Court name
Supreme Court of Turks and Caicos Islands
Case number
CL 70 of 2017

Julianne Marie Dodds and Ors. v. The Proprietors Strata Plan No. 27 (CL 70 of 2017) [2018] TCASC 3 (07 December 2018);

Law report citations
Media neutral citation
[2018] TCASC 3
Coram
Ramsay-Hale, CJ

CL 70 /2017
IN THE SUPREME COURT
TURKS AND CAICOS ISLANDS
BETWEEN:
(1) JULIANNE MARIE DODDS
(2) KEVIN DODDS
(3) BLUE GRASS HOLDINGS LTD.
(4) GRACE HOLDINGS LTD.
(5) VALERIE ANNE BEATTIE
(6) HOWARD GRANT BEATTIE
(7) LITLAN LTD
(8) MICHAEL WILLIAM CRAIG
(9) SARA AYRES CRAIG
Plaintiffs
-AND

THE PROPRIETORS, STRATA PLAN NO.27
Defendant
BEFORE THE CHIEF JUSTICE, THE HON. MRS. JUSTICE MARGARET RAMSAY-HALE
Ms. Ruth Jordan and with her, Mr. Neale Coleman for the Plaintiffs
Mr. Conrad Griffiths QC and with him, Mr. David Cadman for the Defendants
Heard on the 30 January - 2 February, 2018
The Court also considered closing submissions on behalf of the Plaintiffs filed on 7 March 2018 and on
behalf of the Defendant filed on 5 March 2018

JUDGMENT
1. The Plaintiffs are owners of 7 strata units in Ocean Club West, a resort development on Grace Bay
("OCW"). They all rent their units to holiday guests from time to time as well as using them for
their own private use.

2. The Defendant is the corporate body ("the Strata Corporation") that embodies all of the owners
at OCW and its actions are directed by elected owners who form the Executive Committee of the
Strata Corporation ("the EC").

3. The Defendant's duties to maintain and manage OCW have in part been delegated to the strata
management company, Ocean Club Management ("OCM") pursuant to a management agreement
between the Defendant and OCM ("the Strata Management Agreement") 1 . Pursuant to the Strata
Management Agreement, OCM engages staff for the purpose of carrying out its management and
maintenance duties at OCW. OCM is owned by the original developer of OCW ("the Developer").

4. When the Developer sold the units to owners in 2002, it retained ownership of the reception
building, the maintenance building, the restaurant building and the brand Ocean Club West Resort.
These are now all owned by OCM.

5. As well as, but separate to, managing the resort on behalf of the Defendant, OCM runs a rental
program at OCW (and also at the nearby resort known as Ocean Club Resort (informally known as
'Ocean Club East') whereby it manages rentals for owners who chose to join the program and sign
up to a bilateral Rental Management Agreement ("RMA") with OCM.2 OCM provides and manages
marketing services, booking enquiries, reservations, payment, maintenance and decor of units,
reception and concierge services, housekeeping, bedlinen, welcome baskets and airport transfers
("Rental Services"). To this end and for these purposes OCM hires its own staff. OCM is directly
reimbursed (with an additional 10% uplift) by the owners in its programme for many of the Rental
Services such as maintenance and decoration, welcome baskets, housekeeping and airport
transfers and is reimbursed for the other Rental Services it provides via an overall commission of
40% on owners' gross adjusted rental revenue.

6. In August 2016, the Defendant introduced a new policy that banned all owners from directly
renting their units to holiday guests and approved only OCM to rent units to holiday guests ("the
Policy"). The Plaintiffs assert that the Defendant introduced the policy to avert higher fees which
would ostensibly become necessary if direct renting continued, as OCM indicated its intention to
withdraw an alleged subsidy that was off-setting expenses that would otherwise have to paid by
the owners if direct renting continued. This was communicated by the Defendant in the covering
email to owners that attached the 'Notice to Owners Regarding Rental, Trade or Business Activities
at Ocean Club West'.3 The owners were faced with "a simple question: "Do! want to pay, or cause
others to pay, higher strata fees?"'

7. The Defendant does not resile from that position but says, in addition, that the Policy was
introduced after careful consideration by the EC which concluded that direct renting by individual
proprietors was proving an obstacle to operating a well-run full-service resort and assisting the
good management of the development as a whole, including the common property, in the
interests of the owners as a whole. This, the Defendant asserts, was because the direct renters do
not use on-site management and guest services but operate with off-site management services
which has destabilized the operations of the resort overall which was intended to be operated as
a full-service resort. In essence, direct renting gave rise to non-full service resort rental operations
within a 4star full service resort as the guests of direct renters were excluded from services
provided by OCM to their resort guests, on the grounds that the owners engaged in direct renting
made no contribution to them.

8. That said, the Policy is what it is and the merits of it are not for consideration by the Court but
rather the basis upon which the Policy was introduced.

9. The Defendant contends that By-law 10(k) restricts the owners use of their strata lot to use as a
private residence by the owners, their tenants and the owner's visitor and guests and that use for
holiday lets is a commercial use of the units for which purpose they require approval from the EC.
The Plaintiffs challenge this construction of the By-laws and assert that, as a matter of
construction, By-law 10 (k) permits vacation rentals by owners and that owners can rent without
EC permission. This issue is identified by the Plaintiffs as the "Construction issue".

