FEDERAL MAGISTRATES COURT OF AUSTRALIA
McCLYMONT & ANOR v THE OWNERS STRATA PLAN NO 12139	[2009] FMCA 1079	

BANKRUPTCY – Bankruptcy notice claiming debt owed to strata owners corporation – application to set aside – authorisation of solicitor to request issue of bankruptcy notice – validity of resolution of executive committee – whether defects in notice of meeting – disclosure to unit owners of solicitor’s fees agreement and disclosure – effect of non‑compliance – validity of bankruptcy notice upheld – application dismissed.	

Bankruptcy Act 1966 (Cth), s.41(6A)(b)
Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth)
Strata Schemes Management Act 1996 (NSW), ss.22, 22(f), Ch.3, 80, 80D, 80D(2), Ch.5, 153, Ch.7, 230A, 235(2), Sch.3 cll.6, 6(2)(a), 6(3), 11(2), 14
Strata Schemes Management Regulation 2005 (NSW), regs.15, 15(1), 15(1)(a)	

Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1
Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454
Browne v Dunn (1894) 6 R 67
Australian Workers’ Union v Bowen (1946) 72 CLR 575
Coshott v The Owners of Strata Plan No. 48892 [2006] NSWSC 308
Dalsiz Pty Ltd v The Owners SP 47301 (Strata and Community Schemes) [2008] NSWCTTT 930
de Robillard v Carver (2007) 159 FCR 38
Deputy Commissioner of Taxation v Boxshall (1988) 19 FCR 435
Master Education Services Pty Limited v Ketchell (2008) 236 CLR 101, [2008] HCA 38
McClymont v The Owners‑Strata Plan No. 12139 [2009] NSWSC 276
Owners of Strata Plan 36131 v Dimitriou [2009] NSWCA 27
Owners SP 46528 v Hall [2009] NSWSC 278
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Russo v Aiello (2003) 215 CLR 643
Secretary, Department of Family and Community Services v Haagar (2001) 115 FCR 25
Trustees of the Franciscan Missionaries of Mary v Weir (2000) 98 FCR 447
Yang v Mead [2009] FCA 1202	

Lang, A D (2006), Horsley’s Meetings, Procedure, Law and Practice, 5th edition, LexisNexis Butterworths, Australia

Magner, E (2006), Joske’s Law and Procedure at Meetings in Australia, 10th Edition, Lawbook Co, Australia

First Applicant:	Graham James Mcclymont	

Second Applicant:	Selma Maria McClymont	

Respondent:	The Owners - Strata Plan No 12139	

File Number:	SYG 2154 of 2009	

Judgment of:	Smith FM	

Hearing date:	28 October 2009	

Delivered at:	Sydney	

Delivered on:	13 November 2009	

REPRESENTATION
Counsel for the Applicants:	First applicant in person	

Counsel for the Respondent:	Mr D Radman	

Solicitors for the Respondent:	Grace Lawyers Pty Ltd	

ORDERS
(1)	The application is dismissed.  
(2)	The applicants must pay the costs of the respondent as agreed or taxed pursuant to the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth).  
(3)	Orders 1 and 2 shall not take effect until 20 November 2009.  
(4)	Pursuant to s.41(6A)(b) of the Bankruptcy Act 1966 (Cth) the time for compliance with Bankruptcy Notice NN2635 of 2009 is extended until 5pm on 20 November 2009.  

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
Sydney	
SYG 2154 of 2009
Graham James Mcclymont	
First Applicant

