders know that you were paying $1.7 million to the developer to procure the Community Corporation to enter into the letting and caretaker agreement. What do you say to that. A. No, it's not. All my other 20 said they don't know about it, whether it's one million, whether it's 20 million, they don't know about it. 189 I am not satisfied that the above evidence amounts to an acceptance by Mr Song that, during negotiations with respect to the agreements, he specifically turned his mind to the existence of the Procurement Agreement and the consideration payable not being disclosed to the owners of lots. I am unable to discount that, at the time of the entry into the agreements, he did not turn his mind to whether that would happen. In my view, the evidence of Mr Song was that he was not surprised that there was no intention to disclose those matters to lot owners. Mr Song regarded the absence of disclosure as consistent with his experience of such procurement agreements. In my view, in his evidence, Mr Song did not go so far as to accept that he had specifically turned his mind to that issue at any relevant time in 2020. In my view, the effect of the evidence of Mr Song was that, looking back, he was not surprised there had not been disclosure as he regarded it as a matter between RPM and Eklipse. -- 55 of 119 -- [2025] SASC 172 Kimber J 52 The meeting on 1 July 2020 190 As set out above, on 1 July 2020, meetings were held of the four community corporations, including the HRC. As also outlined above, Mr Smith and Mr Pattinson attended for Eklipse as the owners of all lots; and Mr Pattinson and Mr Smith were appointed to the positions of Presiding Officer and Secretary, respectively, for each corporation. Mr Smith was appointed Treasurer. 191 In addition, the motions with respect to the Letting and Caretaking Agreements were carried. I have set out those motions above. As earlier mentioned, there was no declaration of a conflict of interest and there was no reference to any Procurement Agreement or the consideration to be paid pursuant to such an agreement. The duration of the Caretaking and Letting Agreements 192 Both the Letting Agreement with the HRC and the Caretaking Agreement with the HRC, as with the other such agreements, were entered into for a period of five years, with four automatic rights of renewal, each for an additional five years. 193 The nature of the right to extend the Caretaking Agreement is illustrated by cl 3.3 with respect to the first extension of that agreement (all other clauses with respect to extensions being of the same effect):95 First extension Unless the Caretaker provides written notice by no later than 6 months prior to the expiry of the Term stating that they do not wish to exercise their option, then where there is no outstanding breach of this Agreement by the Caretaker entitling the Corporation to terminate it, then this Agreement will be automatically extended for the First Extension, otherwise upon the same conditions as are contained in this Agreement with the exception of this clause 3.3 and except that the Remuneration for the first year and each subsequent year of this First Extension will be calculated in accordance with clause 4 of this Agreement. 194 The right to extend the Letting Agreement is in the same terms. Other key terms of the Letting Agreement 195 Within the Letting Agreement, ‘Letting Business’ is defined. I will set out that definition in more detail later, but it includes:96 (a) a letting agency business, acting as agent for those Owners who wish to appoint the Letting Agent as their letting agent; (b) the letting of Lots for permanent, short term and/or holiday lettings, as may be permitted by the By-Laws applicable to the Corporation; 95 Core Bundle, tab [7]. 96 Ibid, tab [6]. -- 56 of 119 -- [2025] SASC 172 Kimber J 53 196 Clause 3.8 provides that RPM has the exclusive right to operate a letting business from within the Realm Building but does not compel lot holders to use RPM. Clause 3.8 provides:97 Exclusivity for Letting Agent (a) During the subsistence of this Agreement, the Corporation must not itself nor authorise another person to operate a business the same or similar to the Letting Business from the complex. (b) To the extent it can, the Corporation will co-operate with the Letting Agent in taking all action reasonably and practically necessary to stop any person or entity from conducting form the Complex a business the same or similar to the Letting Business. (c) The Letting Agent acknowledges that the Owners may utilise the service of other agents or let their Lots themselves, and the Letting Agent must not unreasonably interfere with these rights. 197 Clause 9.6 provides:98 Further Assurances Each party agrees at its own expense, on the request of the other party, to do everything reasonably necessary to give effect to this Agreement and the transactions contemplated by it, including the execution of documents. Other key terms in the Caretaking Agreement 198 Within the Caretaking Agreement, ‘By-laws’ is defined to mean ‘the By-laws from time to time for the Scheme’.99 2 July 2020 – 21 August 2020 199 The final Procurement Agreement was not entered into until 21 August 2020. Nevertheless, the initial Procurement Agreement and the final Procurement Agreement included several identical terms. The terms, which were identical, included the obligations of Eklipse, the developer. Clause 3.1 of both provided (emphasis added):100 3 Developer’s obligations 3.1 The developer must: (a) give the Manager written notice of Depositing as soon as practical after that has occurred; 97 Core Bundle, tab [6]. 98 Ibid. 99 Ibid, tab [7]. 100 Ibid, tabs [2] and [8]. -- 57 of 119 -- [2025] SASC 172 Kimber J 54 (b) cause each Corporation to hold an extraordinary general meeting (‘EGM’) immediately following Depositing and in any event prior to the Date for Completion; (c) ensure that upon Depositing the by-laws of the Corporations are substantially in accordance with those disclosed in the Disclosure Material and such other changes as the Manager and the Developer agreed upon; (d) cause each Corporation to resolve at the EGM to, subject to Completion, enter into with the Manager and execute under common seal the relevant Caretaking Agreement and Letting Agreement; (e) cause each Corporation to execute under common seal prior to the Date for Completion the relevant Caretaking Agreement and Letting Agreement; (f) within a reasonable time before Completion, deliver to the Manager or the Manager’s Solicitors for execution by the Manager, the original and at least one duplicate copy of the relevant Caretaking Agreement and the Letting Agreement, duly executed under common seal by each Corporation; (g) cause each Corporation to resolve at the EGM to, subject to Completion, enter into with the Manager’s financier and execute under common seal such deed of consent to security, right of entry or like document as that financier reasonably requires; and (h) cause each Corporation to execute under common seal prior to the Date for Completion such deed of consent to security, right of entry or like document as the Manager’s financier reasonably requires and at Completion, deliver to the Manager or the Manager’s Solicitors the original and at least one duplicate copy of it. 200 In the final agreement, the following was set out with respect to the Procurement Sum:101 6 Procurement Sum 6.1 The Procurement Sum is the adjusted amount equal to the number of Letting Appointments held by the Manager on the Adjustment Date multiplied by $20,000.00 plus GST provided always that the Procurement Sum shall not be less than the Minimum Sum. For example, if on the Final Adjustment Date, the Manager holds less than 68 Letting Appointments, the final Procurement Sum will be equal to the Minimum Sum. 6.2 On the Date for Completion, each Adjustment Date, and the Final Adjustment Date, the Manager must pay to the Developer by way of bank cheque the updated Procurement Sum less any amounts (including the Deposit) made by the Manager to the Developer up to the prior Adjustment Date. For example, if on the first Adjustment Date the Manager holds 100 Letting Appointments, and paid for 80 Letting Appointments on the Date for Completion, the updated Procurement Sum will be calculated as follows: 101 Core Bundle, tab [8]. -- 58 of 119 -- [2025] SASC 172 Kimber J 55 Amount Payable to Developer = (100 x $2,000,000.00 plus GST) less (75 x $20,000 plus GST = $1,500,000.00 plus GST) = $500,000.00 plus GST 6.3 The parties agree and acknowledge that the Manager is not required to make payment for a Letting Appointment where the Manager has previously made payment for a Letting Appointment relating to the same Owner’s Lot. 201 There is no dispute that pursuant to the final Procurement Agreement, RPM paid Eklipse about $1,760,000. There is no dispute that no monies were ever received by the HRC or any other community corporation. 202 Consistent with the final Procurement Agreement not being executed until 21 August 2020, between 1 July 2020 and 21 August 2020 due diligence continued. There were extensions to the due diligence period. Clause 18 within the final Procurement Agreement ultimately provided as follows:102 18 Legal Due Diligence 18.1 This Agreement is subject to and conditional upon the Manager and the Manager’s Solicitors perusing and satisfying themselves in all respects with the terms and conditions of the Caretaking Agreements, the Letting Agreements, the proposed by-laws, the Disclosure Material and all aspects about the Complex and the business relevant to the Manger in their sole discretion by no later than 5:00pm on 20 August 2020 (Legal Due Diligence Date). If the Manager and the Manager’s Solicitors are not so satisfied, the Manager may at its sole discretion and by written notice to the Developer terminate this Agreement and the Deposit must be refunded in full to the manager. 18.2 If the Manger does not give notice of fulfilment or waiver of the condition in clause 18.1 by the Legal Due Diligence Date, the Developer may, prior to receiving any late notice from the Manager of fulfilment or waiver of the condition clause 18.1, by written notice to the Manager terminate this Agreement and the Deposit must be refunded in full to the Manager. 18.3 The Developer must not make any amendment to the Caretaking Agreements, Letting Agreements or by-laws without the written approval of the Manager and such amendments being provided for the Manager’s consideration. 203 The due diligence period was extended as, at least in part, there were negotiations in relation to RPM acquiring Lot 1911 (an apartment and lot subsidiary areas in the foyer and on level 5); the lease of Lot 806 for storage and staging; and for the purpose of the Procurement Agreement being settled in its final form. 204 As part of the negotiations for the purchase of Lot 1911 by RPM, on 6 July 2020, Mr George sent an email to, among others, Mr Song and Pevy Lawyers attaching the contract of sale for that lot.103 The tertiary by-laws attached to that contract contained by-law 28 in the following terms (i.e. – in the terms of 102 Core Bundle, tab [8]. 103 Tender Book, tab [237]. -- 59 of 119 -- [2025] SASC 172 Kimber J 56 the indicative by-laws provided with sales contracts to other prospective purchasers of lots) :104 Use of Lots – specific 28.1. Subject to the provisions of these By-Laws, the Scheme Description and the Development Plan for the Corporation of the City of Adelaide and any other relevant statutory enactments: 28.1.1. the Tertiary Lots will only be used for residential accommodation. other than the use specified in By-Law 28.1, an Owner or Occupier is prohibited from leasing or granting rights of occupation in respect of a Lot for valuable consideration for a period of less than 2 months. 28.2. This By-Law 28 does not preclude an Owner entering into a lease, licence or management agreement on normal commercial terms for use of that Lot in accordance with a use authorised by a relevant development authority. 205 On 7 July 2020, Ms Huebner sent an email to Lynch Meyer, copied to Mr Song, directing attention to the above by-law. Ms Huebner said that by-law:105 … suggests short term letting (less than two months occupation) is not permitted. We note that the by-laws provided to us during the legal due diligence had removed this restriction. Can you please provide the by-laws registered with the Titles office and confirm that lot purchasers were provided with the correct by-laws and not the by-laws supplied to us with the lot 19.11 contract? 206 Lynch Meyer replied to Ms Huebner and Mr Pevy (but not to Mr Song) the same day. That email attached the by-laws which were lodged, being the existing by-laws as settled during negotiations with respect to the Letting and Caretaking Agreements. 207 The email of Lynch Meyer concluded:106 Sale Contracts in South Australia include “sample bylaws”. Pursuant to the subject contract the developer is entitled to alter or amend any of the sample Scheme Documents as it reasonably determines to ensure they are appropriate for the safe efficient and harmonious administration management and control of the common property, and regulation and use of the common property having regard to the nature of the Development. The By-laws come into existence on deposit of the plan of division, and "correct" bylaws are not provided to a purchaser or required to be under our legislation. They are of course public documents and available to purchasers. 104 Tender Book, tab [237]. 105 Ibid, tab [242]. 106 Ibid, tab [242]. -- 60 of 119 -- [2025] SASC 172 Kimber J 57 208 On 7 July 2020, Ms Heubner emailed Mr Song attaching Lynch Meyer’s email of the same date. As for the by-laws which had been provided with the sale contract for Lot 1911. She advised Mr Song:107 When providing the draft Lot 1911 Contract it would have been preferable for the Developer’s lawyer to have confirmed the by-laws were the earlier “draft” by-laws. We are comfortable with the terms and conditions in the registered by-laws attached. 209 It is not suggested by any party that there was any further correspondence about the by-laws. 210 On 21 August 2020,108 Pevy Lawyers returned the signed Caretaking and Letting Agreements to Lynch Meyer; the parties exchanged (a) a final unconditional Procurement Agreement; (b) the sales contract for Lot 1911; (c) the lease for apartment Lot 805; and (d) a Side Deed. The sum of $500,000 paid by RPM was released by the deposit holder to Eklipse as part payment for the letting appointments obtained pursuant to the Procurement Agreement. Further payments were made on 19 October 2021 for $1,000,000, on 20 January 2021 for $160,000 and on 7 April 2021 for $100,000 pursuant to adjustment mechanisms in the Procurement Agreement. Did Eklipse breach its fiduciary duty? Eklipse was in a fiduciary relationship with the HRC 211 There is no dispute, and I find, that Eklipse was in a fiduciary relationship with the HRC at the time of the entry into the Letting Agreements and the Caretaking Agreements. 212 The test for the existence of a fiduciary relationship is objective. 213 The UK Supreme Court recently stated in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance in Hopcraft & Anor v Close Brothers Limited & Ors (Hopcraft):109 There must be the assumption of responsibility by the fiduciary to act exclusively on behalf of the other in the conduct of the other’s affairs. This can arise where the fiduciary has expressly undertaken to exclude his or her own interest and those of third parties when so acting. That is what loyalty means and requires in this context. It can also arise where the objectively assessed circumstances enable equity to identify such an undertaking in the acts of the fiduciary. Fiduciary duties can arise in the context of commercial relations in many different circumstances. One must consider with care the terms of any contract between the parties or unilateral undertaking, the wider transaction, and the commercial context of the relationship between the parties in order to ascertain whether and to what extent a person is to be taken to have undertaken such obligations. Thus in New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 1 WLR 1126 Lord Wilberforce spoke of the need to 107 Tender Book, tab [243]. 108 Closing Submissions of First Applicant, (FDN 221, filed 6 February 2025) at [137.1]-[137.3]. 109 [2025] UKSC 33 (Hopcraft) at [100]-[103]. -- 61 of 119 -- [2025] SASC 172 Kimber J 58 mould the precise scope of a fiduciary duty such as the no profit rule according to the nature of the relationship between the principal and its alleged fiduciary. In discussing the position of an employee of an incorporated non-profit society he stated (p 1130): “A person in his position may be in a fiduciary position quoad a part of his activities and not quoad other parts: each transaction, or group of transactions, must be looked at.” He quoted as a principle of general application the dicta of Dixon J in an appeal concerning partnership, Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384, 408: “The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained, not merely from the express agreement of the parties … but also from the course of dealing actually pursued by the firm.” It is important not to distort the commercial bargain between the parties to a contract by too readily implying fiduciary obligations into the commercial relationship. As Sales J stated in F & C, 650: “The touchstone is to ask what obligations of a fiduciary character may reasonably be expected to apply in the particular context, where the contract between the parties will usually provide the major part of the contextual framework in which that question arises.” Similarly, in Hospital Products, at p 97, in a statement which the Privy Council adopted in Kelly v Cooper [1993] AC 205, 215, Mason J stated that where a contractual relationship provides the foundation for the erection of a fiduciary relationship: “The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.” 214 With respect to the Letting Agreement and Caretaking Agreement to which the HRC was a party, Eklipse was the agent of the HRC. Eklipse owed a duty of single-minded loyalty to the HRC. Eklipse could not exercise any power in relation to matters covered by its fiduciary duty to benefit itself.110 215 The fiduciary duties are proscriptive (i.e. – prohibitive). The HRC relied upon two duties: the ‘no conflict rule/duty’ and the ‘no profit rule/duty’. Eklipse was not to put itself in a position where interest and duty conflicted or, if conflict was unavoidable, it had a duty to resolve that conflict in favour of duty (the no conflict rule). The duty upon Eklipse was to not put itself in a position where its duty would or might conflict.111 In addition, or perhaps in consequence, except by special arrangement, Eklipse was not to make a profit out of its position as a fiduciary (the no profit rule).112 The two duties can intersect. For example, the breach of the no profit rule may reflect yielding to a conflict.113 110 Hopcraft at [89]-[93]. 111 Chan v Zachariah (1984) 154 CLR 178, 198. 112 Breen v Williams (1995-1996) 186 CLR 71, 93; Hopcraft, [90]. 113 G. E. Dal Pont, Equity and Trusts in Australia (Thomson Reuters, 8th ed, 2023), [4.15]. -- 62 of 119 -- [2025] SASC 172 Kimber J 59 216 It is important to recognise that a person may be a fiduciary with respect to part of their activities and not others. Section 142B – the statutory duty 217 In addition, as the Letting Agreements and Caretaking Agreements were contracts for services, Eklipse owed the statutory duty in s 142B(2) of the CT Act. As set out above, s 142B provides: 142B—Developer stands in fiduciary relationship with community corporation (1) For the avoidance of doubt— (a) the developer stands in a fiduciary relationship with the community corporation and, before the community corporation is established, with the proposed community corporation; and (b) the duties owed by the developer under this Act are in addition to, and do not derogate from, the duties arising out of that fiduciary relationship. (2) Without derogating from subsection (1), where the community corporation intends, during the developer control period, to delegate functions or powers to a body corporate manager or to enter into a contract for services, the developer must exercise reasonable skill, care and diligence and act in the best interests of the community corporation (as it will be constituted after the developer control period ends). Explanatory Note— An application may be made under section 142 if the developer contravenes this subsection. (3) In this section— developer control period means a period during which— (a) the community corporation is constituted solely by the developer; or (b) the developer owns the majority of lots in the community scheme or in any other way controls the voting of the corporation. The submissions about breach of the no profit and no conflict rules 218 Although Eklipse did not appear at trial, the case against it must still be proven. The second respondent submits that Eklipse breached its fiduciary duty in one or more of the following ways:114 1. Obtaining a benefit of more than $1.3 million via the Procurement Agreement in exchange for causing the HRC to enter into the Letting and Caretaking Agreements;115 114 Closing Submissions of First Applicant (FDN 221, filed 6 February 2025) at [337.1] - [337.3]. 115 Defence – Revision 4 (FDN 197, filed 1 October 2024), [13.10]. -- 63 of 119 -- [2025] SASC 172 Kimber J 60 2. Amending the indicative by-laws previously provided to purchasers to permit short-term letting;116 3. Causing the HRC to enter the Letting Agreement and Caretaking Agreement which was contrary to the interests of the HRC as a whole.117 219 It is necessary to set out some further aspects of the submissions of the HRC with respect to (2) and (3) above. 