10. The Plaintiffs say further, that if EC approval is required to conduct vacation rentals, then the
Policy, which the Plaintiffs assert amounts to a blanket prohibition on all but OCM vacation renting,
is a restriction on owners' rights to deal with their strata lots contrary to section 20 (4) of the Strata
Titles Ordinance ("STO") which provides that
"No by-law shall operate to prohibit or restrict the devolution of strata lots or any transfer,
lease, mortgage or other dealing therewith or to destroy or modify any easement implied or
created by this Ordinance."

11. This is identified by the Plaintiffs as the "Section 20(4) issue".

12. The Plaintiffs also contend that if the Policy is not contrary to section 20(4), then the provision in
the By-Laws that EC approval is required is subject to an implied proviso that approval not be
unreasonably withheld and that the Policy is in all the circumstances an unreasonable withholding
of approval. The Plaintiffs identify this as the "Unreasonableness Issue".

13. The Plaintiffs also allege that, in response to them continuing to rent their units in contravention
of the Policy, whose legal validity they did not accept, the Defendant took active steps to exclude
them from the insurance cover for the strata corporation in respect of claims brought by guests
not coming on property through the OCM rental programme, in breach of the strata corporation's
duty to keep the common property insured, ("the Insurance Issue").

14. Finally, the Plaintiffs assert that, since the introduction of the Policy, the Strata Corporation has
levied daily fines on them and has levied further fines to recover its legal expenses in defending
this claim, as well as a special assessment in respect of legal fees. In addition, the Plaintiffs
challenge the legality of a deduction of USD 1,440 plus interest from funds belonging to the Third
Plaintiff, Blue Grass Holdings, held on account by the Strata Corporation.

15. The Defendant joins issue with the Plaintiffs and in its counterclaim makes a restitutionary claim
against the Plaintiffs, seeking to strip them of gains made by them renting their units in purported
breach of the by-laws.

The Construction Issue: Do by-laws 10(k) and 10(m) by their true construction prohibit owners from
accommodating paying guests without EC approval.
Rules of Construction

16. The approach the Court must adopt in construing contractual provisions is well settled. The locus
classicus is Investors Compensation Scheme v West Bromwich 11998] 1 WLR 896, 912-913 in which
Lord Hoffman summarised the applicable principles.
"(1) Interpretation is the ascertainment of the meaning which the document would convey to a
reasonable person having all the background knowledge which would reasonably have been
available to the parties in the situation in which they were at the time of the contract.
(2) ...Subject to the requirement that it should have been reasonably available to the parties and
to the exception to be mentioned next, [the background] includes absolutely anything which would
have affected the way in which the language of the document would have been understood by a
reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and
their declarations of subjective intent...
(4) ...the meaning of the document is what the parties using those words against the relevant
background would reasonably have been understood to mean.
(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the
common sense proposition that we do not easily accept that people have made linguistic mistakes,
particularly in formal documents... [but]
"if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to
a conclusion that flouts business commonsense, it must be made to yield to business
commonsense:" per Lord Diplock in Antalos Compania Naviera S.A. v. Salen Rederierna A.B. [19851
A.C. 191, 201:

17. In BCCI v Ali [2002] 1 AC 251, Lord Bingham, citing Lord Hoffman's summary with approval, said
at para. 8:
"In construing this provision, as any other contractual provision, the object of the court is to give
effect to what the contracting parties intended. To ascertain the intention of the parties, the court
reads the terms of the contract as a whole giving the words used their natural and ordinary
meaning in the context of the agreement, the parties' relationship and all the relevant facts
surrounding the transaction so far as known to the parties. To ascertain the parties' intentions the
court does not of course enquire into the parties' subjective states of mind but makes an objective
judgment based on the materials already identified. The general principles summarised by Lord
Hoffman in Investors Compensation Scheme Limited ...apply in a case such as this."

18. In the matter of O'Connor (Senior) and Others v The Proprietors, Strata Plan No 51 [2017] UKPC
45, which was concerned with the construction of by-laws of a condominium complex in Grace
Bay, Providenciales, known as The Pinnacle ("the Pinnacle Case") the Privy Council stated at para
15:
"[The by-laws] are to be construed benevolently, having regard to their purpose in assisting the
good management of the development for the benefit of its residents as a whole, and with a view
if possible to avoiding inconsistency with the governing statute."

The By-Laws
19. By-law 10(k) provides that unit owners agree:
"Subject to Paragraph m of this Clause, not to use or permit to be used the Strata Lot for any
purpose other than as a private residence or for the accommodation of Proprietor's guests and
visitors."

20. By-law 10(m) then provides that unit owners shall:
"Not use the Strata Lot for the carrying on of any trade or business unless such rental, trade or
business activity has been approved in advance by the Executive Committee in writing provided
this restriction shall not apply to the use of any Strata Lots retained by the Company [i.e. the
Developer] for commercial use in connection with the operation and management of the
Development Project as a hotel and resort including without prejudice to the generality of the
foregoing, a dive shop, fitness and recreational centres and merchandise shops or Strata Lot
specifically designed by the company for such commercial purposes."