SELMA MARIA MCCLYMONT	
Second Applicant

And

The Owners - Strata Plan No 12139	
Respondent

REASONS FOR JUDGMENT
1.	Mr and Mrs McClymont applied on 4 September 2009 to set aside a bankruptcy notice served on them by the Owners, demanding payment of a debt of $25,857.73 under two judgments of the Local Court of NSW.  The notice required their compliance within 21 days after 14 August 2009, but that time has been extended by orders under s.41(6A)(b) of the Bankruptcy Act 1966 (Cth).  Their case has been presented to the Court by Mr McClymont, in person.  
2.	The judgment debt was obtained in contested proceedings brought by the Owners for unpaid strata contributions levied between 2003 and 2006, plus interest and legal expenses.  The Local Court’s judgments were upheld on appeal by McCallum J (see McClymont v The Owners-Strata Plan No. 12139 [2009] NSWSC 276).  It is unnecessary for me to detail the background which is set out in her Honour’s judgment, since Mr McClymont does not invite the Court to go behind the judgment debt, and does not dispute the indebtedness claimed in the bankruptcy notice.  
3.	Nor does he dispute that the Owners have a right to seek to recover that debt, including by invoking processes under the Bankruptcy Act which are available to all creditors.  His challenge to the validity of the bankruptcy notice rests upon contentions that there were procedural defects under the Strata Schemes Management Act 1996 (NSW) affecting the purported authorisation of the Owners’ solicitor to procure the issue of the bankruptcy notice.  
4.	Mr McClymont did not submit that, if there were no defects in the procedures leading to the instructing of the solicitor, it would not have been permissible under the Bankruptcy Act for the owners corporation to authorise a solicitor to apply for the issue of the bankruptcy notice.  Nor does he take any point in relation to the form in which the solicitor signed the application for the bankruptcy notice, in which he confirmed “that he or she is the creditor’s authorised agent”.  It is therefore unnecessary for me to describe this part of the bankruptcy notice, although I note that it appears to be in a form which has previously been upheld (see Trustees of the Franciscan Missionaries of Mary v Weir (2000) 98 FCR 447 at [2]‑[11], de Robillard v Carver (2007) 159 FCR 38 at [100]‑[116], and Yang v Mead [2009] FCA 1202 at [16]‑[17]).  
5.	The Owners contend that their solicitor was instructed in accordance with the provisions of the Strata Schemes Management Act, in so far as they imposed mandatory preconditions to the employment of a solicitor to take legal action.  They do not submit that the solicitor’s certificate of his authority in the bankruptcy notice was conclusive in this respect.  Nor do they dispute that, if the solicitor acted without valid authorisation, the notice was invalidly issued and should be set aside by the Court.  I have not heard any argument on these points, and shall assume the correctness of these concessions.  I note that they appear to have support in authority (compare Australian Workers’ Union v Bowen (1946) 72 CLR 575 at 583, 584, and 590).  
Legislative background  
6.	Although the general right of the Owners to seek recovery of the monies covered by the judgment debt, and to do so by way of service of a bankruptcy notice, was not in issue, I was referred to recent authorities which have explored difficult issues under the Strata Schemes Management Act concerning the recovery of legal costs and expenses associated with the recovery of unpaid strata contributions.  They provide some of the background to the issues now raised by Mr McClymont.  
7.	Section 80 of the Strata Schemes Management Act has always provided:  
	80	How does an owners corporation recover unpaid contributions and interest?  
	(1)	An owners corporation may recover as a debt a contribution not paid at the end of one month after it becomes due and payable, together with any interest payable and the expenses of the owners corporation incurred in recovering those amounts.  
	(2)	Interest paid or recovered forms part of the fund to which the relevant contribution belongs.  
8.	In Coshott v The Owners of Strata Plan No. 48892 [2006] NSWSC 308, Cooper AJ held that s.80 conferred a right on the Owners to sue in new proceedings for legal expenses relating to the enforcement of an earlier judgment for unpaid contributions, including the Owner’s legal costs beyond those covered by costs orders made in the earlier proceedings, and also including its costs of related bankruptcy proceedings in the Federal Court.  
9.	However, the correctness of this interpretation of s.80, both in relation to the scope of the recoverable expenses and whether they may be sued for in separate proceedings, was decided authoritatively by majority of the Court of Appeal in Owners of Strata Plan 36131 v Dimitriou [2009] NSWCA 27.  McCallum J summarised the effect of that judgment in McClymont (supra) at [25] and following:  
	25	…  The Court held unanimously that the word “expenses” in s 80 does include legal costs and disbursements: at [33] per Hodgson JA; at [62] per Basten JA; at [116] per Handley AJA.  
	26	As to the question whether the Small Claims Division of the Local Court has power to determine a claim to recover legal costs and disbursements as “expenses” under s 80, the Court of Appeal held by majority that s 80(1) confers a right on a corporation to recover legal costs as expenses as a component of the principal judgment of the Court, independently of any costs orders that may or may not be made in those proceedings: at [34]‑[36] per Hodgson JA; at [127] per Handley AJA; Basten JA contra at [102].  
	27	It should be noted that the Court also held, by majority, that the claim for expenses, including legal costs and disbursements, must be made in the same proceedings as the claim for the contributions.  Hodgson JA expressed the view at [47] that the payment of arrears of contributions before proceedings are commenced would preclude an action for recovery of associated expenses.  His Honour said, however, that payment of arrears of contributions after proceedings have been commenced would not preclude continuation of those proceedings to obtain a judgment for expenses including legal costs: see also Handley AJA at [142]; Basten JA contra at [106].  
(A similar understanding of Dimitriou was provided by Kirby J in Owners SP 46528 v Hall [2009] NSWSC 278 at [76]).  
10.	Contrary to the submission to me by the solicitor for the present Owners, I consider that it is clear from the judgment of Handley AJA at [127] and [137]‑[143] that he agreed with Hodgson JA, in holding that any legal expenses incurred by an owners corporation beyond those covered by a costs order are recoverable as debts under s.80 only in the same proceedings in which the relevant unpaid contributions are sued for.  To the extent that Coshott (supra) might suggest that additional legal expenses of the owners corporation in relation to bankruptcy proceedings are separately recoverable as debts arising under s.80, I consider that it is no longer good authority.  