220 As to (2) above, the HRC submits that Eklipse was not acting in the interests of the HRC when the indicative by-laws were amended. HRC submits that it was done to make it possible to permit RPM to conduct a short-term letting business and as Eklipse wanted to obtain the procurement sum. 221 As to (3) above, the HRC particularly relies upon Eklipse allowing the terms of the agreement to be, in effect, 25 years, and what it submits was a failure to negotiate the length of those terms downwards. The HRC directs attention to the evidence of Mr Breda, a body corporate manager for Whittles and the body corporate manager for the Realm Building. As mentioned, Mr Breda was purportedly appointed to that later position at the meeting on 1 July 2020. 222 The evidence of Mr Breda includes that in his experience as a body corporate manager (at the time of his evidence, a period of about five years), he has not seen nor dealt with a letting or caretaking agreement of 25 years. In his experience, a caretaking agreement would typically run for up to three years. Given what Mr Breda said was the ‘extraordinarily long time of 25 years allowed for under the Caretaking and Letting Agreements’ he sent two emails to Mr Pattinson.118 The first was on 1 April 2020 within which he raised his concern about the Caretaking Agreements locking in the community corporations for four further five-year terms. In that email, Mr Breda stated that it would be appropriate that a clause be included in those agreements to allow the community corporations to terminate the agreements. There is no evidence of a response to Mr Breda from Mr Pattinson. However, given that Mr Pattinson sought advice from Lynch Meyer about the 25-year terms, I find that the concerns of Mr Breda were not overlooked by Mr Pattinson. 223 On 16 April 2020, Mr Breda repeated that it would be appropriate that the clauses that he suggested be included and said that he would leave it for Eklipse to discuss with Lynch Meyer. If that occurred as a direct result of that email, there is no evidence of what advice was given about the inclusion of clauses which would allow the agreements to be terminated by the community corporations. This is not to overlook that on 10 April 2020, Mr Pattinson had received the advice earlier mentioned about the 25-year terms. It can be inferred that, whether because of the email from Mr Breda dated 1 April 2020 or for some other reason, Mr Pattinson 116 Defence – Revision 4 (FDN 197, filed 1 October 2024), [13.10]. 117 Ibid, [13.7]. 118 Affidavit of Eric Breda dated 23 November 2022 (Exhibit R29), [30]. -- 64 of 119 -- [2025] SASC 172 Kimber J 61 was aware that legal advice was prudent with respect to the length of the Caretaking Agreements – and – that Lynch Meyer had given advice with respect to what view Eklipse may have to have in order to resist the contention that it would be in breach of s 142B of the CT Act by entering into agreements for 25 years. 224 RPM emphasised that whether Eklipse had breached its fiduciary duty and/or statutory duty was strictly a matter between Eklipse and the HRC. Nevertheless, RPM made submissions about whether there had been a breach. 225 RPM submits that the actual scope of the fiduciary’s obligations, and whether they have been breached, is determined by reference to the facts of each case. In a submission that can be accepted, RPM submits that the nature and terms of the relationship are critical, and the wider commercial context must be borne in mind.119 RPM submits that the no conflict rule must be applied realistically and with common sense to a situation which discloses a real conflict of duty and interest and not to some theoretical conflict. RPM submits that the doctrine cannot be inexorably applied without regard to the circumstances of the relationship.120 226 RPM submits that the first alleged breach mischaracterises the benefit obtained by Eklipse and submits that it does not amount to a breach of fiduciary duty. RPM characterises the breach as theoretical rather than real. It is submitted that the payment of the procurement sum was calculated based on letting appointments which had been obtained by Eklipse (or its agent UA) and that the value of those appointments to RPM was a function of the terms of those appointments. RPM submits that the HRC was not a party to those appointments; Eklipse was entitled to sell them without reference to the interests of the HRC; and Eklipse was entitled to sell them to the same party which was prepared to undertake the rental guarantee and other obligations involved. Consideration The first alleged breach 227 I reject the submissions of RPM about the first alleged breach. I find the acceptance of the Procurement Sum amounted to a breach of the fiduciary duty that Eklipse owed to the HRC. I find that it was a breach of the no profit and no conflict rules. 228 It may be accepted that the letting appointments did not belong to the HRC; that Eklipse was entitled to sell them; and that the procurement sum was calculated based upon the number of letting appointments obtained by Eklipse or its agent. Nevertheless, I find that to view the procurement sum as no more than a payment for letting appointments involves an unrealistic approach to the purpose of that payment given the whole of the evidence, particularly as all the agreements were 119 Ultra Tune Australia Pty Ltd v McCann (1999) 30 ACSR 651, 674 [80]; Hopcraft, [100]-[104]. 120 Pilmer & Ors v Duke Group Ltd (in liq) & Ors (2001) 207 CLR 165, 198 - 199 [79]; Howard v Federal Commissioner of Taxation (2014) 253 CLR 83, 107-108 [60]. -- 65 of 119 -- [2025] SASC 172 Kimber J 62 negotiated at the same time. To view the procurement sum solely as a payment for letting appointments owned by Eklipse (or its agent) would be to divorce the payment of that sum from the terms of the initial Procurement Agreement (the only such agreement in contemplation when the agreements were entered into by the HRC on 1 July 2020); the negotiations that occurred which resulted in the existing by-laws being in terms materially different to the indicative by-laws; and the Letting and Caretaking Agreements being entered into on 1 July 2020. 229 It must be accepted that the final Procurement Agreement ultimately executed on 21 August 2020 identified the consideration as being solely related to the letting appointments in which the HRC had no interest. In its submissions, RPM refers to that recitation of the consideration as one which ‘most accurately reflected the economic and commercial substance of the matter’.121 I am satisfied that the payment of the procurement sum for letting appointments is the case to some extent. On the evidence, letting appointments are of value, and particularly when short-term, that value can be substantial. However, when the transaction is viewed as a whole, I find that the consideration was paid for more than just the letting appointments which were the property of Eklipse or its agent. The final Procurement Agreement executed on 21 August 2020 must be viewed in the context of the state of negotiations at the time of the execution of the Letting Agreements and Caretaking Agreements on 1 July 2020. At that time, the only Procurement Agreement that existed was the one executed by Mr Song and Mr Smith on 17 April 2020. As mentioned, and importantly in my view, that initial Procurement Agreement recited why consideration was to be paid in the following way:122 The Developer has agreed that in consideration of the Manager paying to the Developer the amount shown in ITEM 6 of the Items Schedule (Procurement Sum) that as original and sole proprietor of all of the Lots, the Developer will cause the Corporations at their first general meetings to resolve to enter into with the Manager and execute the relevant Caretaking Agreement and Letting Agreement. 230 That is, as of 1 July 2020, I find that negotiations were being conducted on the basis that RPM wanted to ensure that Eklipse would enter the Letting and Caretaking Agreements in the terms negotiated. In my view, there was a clear connection between the payment of the procurement sum and Eklipse ensuring that the various agreements were entered into by the community corporations. I find that Eklipse knew that the procurement sum was not only being paid for letting appointments. I find that Eklipse knew that consideration in the form of the procurement sum was to be paid, at least in part, for the Letting and Caretaking Agreements to be entered into at the meetings on 1 July 2020. 231 I regard that conclusion as unsurprising. The terms of the initial Procurement Agreement are clear. Further, the agreements were all entered at the same time and all were of value to RPM. Among other things, the Letting Agreements, while 121 Reply Submissions of First Applicant (FDN 223, filed 18 February 2025), [25]. 122 Core Bundle, tab [2]. -- 66 of 119 -- [2025] SASC 172 Kimber J 63 not compelling lot holders to use RPM, gave RPM an exclusive presence in the Realm Building. The Caretaking Agreements gave RPM, among other things, rights to payments on duties being performed. As a matter of common sense, the value of letting appointments was increased by the existence of the Letting Agreements including with the HRC. It increased the likelihood of such appointments being renewed and efficiencies being able to be achieved if additional lot holders were drawn to use RPM because of its unique position as the only letting agent with a physical presence in the building. As a matter of common sense, and it is the evidence, the entry into both the Letting and Caretaking Agreements was advantageous to RPM as, at the very least, it delivered efficiencies. Both sets of agreements conferred the opportunity of substantial benefits to RPM over a long period. As at 1 July 2020, the terms of the initial Procurement Agreement were such that the calculation of the consideration was a product of the number of letting appointments held on the adjustment date.123 However, I find that the method by which that sum was calculated should not be used to deny that more than one agreement was being negotiated at the same time; should not obscure the reality of what Eklipse agreed to ensure happened on 1 July 2020; nor obscure the recitation of why consideration was to be paid as set out in the initial Procurement Agreement. 232 As of 1 July 2020, the procurement sum was being paid to it, at least in part to ensure the Caretaking and Letting Agreements were entered. In the circumstances, I find that it was in the interests of Eklipse to ensure that the terms of the agreements were such that RPM would be prepared to enter into those agreements. Eklipse had an interest in RPM entering the agreements upon terms attractive to RPM because once that occurred, Eklipse could secure the procurement sum. 233 Eklipse made a profit by ensuring that the HRC entered the relevant Letting Agreement and relevant Caretaking Agreement by conferring upon RPM an exclusive right to have a presence in the Building for an effective period of 25 years, both as the letting agent and caretaker. Eklipse gave those rights away, at least to some extent, in return for the payment of the procurement sum. In doing so, I find that Eklipse placed itself in a position of conflict between its interests and the interests of the HRC. I find that Eklipse breached its fiduciary duty. That having been found, it is perhaps not necessary to go further. Nevertheless, it is helpful to consider the other two alleged breaches. The second alleged breach 234 As for the second alleged breach, RPM submits that there is insufficient logical connection between the fiduciary duty and the breach alleged. RPM submits that any submission that the by-laws were amended to make it possible for RPM to conduct a short-term letting business should be rejected as the amended 123 Core Bundle, tab [2]. -- 67 of 119 -- [2025] SASC 172 Kimber J 64 by-laws had been arrived at during negotiations with Imagine and so before the involvement of RPM. 235 It can be accepted that the indicative by-laws had been marked up in the form that became the existing by-laws before RPM became involved in negotiations with respect to the Realm Building.124 I have earlier set out that the marked-up version had come into existence during negotiation with Imagine. It can be accepted that this is relevant to what findings may be made about the conduct of RPM. Nevertheless, the current issue is whether the amendment of the by-laws during the negotiations before 1 July 2020 is relevant in evaluating whether Eklipse breached its fiduciary duty. 236 In my view, it is relevant when viewed in the context of what Eklipse knew at that time. Eklipse knew that the Building had been marketed by at least its agent, UA, to prospective purchasers as a building which would not permit short-term letting. 237 An important aspect of the relationship between Eklipse and the future lot holders within the HRC was that Eklipse had reserved for itself the ability to amend the indicative by-laws. As a result, I would not find that, viewed in isolation, the amendment of the indicative by-laws was a breach of fiduciary duty. Nevertheless, why Eklipse did that remains relevant. I find that Eklipse did that to accommodate Imagine (and then RPM) who wanted to conduct short-term letting within the Building. Eklipse was entitled to do that as it had reserved for itself the right to amend the indicative by-laws. However, as mentioned, I find that it was motivated to do so in order to, at least in part, secure the procurement sum for itself. Put another way, at least in part, for its financial benefit, Eklipse exercised the discretion that it had reserved for itself to amend. 238 Viewed in the context of the way that Eklipse knew the Building had been marketed and in the context of my finding that the first alleged breach has been established, I find that the amendment of the indicative by-laws was a breach of the fiduciary duty of Eklipse. This is not to find that it was also a breach distinct from the first breach. The amendment of the indicative by-laws occurred as part of what can be viewed as a continuing set of conduct of Eklipse. That is, an aspect of its conduct directed to ensuring that it was paid the procurement sum. As earlier found, that sum was not paid solely for the letting appointments which Eklipse owned. 239 However, as mentioned, even if I was wrong in my approach to this second alleged breach, for the reasons given, I have found that Eklipse breached its fiduciary duty in the first way alleged. 124 See above at [114]-[119]. -- 68 of 119 -- [2025] SASC 172 Kimber J 65 The third alleged breach 240 As for the third alleged breach, RPM also submitted that there was insufficient logical connection between the fiduciary duty and the breach alleged. RPM submitted that the contention advanced by the HRC that the 25-year terms were because Eklipse wanted to make the business more attractive to RPM in order for them to enter into the Caretaking Agreements and maximise the procurement sum to be paid to it should be rejected as the evidence shows that the length of the agreement had already been arrived at before RPM became involved. 241 That the effective term of 25-years had been negotiated before RPM became involved must be accepted, but the current issue is not whether RPM participated in that breach. The current issue is whether there was a breach by Eklipse. 242 I acknowledge that Caretaking Agreements were necessary. As to the length of the Agreements, the evidence is that of Mr Breda, Mr Song and what may be inferred from the advice in the Due Diligence Report. 243 Mr Breda has not encountered agreements in South Australia of an effective length of the Caretaking Agreements. The evidence of Mr Breda is that caretaking agreements ‘typically run for up to three years’ and that the period of 25 years for both agreements is an ‘extraordinarily long time’.125 The evidence of Mr Breda was, in effect, that what was in the best interests of the community corporations was a means to terminate the agreements. 244 The evidence of Mr Song was that 25-year terms was the standard in the industry.126 245 Notwithstanding the evidence of Mr Breda, I cannot reject the evidence of Mr Song about that. His evidence finds support in the Due Diligence Report. In the Due Diligence Report, reference is made to the terms being an original term of five years with four automatic options of five years. The report goes on to say, ‘This is the maximum term we typically see for management rights agreements of this nature’.127 That is important. I infer that, consistent with the evidence of Mr Song, Caretaking Agreements of an effective term of 25 years are not unique. 246 As I infer that a term of 25 years is not unique, albeit the maximum term typically seen, I do not find the third alleged breach is established. That is so even when the third alleged breach is viewed in the context of the earlier alleged breaches and the payment of the procurement sum. Summary of findings about breach of fiduciary duty 247 There is no dispute that Eklipse did not disclose the payment of the procurement sum to the HRC. For the reasons given, I find that RPM breached its 125 Affidavit of Eric Breda dated 23 November 2022 (Exhibit R29), [28]-[30]. 126 T564; T602. 127 Tender Book, tab [104]. -- 69 of 119 -- [2025] SASC 172 Kimber J 66 fiduciary duty when it entered the relevant Letting Agreement and relevant Caretaking Agreement to which the HRC is a party. Did Eklipse also breach the statutory duty? 248 The statutory duty in s 142B(2) is set out above. Also set out above are the ways in which Eklipse breached its fiduciary duty. Whether those breaches amount to a breach of s 142B(2) must be separately considered. 249 I find that Eklipse did not exercise reasonable skill, care and diligence and did not act in the best interests of the HRC. Eklipse allowed the agreements to be for terms of effectively 25 years in the context of there being no evidence that Eklipse sought to negotiate lesser periods128 and when Mr Breda had suggested that it was in the best interests of the community corporations to be given a means to terminate the agreements, Eklipse did not allow the HRC any realistic opportunity to exercise a right to not extend either agreement (for example, as the obligations contracted for were no longer appropriate or might be performed by a different party for a different sum). Eklipse also agreed to accept the procurement sum. For reasons given elsewhere, that sum was agreed to be paid, at least in part, to ensure that the agreements between RPM and the HRC were entered into on 1 July 2020 and not only in return for letting appointments which belonged to Eklipse. The remedies for the breach of fiduciary duty and of s 142B(2) by Eklipse 250 It is convenient at this point to say something about the remedies that may be available against Eklipse because of the findings made about the breaches by Eklipse of its fiduciary and statutory duties, and because of my finding that through Messrs Pattinson and Smith, Eklipse breached s 95 of the CT Act. However, as earlier mentioned, even if I am wrong in finding that s 95 of the CT Act was breached, that error is not material to the remedies which exist. It remains the case that the remedies provided in s 142 are available as a result of the breach of s 142B. Further, it is also the case that the potential remedies for a breach of fiduciary duty are not limited to those in s 142 of the CT Act. Breaches of fiduciary duty – general law 251 Based upon the breach of fiduciary duty alone, the HRC seeks that the benefit received by Eklipse under the Procurement Agreement, including the procurement sum, be paid to the HRC.129 252 The unauthorised benefit is that of the HRC. In equity, Eklipse is ‘liable to account to [the HRC] for that profit and any loss caused to it by the breach of the duty consisting of it having been made and received’.130 There is no claim of loss. The HRC seeks the procurement sum. 128 The evidence of Mr Song was that there was no attempt by Eklipse to negotiate anything other than a 25-year term, see T602. 129 Cross Claim – Revision 4 (FDN 196, filed 1 October 2024), [21]. 130 Hopcroft, [71]. -- 70 of 119 -- [2025] SASC 172 Kimber J 67 253 Arriving at the sum appropriate is attended by some difficulties. Subject to at least further submissions, I cannot find the HRC is entitled to the whole of the procurement sum. 254 As set out above, the payment for the procurement sum was not only for entry into the relevant Letting and Caretaking Agreements with the second respondent. It is consistent with what I have found to also find that sum was paid, at least in part, for the entry into other agreements which were not with the second respondent. I make that finding. In addition, I also find that sum was also paid, at least in part, for letting appointments in which the HRC had no interest nor entitlement. 