The Plaintiffs' Submissions
21. Ms. Jordan on behalf of the Plaintiffs submits that, on a proper construction of by-law 10(k), both
on the plain wording itself and having regard to the fact that OCW was at all times intended to be
a vacation resort, there is no restriction on the owner's right to use their strata unit as a "private
residence" which means that residential letting is permitted and there is no restriction on the
owner's rights to use the unit for "accommodation of owners' guests and visitors" which means
that short-term holiday letting is permitted.

22. Ms. Jordan submits that by-law 10 (m) is a prohibition, standard in residential leases, on "trade or
business" (i.e. commercial) use of residential property which prohibition is relaxed by the clause
giving the EC discretion to grant approval for "such rental, trade or business activity".

23. Ms. Jordan contends that the 'such' in 10 (m) is a reference back to the prohibition on "trade or
business" use and that the by-law does not impose a free-standing prohibition on rental activity
per se, as it does with trade and business use. She suggests that the reference to 'rental,' in the
context of the EC's power to approve trade or business use, may have been a reference to owners
obtaining approval not just to use their unit for a trade or business (which is prohibited under by
law 10(m) but for renting it to others for commercial use. Alternatively, given that by-law 10(k)
permits the use of strata lots for the accommodation of guests and that OCW is a resort
development, the use of the word 'rental' in 10(m) is simply a mistake.

24. Ms. Jordan submits that common sense suggests that a commercial strata unit is intended for nonresidential
use, such as a fitness suite or a retail store, whilst a residential unit is one fitted out for
residential use with beds, bathrooms kitchens etc. and that the most straightforward reading of
the by-laws is that 10(k) restricts use of units for use as overnight accommodation and not any
other trade or business use and that by-law 10(m) allows other user subject to EC approval.

25. The crux of the Plaintiffs' argument is that by-laws 10(k) and 10(m), when read together, permit
the renting of units to vacation guests as such renting does not make the use commercial i.e. it
doesn't change the unit from a residential one into a commercial one.

26. Ms. Jordan argues that renting a unit to someone who intended to make trade or business use of
it, as opposed to using it for accommodation, would require approval as would use by the owner
for a commercial activity such as a spa or beauty salon.

27. She submits that as by-law 10(k) on the Plaintiffs' construction, permits vacation rentals, there can
be no requirement for such lets to be approved by the EC under 10(m). She invites the Court to
find that the Policy is redundant and unenforceable.

The Defendant's Response
28. The Defendant asserts that the by-laws in issue are identical for all practical purposes to the bylaws
in the Pinnacle Case with the consequence that there is a restriction on the user of the
Plaintiffs' strata lots for the purpose of holiday letting except with the prior consent of the EC. The
Policy, the Defendant submits, is consistent with the by-laws and does not prohibit rentals other
than through the management company, provided that the use is for private residential use.

29. The by-law under consideration by the Board in the Pinnacle case provided that:
"Each Proprietor shall:
9. Not use or permit his residential Strata Lot to be used other than as a private residence of the
Proprietor or for accommodation of the Proprietor's guests and visitors. Notwithstanding the
foregoing, the Proprietor may rent out his Residential Strata Lot from time to time provided that in
no event shall any individual rental be for a period of less than one (1) month ...
16. Not use or permit to be used the Strat Lot or any part there for any illegal or immoral purpose,
not for the carrying on of any trade or business other than periodic renting or leasing of the Strat
Lot in accordance with these by—laws unless such trade or business activity has been approved in
advance by the Executive Committee in writing, which approval may be revoked for cause."

30. Lord Carnwath giving the decision of the Board stated:
"16. Two features of the by-law attract immediate attention. First, it applied to a "Residential
Strata Lot, that is a lot "intended for use a residence." It is common ground that a by-law designed
to secure restriction to residential use is in principle unobjectionable. By the same take there can
be no objection in principle to the inclusion of words designed to define what is meant by a
residence.
"17. Secondly the latter part of the by-law is not a restriction but a relaxation of what precedes.
The first sentence id very tightly drawn since it restricts use not simply to residential use, but
residential use by the proprietor of the strata. Taken literally, that would make it impossible for
anyone other than the proprietor, even a long—term lessee, to occupy the lot as his home. The
second part of the by-low is therefore essential to relax that restriction, by allowing reasonable
exploitation of the property for rental by others. That element of business use, within the
residential category is recognised by by-law 7.1.16 which prevents business use without consent
"other than periodic renting or leasing...in accordance with these by-laws."
"18. In the Board 's view, the limitation to one month can be seen as designed to provide some
definition of what is meant by "use as a residence" for this purpose. The character of the use is
clearly affected by the length of the occupation. Short —term use by holiday-makers is different in
kind from longer -term residential use, even if it is difficult to draw a clear dividing line."

31. Drawing from the ratio of the Board in the Pinnacle case, Mr. Griffiths QC submits that by-law 10
(k) permits the private residential use of the strata lot only, whether by the proprietor or any other
resident, and also the accommodation of the proprietor's guests and visitors other than for
reward. This, he says, is the construction which is consistent with the Board's decision in Pinnacle
that private residential use was different in character from holiday lets:
"the character of the use is clearly affected by the length of the occupation. Short-term use by
holiday-makers is different in kind from longer term residential use..." [emphasis added]

32. Mr. Griffiths submits further that the restriction on use imposed by 10(k) is then, on a proper
construction, relaxed by by-law 10(m) which permits the use of the strata lots for non-private use
but only where such use has been approved by the EC.