11.	In my opinion, the right of an owners corporation to pursue recovery of unpaid strata contributions through bankruptcy proceedings does not arise directly under s.80, but under the provisions of the Bankruptcy Act available to the owners corporation as a creditor for debts recovered or recoverable under s.80.  I have difficulty seeing how the expenses of such proceedings could be anticipated and recovered in the action in which judgment for the contributions was obtained.  The consequence of Dimitriou in relation to the owners corporation’s expenses of seeking recovery through bankruptcy proceedings of debts arising under s.80, therefore appears to be that the owners corporation is confined to recovering such legal expenses as are ordered under a costs order of a bankruptcy court, or are otherwise payable under the Bankruptcy Act by the debtor or from the debtor’s bankrupt estate.  However, this is not a matter which I need to decide in the present matter in the course of my present judgment.  
12.	The present dispute does not concern the scope and application of s.80, but the effect of two provisions inserted into the Strata Schemes Management Act by amendments made in 2004.  They did not confine the scope of recoverable debts of an owners corporation, whether arising under s.80 or otherwise at law, but prescribe procedures intended to apply to the incurring by the owners corporation of all legal expenses generally.  
13.	Section 80D was inserted in a new Division 3 of Part 3 of Chapter 3.  They are entitled, in descending order: ‘Key management areas’, ‘Finances of strata scheme’, ‘Restrictions on spending’.  Section 80D provides:  
	80D	Legal action to be approved by general meeting  
	(1)	An owners corporation or executive committee of an owners corporation must not seek legal advice or the provision of any other legal services, or initiate legal action, for which any payment may be required unless a resolution is passed at a general meeting of the owners corporation approving the seeking of the advice or services or the taking of that action.  
	(2)	The regulations may make provision for or with respect to exempting any type of legal service or legal action from the operation of this section.  
14.	The exceptions under s.80D(2) to the requirement of approval at a general meeting of all the strata lot owners are in Strata Schemes Management Regulation 2005 (NSW), reg.15, which provides:  
	15	Exemptions from need for approval for certain legal action  
	(1)	The seeking of legal advice, the provision of legal services or the taking of legal action is exempt from the operation of section 80D of the Act if the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action would not exceed:  
	(a)	an amount equal to the sum of $750 for each lot in the strata scheme concerned (excluding parking and utility lots), or 
	(b)	$10,000, 
	whichever is the lesser.  
	(2)	In a case where the cost, or estimated cost, of seeking legal advice, having legal services provided or taking legal action has been:  
	(a)	disclosed by the legal practitioner concerned in accordance with the Legal Profession Act 1987, or 
	(b)	set out in a proposed costs agreement under that Act, 
	the reasonably estimated cost of seeking the legal advice, having the legal services provided or taking the legal action is taken, for the purpose of this clause, to be the cost or estimated cost so disclosed or set out.  
15.	Also inserted in the 2004 amendments, but in the ‘General’ Chapter 7 of the Act, was a new Part 1A, containing one section:  
	Part 1A	Legal costs  
	230A	Disclosure of matters relating to legal costs  
	If a disclosure under Division 3 of Part 3.2 of the Legal Profession Act 2004 is made to an owners corporation in respect of the costs of legal services to be provided to the owners corporation, the owners corporation must give a copy of the disclosure to each owner and executive committee member within 7 days of the disclosure being made.  
16.	In Owners SP 46528 v Hall [2009] NSWSC 278, Kirby J upheld the dismissal by the Local Court of a claim for unpaid strata levies and legal expenses, on the ground that the owners corporation had no authority to commence the action, because s.80D had not been complied with (see [17] and [66]).  In that case, the taking of the action had not been approved by resolution at a general meeting of all unit owners, and, in his Honour’s opinion, the exemption under s.80D(2) and reg.15(1) did not apply because the executive committee which had purported to authorise the action before the statement of claim was issued, had no material before it which was “capable … of providing a basis for a reasonable estimate” of the likely costs of the action against Mr Hall (see [36]).  
17.	In Hall’s Case, it appears that neither the members of the executive committee, nor the unit holders generally, had received a solicitor’s costs disclosure and estimate (see [29], [31], [36]).  However, it was not argued that such a breach of s.230A would itself support a conclusion that the action was commenced without authority, and was for that reason incompetent.  The absence of a costs estimate was treated only as evidentiary in relation to the exemption available to executive committees under s.80D(2), and his Honour’s judgment might suggest that compliance with s.230A was not itself a condition of the valid authorisation of the employment of a solicitor by an executive committee of the owners corporation.  When adverting at [36] to the terms of reg.12C(2), which was in the terms of current reg.15(2), he said:  
	Certainly, reg 12C(1) does not say that the only way in which a reasonable estimate of costs may be formed is through a lawyer’s estimate, but such an estimate was one means by which the requirements of reg 12C(1) could be satisfied (reg 12C(2)).  It had not been used by the executive committee.  There was no evidence of any basis upon which the executive committee could reasonably have formed such an estimate.  
18.	Kirby J’s judgment at [38]‑[66] contains an extensive consideration of High Court jurisprudence which guides the interpretation of legislative requirements in relation to corporate management, so as to determine whether a failure to comply is intended to invalidate, or render legally ineffective or unauthorised, actions purportedly taken by the corporation or its agents.  In particular, he discussed Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454, Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, and Master Education Services Pty Limited v Ketchell (2008) 236 CLR 101, [2008] HCA 38.  The test is “whether it was a purpose of the legislation that an act done in breach of the provision should be invalid.  In determining the question of purpose, regard must be had not only to the language of the relevant provision but also to the scope and object of the whole statute” (see Ketchell’s Case (supra) at [26]).  