255 The agreements which were not with the second respondent, and the letting appointments obtained by RPM from Eklipse or its agent (UA), were a material aspect of the value of what was acquired by RPM and for which payment was made to Eklipse. On the evidence, the letting appointments generate profit for RPM. As mentioned, insofar as an aspect of the procurement sum was for letting appointments, none of those letting appointments belonged to the HRC. Eklipse was entitled to sell them to RPM. There is no expert evidence of the value of the letting appointments acquired divorced from the agreements entered into; the value of the rights conferred under the agreements between RPM and the HRC; or about the value to the other agreements entered into at the same time divorced, or in conjunction with, the agreements to which the HRC is a party. While the HRC has obtained information about what might be charged under another Caretaking Agreement(s), even if accepted, that evidence says nothing about the profit secured by Eklipse beyond what it might have been entitled to be paid. 256 I will return to this later. Breaches of s 142B(2) 257 Having found that Eklipse breached the statutory duty in s 142B of the CT Act and/or breached s 95 of the CT Act, an issue arises as to whether the second respondent is entitled, pursuant to s 142 of the CT Act, to the relief of recission of the Letting Agreement and Caretaking Agreement bearing in mind those agreements are between the second respondent and a third party (i.e. – RPM). For the reasons which follow, that relief is not available pursuant to s 142 of the CT Act. Section 142 of the CT Act 258 Section 142 of the CT Act relevantly provides: 142—Resolution of disputes etc (1) An application may be made under this section— (a) if the applicant claims that a breach of this Act or of the by-laws of the community scheme has occurred; or -- 71 of 119 -- [2025] SASC 172 Kimber J 68 … (7) A court, in hearing and determining an application under this section, should act according to equity, good conscience and the substantial merits of the case, without regard to technicalities and legal forms, and is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks fit. (8) A court may, in respect of an application under this section— … (d) order that a party refrain from further any further action of a kind specified in the order; or (e) by order— (i) alter the by-laws of the community scheme (and make any necessary consequential changes to the scheme description and development contracts); or (ii) vary or reverse any decision of the corporation, or of the management committee of the corporation or of a delegate of the corporation; or (ea) vary, avoid or terminate a contract entered into (whether before or after the commencement of this paragraph) between a community corporation and any of the following: (i) the developer; (ii) an associate of the developer; (iii) the body corporate manager; (iv) an associate of the body corporate manager; …. (9a) A court should not make an order to vary, avoid or terminate a contract entered into between a community corporation and another party unless the court is satisfied that the contract involves a breach of fiduciary duties or other duties under this Act. …. (18) This section does not limit or derogate from any civil remedy at law or in equity. The submissions 259 The second respondent submitted that s 142 provided the power to set aside the relevant contracts. The second respondent relied upon sub-sections (7), (8)(d), (8)(e) and (9)(a). 260 The first applicant submitted that the power provided by s 142(8)(ea) to ‘vary, avoid or terminate’ was limited to the circumstances set out within the sub-section. That is, that the power provided in s 142 did not extend to a contract -- 72 of 119 -- [2025] SASC 172 Kimber J 69 between a community corporation and a party not specified within s 142(8)(ea) (i.e. – a third party, such as RPM).131 Consideration 261 It is convenient to begin with the power in s 142(9a). I reject that sub-section provides a power to vary, avoid or terminate a contract between a community corporation and RPM. The nature of the party to a contract, other than the community corporation, referred to within sub-section (9a) must be construed in the context of the whole of s 142 and, more specifically, in the context of s 142(8)(ea). The natural reading of those two sub-sections is that both are dealing with the same type of contract. That is, a contract between the parties identified in s 142(8)(ea). That construction is reinforced when s 142(18) is considered. That is, s 142 is not limiting the circumstances in which a contract between parties other than those identified in sub-s (8)(ea) might be the subject of an order granting relief. However, when relief is sought based on a breach of the CT Act, the power to ‘vary, avoid or terminate’ a contract, which is provided for by s 142, is limited to a contract between the parties described in s 142(8)(ea). I find that the power in sub-section (8)(ea) relates only to a contract between a community corporation and those parties identified within sub-section (8)(ea). RPM is not one of the parties identified within sub-section (8)(ea). 262 As for s 142(7), I do not construe that sub-section as providing the power to set aside the relevant contracts. Section 142(7) does not provide a power beyond that provided in other parts of s 142. It is merely facultative; a statutory direction as to the way the powers provided elsewhere in the section are to be exercised.132 263 As for ss 142(8)(d) and 142(e)(ii), I also reject that either sub-section can be construed as providing a power to rescind the relevant contracts when a specific power to ‘vary, avoid, or terminate a contract’ is provided for within s 142(8)(ea). 264 It follows that the second respondent is not entitled to an order pursuant to s 142 of the CT Act that the relevant contracts be rescinded because of breaches of s 95 and/or s 142B. If the second respondent is entitled to recission of the relevant contracts, the power to make that order must be found outside of s 142 of the CT Act. As set out in s 142(18), that section does not limit or derogate from any civil remedy at law or in equity. 131 It was not submitted that RPM could be found to be ‘an associate of the developer’. I find that RPM should not be characterised in that way. 132 Griggs v Noris Group of Companies (Including SA Helicopters Pty Ltd and Captured Pty Ltd) (2006) 94 SASR 126, [136]. -- 73 of 119 -- [2025] SASC 172 Kimber J 70 Recission of the Caretaking and Letting Agreements without payment of a secret commission; without knowing assistance in a dishonest and fraudulent design; or without inducing or procuring a breach of fiduciary duty 265 The HRC has described its primary claim against RPM as being based upon it having paid a secret commission. However, at this point, I will turn to some other aspects of the contentions of the HRC. 266 Eklipse is not a party to the Letting Agreements or Caretaking Agreements. Nevertheless, in what it described as ‘very much an alternative claim’133 to its claim that RPM paid a secret commission, the second respondent contends that it has a right of rescission with respect to both agreements if RPM merely had knowledge (i.e. – had actual knowledge; wilfully shut its eyes to the obvious; wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make; or had knowledge of circumstances which would indicate the facts to an honest and reasonable person)134 of breaches of fiduciary duty by Eklipse.135 267 For reasons to be given, I reject the alternative claim outlined above. I will return to it after dealing with other aspects of the claim of the second respondent. Eklipse – Fraudulent and dishonest design 268 An aspect of the claim of the second respondent is that RPM knowingly assisted in a fraudulent and dishonest design. This demands that the breaches by Eklipse of its fiduciary duties must be fraudulent and dishonest.136 The breaches by Eklipse are set out above. The onus is upon the second respondent. 269 The second respondent contends that fraud and dishonesty are established by several matters which can be grouped in the following way: 1. That Eklipse had obtained Development Approval and proposed the scheme documents on the basis that short-term tenancies would not be permitted (the first matter).137 2. That Eklipse, or its agent, held out to potential purchasers that they were purchasing apartments in a building within which short-term tenancies would not be permitted (the second matter).138 3. That Eklipse knew of the ‘serious, extensive… and adverse effect’ which permitting a short-term letting business would have on the living 133 Written Reply Submissions of the Second Respondent (FDN 222, filed on 18 February 2025) at [132]. 134 Baden v Société Générale pour Favoriser le Développement du Commerce et de l’Industrie en France SA [1993] 1 WLR 509 (Baden). 135 Cross Claim – Revision 4 (FDN 196, filed 1 October 2024), [20B]. 136 Farah Constructions, [163]; Grimaldi (2012) 200 FCR 296, [259]. 137 Cross Claim – Revision 4 (FDN 196, filed 1 October 2024), [19A(b)]. 138 Ibid, [17.4(ha)]. -- 74 of 119 -- [2025] SASC 172 Kimber J 71 conditions and standards of lot holders and the harmonious relations of lot holders, guests and staff (the third matter).139 4. That Eklipse altered the indicative by-laws during negotiations with respect to the Letting Agreement and the Caretaking Agreement and did that knowing how the Building had been marketed (i.e. – in a way inconsistent with the indicative by-laws provided to potential purchasers) (the fourth matter).140 5. By entering the Letting Agreement and Caretaking Agreement for periods of five years with four rights of renewal for five years, those rights being at the right of RPM – and – for services not adequate or appropriate for the needs of HRC (the fifth matter).141 6. The Letting Agreement and Caretaking Agreement are not being discharged in a manner appropriate to the needs of the HRC (the sixth matter).142 7. The cost of the Caretaking Agreement (the seventh matter).143 8. That Eklipse obtained the benefit of the Procurement Sum but did not disclose the existence of that sum (the eighth matter).144 The first matter 270 In evaluating this matter, it is helpful to repeat some matters. 271 The Development Contract dated 30 June 2020 provided at cl 4.2 that the relevant lots were ‘intended for residential purposes’.145 Pursuant to s 30(1)(c) of the CT Act, the Scheme Description had to describe the purpose(s) for which the lots may be used. The relevant Scheme Description dated 30 June 2020 provided that the relevant ‘lots may only be used for residential purposes (including residential serviced apartments)’.146 272 The meaning of ‘residential purposes’ in the Development Contract and in the Scheme Description must be construed bearing in mind the definition of ‘residential purposes’ within s 3 of the CT Act. Nevertheless, for reasons already given, I am not satisfied that the words ‘residential purposes’ in the Development Contract or Scheme Description should be construed as only referring to occupancy of at least two months. 139 Cross Claim – Revision 4 (FDN 196, filed 1 October 2024), [19A(f)]. 140 Ibid, [17.4 (i)-(s)]; [19A(g)]. 141 Ibid, [17.4(b)-(c)]. 142 Ibid, [17.4(d)]. 143 Ibid, [17.4(e)-(f)]. 144 Ibid, [17.4(g)-(h)]. 145 Core Bundle, tab [3]. 146 Ibid, tab [4]. -- 75 of 119 -- [2025] SASC 172 Kimber J 72 273 It follows that the Development Contract and Scheme Description do not aid in proof of a fraudulent and dishonest design. The second matter 274 I am satisfied that the Realm Building was marketed by Eklipse and/or UA as a building which would not permit short-term letting and that, at all relevant times, Eklipse knew that. It is only necessary to give some examples of the evidence which has caused me to make those findings. 275 The starting point is that I am satisfied that, as the developers of the Building, Messrs Pattinson and Smith were aware of publicity about the Building. Further, as mentioned, on 15 June 2016, UA was appointed by Eklipse as its marketing and sales agent. That agreement provided UA would obey Eklipse’s reasonable directions and instructions as to the conduct of sale and marketing activities. 276 On 19 June 2017, there was a media release by Eklipse which provided that the Building would ‘uphold a no Airbnb policy’.147 On 19 July 2017, Mr Ben Small, sales director for the Building, was quoted in the Adelaide Advertiser as having said the Building would have ‘… no short-stay accommodation and no Airbnb …’.148 On 6 August 2017, Mr Small held out to a real estate agent that the Building would not have ‘short stay accommodation’.149 On 21 November 2017, Mr Small held out to a prospective purchaser that there were no ‘short term rentals’ in the Realm Building.150 277 Also relevant to what Eklipse knew is the indicative by-laws. Although attended by some ambiguity, the terms of the indicative by-laws can be read in a way consistent with the marketing to purchasers As mentioned above, the indicative by-laws which were provided with the sales contracts set out that an owner or occupier was prohibited from leasing or granting rights of occupation in respect of a lot for valuable consideration for a period of less than two months.151 While the same contract provided that the sample by-laws may be varied in the absolute discretion of Eklipse,152 I am satisfied that does not deprive the indicative by-laws of relevance in consideration of whether Eklipse was involved in a fraudulent and dishonest design. The third matter 278 I am not satisfied the third matter has been established. On the evidence, I am unable to conclude that Eklipse knew of the ‘serious, extensive … and adverse effect’ for which the second respondent contends. It may be accepted that some lot holders believe there have been effects of that nature, but the views of lot 147 Tender Book, [tab 8]. 148 Ibid, tab [10]. 149 Ibid, tab [13]. 150 Ibid, tab [21]. 151 See, for example, Core Bundle, tab [21], page 337. 152 See, for example, ibid, page 29. -- 76 of 119 -- [2025] SASC 172 Kimber J 73 holders after the entry into the agreements cannot be used to inform what Eklipse knew. The fourth matter 279 Given what occurred during negotiations with respect to the Caretaking Agreements (set out in detail above), there is no doubt that Eklipse took steps to amend the indicative by-laws into the form which became the existing by-laws. On the evidence, that was done in the context of accommodating a short-term letting business. For example, as mentioned, on 25 March 2020, Lynch Meyer had sent a marked-up copy of the indicative by-laws to the solicitors for Imagine suggesting that the marked-up copy (i.e. – what became the existing by-laws) reflected the proposed operations of Imagine. On 10 April 2020, Mr Pattinson emailed Pevy Lawyers attaching what became the existing by-laws. I am satisfied that Eklipse knew that the indicative by-laws were being amended in a substantial way; that Eklipse knew that was being done notwithstanding the way in which the Building had been marketed; and that Eklipse knew that was being done to accommodate a party (initially Imagine and later RPM) which was interested in entering into caretaking and letting agreements, and prepared to pay a procurement sum, provided that short-term letting could be conducted in the Realm Building. This is not to overlook that Eklipse had reserved the right to amend the indicative by-laws. However, in my view, the circumstances in which that right was exercised remains relevant to whether the breaches by Eklipse of its fiduciary duties was fraudulent and dishonest. 280 The email of 10 April 2020 was sent the day after an online meeting which took place because of issues Mr Pevy raised with Mr Pattinson about the terms of the initial Procurement Agreement. An aspect of an email of Mr Pattinson before the meeting on 9 April 2020 was that he wanted to remove the reference to ‘short-term letting’ from the Procurement Agreement.153 An obvious inference, and one which I draw in the context of the whole of the evidence, is that Mr Pattinson wanted to ensure that there was no reference within the Procurement Agreement to short-term letting. A further inference is that there was a preparedness to amend the indicative by-laws to secure entry into the agreements ultimately executed on 1 July 2020 and the payment of the procurement sum. 281 That Eklipse, at least through Mr Pattinson, knew that the amended by-laws would be materially different to the indicative by-laws is further confirmed by Lynch Meyer providing a copy of its email advice about that issue to Mr Pattinson on 23 April 2020. While the advice was that there was no statutory obligation to advise a purchaser of the amendment of the indicative by-laws, in the context of whether Eklipse was involved in a fraudulent and dishonest design, any belief about the absence of a statutory obligation does not remove completely the significance of my finding that Eklipse knew that the amended by-laws would be materially different to the indicative by-laws nor the significance of what Eklipse 153 Tender Book, tab [73]. -- 77 of 119 -- [2025] SASC 172 Kimber J 74 knew about how the Building had been marketed to purchasers. Again, this is not to overlook that Eklipse had, within the sales contract, provided for the indicative by-laws to be varied in its absolute discretion. But I am not satisfied that, on the whole of the evidence, deprives the foregoing of all relevance. The fifth matter 282 There are two parts to the fifth matter. First, the duration of the agreements, with the duration needing to be viewed in the context of the rights of renewal resting, in effect, with RPM. Second, that the two relevant agreements are for services not adequate or appropriate for the needs of the HRC. 283 As mentioned, Mr Breda is the body corporate manager of the Realm Building, having been appointed at the meeting on 1 July 2020. It is helpful to repeat and expand upon some matters earlier mentioned. 284 The affidavit of Mr Breda is dated 23 November 2022. At the time of his affidavit, Mr Breda had about four and a half years’ experience as a body corporate manager. His affidavit does not otherwise detail his experience. This includes not setting out whether the extent of his experience, if any, is in buildings the size of the Realm Building. Mr Breda opines that in his experience as a body corporate manager he has not previously seen or dealt with a caretaking or letting agreement which is set for a period of 25 years; in his experience, ‘a caretaking agreement would typically run for up to three years’; and he has ‘not encountered a letting agreement in South Australia’.154 Mr Breda says that, by no later than 1 April 2020, he formed the view that the period of 25 years within the Letting and Caretaking Agreements was an ‘extraordinarily long time’.155 285 As a result of his view that 25 years was an ‘extraordinarily long time’, Mr Breda communicated with Mr Pattison by email on 1 April and 16 April 2020. 286 On 1 April 2020, Mr Breda raised with Mr Pattinson the duration of the agreements. More specifically, Mr Breda raised the corporation being ‘locked in’ for four five-year terms as being the ‘key concern’.156 Mr Breda suggested that a clause be included enabling the community corporations within the Realm Building to terminate the Caretaking Agreements. On 16 April 2020, Mr Breda again emailed Mr Pattinson and repeated his view that it would be appropriate for a clause to be inserted into the Caretaking Agreements which allowed the community corporations to terminate the Caretaking Agreements and stated that he would leave Eklipse to discuss that issue with Lynch Meyer.157 If there was further correspondence on that issue, it is not the subject of evidence. But, obviously enough, a clause such as that raised by Mr Breda did not find voice in 154 Affidavit of Eric Breda dated 23 November 2022 (Exhibit R29), page 4. 155 Ibid. 156 Ibid, page 87. 157 Ibid, page 4. -- 78 of 119 -- [2025] SASC 172 Kimber J 75 the Caretaking Agreements and the terms with respect to renewal were not altered in response to the concern raised on 1 April 2020. 287 Beyond the opinions of Mr Breda, there is no evidence of the extent to which agreements of this type might ordinarily include an effective right of renewal like that ultimately granted to RPM without the other party having a more meaningful ability to choose not to extend the agreement. This is not to overlook the evidence of Mr Song nor what is set out in the Due Diligence Report about the 25-year term, but that evidence does not expressly address the ability of a party such as the HRC not to extend. This is also not to overlook that the draft agreements prepared by the solicitors of Imagine, and before the involvement of RPM and its solicitors, were in the same terms. 288 Given the evidence of Mr Breda, I cannot dismiss as irrelevant this feature of the Caretaking Agreement to contribute to the contention of a fraudulent and dishonest design by Eklipse. However, I consider that it has very limited relevance given my earlier finding that agreements with 25-year terms are not unique. 289 As for the second aspect of this fifth matter, it is necessary to distinguish between the two agreements. In so far as it is submitted that the Letting Agreement is for services not appropriate for the needs of the HRC, as I understand it, that submission is inextricably linked to the submission that short-term letting should not be permitted within the Building. Put another way, the force of the submission depends upon my finding about whether short-term letting is permitted and/or my findings about the conduct of Eklipse in amending the indicative by-laws, particularly against the background of the marketing of the Building. I have found that short-term letting is permitted under the existing by-laws. I have also found that indicative by-laws were amended to be the existing by-laws to meet the way that first Imagine, and later RPM, conducted its business (i.e. – short-term letting) and, in part, to make it more likely that the procurement sum would be paid. 290 Insofar as any submission about the Caretaking Agreements not being appropriate for the needs of the HRC has been made, it may be accepted that some lot holders have complained about aspects of the services provided, but, on the evidence, I am not satisfied that is because the obligations contracted for are not appropriate. The sixth matter 291 I am not satisfied this matter can contribute to the contention of a fraudulent and dishonest design by Eklipse. On its terms, the pleading of the second respondent directs attention to what may have occurred after the entry into the relevant agreements. That is, the discharge by RPM of its obligations. That relates to events to which Eklipse is not a party. -- 79 of 119 -- [2025] SASC 172 Kimber J 76 The seventh matter 292 The cost of the Caretaking Agreements for each of the four community corporations at the date of entry into those agreements on 1 July 2020 was $484,000 per annum inclusive of GST. On 5 July 2021, Property Maintenance Plus (PMP) provided a quote to the HRC for cleaning and caretaking services. Based on a three-year contract, the total annual cost of the quote was $363,000, inclusive of GST. Attached was an ‘example of a full [statement of work]’ to be performed.158 293 Mr Whiting is a lot owner within the HRC. Sent to Mr Whiting on 15 October 2021 was a further quote proposed by PMP dated 8 September 2021.159 It appears that quote is $398,155.62 per annum inclusive of GST and that it is based upon PMP performing the same tasks as RPM.160 294 Assuming the quotes provided by PMP can be treated as final, the quote dated 8 September 2021 is approximately 82 per cent of that contracted for on 1 July 2020 (i.e. – 18 per cent less expensive). That appears a significant difference. Nevertheless, on the evidence, I am not satisfied the difference is such that it contributes to establishing that Eklipse participated in a fraudulent and dishonest design. Mr Breda has experience with caretaking agreements and was prepared to express his views to Mr Pattinson about the length of the agreements. Notwithstanding, he did not opine on the cost of the Caretaking Agreements. There is no evidence of the market for caretaking services in July 2020, other than as may be inferred from what was contracted for and the quotes provided by PMP. As to the latter, the first of those quotes was about 12 months after the Caretaking Agreements were entered into. 295 More importantly, beyond what appears in the Caretaking Agreements and the quotes of PMP, there is no other evidence of the degree to which reasonable quotes might differ with respect to caretaking agreements. Further, and far less significantly, there is no independent evidence of the reputations of RPM and PMP in the performance of caretaking agreements, an issue which might shed light on whether the difference between the agreements and the quotes of PMP is as significant as it might appear. 