33. Learned Queen's Counsel contends that the Plaintiffs' construction of the words "...of Proprietor's
guests and visitors" as including holiday lets to tourists for reward is wrong for the reason that it
ignores the word "Proprietor's" which defines the sort of guests and visitors who may also reside
in the strata lots. The submission is simply that a guest for reward cannot be described as a guest
of a proprietor.

Discussion
34. Ms. Jordan seeks to distinguish the Pinnacle Case on the ground that the Pinnacle is a private
residential development where some owners were engaging in vacation resort rentals. The
prohibition on vacation resort rentals was a restriction on the use of the strata units necessary to
protect the private residential character of the development and was, for that reason, a legitimate
restriction on the use of strata units.

35. OCW, on the other hand, is a vacation resort development. She contends that Defendant attempt
to prohibit owners from engaging in vacation rentals for which the development was intended,
while allowing the management company to do so, is an illegitimate interference with owners'
property rights.

36. Ms. Jordan also submits that by-laws for OCW differ significantly from the by-laws in the Pinnacle
Case and that, as a matter of construction, the word Residential, which was used to describe the
strata lot in the Pinnacle Case was critical to the decision of the Court as it allowed the first
sentence of the by-law to be construed as prohibiting all uses except residential use. Further, the
provision that the strata unit be used as a private residence of the proprietor, which words also
do not appear in by-law 10(k) here under consideration, was held by the Board to further restrict
the use to use by the proprietor only, which would exclude residential tenancies by third-parties.
In this case, the absence of those words in 10(k) means that residential tenancies are permitted.

37. Ms. Jordan contends that, as tenancies are permitted, there is no warrant for holding, as Mr.
Griffiths invites me to hold, that holiday lets are excluded. The words "or for use by the Proprietor's
visitor and guests" when given their ordinary meaning would include paying guests. Further, in
light of the meaning ascribed to private residence by the Board, the clause "or for use by the
Proprietor's visitor and guests" in OCW's by-laws must be construed as relaxing the restriction on
use as a residence, and allowing for short-term or weekend guests of the Proprietor to also use
the units.

38. I accept that the absence of the words "of the proprietor" means that the strata units in OCW may
be used as residences by persons other than the proprietors and that residential tenancies are not
prohibited, as the Defendant concedes. It seems to me, however, that the Board in the Pinnacle
Case decided, citing Caradon District Council v Paton (2001) 33 HLR 34; [2000] 3 EGLR, that "use
as a private residence" was use which was entirely different in character from use for short term
lets by transient holiday makers.

39. Applying the reasoning of the Board, the stipulation in by-Law 10(k) that strata units be used "as
a private residence" would restrict the Proprietors to letting their units to third parties for private
residential use only and, while it would not prevent use by the Proprietors' guests and visitors for
holidays, it would exclude short-term lets to transient holiday makers.

40. Ms. Jordan submits that common sense suggests that a commercial strata unit is a unit intended
for non-residential use (such as fitness suite, restaurant, retail store etc.) whilst a residential unit
is one fitted out for residential use (beds, bathrooms, kitchen) and that the most straightforward
reading of these by-laws is that by-law 10(k) simply restricts use of units to residential use, i.e. use
for overnight accommodation.

41. The submission is reminiscent of the submission made by Counsel in the Caradon case. In that
matter, the meaning and effect of a covenant "not to use or permit to be used the property for any
purpose other than that of a private dwelling house ..." fell to be construed by the Court. Counsel
submitted that the question was whether or not the house could be physically described as a
dwelling house and whether the activities which are being carried out in it and from it can be
described as the ordinary acts of living and that:
"there can be no distinction between a tenancy for the purposes of a holiday and a tenancy for the
purposes of a house provided that the character of the premises, and the character of its use are
the same." 5

42. The submission was roundly rejected by the Court which held that:
"...a person taking a holiday let is not in my judgment using the property as a private dwellinghouse.
..it follows that the defendants permitted the properties to be used for purposes other than
that of a private dwelling house," per Clarke U.
5 Submissions of Mr Damian Falkowski, on behalf of the Respondents in Coradon [2000] 3 EGLR 57 at Page 58

43. Ms. Jordan's submission ignores the fact that the by-law restricts use to use as a private residence,
not simply use for overnight accommodation, just as the submission in Caradon ignored that use
was restricted to use as a dwelling house.

44. In Caradon, the Court of Appeal did not address the issue of whether use of the properties for
holiday lets was use of the properties as a business. In this matter, the issue is front and centre.
The nature of the OCW development is an important factor in determining that question. It is a
resort which at inception had a company - OCM - established for the carrying on the business of a
hotel at the property. In that context, Mr. Griffiths' submissions that use of strata lots for holiday
lets is, in fact, a commercial or business use of the strata lots has much weight.

45. Ms. Jordan's protest, that construing by-law 10(k) as limiting the owners to the residential use of
their properties would be to change the nature of the resort, misses the mark, as by-law 10(m)
permits owners to let their units to transient holiday makers as a commercial enterprise,
consistent with the character of OCW as a tourism resort. The limit which the by-law places on
that right is the requirement that owners obtain the prior approval of the EC for such lets. The EC
has now determined that individual owners should not be permitted to engage in direct rentals of
their lots as short-term vacation rentals but they may do so through the rental management
company.