19.	Applying this test in relation to the bar raised by s.80D on owners corporations seeking legal services, Kirby J concluded on balance that the restriction on spending was intended for the benefit of owners, and that it had the effect that the owners corporation “lacked the capacity to bring its action against Mr Hall” as a unit owner (see [65]‑[66]).  
20.	As I shall explain, Mr McClymont’s submissions in the present case seek to extend the reasoning in Hall’s Case, to a case where there was no breach of s.80D and reg.15 by reason of the executive committee and its members lacking a reasonable estimate of legal costs, but where there was a breach of s.230A by reason of all other unit holders not being given a copy of the solicitor’s fee disclosure within seven days of the disclosure being made, or at all.  I shall address this contention further, after making findings as to the relevant facts, and after addressing Mr McClymont’s other contentions.  
The employment of the solicitor to take bankruptcy proceedings  
21.	The evidence shows an extended series of meeting agenda items at general meetings of the present owners corporation and at meetings of its executive committee, which have purported to authorise the recovery of unpaid strata contributions from Mr and Mrs McClymont.  It is clear that at each stage of the extensive litigation, it was thought appropriate that resolutions should be obtained authorising expenditure on the solicitor for the next or current stage of recovery.  This is reflected, for example in three resolutions adopted at general meetings after the initial commencement of Local Court proceedings:  
i)	An extraordinary general meeting on 9 July 2007, resolved “that the Owners continue to engage the services of Grace Lawyers Pty Ltd in the recovery of unpaid levies plus interest and costs due and payable by Lot 5 and continue acting on behalf of the Owners – Strata Plan 12139 in relation to Downing Centre Local Court proceedings 1366 of 2007 and 122303 of 2006 and all matters incidental thereto and to pay all of their costs in acting for the Owners as disclosed in the costs agreement and costs disclosure between Grace Lawyers Pty Ltd and the Owners – Strata Plan 12139 dated 21st May 2007”.  The contents of the cited solicitor’s costs agreement and costs disclosure are not in evidence.  
ii)	An annual general meeting of the owners corporation on 28 November 2007 passed a resolution in the same opening terms as the previous one, with the extension “including but not limited to the enforcement of any judgment obtained in those proceedings or filing or defending any appeal of those proceedings (and all matters incidental thereto) and to pay all of their reasonable costs in acting on behalf of the Owners – Strata Plan 12139 in this regard)”.  This resolution made no reference to there being any new costs disclosure and estimate given to unit holders prior to this meeting.  
iii)	The annual general meeting of the owners corporation on 10 November 2008 passed a resolution in the same terms as the previous meeting.  There is no evidence that unit holders were given any new costs disclosure or estimate.  
22.	Mr McClymont’s appeal from the Local Court judgments was argued before McCallum J on 15 September 2008, and her Honour gave judgment on 17 April 2009.  The effect of the judgment was explained in a letter to the Owners from their solicitor dated 8 May 2009.  The letter referred to a costs order in the appeal proceedings and recommended that it should not be pursued at that time, but it recommended that the Local Court judgments should be enforced through bankruptcy proceedings.  The solicitor said: “we confirm that we have instructions to enforce both Local Court judgments by commencing bankruptcy proceedings against the McClymonts”.  He suggested that the previous resolutions of the owners corporation were sufficient to engage his services in this respect, but said:  
	We note that for the abundance of caution, the executive committee are minded to convene a meeting and pass a resolution to approve our acting on their behalf to enforce the judgments obtained in both Local Court proceedings and the Supreme Court appeal proceedings against the McClymonts by commencing bankruptcy proceedings.  
23.	The solicitor proposed a form of resolution “should the executive committee be minded to hold such a meeting”, and enclosed a costs agreement and costs disclosure “in acting on behalf of the Owners Corporation in the enforcement of the Local Court and Supreme Court Judgments”.  He advised: “if you agree to its terms kindly table these documents at the executive committee meeting for approval and execution”.  
24.	The enclosed ‘standard costs agreement’ described the proposed engagement as:  
	B.	The work we have been instructed to do is legal work in relation to the recovery of strata levies from Graham James McClymont & Selma Maria McClymont and all matters incidental thereto including enforcement of judgments in Local Court Proceedings No 122303 of 2006 and 1366 of 2007 and Supreme Court NSW Proceedings No 30127 of 2007 including issuing bankruptcy notices and commencing bankruptcy proceedings in the Federal Magistrates Court or Federal Court.  
25.	The enclosed ‘standard costs disclosure’ set out hourly and other rates of charges, and included an estimate of $7,000.00 for “preparation of matter generally up to and including 1 day hearing”.  
26.	I note that Mr McClymont does not contend that this was an unreasonable estimate of the costs of commencing and completing bankruptcy proceedings on behalf of the owners corporation, including an application for the issue of a bankruptcy notice, when given in May 2009.  He conceded that it was permissible under s.80D(2) and reg.15(1)(a) for the executive committee to authorise the engagement of the solicitor to commence bankruptcy proceedings based on the Local Court judgments, taking into account the solicitor’s estimate and the number of total unit holders.  He also did not dispute that the engagement of the solicitor subsequently occurred through the agency of the managing agent, in accordance with the costs agreement and its purported approval by the executive committee.  However, he argued that the proceedings of the executive committee were invalid, when purporting to provide authorisation to the solicitor to procure the issue of a bankruptcy notice.  
27.	The solicitor’s letter of 8 May 2009 and its enclosures were addressed and sent to the scheme’s managing agent, and was considered by its employee, Mr Cummins.  He then prepared and signed a notice and agenda for a meeting of the executive committee of the owners corporation to be held on 19 May 2009.  It is necessary to set out the whole of that notice, which was on the letterhead of Mr Cummins’ company Strata Partners Pty Ltd, and showed its full address and contact details:  
	NOTICE OF AN EXECUTIVE COMMITTEE MEETING  
	STRATA SCHEME:  12139  
	ADDRESS:  567‑569 PACIFIC HIGHWAY KILLARA  
	