296 In the circumstances, although the difference between the price contracted for under the Caretaking Agreements and that quoted by PMP appears significant, I am not able to conclude that difference can contribute to the establishment of a fraudulent and dishonest design. The eighth matter 297 I am satisfied that Eklipse failing to disclose the procurement sum weighs in favour of the existence of a fraudulent and dishonest design, but only in a limited 158 Tender Book, tab [331]. 159 Ibid, tab [339]. 160 Ibid, tab [340]. -- 80 of 119 -- [2025] SASC 172 Kimber J 77 way. The evidence of Mr Song, which I cannot reject, is that such sums are between the developer and the caretaker and are not disclosed. Nevertheless, it remains of some weight as it is so closely linked to Eklipse having breached the no conflict and no profit rules. Conclusion 298 I have found that Eklipse breached its fiduciary duty to the HRC by breaching the no conflict rule and the no profit rule. I have found that breach occurred in the context of Eklipse amending the sample indicative by-laws, at least in part, to help secure payment of the procurement sum and in the knowledge of how the Building had been marketed, but also in the context of Eklipse having reserved for itself a discretion to amend the by-laws. I find that the breach also occurred in the context of at least Mr Pattinson not wishing to include in the final Procurement Agreement reference to short-term letting. Although that was an agreement to which the HRC was not a party, on the evidence, and particularly given the description of why consideration was to be paid under the initial Procurement Agreement, it is difficult to discern why Mr Pattinson cared about that appearing in the Procurement Agreement, other than him wanting to limit the likelihood of the link between the approach taken to short-term letting through the amendment of the indicative by-laws and the payment of the procurement sum being discerned. On the evidence, no obvious alternative explanation presents itself. 299 I have found that the 25-year term of the agreements and the limited ability of the HRC to resist renewal are relevant and that RPM did not seek to negotiate that term to one which was lesser. However, I have also found that 25-year terms are not unique and, beyond the opinions of Mr Breda about the relevant agreements, there is no evidence about the approach taken to rights of renewal in the industry. I have found that Eklipse knew about the indicative by-laws and how the building had been marketed. I also find that Eklipse had legal advisers and there is nothing in the evidence to suggest that legal advice was received which might have suggested Eklipse was acting in a fraudulent or dishonest way. 300 In the circumstances, whether the second respondent has proven that Eklipse was involved in a fraudulent and dishonest design is relatively finely balanced. However, on the balance of probabilities, I find that, on 1 July 2020, Eklipse knew that the breaches of its duties were both fraudulent and dishonest. I make that finding as it knew how the Building had been marketed and with that knowledge, it negotiated and accepted the procurement sum, at least in part, in return for exercising the discretion to amend the indicative by-laws and to ensure that the HRC entered the relevant agreements. 301 Before considering whether the second respondent has proven that RPM knowingly assisted in that fraudulent and dishonest design, it is convenient to consider what the second respondent described as its primary case. That is, that the procurement sum should be characterised as the payment of a ‘secret commission’. -- 81 of 119 -- [2025] SASC 172 Kimber J 78 Bribery/secret commission – the common law – no accessorial liability 302 The primary case of the HRC is that the payment of the procurement sum was a bribe or secret commission and, if so, there is no need to establish that RPM intended to procure or induce a breach of fiduciary duty nor any need to prove that RPM assisted in a dishonest and fraudulent design. The primary case of the HRC is that under the common law, if RPM paid a bribe or secret commission, it is a primary wrongdoer. The HRC relies in this context on the common law tort of bribery. 303 The first applicant submits that, the dealings of RPM with Eklipse being when Eklipse held all the lots in the Building and/or when there was disclosure to the office holders appointed at the meeting on 1 July 2020, it is not appropriate to construe the payment of the procurement sum as a bribe or secret commission. In those circumstances, the applicant submits that there is no secrecy with respect to the payment of the procurement sum. Bribes and secret commissions 304 The principles surrounding bribes and secret commissions (the terms are indistinguishable)161 are an accepted subset of the general principles relating to conflict of duty and interest and misuse of fiduciary position.162 305 The generally accepted definition of a bribe is that stated by Slade J in Industries & General Mortgage Co Ltd v Lewis:163 For the purposes of the civil law a bribe means the payment of a secret commission, which only means (i) that the person making the payment makes it to the agent of the other person with whom he is dealing; (ii) that he makes it to that person knowing that that person is acting as the agent of the other person with whom he is dealing; and (iii) that he fails to disclose to the other person with whom he is dealing that he has made that payment to the person whom he knows to be the other person's agent. 306 To negate secrecy, what is required is disclosure of all material facts.164 307 The law takes a strict and deterrent approach to bribery.165 308 An aspect of the policy underpinning the law with respect to secret commissions was summarised by Ward CJ in Eq in Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd (Broadway)166 in the following way:167 161 Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd (Broadway), [1982]. 162 Grimaldi v Chameleon Mining NL (No 2) (200) FCR 296 (Grimaldi), 348 [189]. 163 [1949] 2 All ER 573, 575. 164 Hopcraft,[225]-[226]. 165 Hopcraft, [136]. 166 [2020] NSWSC 1778. 167 Ibid, [1986]-[1988]. -- 82 of 119 -- [2025] SASC 172 Kimber J 79 I accept - indeed, I think it beyond argument - that a policy undergirding this area of the law is a need to deter the payment of bribes and other such corrupting behaviours. As Lord Templeman said for the Privy Council in Attorney General v Reid (at 330-331): “Bribery is an evil practice which threatens the foundations of any civilised society … Where bribes are accepted by a trustee, servant, agent or other fiduciary, loss and damage are caused to the beneficiaries, master or principal whose interests have been betrayed.” Similarly, there is the rationale of protection of principals and the need for the principal to have the disinterested advice, and assistance, of his, her or its agent - the principal being entitled, by policy of the law, to be confident the agent will act wholly in the principal's interests. In this regard, I accept that allowing a third party dealing with the principal to confer benefits on an agent may be productive of a corrupting influence. Indeed, such a policy and normative concern underpins a conception of the substantive legal rule as not requiring it to be proven that the alleged payer did in fact seek to influence, by paying the alleged bribe, the payee. Likewise, such a policy and normative concern also underpins a conception that it not be necessary to prove that the alleged payer did, in fact, have a corrupt purpose in so paying. Similarly, such a concern coheres with the operation of presumptions - including irrebuttable presumptions - as to the fact of the payee having been influenced by the alleged bribe. 309 In Grimaldi v Chameleon Mining (No 2) (Grimaldi),168 in remarks which are obiter but which I do not understand to be open to doubt, it was said by the Full Court of the Federal Court:169 While secret commissions often are given with the corrupt purpose of influencing, such is not a necessary characteristic of them in civil proceedings. As Lawrence Collins J observed in Daraydan Holdings Ltd v Solland International Ltd [2005] Ch 119 at [53]: “In proceedings against the payer of the bribe there is no need for the principal to prove (a) that the payer of the bribe acted with a corrupt motive; (b) that the agent's mind was actually affected by the bribe; (c) that the payer knew or suspected that the agent would conceal the payment from the principal; (d) that the principal suffered any loss or that the transaction was in some way unfair; the law is intended to operate as a deterrent against the giving of bribes.” Finally, as both of the above quotations make plain, the payer of a secret commission to a person known to be acting in the matter on behalf of another, is taken to have assumed the risk of the payee having not obtained his or her principal's informed consent to receipt of the payment: Grant v Gold Exploration and Development Syndicate [1900] 1 QB 233 at 249. Knowing that the payee is acting on another's behalf is sufficient of itself to attract liability, unless full disclosure is made by the payer or “agent” and consent is given by the principal to the payment. Importantly, the payer's liability does not turn on his or her knowing or suspecting that the agent has not received the principal's informed consent to the payment: Daraydan Holdings at [53]; Bartram & Sons Ltd (1904) 90 LT 357 at 359- 360. … 168 (2012) 200 FCR 296. 169 Ibid, [190], 348 [192]-[193]; 357 [246]-[247]. -- 83 of 119 -- [2025] SASC 172 Kimber J 80 …where the third party deals with a known agent (or fiduciary) in a projected transaction with the agent's principal (or beneficiary) and in the course of so dealing offers and has accepted, or agrees to the agent's solicitation of, a commission, introduction fee or other collateral benefit without the informed consent of the principal. In such a case the third party's liability is founded on the assumption of the risk that the agent has not obtained the informed consent of the principal to the receipt of such a benefit and hence is acting in breach of fiduciary duty: see Grant v Gold Exploration and Development Syndicate at 249; Daraydan Holdings, at [53]; and, above, “Bribes and Secret Commissions”. What the above appears to illustrate is that participatory liability as it evolved in equity in cases prior and subsequent to Barnes v Addy was not based on inflexible formulae. Given the variety of circumstances in which, and bases on which, a third party could be characterised as a wrongdoer in equity - and we have not here referred as well to third party participation, for example, in a breach of confidence or the abuse of a relationship of influence: see eg Bank of New South Wales v Rogers (1941) 65 CLR 42 - varying importance has been given to three matters: (i) the nature of the actual fiduciary or trustee wrongdoing in which the third party was a participant; (ii) the nature of the third party's role and participation, eg as alter ago, inducer or procurer, dealer at arm's length, etc; and (iii) the extent of the participant's knowledge or, assumption of the risk of, or indifference to, actual, apprehended or suspected wrongdoing by the fiduciary. 310 Consistent with the foregoing, there is no need to prove any dishonesty or corrupt motive on behalf of a third party who pays a bribe to a fiduciary and no need to prove that the third party knew or suspected that the payment would be kept secret. The Court will not inquire into the motive of the donor. There is an irrebuttable presumption in favour of the principal and against the fiduciary that the fiduciary was influenced by the bribe.170 The elements of a secret commission 311 To summarise, to establish payment of a bribe or secret commission only the following need be established: 1. There must be a gift to the fiduciary (i.e. – Eklipse); 2. The gift must be intended by the donor (i.e. – RPM) and done to be an inducement to the donee (i.e. – Eklipse); 3. The donor (i.e. – RPM) must know the donee (i.e. – Eklipse) is the agent or fiduciary of the principal (i.e. – the HRC) with whom the donor is dealing; and 4. The gift is secret, not disclosed to the principal (i.e. – HRC) (i.e. – the donor fails to disclose to the principal that the payment was made to the agent or fiduciary of the principal).171 170 Aequitas v AEFC [2001] NSWSC 14, [369]. 171 Broadway, [1996] quoting Attorney-General v Reid [1994] 1 AC 324, [1131]-[1132]; Industries & General Mortgage Co Ltd v Lewis [1949] 2 All ER 573. -- 84 of 119 -- [2025] SASC 172 Kimber J 81 The submissions 312 The primary case of the HRC is set out above. The HRC submits that if that case is made good, it is entitled to rescission of the Letting Agreement and the Caretaking Agreement. 313 For its part, RPM submits that a claim based upon a secret commission is subsumed as a sub-category of the claim that RPM induced or procured the breach of fiduciary duty. On that basis, RPM submits that the HRC must establish that RPM knowingly induced or immediately procured the breach of fiduciary duty by Eklipse. RPM submits that approach is consistent with obiter in Grimaldi, as RPM submits that, in that case, the Court appears to have assimilated bribery and secret commission cases with procurement cases.172 I cannot accept that submission. The principles in the case of procurement and in the case of the common law tort are distinct and lead to different remedies.173 In equity, the briber is only made liable as a dishonest accessory. Under the common law, the briber is a primary wrongdoer174 and there is no requirement to prove dishonesty on the part of either party.175 314 RPM also submits that, even if a case of bribery was permissible standing alone (i.e. – outside any obligation to establish an intention to procure or induce a breach of fiduciary duty or to establish knowing assistance in a fraudulent and dishonest design), it is essential to prove that the payment was secret. RPM submitted that a payment cannot be secret if the fiduciary (i.e. – Eklipse) and the principal (i.e. – HRC) were not separate and distinct. Was the procurement sum a secret commission? 315 The four elements of a bribe or secret commission are set out above. If the principles with respect to secret commissions apply to the facts of this case, there is no need to prove that RPM acted with a corrupt motive; that the mind of Eklipse was affected by the ‘bribe’; that RPM knew or suspected that the agent would conceal the payment from the principal; or that loss was suffered or the transaction was in some way unfair.176 316 In this case, I find that RPM knew that the procurement sum was a ‘gift’ to the fiduciary and that it was intended as an inducement to the fiduciary to enter into the Letting Agreement and Caretaking Agreements. For the reasons set out earlier, I have found that an aspect of the payment of that sum was beyond just for the letting appointments obtained by Eklipse. Viewed in the context of the initial Procurement Agreement executed on 17 April 2020, and what was set out in that agreement as to why the procurement sum was to be paid, I find that at least an aspect of that sum was for the entry into the relevant Letting and Caretaking 172 Grimaldi, [247]. 173 See, for example, the discussion in Hopcraft, [73]-[77], [237]-[240]. 174 Ibid, [147]. 175 Ibid, [135]. 176 Grimaldi, [192]. -- 85 of 119 -- [2025] SASC 172 Kimber J 82 Agreements with the second respondent. There also cannot be any doubt that RPM knew that Eklipse was the fiduciary of the HRC. Mr Song said he understood that ‘the developer stood in a fiduciary relationship with the [HRC]’.177 317 This is not to find that RPM knew that the payment of the procurement sum was dishonest, but I am satisfied that it was paid in the knowledge that Eklipse was a fiduciary and to influence it to enter into the two relevant agreements with the HRC. 318 To the extent that it may be relevant to whether a secret commission was paid or to whether RPM is liable in some other way, I find that it is unlikely that Mr Song had any intention or belief that the procurement sum would be brought to the attention of the HRC. I have earlier set out the evidence of Mr Song about that. This is not to suggest that I am satisfied that Mr Song in any way actively encouraged that the procurement sum not be brought to the attention of the HRC. It is more likely that he did not turn his mind to the issue as he never expected there would be disclosure. His experience was that disclosure beyond Eklipse would not occur.178 319 It is helpful to return to some of the other evidence about the state of mind of Mr Song about the issue of disclosure to RPM. 320 In an email between Mr Song’s lawyers on 15 April 2020, Mr Pevy noted that Eklipse did not wish to refer to the Procurement Agreement in the meeting on 1 July 2020. The HRC accepted that Mr Song was not a party to that email. Mr Song gave evidence that he was not told that the existence of the Procurement Agreement was not to be referred to in the Minutes of the meeting on 1 July 2020. Mr Song also gave evidence that he did not think that it was important that it be disclosed in the Minutes of that meeting as it was a ‘commercial arrangement between me and a developer’.179 He said that ‘[a]t the time it’s not [the lot holder’s] business, the business belonged to the developer’.180 Mr Song said that it was not important that the lot holders knew about the procurement sum and drew upon his experience of other like arrangements.181 321 I accept the evidence of Mr Song that he was not told that the existence of the Procurement Agreement was not to be disclosed in the Minutes of the first meeting. There is no evidence that the position set out in the email dated 15 April 2020 was later conveyed to Mr Song, including by those acting for him. It was also not a matter raised in the Due Diligence Report provided later that same day. 177 T513.36-T514.5. 178 See, for example, T534. 179 T534.11-12. 180 T534.15-16. 181 T533-534. -- 86 of 119 -- [2025] SASC 172 Kimber J 83 322 As for the balance of the evidence of Mr Song regarding his expectations about disclosure which I have summarised earlier, as mentioned, I am not satisfied that evidence should be viewed as Mr Song having specifically turned his mind to it at the time of the execution of the specific agreements relevant in this case, let alone that he specifically considered that they should be disclosed but nevertheless contributed in some way to that not taking place. That was not the evidence of Mr Song, nor do I draw those inferences given that I cannot reject his evidence about his experience of other like arrangements. 323 An important aspect of the evidence given by Mr Song regarding his thinking about disclosure is that it was not given in the context of him being asked about what he had thought before 1 July 2020; or on 1 July 2020 when the first meeting occurred; or on or about 21 August 2020 when the final Procurement Agreement was executed. The evidence of Mr Song was in the context of him being asked to give his view about whether it was important that there be disclosure to the lot holders in the Minutes or in some other way. In essence, Mr Song was being asked to give his opinion. The evidence of Mr Song was that it was not important as, in his view, the sum was for the business of the developer and to have disclosed it would not have been consistent with what had occurred in other like arrangements. I am not satisfied that his evidence should be viewed as him having accepted that he had turned his mind to the issue at the time. I am also not satisfied that it is evidence that founds an inference that he had a conscious role in an absence of disclosure. The most obvious inference from the evidence of Mr Song, and the inference which I draw, is that he gave no thought to the issue as he did not regard the payment as a matter that needed to be disclosed beyond Eklipse. The payment was secret 324 Unless disclosure of the procurement sum to Eklipse deprives that payment of characterisation as secret (either on the basis that it held all the lots in the HRC and/or on the basis that by 1 July 2020 its representatives held the positions of Presiding Officer, Secretary and Treasurer and so controlled the management of the HRC) there can be no doubt that the payment of the procurement sum was secret. 