46. The fact that the by-laws do not require the owners to put their units in the rental pool does not
mean the owners have the right to engage in short-term holiday letting themselves in competition
with the rental manager approved by the majority to run the strata's hotel operations. Their use
of their units is limited by by-law 10(k) to use as a private residence either by the owners or any
tenant of the owner, and by the owner's visitors and guests.

The Section 20(4) Issue
47. The question then is whether the provision in by-law 10(m), which prohibits owners from letting
their units to short-term holiday makers without the prior approval of the EC, is a breach of section
20 (4) of the STO which provides that:
"No by-law shall operate to prohibit or restrict the devolution of strata lots or any transfer,
lease, mortgage or other dealing therewith or to destroy or modify any easement implied or
created by this Ordinance."

48. 1 do not think the requirement to first obtain EC approval can be construed as imposing a
restriction on dealing contrary to section 20(4). The by-law simply requires that short-term rentals
be approved and is best viewed perhaps as intending to regulate, rather than restrict, short-term
letting. The legitimate purpose of requiring such approval is recognized by the Plaintiffs who
acknowledge that such regulation may be necessary 'to protect the character, atmosphere,
aesthetics and harmony of the resort."'

49. Although the Policy has been framed by the Plaintiffs as a blanket ban on direct renting- and an
impermissible restriction on dealing - and not a mere restriction on use, given that the strata lot is
subject to the same use whether rented by OCM or directly by the owner, it is framed by the
Defendant as blanket permission for all owners to engage in the use of their units as short-term
holiday lets with the only restriction on that use being that they rent their units through OCM.

50. Mr. Griffiths submits that the Policy does not offend section 20(4) as it is only concerned with the
use of the strata lot for short-term holiday lets which is a commercial use of the property and not
a residential use and that lot owners are free to let their premises as private residences.

51. Given the observations of the Board in the Pinnacle Case, I feel constrained to hold that the Policy
is no more of a ban on renting (dealing) than the restriction on short-term lets in by-Law 10(k) is a
ban on renting. It is a restriction on the owner's rights to commercially exploit their units by renting
them as short-term holiday lets and does not offend section 20(4) of the STO.
The Unreasonableness Issue: Is the requirement for approval subject to an implied proviso that approval
not be unreasonably withheld

52. This question is premised on the Plaintiffs' contention that the Policy amounts to a withholding of
approval. I have already expressed the view that the Policy cannot be categorised as a refusal to
permit owners to exploit their units commercially. Rather, it is a restriction on how they may do
so, which the EC has determined should be through a single management company. As approval
has not been withheld, the question does not arise.

53. If I am wrong and the Policy should be construed as a withholding of approval for direct renting of
strata lots by individual owners, I move to consider whether the proviso, that approval for direct
renting should not be unreasonably withheld, should be implied into by-law 10(m).

54. Ms. Jordan relies in support of this proposition on the authority of 89 Holland Park (Management)
Limited v Hicks [2013] EWHC 391. Ms. Hicks, the owner of property adjacent to land owned by the
first claimant, was required by deed to seek their consent prior to applying for planning permission
from the local authority. In proceedings brought by the claimants, they sought declarations that
they were entitled to the benefit of the covenant to the development and use of adjoining land.

55. The Court stated at para. 81 of the judgment, that:
"The question is to be approached by considering the terms and purposes of the provision in
question, the other terms and the commercial purpose of the contract as a whole and the
surrounding circumstances".

56. The Judge then considered the provisions in light of the purpose of the contract and observed,
inter alia:
"88....[T]he whole purpose of the Agreements was the development of the property by (the
adjoining landowner]... The only purpose for owning the plot was to build a house or houses on it.
That is reflected too in the fact that in the 1968 Deed [the adjoining landowner] was described as
the Building Owner. The provisions of the 1968 Deed ... are concerned with the development of the
Property and restrictions on what might be developed. In my judgment, it would wholly undermine
the purpose of the agreement if the Adjoining Owner was given a complete and unfettered right,
exercisable on a whim to veto any development of the development plot which [the adjoining
landowner] bought and promised to develop.
89. Secondly, a process is set out in clauses 2(b) and 3 for the seeking of planning permission and
the provision of definitive plans and specifications and for the giving or withholding of consent by
[the claimant]. It would be pointless to provide for such a process if [the claimant] could, without
any reason, refuse consent."

57. The Judge concluded by finding that:
"96. ..., if the parties had been asked in 1968 whether the Adjoining Owner was to be able to
withhold his consent under clauses 2(b) and 3 unreasonably, arbitrarily, or capriciously, the parties
would have said "of course not". In my judgment reading the Deed as a whole, in its commercial
context, and in the light of its purposes, it is necessary to imply a proviso into these clauses in order
to give business efficacy to the agreement• and to give effect to the reasonable expectations of the
parties as set out in the agreement as a whole."

58. Ms. Jordan contends that, given the commercial context of OCW, a development whose purpose
was to operate as a resort and that the fact that the owners purchased units in almost all cases to
be enjoyed as a holiday home or residence but also to be rented out on holiday lets, it should be
implied in by-law 10(m) that, if approval to carry out resort letting is required, approval ought not
be unreasonably, arbitrarily or capriciously withheld.

59. Mr. Griffiths submits in response that the Plaintiffs' reliance on 89 Holland Park (Management)
Limited & Others v Hicks is misplaced. It deals with a contractual agreement between parties which
is entirely different to the relationship between the owners of strata property who are bound by
the by-laws which from time to time are in effect.