	The Executive Committee of the Owners – Strata Scheme No 12139 will hold a meeting on 
	Tuesday 19 May 2009 in Unit 3, commencing at 10.00 a.m.  
	AGENDA  
	1.	To confirm the Minutes of the last Executive Committee Meeting held on 27 January 2009 as a true record and account of the proceedings at that meeting.  
	2.	That the Owners – Strata Plan 12139 resolve, pursuant to Section 80 of the Strata Schemes Management Act 1996, to continue to engage the services of Grace Lawyers Pty Ltd in the recovery of unpaid levy contributions plus interest and costs thereon due and payable by lot 5 and to continue acting on behalf of The Owners – Strata Plan 12139 in relation to Downing Centre Local Court Proceedings No. 1366 of 2007 and 122303 of 2006 and all matters incidental thereto, including but not limited to the enforcement of any judgment obtained in those proceedings or defending or enforcing the judgment obtained in any appeal of those proceedings, namely Supreme Court Proceedings 30127 of 2007 (and all matters incidental thereto) and to approve the costs agreement and costs disclosure issued by Grace Lawyers dated 8 May 2009 and pay all of their reasonable costs in acting on behalf of The Owners – Strata Plan 12139.  
	[signature]  
	Rex Cummins  
	Date of Notice:  13 May 2009  
	NOTE:  If you cannot attend the meeting, please complete the attached “Appointment of Executive Committee Alternate” form (last page of the attached papers) and send it to the Secretary, Mr John Morgan in unit 3 or to Strata Partners prior to the meeting so that a quorum is achieved.  
28.	The solicitor’s letter suggests that the calling of such a meeting had previously been discussed between the relevant officers of the owners corporation, the managing agent and the solicitor.  The fact that oral discussions occurred at around this time between Mr Cummins and Mr Morgan, who was the owners corporation secretary, and chairman of the executive committee tended, though unclearly, to be confirmed in the course of their oral evidence.  Their evidence, considered in the light of the surrounding circumstances, causes me to find that Mr Morgan gave, in effect, a direction to Mr Cummins for the calling of a meeting to pass a resolution to authorise expenditure on employing the solicitor to pursue recovery through bankruptcy proceedings (compare Mr Cummins at transcript 28.10.09 p.13 line 35, also Mr Morgan at p.4 line 21).  I find that Mr Cummins performed a secretarial or administrative role only, when preparing and signing the meeting notice, and I accept his evidence that he did not regard himself as exercising a delegated discretion as to the calling of the meeting and the instructing of the solicitor after the meeting (see transcript p.15 line 36).  
29.	The evidence shows that the executive committee meeting occurred on 19 May 2009, that it adopted the resolution in exactly the same terms proposed in the meeting notice, and that the minutes showing this were confirmed at its subsequent meeting on 14 September 2009.  No issue arises as to how the meeting was conducted, nor as to the subsequent implementation of the executive committee’s resolution, leading to the solicitor applying for a bankruptcy notice.  The details of how this occurred do not need to be investigated in this judgment.  
30.	In the course of submissions, I queried the date when the solicitor’s costs disclosure was “made” to the owners corporation, from which the seven days requirement for disclosure to “each owner and executive committee member” under s.230A should be calculated.  This issue had not been focused upon in the evidence, and there was no cross‑examination of Mr Cummins nor of Mr Morgan directed at it.  
31.	As I have noted, the solicitor’s letter dated 8 May 2009 was addressed to the Secretary of the owners corporation ‘C/-’ the managing agent at the agent’s address, and Mr Cummins’ affidavit states that he received the enclosed costs agreement and disclosure on the same date.  This might appear inconsistent with a date stamp of 12 May 2009 on the copy which was tendered at the hearing, but in the absence of questioning on the issue, I prefer to accept Mr Cummins’ sworn evidence that he received it on 8 May 2009.  If his receiving it amounted to receipt by the owners corporation, and assuming in favour of the Owners that the disclosure was only ‘made’ on the date that it was received (cf Secretary, Department of Family and Community Services v Haagar (2001) 115 FCR 25), then the seven day period elapsed on 15 May 2009.  
32.	However, the official address of the owners corporation was the address of the home units on the Pacific Highway at Killara, since this was its address for service ‘of other documents’ under s.235(2) of the Strata Schemes Management Act in accordance with the Register of Title for the common property.  It was also the address of the secretary of the owners corporation, Mr Morgan, and he gave evidence that he received “on or about” 14 May 2009 the solicitor’s letter, the solicitor’s costs agreement and the costs disclosure, together with a notice appointing an executive committee meeting on 19 May 2009 to consider the resolution suggested by the solicitor, and a form of alternate appointment.  These documents are in evidence, and were received by Mr Morgan as a stapled bundle.  He also gave evidence that he received another copy of the notice of the meeting, without any attachments, to affix to the notice board in the home units, and that he did this on the same day.  Although Mr Morgan’s evidence in his affidavit made no mention of receiving the costs agreement and disclosure, this was clarified in his oral evidence, and I accept that he received it at the same time that he received the meeting notices.  That this probably occurred no earlier than 13 May 2009 is confirmed by a contemporaneous posting record kept by Mr Cummins.  This shows that he posted to ‘executive committee’ on 13 May 2009, 6 copies of the meeting notice with the stapled bundle of other documents, and also a single copy of the meeting notice without the documents referred to in the agenda.  
33.	No submissions were made to me on the factual and legal issues concerning the date of the ‘making’ of the costs disclosure to the owners corporation for the purposes of the seven day requirement of s.230A.  However, noting the short time scale provided in the section, and in the light of the purposes of the section and the placing of the obligation of disclosure specifically on ‘the owners corporation’, it seems appropriate that the time for disclosure should be calculated from the date that the relevant document is actually received by the secretary at the official address of the owners corporation, rather than by its managing agent.  I therefore find that the solicitor’s costs agreement and disclosure was relevantly ‘made’ to the owners corporation on 13 or 14 May 2009, when they were received by Mr Morgan.  I find that probably they were also ‘given’ to all the other members of the executive committee on or around the same time, since copies had been posted to them at the same time.  Disclosure to members of the executive committee therefore occurred within seven days of its ‘making’ to the owners corporation.  No breach of s.230A is established in relation to disclosure to these persons, and I find confidently that it is probable that they all had received the costs documents and considered their contents before or at their committee meeting which was held on 19 May 2009.  
34.	The evidence as to whether the costs agreement and disclosure were ever shown to the other unit owners before or after that meeting is less clear.  The solicitor for the Owners disputed that Mr McClymont had established that it was not given to them.  
35.	Mr Morgan’s evidence is clear that he did not attach copies of the solicitor’s costs agreement and disclosure documents to the notice board with the agenda notice.  Although the notice referred to these documents, and gave notice that the meeting would consider whether to ‘approve’ them, I do not consider that the publication of the meeting agenda in itself was enough to satisfy the s.230A requirement of disclosure to all unit owners.  