325 It may be asked, can the payment of the procurement sum be characterised as secret if the principal and the agent are indistinguishable and/or if the payment was disclosed to the office holders just mentioned? The first applicant submits that for one, or both, of those reasons, the procurement sum was not a secret commission. This case can be distinguished from those authorities which provide the principal with a remedy against a third party with which it has contracted through its agent if the third party makes a payment to the agent which is not disclosed to the principal when the principal is in existence. In the circumstances of this case, is it open to be satisfied that the payment of the procurement sum was a secret commission which entitles the principal to rescind the contract with the third party that makes the payment? -- 87 of 119 -- [2025] SASC 172 Kimber J 84 326 The contention of the HRC within this aspect of the proceedings is, in effect, at least in part, that RPM was obliged to disclose to the HRC a payment which RPM made to Eklipse at a time when RPM could only deal with Eklipse as it held all the lots. 327 In my view, it is appropriate to ask: given that RPM was dealing with Eklipse which was not only the fiduciary of the proposed community corporation, but held all the lots and so was the entirety of the community corporation and given that the representatives of Eklipse were the office holders earlier mentioned, at the time of agreeing to pay the procurement sum, to whom was RPM to make disclosure of that sum in order that it not be characterised as secret? 328 Although it is not necessary to be comprehensive as to what might be appropriate methods of disclosure, if the contention of the HRC is correct, perhaps disclosure might have been made in the Minutes of the meeting on 1 July 2020 and/or at the first statutory meeting held pursuant to s 79 of the CT Act? Certainly, there is no dispute that neither occurred. 329 It must be accepted that there is nothing in the principles with respect to secret commissions to suggest that a third party must know that the payment it makes is to be kept secret. To recapitulate, in Broadway, it was held that it was not necessary to prove that the payer of a bribe had knowledge of any type that the payment would not be disclosed.182 In Grimaldi, the Full Court referred with approval to authorities which had held that the payer assumes the risk of the payee not having obtained the informed consent of the principal and that liability of the third party did not turn on that third party knowing or suspecting that informed consent had not been obtained.183 330 Close attention to the authorities upon which Grimaldi relies for its statement of the relevant principles, authorities each also referred to in Broadway, reveals that the circumstances dealt with in those authorities are not analogous in every respect to this case. In each case,184 it may be said that the party making the payment (in this case, RPM) made that payment to an agent of the principal (in this case, Eklipse) at a time when the principal existed as an entity separate and distinct from its agent (in this case, the HRC). As a result, there was the capacity for the payer to ensure that it was disclosed to the principal. In such a case, it is meaningful to take into account the payer assuming the risk that the agent will not make disclosure to its principal. In this case, as mentioned, the principal did not exist as an entity separate to the agent at the time it was agreed that consideration would be paid as the agent held all the lots and the payment was not secret from the officer holders appointed on 1 July 2020. 182 Broadway, [2040]-[2042]. 183 Grimaldi, [193]. 184 Industries & General Mortgage Co Ltd v Lewis [1949] All ER 573; Grant v The Gold Exploration and Development Syndicate Ltd [1900] 1 QB 233; Daraydan Holdings Ltd & Ors v Solland International Ltd & Ors [2004] EWHC 622. -- 88 of 119 -- [2025] SASC 172 Kimber J 85 331 Further, while I was referred by the HRC to authorities involving breaches of fiduciary duty by developers and/or promoters in the setting of, or akin to, a developer control period, the issue in those authorities was not whether there could be a finding of the payment of a secret commission by a third party when the principal and the fiduciary were, at the relevant time, one and the same.185 332 One can see how it is appropriate that there be a remedy against a third party when that party makes a payment to the fiduciary; and the third party could have ascertained the identity of the principal and made disclosure but did not do so. In such a case, it is more clearly appropriate to characterise the payment as secret and find that the third party assumed a risk the fiduciary would not disclose it. However, it might be more difficult to see how it is appropriate that there be remedies available against the third party when the principal is, at the time of entry into the contracts, and at the time it is agreed the payment will be made, wholly constituted by the fiduciary with whom the third party is dealing and/or when there is disclosure to the office holders of the principal. 333 All of that said, it is also not appropriate to proceed on the basis that the future HRC did not exist. To proceed in that way would be to conclude on the one hand, that Eklipse owed a fiduciary duty to the future HRC but on the other hand and at the same time, proceed on the basis that no secret commission was paid because the future HRC did not exist as a separate body. To approach the issues in that way would be to find that the future HRC existed as Eklipse had a fiduciary duty to the HRC but to find, at the same time, the HRC was not a body separate to Eklipse. At 1 July 2020, the future HRC is either separate from Eklipse, or it is not. The future HRC either exists, or it does not. 334 For that reason alone, I find that Eklipse owning all the lots on 1 July 2020 cannot stand in the way of a finding that a secret commission was paid. Although not necessary to decide, it may be observed that a different approach would enable a party such as RPM to avoid the principles surrounding secret commissions simply because of the timing of an agreement even when it knew the agent was a fiduciary. It might be difficult to reconcile that approach with the existence of the fiduciary relationship between Eklipse and the HRC and the importance of the deterrence of behaviour which may be destructive of commercial relations. I find that the payment was secret notwithstanding that it was known to Eklipse at a time at which it held all the lots. Further, I also find that the payment was secret notwithstanding that it was known to the office holders appointed on 1 July 2020. While those persons were office holders, they were also representatives of Eklipse and not independent. 335 I find that the procurement sum paid by RPM was a secret commission. It was a gift by RPM intended, at least in part, to enter into the relevant agreements 185 See for example – Community Association DP No. 270180 v Arrow Asset Management Pty Ltd [2007] NSWSC 527; Meriton Apartments Pty Ltd v The Owners Strata Plan No. 72381 [2015] NSWSC 202. -- 89 of 119 -- [2025] SASC 172 Kimber J 86 between the HRC and RPM. RPM knew that Eklipse was in a fiduciary relationship with the future HRC. 336 The gift was secret as it was not disclosed to the future HRC. I find that disclosure to the representatives of Eklipse, even once they were officeholders as appointed on 1 July 2020, was not sufficient to deprive the agreement to pay the procurement sum of being secret when Eklipse was the agent of the HRC and no disclosure was made to the HRC by any person or entity who might be properly characterised as independent of Eklipse or its representatives. Consistent with reasons already given, this is not to find that the whole of the procurement sum was a secret commission, nor to find that the second respondent is entitled to obtain the whole of that sum. 337 I will later consider the remedies available to the HRC, but before doing so, I turn to some other matters. Other contentions with respect to proof of a remedy of recission – equity 338 In addition to the HRC’s claim for recission of the Letting Agreement and Caretaking Agreement to which it is a party based on the payment of a secret commission, the HRC makes three alternative contentions, each of which it says also entitles it to recission of the relevant agreements. 186 Each is based upon RPM knowing that Eklipse owed a fiduciary duty to the HRC. First, that RPM knowingly induced or procured a breach/es of a fiduciary duty by Eklipse.187 Second, that RPM knowingly participated in a dishonest and fraudulent design by Eklipse.188 Third, that RPM knew that Eklipse was breaching its fiduciary duty.189 The first and second contentions – accessorial liability 339 Lord Selborne LC in Barnes v Addy190 identified two limbs of accessorial liability (i.e. – knowing receipt and knowing assistance). Lord Selborne LC stated:191 Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. 186 Cross Claim – Revision 4 (FDN 196, filed 1 October 2024) at [22]. 187 Ibid,[20C]. 188 Ibid, [20D]. 189 Ibid, [20B]. 190 (1874) LR 9 Ch App 224, 252. 191 Ibid, 251-252. -- 90 of 119 -- [2025] SASC 172 Kimber J 87 340 As held by the High Court in Farah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd (Farah Constructions),192 the form of accessorial liability referred to as ‘knowing assistance’ (or the second limb of Barnes v Addy) makes a third party (i.e. – RPM) liable if that party assists a fiduciary (i.e. – Eklipse) with knowledge of a dishonest and fraudulent design on the part of the fiduciary.193 Nevertheless, the High Court also held:194 …there is a distinction between rendering liable a defendant participating with knowledge in a dishonest and fraudulent design, and rendering liable a defendant who dishonestly procures or assists in a breach of trust or fiduciary obligation where the trustee or fiduciary need not have engaged in a dishonest or fraudulent design … Australian courts should continue to observe the distinction mentioned above and apply the formulation in the second limb of Barnes v Addy. (citations omitted) 341 Notably, knowing assistance requires the third party to have knowledge of the dishonest and fraudulent design. The knowledge necessary being actual knowledge; wilfully shutting one’s eyes; wilfully and recklessly failing to make such inquiries as an honest and reasonable person would make; and knowledge of circumstances which would indicate the facts to an honest and reasonable person.195 342 To succeed in a claim of knowingly procuring or assisting in a breach of fiduciary duty, it is not necessary to show any fraudulent or dishonest design, but it is necessary to show that the third party (i.e. – RPM) dishonestly procured or assisted in a breach of fiduciary duty.196 The knowledge necessary is the same as that above. The submissions of the second respondent 343 The second respondent identified nine matters which it submitted, viewed in combination, establish that RPM was either a knowing participant in a fraudulent and dishonest design or dishonestly procured or induced a breach of fiduciary duty:197 1. RPM and Mr Song knew Eklipse had obtained Development Approval on the basis that the land use was only for ‘residential purposes’; 2. RPM and Mr Song were provided with the Scheme Descriptions, the High-Rise Scheme and Development Contract and therefore knew that the Realm Building was for ‘residential purposes’ and that running a 192 (2007) 230 CLR 89 (Farah Constructions). 193 Ibid, 159 [160]. 194 Ibid, 160 [163]. 195 Ibid, 163-4 [174]-[177]; Baden [1993] 1 WLR 509, 575-576; 582. 196 Farah Constructions, 159 [161]; Elders Trustee v EG Reeves (1987) 78 ALR 193, 238-239; Grimaldi, [245]. 197 Second Respondent’s Written Closing Submissions (FDN 220, filed 6 February 2025),[215]. -- 91 of 119 -- [2025] SASC 172 Kimber J 88 hotel business or offering short stay accommodation for reward was not permitted; 3. RPM and Mr Song knew that Eklipse had initially provided lot holders with by-laws which precluded the offering of short stay accommodation, that those by-laws had been amended with the intent of reversing that position and that those amended by-laws had not been disclosed to lot holders; 4. RPM and Mr Song knew that the majority of property management appointments which were held by Eklipse, or its agent were for investor lot holders to enter into long term tenancies and that there would be a need to convert them to short term tenancies; 5. RPM and Mr Song knew that Eklipse was not engaging in bona fide negotiations with respect to the Caretaking Agreement when Mr Pattinson sent to Mr Song an email letter of 10 April 2020, which, referring to the length of the term stated, ‘this is one of the reasons we must act carefully’ and highlighting sections of s.142B(1); 6. RPM and Mr Song knew that Eklipse was not engaging in bona fide negotiations with respect to the Caretaking Agreement by reason that a request for a quote was never made and instead a schedule of intended charges was provided by Eklipse to RPM; 7. RPM knew that the consequence of Eklipse acting in breach of its fiduciary obligations was that there would be serious, extensive (there are 160 lot holders in High Rise) and adverse effects which permitting RPM to run its hotel business in the Realm Building would have on the living conditions and standards of lot holders and the harmonious relations of lot holders, guests and staff, within the Realm Building; 8. RPM knew that Eklipse did not intend to seek the informed consent of lot holders or the High-Rise Corporation to the amendment of the by-laws or to the receipt of the procurement payment; 9. RPM intended or alternatively knew, that the entry into the Procurement Agreements and the payment of the amounts due under them would influence Eklipse to amend the By-Laws provided to purchasers within the High-Rise Corporation to a form of by-laws which permitted RPM’s operations to occur. 344 I turn to each of the above. -- 92 of 119 -- [2025] SASC 172 Kimber J 89 Knowledge of Development Approval – ‘residential purposes’ only 345 The Scheme Descriptions were provided to Mr Song’s solicitors on 10 April 2020.198 Relevant documents, including a Development Approval, were perused by those solicitors and advice was provided to Mr Song. It may be accepted that the Development Approval within the draft Scheme Description referred to the nature of the development as being for ‘residential purposes’. Nevertheless, I am not satisfied this assists the second respondent. 346 First, the submission assumes that the reference to residential purposes is something that only denotes occupancy that is not short-term. For reasons given, I do not accept that assumption. 347 Second, whether this is a matter of significance must also be considered bearing in mind that there cannot be any doubt that Mr Song was anxious to ascertain whether the only letting business that was of any real commercial interest to him (i.e. – short-term letting) would be permissible. So much is obvious from Mr Song seeking legal advice and from the fact that he was prepared to pay a much more substantial sum ($22,000) for each short-term letting appointment compared to what he was prepared to pay for a long-term appointment ($6,000). I am satisfied that Mr Song would not have agreed to pay that greater fee if he considered there was a prohibition based upon Development Approval. 348 Third, as just mentioned, Mr Song took legal advice. Insofar as the development approval is concerned, Mr Song sought legal advice from a person other than a solicitor within Pevy Lawyers. 349 While the final piece of correspondence from Mr Dawson stated that the planning system in South Australia ‘differentiates residential apartments as being different to serviced apartments or those that are let out for short term stays’; that ‘the use of private apartments for Airbnb is still a grey area’; and that approval to change the use would be needed; Mr Dawson also advised that ‘going from residential to serviced is more straight forward’.199 Further, and putting the foregoing aside, there is nothing in the advice received about planning which suggested that what Mr Song was contemplating was unlawful, or otherwise inappropriate. Scheme Descriptions and development contract 350 This submission assumes that the effect of the documents identified was that short-term letting was not permitted. I have rejected that assumption. The indicative by-laws 351 I am satisfied that Mr Song had reason to know that the issue of short-term letting was an issue about which Eklipse was concerned. Specifically, Mr Song 198 Tender Book, tab [79]. 199 Ibid, tab [136]. -- 93 of 119 -- [2025] SASC 172 Kimber J 90 had reason to know that Eklipse did not want short-term letting referred to in the Procurement Agreement. While I accept that Mr Song may not have read carefully the emails of Mr Pattinson on or about 9 April 2020 in which Mr Pattinson expressly raised not referring to short-term letting in the Procurement Agreement, and the presence of Mr Song in the Zoom teleconference on 9 April 2020 is not pleaded, attention can be given to what occurred after that meeting .200 The purpose of that conference was to resolve outstanding issues about the Procurement Agreement, one being whether reference to short-term letting would appear. After the meeting, Mr Pevy emailed Mr Song to advise that, because of the meeting, he would further amend the draft Procurement Agreement to remove references to short-term letting.201 I am satisfied that Mr Song would have paid attention to the communications after the Zoom teleconference as short-term letting was the only business in which he had any real interest. That said, I am not satisfied this weighs in favour of the case of the second respondent as Mr Song received legal advice throughout. At least once the matter had been discussed at the Zoom teleconference, the legal advice to Mr Song did not suggest that the approach of Eklipse to short-term letting and reference to it being excluded from the initial Procurement Agreement should be of concern to RPM. For example, Mr Pevy did not raise any such concern in his email to Mr Song immediately after that meeting.202 352 It must be accepted that the indicative by-laws provided to lot holders were materially different to those the subject of the amendments. It must also be accepted that what became the existing by-laws had not been given to lot holders was a matter brought to Mr Song’s attention. Regardless of whether Mr Song read the email of Ms Huebner to Mr Pattinson on 21 April 2020, I find the issue was discussed with him. That is the obvious inference from the email on 22 April 2020 from Pevy Lawyers to the effect that Mr Song was comfortable with the advice provided by Lynch Meyer on 22 April 2020.203 That advice being that there was no obligation to provide the amended by-laws to purchasers who had received the indicative by-laws. 353 I find that Mr Song was told, on 21 or 22 April 2020, that the existing by-laws were different to those provided to lot holders. That said, I also find that Pevy Lawyers did not tell Mr Song that Eklipse was under an obligation to provide the existing by-laws to purchasers who had received the indicative by-laws. That was not the advice of Lynch Meyer conveyed to Pevy Lawyers. Given the email from Pevy Lawyers to Lynch Meyer on 22 April 2020, I find that Pevy Lawyers discussed the position of Lynch Meyer with Mr Song. It is unlikely that Pevy Lawyers gave Mr Song advice different to that provided by Lynch Meyer. Lynch Meyer was a local solicitor commenting upon a state Act. That advice was correct. Putting that aside, for reasons given, a particular concern of Pevy Lawyers 200 Tender Book, tab [74]. 201 Ibid, tab [76]. 202 Ibid. 203 Ibid, tab [144]. -- 94 of 119 -- [2025] SASC 172 Kimber J 91 was the issue of the by-laws. Had Mr Song been told by Pevy Lawyers that there was such an obligation, I would expect them to have made a record of the giving of that advice. There is no such evidence. 354 As earlier set out, that Eklipse was aware that the indicative by-laws were different to what became the existing by-laws is an aspect of my finding that Eklipse was involved in a fraudulent and dishonest design. Nevertheless, while not irrelevant, that Mr Song had the same awareness does not have the same significance in the case of RPM for two reasons. 355 First, unlike in the case of Eklipse, given that Mr Song did not become involved in negotiations until about 26 March 2020, I am not able to find that RPM had knowledge of how the Building had been promoted. That alone materially distinguishes the position of Mr Song from the position of Eklipse. Second, RPM sought legal advice. As set out above, it can be inferred that on 21 or 22 April 2020 Mr Song was told, by his own solicitors, of the advice of Lynch Meyer that there was no statutory obligation to disclose a change of indicative by-laws to lot holders. As mentioned, in the absence of contrary evidence, of which there is none, I infer that Pevy Lawyers did not suggest to Mr Song that the advice of Lynch Meyer was incorrect. In the Due Diligence Report, Pevy Lawyers had given substantial advice which touched upon the by-laws and Mr Pevy had told Ms Huebner to check the by-laws carefully. In such circumstances, it is more likely than not that Pevy Lawyers gave thought to the advice of Lynch Meyer; were comfortable with the advice of Lynch Meyer; and communicated that to Mr Song. True it is that the same advice was brought to the attention of Mr Pattinson, but again, in the case of Eklipse and its representatives, the significance of the advice it received must be considered in the context of what it knew about how the Realm Building had been promoted. 356 Further, as touched upon, that Mr Song was on notice of the indicative by-laws having been in a different form and that not being conveyed to the lot holders cannot be viewed as divorced from the Due Diligence Report. That Report expressly referred to what became the existing by-laws being appropriate for the agreements contemplated. It may be accepted immediately that is not the same as advice to the effect that there was no difficulty with amending the indicative by- laws in a material way. Nevertheless, it remains that nothing appeared in that Report which conflicted with what it is likely Mr Song was later told by Pevy Lawyers on or about 22 April 2020. Property management appointments 357 It may be accepted that Mr Song knew UA would be responsible for lettings in the first 12 months and considered that UA did not have the ability to do short-term letting.204 It may also be accepted that Mr Song was sent letting documents that were not consistent with short-term letting.205 However, it must 204 T468; T475. 