60. If, however, the obligation of owners to observe the by-laws were held to be analogous to the
contractual relationship between the parties in Holland Park, then the "surrounding
circumstances" which the Court in that case said were a relevant consideration, would here include
the statutory framework for the management of strata corporations by the owners under the STO.
That framework provides that if all owners, or a majority of them, think the Policy is unreasonable
they can vote to change it, just as they can choose to amend by-law 10(m) to add the proviso that
approval not be unreasonably withheld. Given the power in the majority to change the by-laws,
there is no warrant to read such a proviso into by-law 10(m). The only limit on any owner's power
to affect the direction the Strata Corporation or the EC take, is their ability to build consensus
among the owners within the scheme, as the majority rules. This is the essential feature of
community living in a strata development.

61. In addition, as Mr. Griffiths has observed, the words "reasonable" and "unreasonable" appear
several times throughout the by-laws, demonstrating that if it had been intended to circumscribe
the EC's discretion to approve commercial use of strata lots by requiring that their approval not
be unreasonably withheld, the by-law would say so. Absent clear words in the STO or the by-laws,
Mr. Griffiths submits, and I agree, that no proviso, that approval should not be unreasonably
withheld, falls to be implied.

62. It appears to me that the Judge in 89 Holland Park, in concluding that such a term should be
implied, placed particular emphasis on the fact that the refusal to give approval undermined the
whole purpose of the agreement, which was to develop the adjacent property. In this matter, the
Policy does not undermine the commercial purpose for which owners may have acquired strata
lots at OCW. Under the Policy, all owners can rent their units as holiday lets through the approved
Rental Manager, consistent with the terms on which they purchased their units: see 12.2 Extended
Payment Agreement.'

63. I repeat my earlier observation that, the fact that the owners are not required under their
agreements to let their units for short-term resort rental through OCM - they need not participate
in the resort rental programme - does not suggest that they are entitled to rent their units as
holiday lets directly and engage in the business of resort letting in competition with the
management company which manages the property as a full service resort.

64. As to Ms. Jordan criticism that the Policy fails to take into account owners who may wish to rent
their units to guests on an infrequent or sporadic basis, the Policy does not, in my view, exclude
the possibility of an owner getting approval for the occasional holiday let.

65. It only 'bans' owners from engaging in the business of holiday lets in competition with OCM.
The Fines for Breach of By-Law 10(m)

66. The Defendant has levied daily fines on the Plaintiffs as provided for by by-law 8(s)(vi) for breach
of the by-laws prohibiting vacation rentals without approval, since the Policy was introduced. The
Plaintiffs contend that the fines ought not be levied on a daily basis but only in respect of each of
the impugned lettings.

67. Mr. Griffiths in response asserts that a strata lot is used for the carrying on of a business where a
strata lot is actively promoted and advertised for use as a business throughout the period from
when the business commences until it ceases, and not arbitrarily on only those days when a paying
guest is in occupation. He submits that the business does not 'stop' and 'start' on any given day
or time; that premises do not cease to be business premises or used for a business at 5.00 pm
when staff lock up and go home; that a hotel room does not cease to be a hotel room when a
guest vacates and that the Plaintiffs do not cease to be in breach of the by-law on a Tuesday when
one guest leaves, compliant on a Wednesday, and in breach again when the next guest arrives on
a Thursday.

68. He argues that the prohibition is not related to days of actual unlawful occupation as the
prohibition in by-law 10(m) relates to the use of the strata lot for the carrying on of a business
which necessarily includes the promotion and advertisement of the strata lots with the result that
the restriction encompasses days when occupied and unoccupied.

69. I do not agree. The restriction is against using the strata lot without approval for the
accommodation of persons who are not using it as a private residence and any fine should relate
to the days (nights) that it is so used and not to days when it is advertised as available for rent.
When no-one is on it, it is not being put to any use and the strata lot would remain the private
residence of the owner. I therefore hold that the Defendant is not entitled to fines that represent
nights on which the Plaintiffs' properties were not occupied by paying guests.

The Levy for Legal Costs of Enforcing the By-Laws

70. On 30 June 2017, the Defendant levied a further fine of $7,800 for each strata lot to recover the
Defendant's legal costs. This amounts to $54,600 which figure does not include the same $7,800
figure levied against all other direct renters who are not named Plaintiffs herein. The Plaintiffs
dispute the Defendant's right to impose this levy to recover its legal costs.

71. Mr. Griffiths submits that, in imposing the penalty of $7,800, the EC was exercising its power under
by-law 8 (s) (vi) to impose sanctions "of its choosing." He makes the point that this sum does not
represent a contribution towards the Defendant's legal costs of these proceedings, which are in
the discretion of the Court, but are levied in respect of legal costs incurred by the EC in enforcing
the by-laws, including the drafting warning notices and notices of penalties over several months.

72. Ms. Jordan rejects this proposition and submits that the Defendant's contention that these fines
are to cover its costs of enforcement as opposed to its costs of the litigation is a false distinction.
She says further, that Defendant has pointed to no costs of enforcement that are not costs of
defending this litigation and that it is for the Court to make an order for costs in due course and
not for the Defendant to charge its costs to the Plaintiffs whilst the litigation is still pending.