36.	Mr McClymont’s affidavit evidence, which I admitted over objections, was that he and his wife, who are unit owners, had ‘not sighted’ and were not ‘circularised’ with the costs disclosure.  I took his evidence to mean that they were not ‘given’ copies of these documents at any relevant time in any manner, and I accept that evidence.  Mr McClymont was not cross‑examined to the contrary.  He also gave somewhat inconclusive evidence that his searches in the records of the owners corporation discovered no evidence of the disclosure of any relevant costs agreements to unit owners.  
37.	No evidence was led by the Owners to show or suggest that at any time any action was taken in an attempt to ‘give’ the 8 May 2009 costs disclosure documents to unit owners who were not members of the executive committee, notwithstanding that compliance with s.230A was an apparent issue in the present proceedings.  The Owners’ solicitor did not advise that this should happen in his letter of 8 May 2009, but advised only that the documents should be tabled at the meeting.  Mr Cummins careful record of his copying and posting of the documents shows only that he gave them to the executive committee members.  Taking into account all the evidence presented in the proceeding, and applying the axiomatic principle that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted” (see Russo v Aiello (2003) 215 CLR 643 at 647), I find on the balance of probabilities that no person on behalf of the owners corporation ‘gave’ a copy of the solicitor’s costs agreement and disclosure to those of the unit owners who were not members of the executive committee, including Mr and Mrs McClymont, neither within seven days after disclosure was ‘made’ to the owners corporation, nor at a later time prior to the engagement of the solicitor under that agreement and before his application for the bankruptcy notice on or about 23 June 2009.  
38.	I make this finding notwithstanding that Mr McClymont did not put his own evidence to Mr Morgan and Mr Cummins in cross‑examination, nor his contention that no disclosure was made to unit owners generally.  I doubt that this was required under the ‘rule’ in Browne v Dunn (1894) 6 R 67 (discussed in Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1), since the issue was obviously raised in the proceedings.  Moreover, a refusal to draw an inference for that reason may not be appropriate in relation to a self‑represented litigant who is not legally qualified.  
39.	Mr McClymont also disputes that he received earlier costs disclosures made to the owners corporation by its solicitor prior to the earlier resolutions of its general meetings and its executive committee meetings leading to the solicitor’s engagement at earlier stages of the litigation, and contends that s.230A was not observed in relation to any such disclosures.  There is certainly no evidence that he was given earlier costs disclosures, and the dating and contents of any such disclosures, if they existed, is unclear.  No admissions are made by the Owners as to what they contained, nor whether and when they were disclosed to unit owners.  
40.	The contents and disclosure of such documents becomes an issue if I find that the engagement of the solicitor to procure the bankruptcy notice was not validly authorised by the 19 May 2009 meeting of the executive committee, but might have been authorised by earlier resolutions.  This is an area of fact which was poorly explored in evidence and submissions, and I prefer not to make a finding about earlier costs disclosures.  It is unnecessary for me to do so for two reasons.  First, because I have concluded that the approval of the engagement of the solicitor by the executive committee on 19 May 2009 was not legally ineffective notwithstanding the partial non‑compliance with s.230A which I have found.  Secondly, because in my opinion it is not open to the Owners now to support the authorisation of the solicitor to commence bankruptcy proceedings by reliance upon earlier resolutions.  This is because, in my opinion, the actions of Mr Morgan and the executive committee in relation to the meeting on 19 May 2009 were intended by them to provide a necessary step in the engagement of the solicitor to take the pursuit of Mr and Mrs McClymont into bankruptcy.  Their actions reveal their opinion that this step should not occur without further authorisation, and their intention not to accept the solicitor’s advice that this was not necessary.  In my opinion, if their actions in May 2009 were legally flawed, then the subsequent engagement of the solicitor pursuant to their resolution was unauthorised.  
Mr McClymont’s contentions  
41.	Mr McClymont summarised his grounds for setting aside the bankruptcy notice in his written submissions:  
	17	All Executive Committee Meetings (“ECM”), Annual General Meetings (“AGM”) and Extraordinary General Meetings (“EGM”) held by the Respondent and relied upon by the Respondent in the filed Affidavits to adopt resolutions as mandatorily required by law to commence legal action and, without notice or disclosure by the Respondent to all Lot Owners, apply for the issue of a Bankruptcy Notice against the Applicants by the “creditor’s authorised agent” are a nullity through those Meetings being improperly convened through:  
	(a)	The Notices of Meeting being fundamentally irregular by being convened by a person who has no authority under the law and mandatory written instruments of strata management appointment to convene Meetings of the Respondent.  
	(b)	Furthermore, the signatory to all Notices of Meeting by not affixing reference to his capacity by position to convene Meetings and the source of his authority to convene Meetings further making those Notices irregular.  
	18	Furthermore, the resolutions adopted from all these Meetings relating to legal action to enforce judgments are in breach of the law and invalid as they delegate decisions relating to the form of legal action to be taken to the legal practitioner and those decisions and approval of prospective legal costs for consented legal action can only be exercised by the Owners Corporation Respondent.  
	19	Furthermore, as required by law all Lot Owners of the Respondent were not circularised with the alleged legal Costs Disclosure claimed to be the sole information, in the absence of a required specific notice of motion for a meeting and subsequent adopted resolution, of the prospective commencement of legal action by the issue of a Bankruptcy Notice against the Applicants.  
	20	Alternatively, without reliance on the NSW jurisdiction strata legislation, the FMC can solely rely on common law to have Meetings nullified as the strata manager has no authority whatsoever through the executed written instruments of appointment between the relevant parties to convene any Meetings.  
42.	In addition, in oral submissions, Mr McClymont argued that the terms of the resolution adopted by the executive committee on 19 May 2009 did not extend to the instructing of the solicitor to commence bankruptcy proceedings by procuring the issue of a bankruptcy notice.  
43.	Mr McClymont’s submissions therefore present three contentions that the solicitor lacked authority validly given under s.80D(2) of the Strata Schemes Management Act and reg.15(1)(a), with the first contention containing three alternative arguments:  
i)	The convening of the executive committee meeting on 19 May 2009 was irregular and invalidated the resolutions passed at the meeting, because:  
1.	the agent, Mr Cummins, had no authority to convene the meeting, either in his capacity as managing agent, or as a delegate of the secretary’s power, or at ‘common law’; or  
2.	the meeting notice was invalid, because it did not expressly identify the capacity in which Mr Cummins signed it; or  
3.	the meeting was invalidly called, because the solicitors’ costs agreement and disclosure identified in the proposed resolution were not included with the copy attached to the notice board.  
ii)	The resolution passed by the executive committee did not in its terms authorise the engagement of the solicitor to apply for a bankruptcy notice.  
iii)	The resolution passed by the executive committee was legally ineffective, because the costs agreement and disclosure were not disclosed to all unit owners in accordance with s.230A of the Strata Schemes Management Act.  
44.	In relation to the first issue, I shall assume – with some reservations – that any one of the argued irregularities, if they occurred, would lead to the resolution passed at the meeting being legally ineffective or invalid, and to the invalidity of the solicitor’s application for the bankruptcy notice.  However, I do not consider that any of the arguments has substance.  