205 See [128]-[129] above. -- 95 of 119 -- [2025] SASC 172 Kimber J 92 also be accepted that the first approach to Mr Song was on about 26 March 2020 and involved Mr Song being told about Imagine having withdrawn from negotiations.206 I accept the evidence of Mr Song that Imagine was a business like that of RPM (i.e. – with a particular focus on short-term letting)207 and that he was told Imagine had withdrawn from negotiations because of COVID-19.208 I cannot reject that Mr Song had good reason to believe what he was told given the travel restrictions announced at around the same time as he was approached about the Realm Building. Viewed objectively, the pandemic was more likely to adversely impact short-term letting. In my view, that Mr Song knew that Imagine had been involved in negotiations and that he was given a cogent explanation for Imagine having ceased negotiations is relevant to whether Mr Song had knowledge of a fraudulent and dishonest design. It weighs against that conclusion as there was a reason for Imagine withdrawing from negotiations for reasons other than Imagine having a concern about the propriety of short-term letting in the Realm Building. 358 Further, as early as 1 April 2020, Mr Song exchanged emails with UA with respect to paying for letting appointments. I do not interpret that exchange as putting Mr Song on notice that short-term letting might not be permitted. To the contrary, from the beginning, UA was holding out the possibility of a substantial number of such appointments without raising that there was some impediment to that occurring. UA might be criticised for having done so in the context of having been involved in the promotion of the Realm Building, but I am not satisfied that any criticism of UA weighs in favour of RPM having the relevant knowledge. 359 HRC submits that I should reject that Mr Song only learned that it had long-term letting around August 2020.209 I have some uncertainty about whether I should accept that evidence. I have been unable to reach a view. 360 However, I am satisfied of two matters. First, even if it was assumed that evidence should not be accepted, I would not find it was a lie. It might be that it was considered by Mr Song to be in his interest to give that evidence. It might be equally the case that his memory was faulty. This was not the only business occupying Mr Song’s time in 2020. Mr Song was running a short-term letting business in more than one state during the COVID-19 pandemic. Knowledge that Eklipse was not engaged in bona fide negotiations because of Mr Pattinson’s email on 10 April 2020 361 I set out again the email dated 10 April 2020:210 Trent 206 Third Affidavit of Tianyi (Michael) Song dated 1 February 2024 (Exhibit A34), [4]-[14]. 207 Ibid. 208 Ibid. 209 Second Respondent’s Written Closing Submissions (FDN 220, filed 6 February 2025), [221]. 210 Tender Book, tab [82]. -- 96 of 119 -- [2025] SASC 172 Kimber J 93 This is one the reasons we a (sic) must act carefully in particular stating upfront 25 year term (even though it essentially is but eh (sic) manger can be terminated prior to the full 25 year term. The current Motions already email (sic) to you have not be (sic) vetted as yet and are subject to change. To overcome this position our legal advice is noted in the last 2 items. COMMUNITY TITLES ACT 1996 - SECT 142B 142B—Developer stands in fiduciary relationship with community corporation (1) For the avoidance of doubt— (a) the developer stands in a fiduciary relationship with the community corporation and, before the community corporation is established, with the proposed community corporation; and (b) the duties owed by the developer under this Act are in addition to, and do not derogate from, the duties arising out of that fiduciary relationship. (2) Without derogating from subsection (1), where the community corporation intends, during the developer control period, to delegate functions or powers to a body corporate manager or to enter into a contract for services, the developer must exercise reasonable skill, care and diligence and act in the best interests of the community corporation (as it will be constituted after the developer control period ends). Note— An application may be made under section 142 if the developer contravenes this subsection. (3) In this section— "developer control period" means a period during which— (a) the community corporation is constituted solely by the developer; or (b) the developer owns the majority of lots in the community scheme or in any other way controls the voting of the corporation. You may have formed the view that in (sic) to maintain the high standards of the development and expectations of purchasers • it is necessary to enter into such Agreements with an experienced operator for the ongoing benefit of the proposed Corporations, and that the Corporations are otherwise entitled to determine the Agreements if the Caretaker fails to remedy breaches (as in Clause 9 you adverted to), and • as experienced developers have exercised reasonable skill, care and diligence in your judgement of entering the agreements. Thanks Anthony -- 97 of 119 -- [2025] SASC 172 Kimber J 94 362 I am not satisfied that this email weighs in favour of RPM having any relevant knowledge. 363 Several observations must be made. First, Mr Song did not receive this email. His email address was misspelt. Second, while the email obviously raised s 142B of the CT Act and, in that context, a need to ‘act carefully’ with respect to the 25-year terms, assuming that was conveyed to Mr Song by Pevy Lawyers, whether that is significant must be viewed given the Due Diligence Report which postdates this email. The length of the agreements was specifically raised in the Due Diligence Report. While that Report raised the potential for long-term agreements to be set aside, it did not suggest that there was something unlawful or otherwise improper about such agreements. 364 I acknowledge that I have earlier rejected that Mr Song was not told of the risk of the agreements being set aside due to the length and/or following a valid resolution of a community corporation. While that rejection is relevant to the evaluation of the credibility and reliability of other aspects of the evidence of Mr Song, it cannot change the advice given in the Due Diligence Report. In my view, that advice is the most significant consideration. As mentioned, while that advice was that there existed a risk of the agreements being set aside, that advice was not to the effect that the agreements were a breach of fiduciary duty; that Eklipse might have been acting dishonestly; or that RPM might otherwise be acting unlawfully or improperly. 365 Further, as earlier set out, I cannot reject the evidence of Mr Song to the effect that 25-year arrangements were not unusual.211 Negotiations not bona fide – no quote and the duration of the agreements 366 In the case of RPM, I am not satisfied that this weighs in support of the requisite knowledge. 367 First, the evidence of Mr Song was that it was not always the case that there was a tender process for agreements of these types.212 While I have rejected some aspects of the evidence of Mr Song, I am unable to reject that aspect of his evidence. There is no evidence which contradicts that evidence. Second, putting that aside, in my view, it is relevant that the negotiations with respect to the agreements occurred after earlier negotiations with Imagine had advanced to the point of drafting agreements. In that limited sense, this was not a case of Eklipse going to the market for the first time when it commenced negotiations with RPM. Further, and although of very limited significance, I cannot reject the evidence of Mr Song that terms were negotiated which were less favourable to him than to Imagine,213 albeit not materially so. 211 T564, T602. 212 Second Affidavit of Tianyi (Michael) Song dated 12 December 2022 (Exhibit A33), [13]-[14]. 213 T602.30-32. -- 98 of 119 -- [2025] SASC 172 Kimber J 95 368 As for the length of the agreements, two observations can be made – both of which weigh against this contributing to RPM having the requisite knowledge. First, the length of the agreements, as executed, already appeared in the drafts provided to RPM after Imagine had withdrawn. Second, as mentioned more than once, I cannot reject the evidence of Mr Song that it was common practice for agreements like those in this case to have 25-year terms.214 369 The evidence tends to support that what appeared in the drafts provided following the cessation of negotiations with Imagine was not something which should be seen as contributing to RPM having acted dishonestly. I recognise that, to some extent, the evidence of Mr Breda weighs against the evidence of Mr Song about 25-year terms. Nevertheless, the evidence of Mr Breda appears limited to South Australia, which limits its significance in undermining the evidence of Mr Song. Further, there is no evidence that the views of Mr Breda were shared with Mr Song. In addition, as earlier mentioned, while the Due Diligence Report raised the risk given the length of the agreements, an aspect of the same Report was that terms of 25 years did occur in the case of caretaking agreements.215 I also recognise that the length of the agreements contributed to my finding that Eklipse breached s 142B of the CT Act. However, Eklipse was aware of the position of Mr Breda not just about the length of the agreements but also his position about a clause being added which might have provided a greater opportunity to the HRC not to extend the agreements. 370 As for the payment of the procurement sum, it is not in dispute that Mr Song is a very experienced operator of caretaking and short-term letting businesses. I cannot reject the evidence of Mr Song that it was common in his experience that a procurement sum would be paid to the developer. After all, an aspect of what was being purchased was letting appointments which had been acquired by the developer. In evidence that I do not reject, Mr Song said that he had caused the payment to be made:216 … because I considered that consistent with the position in Queensland and Victoria, transactions involving the entry into agreements providing for the grant by the developers of apartment complexes of rights to managers or agents to undertake caretaking of apartment complexes and make rental agreements on behalf of owners was lawful and appropriate in South Australia, and nothing was brought to my attention during my dealings in relation to the Realm apartments that led me to doubt this position. Knowledge of impact on lot holders 371 Respectfully, this is no more than an assertion. Assuming that it is an assertion with any weight, it could only really have significance if Mr Song had the requisite knowledge that a substantial number of lot holders had contracted with Eklipse in a way inconsistent with what was contemplated. As set out above, Mr Song was not involved in the Realm Building during its promotion. Mr Song 214 T564; T602. 215 Tender Book, tab [104], page 7. 216 Third Affidavit of Tianyi (Michael) Song dated 1 February 2024 (Exhibit A34), [29]. -- 99 of 119 -- [2025] SASC 172 Kimber J 96 did not become involved until about 26 March 2020 and I have not found that he had knowledge of how the Building had been promoted. Even if Mr Song had reason to consider that the short-term letting business might disappoint some residents, I would not be satisfied that can contribute in any substantial way to Mr Song’s requisite knowledge in the absence of reason to consider that lot holders had been deceived by Eklipse. I am not satisfied that Mr Song had any requisite knowledge that lot holders might have been deceived by Eklipse during the marketing of the Building or through sales contracts. Knowledge that RPM did not intend to seek informed consent about the Procurement Sum 372 I have earlier set out my views regarding the state of mind of Mr Song about what the lot holders or the HRC would be told about the procurement sum. I doubt that he turned his mind to that issue. Even if he did, I am not satisfied that weighs in favour of Mr Song having the requisite knowledge. I cannot reject his evidence that he did not consider it anything other than a matter between himself and Eklipse. I am not satisfied that he should have regarded an absence of disclosure of that as an issue. Pevy Lawyers were aware that it would not appear in the Minutes of the meetings on 1 July 2020. There is no evidence which suggests that those solicitors raised any concern about that. 373 An aspect of the submissions of the HRC was that something about the state of mind of RPM may be inferred from the absence of evidence that Mr Song sought and received advice about the propriety of the initial and/or final Procurement Agreements. Attention was directed to the absence of such advice in the Due Diligence Report. I cannot accept that submission. First, the absence of evidence that advice was sought about the terms of those agreements might contribute to establishing dishonesty on behalf of the first applicant was not a matter which was pleaded. Second, and separately, it was not a matter put to Mr Song in cross- examination. In the circumstances, I am not satisfied that it would be appropriate to draw an inference adverse to him on the basis suggested by the second respondent. 374 As for the by-laws, I have dealt with that above. Intention to influence 375 Consistent with earlier aspects of this judgment, I find that the procurement sum was paid, in part, to secure entry into the Caretaking and Letting Agreements with the HRC. Further, under both the initial Procurement Agreement and the final Procurement Agreement, the obligations of Eklipse included that it would ensure the by-laws deposited would be what became the existing by-laws.217 376 However, I am not satisfied that this aids in proof that RPM had the requisite knowledge. As set out above, Mr Song was given legal advice about the by-laws 217 Clause 3.1 in both the initial and final Procurement Agreement. -- 100 of 119 -- [2025] SASC 172 Kimber J 97 and the Caretaking and Letting Agreements. There was nothing in that advice which suggested that amending the indicative by-laws or those agreements were unlawful or improper. The evidence is to the contrary. To the extent that the legal advice given to Mr Song alerted him to risks in the context of s 142B of the CT Act and/or the risk of valid motions being passed by the community corporations, that was also not advice that amending the indicative by-laws was unlawful or improper, nor was it advice that Eklipse might have been acting in breach of its fiduciary duty. Having been advised by his solicitors, I am satisfied that Mr Song was entitled to leave the issue there. Dishonesty – conclusion with respect to RPM 377 I recognise that the matters relied upon by HRC, and which I have identified as being relevant to RPM having the requisite knowledge of a fraudulent or dishonest design or the requisite knowledge of dishonestly having procured or induced a breach of fiduciary duty, must be viewed in combination. 378 The matters which I have identified are that Mr Song had reason to know that there was sensitivity on behalf of Eklipse about reference to short-term letting appearing in the Procurement Agreement and that Mr Song was aware that lot holders had been provided with indicative by-laws which were different in material respects to what became the existing by-laws. 379 As for the issue with respect to the by-laws, as mentioned, what was known about the existence of the indicative by-laws and that they were to be amended must be viewed in the context of Mr Song having received legal advice. As mentioned, the issue of the indicative by-laws was known to Pevy Lawyers and there was no advice that there was anything untoward about that. 380 As for short-term letting not appearing in the Procurement Agreement, I am unable to conclude that this contributes to Mr Song having any requisite knowledge. That it contributes to relevant knowledge on behalf of Mr Song is difficult to reconcile with letting of that type being referred to in the Letting Agreement with the HRC. Further, even were that put aside, once the Letting Agreement had been entered into, the conduct of a short-term letting business was always going to be revealed by the conduct of that business. Further, if this has any relevance, it would be on the basis that Mr Song considered that the payment of the procurement sum would not be disclosed to the lot holders. Assuming that, it would have some significance as, for reasons given, that sum was not only being paid for letting appointments. An aspect of the consideration was for other rights conferred under all the Letting Agreements; the rights conferred under the Caretaking Agreements; and the depositing of what became the existing by-laws. 381 Nevertheless, I have not found that the second respondent has met its burden of establishing on the balance of probabilities that Mr Song had the requisite knowledge or was dishonest. Mr Pevy participated in the meeting on 9 April 2020 and, following that meeting, advised Mr Song that he would amend the Procurement Agreement to remove reference to short-term letting. Whatever was -- 101 of 119 -- [2025] SASC 172 Kimber J 98 communicated before the meeting on 9 April 2020, there is no evidence that after that meeting Mr Pevy communicated to Mr Song reservations about that. As mentioned, Mr Pevy was anxious to ensure that his firm protected itself given the risk that he believed Mr Song might be prepared to take. Notwithstanding that concern, after the meeting on 9 April 2020, Mr Pevy expressed no concern about the removal of the reference to short-term letting. This weighs against a conclusion that Mr Song should have thought there might be a concern about that occurring. 382 In the circumstances, I am not satisfied that Mr Song had, at least, knowledge of facts which would indicate the existence of a dishonest and fraudulent design to an honest and reasonable person. In the circumstances, I am also not satisfied that Mr Song had, at least, knowledge of facts which would indicate to an honest and reasonable person that he was dishonestly procuring or inducing a breach of fiduciary duty by Eklipse. Recission if RPM merely knew that Eklipse was in breach of its fiduciary duty. 383 As earlier set out, the second respondent contends that an order for recission of the relevant Letting and Caretaking Agreements may be made even if it is not found that RPM paid a secret commission; participated in a fraudulent and dishonest design; or knowingly induced a breach of fiduciary duty. It is arguably not necessary to deal with this issue given my finding that RPM paid a secret commission. Nevertheless, in case my approach to any relevant issue is wrong, I will deal with it. 384 The second respondent contends that merely establishing that RPM had knowledge (i.e. – had actual knowledge; wilfully shut its eyes to the obvious; wilfully and recklessly failed to make such enquires as an honest and reasonable person would make; or had knowledge of circumstances which would indicate the facts to an honest and reasonable person)218 that Eklipse was breaching its fiduciary duty is sufficient. The second respondent contends that RPM had the requisite knowledge as RPM knew that Eklipse was acting for, and on behalf of, the HRC during the developer control period; knew that Eklipse owed a fiduciary duty to the community corporation; intended that the entry into the Procurement Agreements and payment of consideration would influence Eklipse to enter into the Caretaking and Letting Agreements and did not disclose, or adequately disclose, the Procurement Agreement and was aware that Eklipse did not intend to do so. 385 The second respondent relied upon two authorities in support of this contention: Vic Beef Holdings Pty Ltd v Chen (VicBeef)219 and Great Investments Ltd v Warner (Great Investments). 220 218 I.e. – the first four Baden categories (see Baden, 575-576; 582). 219 [2021] VSC 546. 220 (2016) 243 FCR 516. -- 102 of 119 -- [2025] SASC 172 Kimber J 99 386 The first applicant contends that the authorities upon which the second respondent relies to establish this relief do not support its existence. VicBeef and Great Investments 387 The second respondent submits that in VicBeef, M Osborne J held that where all that is sought by a party to a contract is an order for recission and the consequential re-vesting of the benefit provided under the contract, the only relevant question is whether the third party was a bona fide purchaser for value without notice.221 388 In VicBeef, Mr Chen was a director of the plaintiff companies: VicBeef and Tabro Meat. Mr Chen caused those companies to enter into security agreements over their assets (the agreements) to companies associated with a defendant, Mr Cai. VicBeef and Tabro Meat sought rescission of the agreements on the basis that Mr Chen breached his obligations to the plaintiff companies. M Osborne J held that Mr Chen had breached his duties under ss 180, 181 and 182 of the Corporations Act 2001 (Cth) and also the no conflict rule under the general law. Mr Chen did not seek to establish that his actions were honest.222 389 It was held that VicBeef and Tabro Meat were entitled to an order rescinding the agreements. That occurred in the context of Mr Cai having had knowledge, principally by way of the knowledge of his lawyers, of the breaches of a fiduciary nature. However, an aspect of the evidence contributing to that finding was knowledge that the agreements were ‘not legal’ and in the knowledge that the debt created pursuant to the agreements was not a debt of VicBeef and Tabro Meat.223 That is, Mr Cai had knowledge which, at least, could establish that the entry into the agreements was dishonest. 390 The second respondent relies upon the fact that what M Osborne J said in VicBeef had been held in Great Investments. M Osborne J stated that Great Investments supports the proposition set out in [387] above. 