73. By-Law 8(s)(vi) provides,
"1-1
s. The Executive Committee shall:
1...1
vi. Issue a written warning, including the expected corrective behaviour on the part
of the Proprietor, in any case where a Proprietor is in noncompliance with the Strata By-Laws. If,
after a specific amount of time, the Proprietor is still in noncompliance, the Executive Committee
may impose sanctions of its choosing, including fines of up to $100.00 per day but not to exceed
$1,000 per violation, until the Proprietor is in full compliance. If after the assessment of $1,000.00
has occurred and the violation has not been corrected, additional fines in the sum of $100.00 per
day may be assessed. Fines unpaid for more than thirty (30 days) from the date of the assessment
shall accrue interest at a monthly rate of two percent (2%). Fines will be charged on the Proprietor's
statement. Fines collected will be added to the Reserve Fund."

74. In my judgment, By-Law 8(s)(vi) does not permit the EC to levy a financial penalty of $7,800 to
recoup legal costs. The sanction of "its choosing" may be other than a financial penalty but if they
choose to impose fines, then those fines must be levied as provided for in the By-Law: daily and
not to exceed $1000 per violation.

75. Further, it appears to me that Ms. Jordan's observation that the Defendant is seeking to assess
and recover costs which are in the Court's discretion and to be assessed in due course is correct.

76. I therefore hold that the Defendant is not entitled to levy the sum of $7800 against the Plaintiffs
as and for legal costs.

The Insurance Issue
77. The Plaintiffs' complaint that the Defendant was in breach of its obligations to insure the Common
Property no longer arises for resolution. The question was whether the Strata Corporation was in
breach of its obligations to insure the common property but the evidence established that the
common property was insured by the Defendant.

The Counterclaim
78. The Defendant also counterclaims for:
(i) an account of the Plaintiffs' profits for the Defendant's unjust enrichment. Alternatively, the
Defendant seeks that the Plaintiffs pay mesne profits or alternatively quantum meruit for the
Plaintiffs' impermissible use of the Common Property through their direct rental activities; or
(ii) an account of profits in response to the Plaintiffs' wrong of breaching the Policy or, in the
further alternative (but on the same basis), the restitutionary measure known as negotiation
damages.

Unjust Enrichment
79. The counterclaim for unjust enrichment is premised on the fact that the Plaintiffs' holiday guests
had access to and benefitted from the facilities, amenities and services (the common property)
which are paid for by all residential Strata Lot owners on a unit entitlement basis: see (para. 92(iii)
of the Defence). The Defendant contends that as these holiday lets were undertaken without EC
approval as required under by-law 10(m), the Plaintiffs have been "unjustly enriched" by their use
of these amenities and services and as such are liable to make restitution in respect of the
'enrichment' by account of profits.

80. In his closing submissions, Mr. Griffiths enlarged on the claim and submitted that the Plaintiffs had
profited from their direct rental activities and that those profits were made unjustly insofar as the
Defendant never intended that the Plaintiffs would obtain them but had framed the Policy with
precisely the opposite aim in view. He asserts that the Plaintiffs' direct rental activity had caused
the Defendant to suffer losses as OCM had reduced its voluntary subsidy as a result and that the
Defendant had had to increase its expenditure for the maintenance. He submits that, on that basis,
the Defendant is entitled to the Plaintiffs' ill-gotten gains in full via an account of profits.

81. Ms. Jordan citing Chitty on Contracts at para. 29-017, submits that the principle of unjust
enrichment requires: first, that the defendant has been enriched by the receipt of a benefit;
secondly, that this enrichment is at the expense of the claimant; thirdly that the retention of the
enrichment be unjust; and finally that there is no defence or bar to the claim.

82. Learned Counsel submits that the Plaintiffs here have not been enriched by use of the common
property and amenities and services because they have already paid their share of them on a unit
entitlement basis. For the same reason, she submits, there has been no expense caused to the
Defendant, nor has the Defendant particularised or provided evidence of any alleged expense and
in any event, any alleged retention by the Plaintiffs is not unjust in the circumstances.

83. I confess to having a conceptual difficulty with the claim as it doesn't seem to me that the Plaintiffs
can be said to have received a benefit from the Defendant. The common property, including the
amenities and facilities set out by the Defendant in its pleaded case, belongs to the Plaintiffs and
the other members of the Defendant and the strata's common expenses are paid for by the
Plaintiffs through their strata fees.

84. Conceptually too, I don't see how it can be said that the Plaintiffs gained their profits by use of the
common property. Even if this proposition were arguable, there was no concomitant loss suffered
by the Defendant which would permit the conclusion that the Plaintiffs profits were at the
Defendant's expense. In other words, it is not possible to suggest that the Plaintiffs usurped the
Defendant's assets to gain a profit.

85. In my judgment, the Defendant has failed to show that the Plaintiffs were enriched at its expense
and the claim for unjust enrichment is consequently not made out.

Mesne profits
86. With respect to the alternative claim, that mesne profits should be awarded to represent the use
made by the Plaintiffs' direct rental guests of the Common Property as trespassers in such sum as
represents the ordinary market value far rental of the Common Property, Ms. Jordan submits that
mesne profits are a means by which a trespasser must compensate a landowner for wrongful
possession of land. There is no pleaded claim that the Plaintiffs have been in wrongful possession
of the Defendant's land. Without such a pleaded claim there is no cause of action founding a
mesne profits claim.