45.	Mr McClymont referred me to s.22 of the Strata Schemes Management Act, which lists the functions of a secretary of an owners corporation, and includes the function under (f) “to convene meetings of the executive committee …”.  He also referred me to Sch.3 of that Act, which contains provisions concerning the constitution of an executive committee and its meetings.  Clause 6 provides:  
	6	Notice of executive committee meetings  
	(1)	…  
	(2)	An executive committee of a strata scheme that is not a large strata scheme must give notice of its intention to hold a meeting at least 72 hours before the time fixed for the meeting:  
	(a)	by displaying the notice on the notice board, or 
	(b)	if the owners corporation is not required by the by‑laws to maintain a notice board, by giving written notice (which may be done by electronic means) to each owner and executive committee member.  
	(3)	The notice must specify when and where the meeting is to be held and contain a detailed agenda for the meeting.  
	(4)	A notice may be given to a person by electronic means only if the person has given the owners corporation an e‑mail address for the service of notices under this Act and the notice is sent to that address.  
46.	Mr McClymont’s argument that Mr Cummins was invalidly exercising a power to convene meetings only given to the secretary of the owners corporation fails, in my opinion, upon my above finding of fact that the calling of the meeting was a decision of Mr Morgan, and that Mr Cummins was exercising only a ministerial or administrative function upon the instructions of Mr Morgan, when he prepared and forwarded the meeting notice to Mr Morgan and to the other members of the executive committee.  It is therefore unnecessary for me to consider whether Mr Cummins would have had an independent power to convene the meeting arising from the terms of his engagement or under the legislation.  
47.	I do not accept that the list of ‘functions’ of the secretary of an owner’s corporation in s.22(f) of the Strata Schemes Management Act excludes normal implications that a secretary can employ agents, including the unit scheme’s managing agent, to act on his or her behalf when performing these functions, at least so far as it might include signing a meeting notice if this was a requirement of the legislation (cf. the principle referred to in Deputy Commissioner of Taxation v Boxshall (1988) 19 FCR 435, cited in the Franciscan Missionaries Case (supra) at [6]).  
48.	Mr Cummins clearly had contractual authority to provide secretarial and administrative services to Mr Morgan for the preparation of a meeting notice.  His services were provided in accordance with a Strata Management Agency Agreement executed on 10 November 2008.  This included the giving of ‘agreed services’ and ‘additional services’, which included in Sch.A1 “maintaining records relating to the scheme”, “issuing and serving notices to comply with a by‑law”, “undertaking steps necessary to recover any money owing in relation to levies”, and “arranging and undertaking administrative duties in relation to annual general meetings and other general meetings”.  Under Sch.A2, the agent was given the function of “arranging and undertaking administrative duties in relation to other meetings”, including “prepare and distribute notices of executive committee meetings”.  
49.	Nor do I accept that there was any requirement that the meeting notice should expressly identify, on its face, the capacity in which Mr Cummins signed the notice of meeting.  Clearly, the use of the strata manager’s letterhead identified him as a person signing on behalf of the managing agent and in the performance of a function of the strata scheme’s managing agent.  Mr McClymont does not take issue that Mr Cummins had that capacity.  
50.	Mr McClymont referred me to a statement in Joske’s Law and Procedure at Meetings in Australia, 10th Edition at [3.05], which states that “the manner in which the notice is given and the period of notice are also dictated by the constitution of the association”.  A similar statement is given in Horsley’s Meetings, Procedure, Law and Practice, 5th edition, to which I was also referred.  He gave particular reliance upon the statements in the latter text:  
	4.3	A notice needs to be issued with proper authority, that is, in accordance with any requirement in the rules, or consequent to a resolution of the appropriate body or committee.  The notice should show the name and office, that is, the appointment, of the person who signs and issues the notice.  This is normally the secretary.  
		If the rules provide that notices are to be issued by order of or under the hand of an officer or officers as specified, a departure from this or neglecting to refer to such officers on the notice makes it invalid, and the meeting is therefore not duly convened:  King v Fulton (1876) 2 VLR (Eq) 100; compare Allen v Hagger (1983) 4 IR 100.  
51.	However, these texts and the authorities they cite, do not assist Mr McClymont in the present case.  He was unable to refer me to any provision in the legislation or by‑laws governing the giving of notice of a meeting of this executive committee which required the notice to be “under the hand of an officer or officers as specified”.  In the absence of an express requirement of this formality, I would not draw any implication from the provisions of Sch.3 cl.6, that Mr Morgan was required personally to sign every notice of meeting, nor, that he or his agent must expressly describe the capacity in which the meeting notice was signed.  Indeed, I am doubtful whether any signature was required as a precondition to a valid meeting notice.  
52.	Nor can I find in Sch.3 cl.6 any requirement that documents referred to in a meeting notice, including in the body of a proposed resolution, should be affixed to the notice board with the meeting notice.  The language of cl.6(2)(a) and (3) seems to require only that the notice itself should be ‘displayed’ on the notice board and contain a ‘detailed agenda’.  I can find nothing in the terms of s.230A which suggests that the disclosure required under that provision must include the displaying of a costs agreement and fees disclosure on the notice board, either with or without a relevant meeting notice.  
53.	For all the above reasons, I do not accept any of the arguments of Mr McClymont in support of his challenges to the validity of the convening of the executive committee meeting on 19 May 2009.  
54.	I also do not accept his second contention, that the engagement of the solicitor to apply for a bankruptcy notice was not authorised by the resolution passed at the executive committee meeting on 19 May 2009.  Mr McClymont’s argument essentially is based upon the absence of express reference to bankruptcy proceedings as the solicitor’s work which was authorised.  However, the resolution included ‘enforcement of’ the Local Court judgments, and approved a costs agreement which expressly included the work of “issuing bankruptcy notices”.  In my opinion, taking into account the stage reached in the litigation with Mr and Mrs McClymont, the content of the solicitor’s fees agreement identified in the resolution, and the other surrounding circumstances, the resolution’s reference to “services … in the recovery of” the two identified Local Court judgments should be read as encompassing the work of applying for a bankruptcy notice on behalf of the owners corporation.  
55.	Turning to Mr McClymont’s third contention, the effect of the owners corporation’s partial non‑compliance with s.230A is not clear.  On my above findings, the costs agreement and costs disclosure were duly disclosed to the members of the executive committee before or at their meeting, and they had the capacity to be satisfied that they had a “reasonably estimated cost of … having the legal services provided or taking the legal action”, for the purposes of reg.15(1).  The reasoning of Kirby J in Hall’s Case (supra) is, therefore, inapplicable to the present case.  
56.	However, Mr McClymont argued that the failure to disclose the documents to all unit owners, himself included, prior to the meeting might have had a material effect on the outcome of the meeting.  He suggests that, if its contents had been known, he might have lobbied successfully for the owners corporation not to have pursued him and his wife into bankruptcy.  He points to the rights of an unit owner who is not a member of the committee, under Sch.3 to the Strata Schemes Management Act to have notice of the meeting with “a detailed agenda for the meeting” (cl.6(3)), to attend the meeting without addressing it (cl.14), and to endeavour before the meeting to collect a ‘blocking’ opposition notice from one‑third of the aggregate unit entitlements (cl.11(2)).  