391 Nevertheless, as the first applicant submitted, Great Investments was not a case involving the recission of a contract. 392 Great Investments concerned a claim by the liquidator of a company (Bellpac) to recover $6,000,000 of bonds transferred from Bellpac to Great Investments while Bellpac was insolvent. The bonds were transferred by Mr Wong, a director of Bellpac, as payment of his own personal debts. Those personal debts included $2,000,000 to his brother-in-law and $1,000,000 to a man who knew Mr Wong was dishonest.224 It was conceded that if the transfers were made without authority, then questions of knowing receipt would not arise and the issue would be whether Great Investments could maintain a defence of being a 221 Ibid, [283]. Notice, here, being any of the Baden categories 1 to 5. 222 Ibid, [249]-[250]. 223 Ibid, [309]-[320]. 224 Great Investments at [1]-[2]. -- 103 of 119 -- [2025] SASC 172 Kimber J 100 bona fide purchaser for the value without notice. It was held that concession was proper.225 393 In so holding, the Court reasoned that if benefits were transferred pursuant to a contract, then unless the contract was first rescinded, the contract provided the reason the company could retain the benefit such that, unless the contract was rescinded, there was no question of knowing receipt. If the contract was rescinded and the claim limited to restitution of the benefit, there was no work for knowing receipt as there was no contract, and that the issue in the case was whether Great Investments could resist a claim for restitution, including on the basis that it was a bona fide purchaser for value without notice or could point to a relevant change of position.226 Great Investments did not hold that rescission of a contract might be available as there was no contract to rescind. 394 I am not satisfied that recission of a contract is an available remedy without the second respondent establishing that Mr Song knowingly participated in a fraudulent and dishonest design; without establishing that Mr Song dishonestly procured a breach of fiduciary duty; or without establishing that RPM paid a secret commission. 395 In Farah Constructions, the High Court identified two separate and distinct forms of participatory or accessory liability. Neither attributes liability to a third party without either participation in a fraudulent or dishonest design or without procuring or assisting in a breach of fiduciary duty.227 396 For the above reasons, I reject that the relevant Letting and Caretaking Agreements might be rescinded on the basis that RPM induced a breach of a fiduciary duty, without more. RPM’s claim 397 RPM’s claim is limited to seeking injunctive relief to restrain HRC from giving effect to by-law 28 as amended following the resolution on 23 December 2022. RPM contends that restraint is appropriate as to give effect to that resolution so would be to breach express and/or implied terms of the Letting Agreement with the HRC. RPM also contends that to give effect to the amended by-law would unlawfully interfere in the contracts entered into by owners within the HRC who have appointed RPM as their letting agent with authority to undertake the letting for terms of less than two months. Breach of express and implied terms 398 Clause 3.1 of the Letting Agreement provides:228 225 Ibid, [56]-[69]. 226 Ibid, [60]-[69]. 227 Farah Constructions, [161]-[163]. 228 Core Bundle, tab [6], cl 3. -- 104 of 119 -- [2025] SASC 172 Kimber J 101 3 Letting Authority 3.1 Authority for Letting Agent The Corporation authorises the Letting Agent a right to conduct the Letting Business from that part of the Complex designated for use by the Letting Agent for that purpose during the Term and any Extensions. In consideration of the Corporation granting to the Letting Agent the right to carry on the Letting Business, the Letting Agent will provide the Letting Services should it elect to carry on the Letting Business. 399 In the context of cl 3.1, in relation to an express term, RPM relies upon two specific aspects of the terms of the Letting Agreement, namely the definition of ‘Letting Business’ in cl 1 (specifically (b)) and cl 9.6. 400 In cl 1, the definition of ‘Letting Business’ is:229 Letting Business Means: (a) a letting agency business, acting as agent for those Owners who wish to appoint the Letting Agent as their letting agent; (b) the letting of Lots for permanent, short term and/or holiday lettings, as may be permitted by the By-Laws applicable to the Corporation: (c) the sale of Lots; (d) the hiring of equipment or items the Letting Agent considers desirable and that are not contrary to the interests of the Corporation and the Owners and do not contravene the By-Laws; (e) the supply of PABX, internet, pay television and/or any other utility services (if any) as is agreed from time to time between any Owner and the Letting Agent; and (f) the provision of any other ancillary services or goods commonly provided in connection with the letting of lots in a complex of the nature of the Complex and/or which the letting Agent wishes to provide. (emphasis added) 401 Cl 9.6 provides:230 Each party agrees, at its own expense, on request to the other party, to do everything necessary to give effect to this Agreement and the transactions contemplated by it, including the execution of documents. 229 Ibid, cl 3. 230 Ibid, cl 9.6. -- 105 of 119 -- [2025] SASC 172 Kimber J 102 The submissions 402 RPM contends that the express obligation that should prohibit the amended by-laws being acted upon is cl 9.6. 403 In so far as an implied term is relied upon, RPM submits that it is an implied term that the parties will not act in a manner to frustrate or defeat the purpose of the Letting Agreement;231 or deprive each other of the benefit of the Letting Agreement.232 404 RPM contends that if the amended by-law is acted upon, the HRC will be in breach of contract and must accept the consequences of that breach. RPM submits that it contracted with the HRC on the basis that RPM would conduct short-term letting from the lots in the High-Rise Scheme. RPM submits that for the change to the by-laws to be enforced would be to render those rights substantially nugatory or would at least seriously undermine them. RPM contends that damages will be an inadequate remedy. 405 Putting aside any contention already rejected that the existing by-laws should be construed as already prohibiting short-term letting, the HRC advances more than one contention with respect to why it should not be prevented from giving effect to the amended by-laws. 406 First, it submits that the existence and content of an express or an implied term should not be found to exist in circumstances where the definition of the letting business is stated to be ‘as may be permitted by the By-laws’.233 The HRC submits that those words should not be treated as static. The HRC submits that if that were so, those words would have no work to do. The HRC also submits that the length of the Letting Agreement is such that it is more likely that the words are to be given an ambulatory meaning. 407 The HRC also directs attention to s 12(1) of the CT Act in support of its contention that a static approach would unreasonably fetter the discretion of the HRC to amend the by-laws. Section 12 provides: 12—By-laws (1) By-laws may be used to regulate— (a) the use and enjoyment of the common property; and (b) the purpose or purposes for which community lots may be used; and (c) the design, construction and appearance of buildings on the common property and the community lots and the landscaping of community lots. 231 Statement of Claim – Revision 4 (FDN 217, filed 20 December 2024), [15]. 232 Ibid, [30.1.2]. 233 Core Bundle, tab [6], cl 1(b). -- 106 of 119 -- [2025] SASC 172 Kimber J 103 Discussion Express term 408 In my view, whether cl 9.6 is to be construed as an express term which prohibits effect being given to the amended by-law must depend upon whether the relevant words within cl 1(b) (i.e. – ‘as may be permitted by the By-laws’) are given a static or ambulatory meaning. If the meaning is static, then it might be possible to read cl 9.6 as consistent with the HRC being in breach of contract if it gives effect to the amended by-laws. However, if the meaning of those words is ambulatory, then it is difficult to see that to give effect to the amended by-laws could be a breach of an express term. I will return to this below. Implied term 409 It may be accepted that every contract includes an obligation, implied if not express, that neither party should do anything to destroy the efficacy of the bargain made.234 410 In BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings,235 it was stated:236 Their Lordships venture to cite only three passages - albeit they are familiar to every student of this branch of the law. In The Moorcock Bowen LJ. said: "I believe if one were to take all the cases, and they are many, of implied warranties or covenants in law, it will be found that in all of them the law is raising an implication from the presumed intention of the parties with the object of giving to the transaction such efficacy as both parties must have intended that at all events it should have. In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transaction as must have been intended at all events by both parties who are business men…" It is because the implication of a term rests on the presumed intention of the parties that the primary condition must be satisfied that the term sought to be implied must be reasonable and equitable. It is not to be imputed to a party that he is assenting to an unexpressed term which will operate unreasonably and inequitably against himself. In Reigate v. Union Manufacturing Co., Scrutton L.J. said: "A term can only be implied if it is necessary in the business sense to give efficacy to the contract i.e., if it is such a term that it can confidently be said that if at the time the contract was being negotiated someone had said to the parties, 'What will happen in such a case?', they would both have replied: 'Of course, so and so will happen; we did not trouble to say that; it is too clear.'" In Shirlaw v. Southern Foundries (1926) Ltd., MacKinnon LJ. said: "Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were 234 O’Keefe v Williams (1910) 11 CLR 171, 191. 235 (1977) 180 CLR 266. 236 Ibid, 283-284. -- 107 of 119 -- [2025] SASC 172 Kimber J 104 making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common, 'Oh, of course.''' (footnotes omitted) 411 RPM submits that the definition of letting business expressly allows for ‘short term and/or holiday letting’. That is, even if the words ‘may be permitted by the By-laws’ are construed as meaning the by-laws from time to time, that cannot override the primary meaning of ‘letting business’ in the Letting Agreement – that meaning being ‘permanent, short term and/or holiday letting’.237 RPM submits that to not imply that there is a prohibition on the amendment of the by-laws (or from giving effect to the amended by-laws) would be to undermine the foundational premise of the agreement. 412 I reject the submissions of RPM. 413 Unless the meaning of the relevant words in cl 1(b) is static, I am not satisfied that what is sought to be implied is so obvious that it goes without saying. While it may be that there is an implication that the by-laws may not prohibit any form of letting, so long as the by-laws permitted a form of letting which can be described as at least one of ‘permanent, short-term and/or holiday’, I would not find that the Letting Agreement is deprived of its efficacy or efficiency. On the evidence, if short-term letting is not permitted, RPM would make substantially less profit from relevant letting appointments and, in an indirect way, there may be less benefit to RPM in being a party to one or more caretaking agreement. However, I am not able to go so far as to say that the Letting Agreement would be deprived of efficacy or efficiency. While existing short-term letting appointments within the HRC (i.e. – on the evidence, 24, as at December 2023) would be substantially less profitable for RPM,238 there would still be the ability to conduct a form of letting (i.e. – a form 237 Core Bundle, tab [6]. 238 In the context of its Claim, RPM led evidence of damages and the complexity of their calculation. RPM specifically relied upon the evidence of Ms Anna Shaw, the Chief Operating Officer of the holding company of RPM and Mr Song. The evidence of Ms Shaw was that RPM’s profits from apartments it manages on a long-term letting basis are calculated based on the monthly management fee it charges formulated at an average of 6.6 per cent of the monthly rent revenue received for the relevant apartment. In contrast, RPM’s profits from apartments it manages on a short-term letting basis are calculated at approximately 15 per cent of total revenue received from the relevant apartments. Ms Shaw explained that while the profit calculation was an estimate, she was confident that it was a fair and accurate one. Ms Shaw calculated RPM’s average monthly short-term profits per apartment or room type (i.e. – one bedroom, two bedroom or three bedroom) over the 12-month period between December 2022 and November 2023 for the apartments managed by RPM on a short-term basis. Ms Shaw also calculated RPM’s average monthly long-term profits per apartment or room type (i.e. – one bedroom, two bedroom or three bedroom) over the 12-month period between January 2023 and December 2023 for the apartments managed by RPM on a long-term basis. The calculations demonstrated that RPM’s average profit per month per apartment for the relevant periods was substantially greater for short-term rentals than for long-term rentals. Based on those average profit figures, Ms Shaw then calculated RPM’s profits for a 12-month period from short-term letting in the HRC based on the 24 apartments in the HRC managed by RPM pursuant to short-term appointments as at 22 December 2023 (the ‘status quo’ scenario); and based on the scenario where all 24 of the apartments in HRC managed by RPM pursuant to short-term appointments as at 22 December 2023 were converted to long-term appointments (the ‘no -- 108 of 119 -- [2025] SASC 172 Kimber J 105 that meets the description of ‘permanent’) and the ability to undertake the other aspects of the letting business described in cl 1. 414 It follows from the above that to determine whether, if given effect, the amended by-law would interfere with the rights of RPM under the Letting Agreement and would put the HRC in a position of breach of contract, it is necessary to determine whether the words ‘as may be permitted by the By-laws’ is to be given an ambulatory or static meaning. Ambulatory or static 415 In the context of the incorporation of standard terms and conditions, Finkelstein J held in Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd,239 that, prima facie, reference to such standard terms and conditions was a reference to those conditions as current at the date of the contract. Finkelstein J held that there:240 … will be occasions when the incorporation includes amendments made from time to time. Usually this will only occur when the amendments are of a procedural, and not a substantive, type. (citations omitted) 416 RPM submits that the context and purpose of the incorporation of the by-laws into the Letting Agreement dictate that it was the by-laws as at the date of the Letting Agreement that were incorporated (i.e. – the existing by-laws). RPM submits that interpretation provides certainty and is in keeping with commercial good sense. 417 Both RPM and the HRC submit that I am entitled to have regard to the Caretaking Agreement and Procurement Agreement in deciding whether the relevant words within the Letting Agreement are to be given a static or ambulatory meaning. 418 The Caretaking Agreement defines ‘By-laws’ as ‘the by-laws from time to time for the Scheme’.241 The first Procurement Agreement does not define ‘By-laws’ but obliged Eklipse to ensure that the by-laws deposited were ‘substantially in accordance with those disclosed’242 (i.e. – as agreed during the negotiations). The initial Procurement Agreement also has an interpretation section which provides that references to documents include ‘all references to such short-term letting in HRC’ scenario). The results of Ms Shaw’s calculations indicated that the ‘no short-term letting in HRC’ scenario would result in a reduction in profits of $204,440 from the ‘status quo’ scenario across a given 12-month period. RPM also directed attention to the Letting Agreement being for an effective term of 25 years, commencing 1 July 2020. In the result, RPM contended that there is a realistic prospect of it being granted extensions of existing letting appointments and obtaining new ones. 239 [2002] FCA 1156. 240 Ibid, [6]. 241 Core Bundle, tab [7], cl 1.1. 242 Core Bundle, tab [2], cl 3.1(c). -- 109 of 119 -- [2025] SASC 172 Kimber J 106 document … as amended, novated, supplemented, varied or replaced from time to time’.243 No such reference appears in the Letting Agreement. RPM says that when regard is had to the drafting choice in the Caretaking Agreement and in the Procurement Agreement, the words ‘as may be permitted by the By-laws’ in the Letting Agreement are to be construed as static. 419 The HRC makes a contrary submission. The HRC submits that the meaning given to the by-laws in the Caretaking Agreement supports that the same approach should be taken to the Letting Agreement. The HRC contends that it would be most unusual for the rights and obligations in the two agreements not to be in lock step. As mentioned, the HRC also submits that the duration of the agreement weighs in favour of an ambulatory meaning. Discussion 420 In my view, the approach in the interpretation section within the initial Procurement Agreement does not assist in construction of the relevant aspect of the Letting Agreement. The only reference to by-laws is in cl 3.1(c) and that is a reference to by-laws deposited. The Procurement Agreement does not contemplate by-laws beyond those deposited. That is not surprising, the nature of that agreement was not such that by-laws beyond those deposited might be relevant. 421 In contrast, I find that the approach to the definition of ‘By-laws’ within the Caretaking Agreement is relevant to the proper construction of the Letting Agreement. In my view, the respective approaches in those two agreements may weigh in favour of a different drafting decision and may favour the position of RPM. That said, the words ‘may be permitted’244 are arguably not suggestive of an intention to incorporate into the agreement by-laws fixed at a single moment in time (i.e. – at the time of the execution of the agreement). For example, cl 1(b) in the Letting Agreement could have been drafted in a way which expressly incorporated the existing by-laws as first deposited (e.g. – ‘as permitted by the first by-laws filed with the community plan by the Registrar-General’).245 422 Ultimately, it is the words in the Letting Agreement that must be construed in the context of the whole of that agreement and the other agreements executed at the same time. I must give weight, if possible, to every word used in the Letting Agreement.246 423 In Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd,247 Kirby P stated that the fundamental rule is that a court should give the words of a written agreement their natural meaning. Subject to that rule, in giving meaning to the words of an agreement between commercial parties, courts will endeavour to avoid 243 Ibid, cl 2.1(i). 244 Emphasis added. 245 For example, adopting the words of s 34(1) of the CT Act. 246 Cartwright v MacCormack Trafalgar Insurance Co Ltd [1963] 1 WLR 18, 21. 247 (1990) 20 NSWLR 310. -- 110 of 119 -- [2025] SASC 172 Kimber J 107 a construction which makes commercial nonsense or is shown to be commercially inconvenient. Courts will infer that commercial parties would not themselves normally agree in such a way. 424 As for the issue of commerciality, as earlier set out, it may be noted that RPM had been advised of the risk of the by-laws being amended. That included advice in the specific context of s 37(2)(a) of the CT Act, which provides: (2) A by-law may— (a) prohibit or restrict the owner of a lot from leasing or granting rights of occupation in respect of the lot for valuable consideration for a period of less than 2 months; or (b) impose a monetary obligation on the owner of a lot in relation to the payment of an insurance premium, where the by-laws authorise or require the community corporation to act as agent for the owner in arranging the policy of insurance. 425 Whether the relevant words are to be given a static or ambulatory meaning is not without some difficulty. 426 On the one hand, a static meaning provides commercial certainty; is consistent with the intent and importance of the negotiations which resulted in the existing by-laws; and affords significance to the different drafting decision in the Caretaking Agreement. 427 On the other hand, the agreement is, in effect, for 25 years. In that period, lot holders will change. A static construction binds lot holders to specific purposes for which lots may be used over a long period. Section 12 of the CT Act expressly provides both that by-laws may be used to regulate the purpose for which lots may be used and that the first by-laws lodged may be relevantly varied by special resolution. An ambulatory construction gives the words ‘as may be permitted’ work to do. In my view, the natural reading of those words is that they contemplate change to the by-laws in the future. I find that the natural reading is ambulatory, not static. 428 While there is force in the submissions of RPM, I find that the proper construction of the words ‘as may be permitted by the By-Laws’ is that they have an ambulatory meaning. Subject to determination of the claim of RPM about unlawful interference in contractual relations and/or that the relevant agreements have been affirmed, I decline to order that the HRC be restrained from giving effect to the amended by-laws on the ground that it would breach the Letting Agreement between it and RPM. Unlawful inference with contractual relations 429 RPM also claims that if the amended by-laws were acted upon, HRC would improperly and unlawfully interfere with RPM’s contractual relations with owners who have retained RPM to manage their apartments, including by securing -- 111 of 119 -- [2025] SASC 172 Kimber J 108 short-term rentals of less than two months as contemplated by property management agreements. 