57.	Whether any of these possibilities would have been at all likely in the present case, if the unit owners had been given the solicitor’s costs documents as well as the meeting notice on the notice board, is something which is entirely speculative on the present evidence.  However, Mr McClymont can point to these avenues being available in the procedural code contained in the Schedules to the Strata Schemes Management Act as an aid to understanding the legislative scheme, when attempting to discern the legislature’s intentions in relation to a non‑observance of s.230A.  
58.	The legislative intentions are difficult to discern from the terms and location of s.230A in the Act.  The section indicates no consequence for a non‑compliance with its direction requiring disclosure.  The Act is silent whether it intends a failure of disclosure to carry any consequence, in particular, by leading to the legal ineffectiveness of a valid authorisation of legal expenses under s.80D.  Accepting the correctness of Kirby J’s conclusion that compliance with s.80D is mandatory before any legal action can be commenced, the language of that provision and the consequence identified by Kirby J might appear to provide the only intended legal restraint upon the commencement of a legal proceeding.  If so, s.230A is a disclosure provision carrying no direct sanction in relation to the valid commencement of legal proceedings covered by a costs disclosure.  
59.	As was pointed out by the Owners’ solicitor, a unit owner who did not receive a disclosure required by s.230A is not left without any remedy under the Act.  Rather, he or she has access to the dispute adjudication processes available under Ch.5, in which an adjudicator, and a Tribunal on appeal, can address any injustice arising from the non‑disclosure.  Orders can be made to compel disclosure (cf. Dalsiz Pty Ltd v The Owners SP 47301 (Strata and Community Schemes) [2008] NSWCTTT 930 at p.6), and the significance of any non‑compliance upon a resolution taken by the executive committee can be addressed when considering whether to invalidate the resolution under s.153.  These remedies are able to be given in a much more sophisticated manner, than the blunt instrument of a principle of invalidity ab initio.  
60.	Mr McClymont invoked a passage in the Minister’s second reading speech, as indicating his intentions in relation to the 2004 amending legislation which inserted both ss.80D and 230A:  
	Another new initiative will be in relation to the commencement of any form of legal action by executive committees.  
	Concern has been expressed that prior to commencing action individual owners should be made aware of the cost of legal action and the likelihood of success.  
	Most strata schemes will contain individuals from a broad cross section of the community with a variety of personal expectations, attitudes and level of involvement.  It is impossible to expect that there will always be perfect harmony.  The commencement of legal action on matters concerning the scheme is one area where it is certain that a divergence of views will exist.  
	The Government proposes to minimise the level of internal dispute arising in this area by taking some simple but effective measures.  
	Firstly, if legal action of any type is being contemplated, the estimated cost of the action is to be provided in writing to all owners in accordance with the Legal Profession Act.  A meeting of the owners corporation must be called before the action can actually commence to ensure that everyone can have a say if they wish.  These new provisions will not only include the initiation of legal proceedings but also the obtaining of legal advice.  
	Executive committees will effectively be prevented from undertaking legal action under their own initiative thus removing the possibility that claims will be made that a committee has not acted in the interests of all owners and added to existing conflict rather than dissipated it.  
	A new mandatory item will be added to the agenda of the annual general meeting of each owners corporation.  
	The owners corporation will have to consider whether any restrictions are to be placed on the decision‑making powers of their executive committee for the ensuing year.  This will remove the likelihood that owners suggest that their executive has acted beyond its mandate and leave the executive free to carry on with its tasks without undue hindrance.  An associated amendment will make it clear that the owners corporation is the superior body and has the final say in the event of any dispute between the two levels of management.  
	Another clarifying amendment will confirm that the owners corporation can dismiss its entire executive committee by special resolution should extreme circumstances arise that would lead to such an action being necessary.  
	I want to make it clear that there is no intention to unnecessarily muzzle executive committees.  Most owners corporations could not operate effectively without a diligent executive committee to carry out the essential day to day tasks.  These measures should minimise the possibility of disputes arising in this area in the future.  
61.	This passage does suggest an intention that disclosure should precede the taking of a resolution at a general meeting of all unit owners to incur legal expenses.  However, it is ambiguous as to the consequences of this not occurring.  More significantly, the Minister overlooked that the amending legislation did allow for legal expenses to be incurred by decision of the executive committee, in relation to an exempt class of relatively inexpensive legal services.  I find it difficult to distil from this speech, a clear intention that disclosure must occur in all cases before such a decision is taken by an executive committee, even if this intent were confined to legal action against a unit owner as distinct from other debtors – as did Kirby J in Hall’s Case in relation to the s.80D formalities.  
62.	Weighing up the above matters, together with the considerations identified by Kirby J under the general principles in relation to the directory/mandatory classification of procedural restrains on corporate management, and also benefiting from his Honour’s discussion of their application to a related – but different – section of the Strata Schemes Management Act, I have concluded that the Act did not intend that the executive committee’s resolution should be treated as invalid in the present circumstances, and as legally ineffective to authorise the solicitor to seek recovery from Mr and Mrs McClymont by way of the issue of a bankruptcy notice.  In my opinion, in view of the alternative, more flexible, remedies given to them by the Act in relation to a departure from s.230A, and in view of the separate and clearer formal requirement imposed on the owners corporation by s.80D concerning the incurring of legal expenses, the Act should not be construed to have this effect in the present circumstances.  
63.	I therefore do not accept the third contention argued by Mr McClymont.  Since I reject all his challenges to the bankruptcy notice, I must dismiss his application.  
64.	As was raised at the hearing, it is appropriate for me to consider whether to allow Mr McClymont a short time to consider this judgment before being required to comply with the bankruptcy notice.  I shall therefore invite further submissions on whether I should give my orders a delayed date of effect and extend time for compliance until that date.  If Mr McClymont then wished to extend that time during an appeal, he would need to make an urgent interim application to the Federal Court.  
65.	I note that, when writing this judgment I had no regard to a document headed ‘applicants’ chronology’ which was filed by Mr McClymont without leave to do so, after I had reserved my judgment.  It should have been clear to him from my previous oral and written directions, that his opportunities to present evidence and submissions to the Court were concluded at the hearing.  
I certify that the preceding sixty-five (65) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate:  Lilian Khaw

Date:  13 November 2009