430 As of 22 December 2023, RPM had letting agreements with 24 owners in the High-Rise Scheme whereby it has either a licence to manage short-term letting or a lease permitting short-term subletting.248 431 The HRC denies the allegation of unlawful interference. 432 In Williams v Hursey, 249 Fullagar J referred to Lumley v Gye250 and the class of case in which a cause of action may exist in tort. Fullagar J held:251 In that class of case A procures B to break a contract between B and C. If C suffers loss by reason of this breach of contract, he has (in addition to his cause of action in contract against B) a cause of action in tort against A. In such cases it does not matter whether the means by which A procured B to break his contract with C were lawful or unlawful in themselves: A may have used violence or given B a monetary consideration, or may have used mere persuasion or argument. The bringing about of the breach of contract as such is the wrongful act which, damage being proved, constitutes the cause of action. 433 Given that the resolution to amend the by-laws was valid, I decline to find that to give effect to the by-laws would amount to unlawful interference with RPM’s contractual obligations with relevant lot holders. The lot holders who desire to conduct short-term letting had the opportunity to vote on the resolution to amend the existing by-laws. That resolution was passed. Affirmation of the agreements 434 RPM alleges that the Caretaking and Letting Agreements have been affirmed by the HRC. The offer to purchase the agreements 435 In early 2021, members of the HRC management committee (Mr Whiting, Ms Leonello, Ms Butler and Mr Glover) communicated with each other about the possibility of purchasing the Caretaking and Letting Agreements. In March 2021, information was sought from Mr Breda about the costs in other buildings. In June 2021, information was sought with respect to financing and on 11 June 2021 Strata Loans provided a loan proposal in writing. That proposal was addressed to the owners of Community Corporation 42053 Inc. 436 On 2 August 2021, Mr Whiting sent an email to Mr Song asking Mr Song to contact him to discuss the Caretaking and Letting Agreements. Mr Song said that he called Mr Whiting on 3 August 2021 and that during that phone call the following exchange occurred. Mr Whiting said that a group of owners in the Building were interested in purchasing the Letting and Caretaking Agreements 248 Second Affidavit of Anna Shaw dated 22 December 2023 (Exhibit A16). 249 (1959) 103 CLR 30. 250 (1853) 118 ER 749. 251 Williams v Hursey (1959) 103 CLR 30, 77. -- 112 of 119 -- [2025] SASC 172 Kimber J 109 from RPM for a price of $1.25 million plus GST. Mr Song said that he would not accept an offer at that price given it was less than what he had paid. Mr Whiting said words to the effect that his offer equated to $1.375 million including GST and that, as Mr Song had paid the developer $1.36 million for the Agreements, his offer was a reasonable one. Mr Whiting asked at what price Mr Song would consider selling and Mr Song said that he would think about it. Mr Whiting then asked when RPM would start short-term letting in the Realm Building and so start having more people employed and working on-site (which Mr Song said was something he had discussed with Mr Whiting on an earlier occasion). Mr Song said short-term letting would start as soon as the COVID-19 situation improved. 437 On 3 August 2021, Mr Whiting sent an email to Mr David Pender. That email contained a draft email to Mr Song. I am satisfied that Mr Whiting was seeking the advice of Mr Pender with respect to the draft. It appears that Mr Whiting believed that Mr Pender had some experience in negotiations of this type. Mr Pender made some suggestions and on 4 August 2021, Mr Whiting circulated his draft email to Ms Leonello, Ms Butler and Mr Glover. 438 On 5 August 2021, Mr Whiting then sent the following email to Mr Song:252 Hi Michael Thanks for your time on the phone earlier this week and for providing the caretaking services over the last 12 months to the Realm building residents. A group of residents are considering making an offer to purchase the Realm caretaking and letting agreements with the view of providing these services in a novel way. We plan to provide a range of no-fee services for residents that would not be commercially viable in a traditional caretaking/short-term letting business model. I know the last 12 months have been difficult especially with the short-term letting business with many Realm investors now locked into long term rentals due to Covid. As residents we have realised that there are physical aspects of the building that are not ideal for running short term stays. We are at the early stages of thinking this through and wanted to get your thoughts on a possible sale before we go much further. We have investment committed for a deal that works. We know that an offer at around $1.25 million would be easily justified by the numbers. Of course, as the negotiated price rises, those equations also change. So, we see something in excess of $1.25m if you are interested in selling. The group has locked in the cash commitment for the next 14 days only after which time they will proceed with other investments they have put on hold. If we can agree on a figure, we would look to settle very quickly as no finance would be involved. I look forward to your reply. 252 Tender Book, tab [334]. -- 113 of 119 -- [2025] SASC 172 Kimber J 110 439 Mr Song replied on 5 August 2021. That reply was to the effect that the sum mentioned in the email of Mr Whiting was less than Mr Song had paid. Mr Whiting replied on 7 August 2021 inviting Mr Song to indicate a sum and stating that the expectation was that Mr Song would ‘add a reasonable premium on top of what you paid and came back with a counter offer’.253 Mr Song did not respond, and communications went no further. 440 Some observations can be made about communications between Mr Whiting and Mr Song. In the phone call on 3 August 2021, Mr Whiting purported to be speaking on behalf of a group of owners (i.e. – not the community corporation); and the email on 5 August 2021 referred to a ‘group of residents’ (i.e. – not the community corporation). The position of RPM 441 RPM submits that by the above conduct and by the HRC’s Management Committee separately seeking to hold RPM to the terms of the Caretaking Agreement by complaining about deficient performance and insisting on further and better compliance, the HRC has affirmed either the Caretaking Agreement or the Letting Agreement. 442 RPM submits that the email dated 5 August 2021254 from Mr Whiting referred to ‘management rights’ and that the reference to the possibility of an offer of about $1,200,000 means that it can be inferred that Mr Whiting and those with whom he was involved from the Management Committee had awareness of at least the existence of a Procurement Agreement. 443 RPM further submits that the approach to Mr Song was made on behalf of the HRC. RPM submits that Mr Whiting, Ms Leonello, Ms Butler and Mr Glover formed the majority of the HRC (the other members being Mr Smith, Ms Cui and Dr Hill) and that supports the inference that the offer was made on behalf of the HRC and that those supporting Mr Whiting had the same knowledge which it should be inferred that he had of the existence of a Procurement Agreement. Discussion 444 In Allianz Australia Insurance Ltd v Delor Vue Apartments,255 it was held:256 This doctrine of election by affirmation of a contract has been recognised by decisions, including in this Court, for almost a century. The dominant rationale is that the “the mere fact of intimating [a] choice” in relation to these alternative rights makes it “inevitable, or necessary in the interests of justice, that the choice, when once made, should be irrevocable”. In other words, the choice between maintaining one right or set of rights and extinguishing an alternative, immediately inconsistent right or set of rights is one that must be irrevocable “because [the sets of rights] are inconsistent [so that] neither one may be enjoyed without the extinction of the other and that extinction confers upon the elector the 253 First Applicant’s Documents for Tender – Cross Claim (Exhibit A38), document 1. 254 Tender Book, tab [334]. 255 (2022) 277 CLR 445. 256 Ibid, 475-6 [51]. -- 114 of 119 -- [2025] SASC 172 Kimber J 111 benefit of enjoying the other”. The very nature of the states of legal existence and non-existence of a contract is that both states cannot subsist, like Schrödinger's cat, at the same time. (footnotes omitted) 445 I reject that the HRC, or a majority of its Management Committee, affirmed either agreement. 446 I decline to find that demands for obligations under a caretaking agreement to be met amounts to affirmation or lends weight to such a finding along with other conduct. It may be accepted that members of the HRC made complaints and demanded better performance of certain obligations which existed under the relevant Caretaking Agreement. However, I reject that those demands amount to, or contribute to, a finding of affirmation. To so find would be to conclude that the HRC was obliged to suffer what it perceived to be poor performance to avoid a suggestion that it was affirming a contract. 447 I also decline to find that the communications about an offer should be seen as affirmation in circumstances in which there was no meaningful right provided to terminate either relevant agreement other than if there was a breach which was not remedied within 14 or 28 days.257 It is significant that neither Mr Whiting nor the ‘group of residents’ had any right to terminate either agreement. To the extent that right existed, it rested with the community corporation.258 In the circumstances, I am not satisfied that the exploration of whether the agreements might be purchased makes it inevitable, or necessary in the interests of justice, that the choice to explore whether an offer might be accepted amounts to an affirmation. 448 The offer of $1.375m inclusive of GST is strongly suggestive of knowledge of the procurement sum as at the date of the email from Mr Whiting to Mr Song, as is the reference to an expectation for Mr Song to have responded with an offer that built in a premium. It is likely that Mr Whiting had some knowledge of what had been paid. However, even assuming that suggests knowledge of a procurement agreement, that is an agreement to which the HRC was not a party. 449 Putting that aside, I reject the contention of affirmation as there was no offer by the community corporation to purchase any agreement. What was said to Mr Song on 3 August 2021 and communicated in the email on 5 August 2021 was not expressed to be on behalf of the community corporation. The email dated 5 August 2021 was not an email on behalf of the HRC or its Management Committee. The email refers only to a ‘group of residents’. While it may be assumed that the group were members of the Management Committee, and it may be assumed from Strata Loans addressing its quote to the HRC that there was an intent held by the group to seek to have the Management Committee agree, those 257 Tender Book, tab [6], cls 3 and 5.1; tab [7], cls 3 and 9.1 258 Ibid. -- 115 of 119 -- [2025] SASC 172 Kimber J 112 matters alone cannot make the correspondence between Mr Whiting and Mr Song a communication of behalf of the HRC and I am not satisfied that it is sufficient to establish that the relevant agreements were affirmed. Remedy given payment of the secret commission 450 Given the payment of the secret commission, the HRC seeks various orders. 451 First, that the relevant Letting and Caretaking Agreements with the HRC be rescinded. Second, equitable compensation and/or an account of profits for any benefit derived by RPM in respect of the Caretaking and the Letting Agreements with the HRC.259 Third, that if Eklipse does not pay or is unable to pay what it received, that RPM should pay. The remedies available to the second respondent 452 The remedies available to the second respondent depend upon whether they are in equity or at common law. Equity 453 In equity, the payment amounts to an unauthorised profit obtained by Eklipse. Eklipse is liable to account for and disgorge the profits obtained in breach of fiduciary duty, which includes the bribe.260 In this case, all that is sought against Eklipse is the amount of the bribe. As mentioned, I cannot find that amount should be the whole of the procurement sum. It may also be that the recipient of a bribe is exposed to the loss-based remedy of equitable compensation for breach of fiduciary duty, provided it can be shown that there is a causal connection between the payment of the bribe and the loss suffered by the principal (i.e. – the HRC).261 This remedy cannot be combined with the remedy of obtaining the profit from Eklipse.262 However, in this case, the second respondent does not seek to prove loss. 454 In equity, if there is dishonest assistance or procurement, the payer of the bribe (i.e. – RPM) is not liable jointly or at all to account for the unauthorised profit of the fiduciary (i.e. – Eklipse); it is not liable to pay to the principal (i.e. – the HRC) an amount equivalent to the bribe; but it is jointly liable with the fiduciary for any loss occasioned by the breach of fiduciary duty; and it is liable for his own unauthorised profit.263 455 In equity, in the case of dishonest assistance or procurement, recission of the contract is a discretionary form of relief available at trial. In Hopcroft, it was said that ‘the much more flexible and pragmatic approach taken by equity for the need 259 Cross Claim – Revision 4 (FDN 196, filed 1 October 2024), [23]. 260 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 137; Boardman v Phipps [1967] 2 AC 46; Murad v Al- Saraj [2005] EWCA Civ 959; Finn, Equity Obligations (Federation Press, 2016), [510]-[511]. 261 Swindle v Harrison [1997] 4 All ER 705; Gwembe Valley Development Co Ltd v Koshy (No 3) [2003] EWCA Civ 1048. 262 Tang Man Sit (Deceased) v Capacious Investments Ltd [1996] AC 514. 263 Hopcroft, [75]. -- 116 of 119 -- [2025] SASC 172 Kimber J 113 for restitution in integrum makes it more useful than its common law sister’264 (i.e. – the tort of bribery). In equity, recission may be ordered even if it is no longer an available remedy at common law.265 Common law – the tort of bribery 456 At common law, the briber (i.e. – RPM) and the bribee (i.e. – Eklipse) are jointly and severally liable in damages for any loss suffered by the principal (i.e. – the HRC) because of the payment of the bribe. As mentioned, damages for loss are not sought in this case. At common law, the briber and the bribee are also jointly and severally liable for the value of the bribe, sometimes described as an action for money ‘had and received’.266 At common law, there is right of recission of a contract but its usefulness as a remedy is limited by the strict requirements as to counter-restitution. Where recission at law is not available, equitable recission may be ordered but is discretionary.267 Summary of relevant remedies 457 Given the findings I have made, in equity, the second respondent is entitled to the profit obtained by Eklipse when it received the bribe but is not entitled to any remedy against RPM as I have not found that it acted dishonestly in the relevant sense. 458 Given the findings I have made, at common law, Eklipse and RPM are jointly and severally liable to the second respondent for the amount of the bribe and the second respondent is entitled to an order rescinding the relevant Letting and Caretaking Agreements if counter-restitution is possible or, in equity, recission may also be ordered. Restitutio in integrum – the submissions of RPM 459 RPM submits that restitutio in integrum is not possible and that it would be unfairly and unjustifiably prejudiced if denied the benefit of the agreements with the HRC. RPM pleads that it paid the procurement sum for letting appointments and restraints on Eklipse and its agents obtaining their own letting appointments; that it entered into a long lease of an apartment; acquired an apartment to provide services pursuant to the Caretaking Agreements, financed by a mortgage for a 25 year term; has employed staff to perform the Letting and Caretaking Agreements; has performed the duties pursuant to the Agreements, expending time, effort and expense; and entered into the Letting and Caretaking Agreements with the HRC as part of a package which induced other like agreements providing economies of scale and the risk that the remaining agreements would not be viable if the Agreements with the HRC were set aside. 264 Ibid, [77]. 265 Ibid, [238]. 266 Mahesan S/O Thambiah v Malaysia Government Officers’ Cooperative Housing Society [1979] AC 374, 383. 267 Hopcraft, [77], [237]-[239]. -- 117 of 119 -- [2025] SASC 172 Kimber J 114 460 The HRC submits that the Court need not have regard to the impossibility of an order based in equity for restitutio in integrum as RPM was knowingly concerned in the breach of fiduciary duty or a participant in a fraudulent and dishonest design, making it unjust for RPM to retain the benefit of the agreements; and the Court only need determine ‘what is practically just between the parties and by so doing restore them substantially to the status quo’.268 However, as mentioned, I have not found that RPM was a participant in a fraudulent and dishonest design, nor that it dishonestly induced a breach of fiduciary duty. Discussion 461 The respective Letting and Caretaking Agreements with the second respondent were entered into as part of a single overall transaction in which other like agreements were entered into at the same time. For example, the Caretaking Agreement with the second respondent is one of several such agreements. It can be accepted that RPM has expended considerable resources in ensuring that it meets the obligations pursuant to all agreements. This includes, but is not limited to, the purchase of a lot in the building which is used to meet obligations under agreements other than with the second respondent. It can also be accepted that if the two relevant agreements with the second respondent are rescinded, that will impact in a significant way on the balance of the agreements. I have not rejected the evidence of Mr Song that the efficiency of the remaining agreements will be undermined in a material way. 462 Given the above, I find that restitutio in integrum is not possible. Given the above, I also find that recission should not be ordered in equity. That relief is discretionary. I find that it would be an inappropriate order when RPM is obliged to meets its obligations under other agreements within the building entered at the same time. 463 Both in equity and at common law, the second respondent is entitled to the remedy of payment of the secret commission. At common law, RPM is jointly and severally liable for that sum. 464 However, currently, the identification of appropriate orders is frustrated by at least two matters. First, while recovery from Eklipse might be unlikely, that is not yet confirmed. Second, for reasons already given, the procurement sum was not paid solely to ensure the entry by the HRC into the Letting and Caretaking Agreements to which it is a party. There were other agreements and the letting appointments belonged to Eklipse. I cannot find that the second respondent is entitled to the whole of the procurement sum and, on at least the submissions to date, the appropriate sum which is appropriate cannot be determined with any precision on the balance of probabilities. 268 Taheri v Vitek (2014) 87 NSWLR 403, [96]. -- 118 of 119 -- [2025] SASC 172 Kimber J 115 465 In the circumstances, if the parties cannot agree upon the sum, at the very least, further submissions will be necessary before I can make a finding as to the sum to be paid by either the first or second applicant. Summary of orders/decisions 466 To summarise, I make the following orders: 1. To the extent necessary, pursuant to s 39(2) of the CT Act, I order that the second respondent may lodge the by-laws of the second respondent as amended by the special resolution on 23 December 2022. 2. The application of the second respondent for a declaration that the existing by-laws of the second respondent prohibit short-term letting of less than two months is refused. 3. The application of the second respondent for a declaration that the existing by-laws are invalid is refused. 4. The application of the second respondent for an order that the Letting and Caretaking Agreements between it and the first applicant be varied, avoided or terminated pursuant to s 142 of the CT Act is refused. 5. The application of the second respondent that the Letting and Caretaking Agreements between it and the first applicant be rescinded is refused. 6. I find that the first applicant paid a secret commission to the second applicant. 7. I find that the second respondent is entitled to an order that the benefit obtained by the second applicant because of the receipt of the above secret commission be accounted to the second respondent. I find that the first applicant and the second applicant are jointly and severally liable for that secret commission. However, on the evidence and submissions to date, I am unable to make a finding about the sum to be paid by the first and/or the second applicant. 8. The application of the first applicant for an order that the second applicant be permanently restrained from acting upon the by-laws of the second respondent as amended by the special resolution on 23 December 2022 is refused. To the extent necessary, I revoke the existing orders which restrain the second respondent acting upon those by-laws. 467 I will hear the parties as to any further orders which may be appropriate. -- 119 of 119 --