87. I agree. In any event, the Plaintiffs are owners in common of the common property and there is
no basis in law to require them to pay fair rent for use of the common property by them or their
licensees.

Quantum Meruit
88. With respect to the claim for a quantum meruit, Mr. Griffiths contends that the Plaintiffs have
made use of OCW's reputation and imagery in advertising their units for direct rental and have
relied on the resort management services undertaken by OCM to which the Plaintiffs do not
contribute. On that basis, the Plaintiffs should be ordered to pay, as a minimum, a sum equal to
the objective market value of OCM's management services, and the reputation and imagery of
OCW that the Plaintiffs have employed.

89. Ms. Jordan submits that a quantum meruit claim is a claim for reasonable remuneration where the
claimant has rendered services or supplied goods to the defendant but the parties had not fixed
the sum to be paid, although it was obvious in the circumstances that neither party intended the
services to be gratuitous, or the goods to be a gift. It is a reasonable sum to compensate a
complainant for the value of services rendered by the complainant and enjoyed by the other party.

90. To the extent, if at all, that the Defendant has rendered services to Plaintiffs or for the benefit of
the Plaintiffs, she contends that these have been paid for and continue to be paid for by the
Plaintiffs through strata fees on a unit entitlement basis.

91. OCM is not a party to these proceedings and can make no claim to compensation for use of their
services. OCW's reputation and imagery are not services rendered or goods supplied to the
Plaintiffs for which the Defendant is entitled to be paid.

92. The claim for compensation on the basis of quantum meruit is not made out.

Account of Profits for breach of quasi-contract
93. The Defendant claims to be entitled in the alternative to a restitutionary award founded on the
Plaintiffs' wrongdoing, being their breach of the by-laws as a quasi-contract. Mr. Griffith submits
that the Defendant is entitled to such an award by analogy with the principle affirmed in Attorney-
General v Blake [20011 1 AC 268 that an account of profits may exceptionally be awarded for
breach of contract. He argues that insofar as strata corporation by-laws are analogous to
contractual terms, the principle may be extended to the circumstances presently in issue.

94. He submits that, consistent with the decision in AG v Blake, the Court should consider all the
circumstances of the case, including the subject matter of the contract, the purpose of the term
breached, the circumstances in which the breach occurred, the consequences of the breach and
the circumstances in which the relief is being sought.

95. He asserts that each of these factors weighs in the Defendant's favour. The agreement between
the Defendant and the Plaintiffs, constituted by the by-laws, was concerned with the proper
management and operation of the strata plan community known as OCW. He contends that the
Plaintiffs' breaches have been deliberate and flagrant, and continue to this day and have led to
deterioration of conditions at OCW as well as of relationships between owners which the
Defendant, in introducing the Policy, had sought to eliminate.

96. Mr. Griffiths submits further that the Defendant has a legitimate interest in preventing the
Plaintiffs' profit-making activities and therefore in depriving the Plaintiffs of their profit, which he
identifies as the decisive factor in Blake. This interest arises from by-law 6(a) which specifically
entrusts the Defendant with responsibility to "[c]ontrol, manage, and administer the Common
Property for the benefit of all Proprietors..."

97. Learned Queen's Counsel asserts that no other remedy is appropriate. He also contends that the
Defendant's loss is not commensurate with the Plaintiffs' gains as award of the compensatory
measure of damages would be insufficient to deter the Plaintiffs' continuing breach of the by-laws.

98. Mr. Griffiths submits that, in sum, these factors combine to make this case "exceptional" and the
Defendant is entitled to a complete account of profits leading to disgorgement of the Plaintiffs'
entire profits in accordance with Blake.

99. Ms. Jordan in response submits briefly that, in AG v Blake, the Court made it clear that an account
of profits is only available in extraordinary circumstances and there are no such circumstances
here. She refutes Mr. Griffiths' proposition that the lack of availability of an alternative remedy
could constitute extraordinary circumstances.

100. She submits that the remedy is available only in "very exceptional cases" where "something more
is required than mere breach of such an obligation [the obligation to refrain from doing the very
thing one promised not to do] before an account of profits will be the appropriate remedy" as
stated by the learned authors of per Chitty on Contracts at para. 26-055.

Discussion
101. AG v Blake was a breach of contract case in which the Crown, who was the claimant, had suffered
no financial loss which would usually provide the measure of damages. The Court found that there
were exceptional circumstances which warranted an order for an account of profits to deprive
Blake of all the profits he made from the breach.

102. Lord Nicholls, in a judgment with which the members of the Court, with the exception of Lord
Hobhouse, agreed, stated at page 284:
"My conclusion is that there seems to be no reason, in principle, why the court must in all
circumstances rule out an account of profits as a remedy for breach of contract. I prefer to avoid
the unhappy expression 'restitutionary damages'. Remedies are the law's response to a wrong (or,
more precisely, to a cause of action). When, exceptionally, a just response to a breach of contract
so requires, the court should be able to grant the discretionary remedy of requiring a defendant to
account to the plaintiff for the benefits he has received from his breach of contract. In the same
way as a plaintiffs interest in performance of a contract may render it just and equitable for the
court to make an order for specific performance or grant an injunction, so the plaintiffs interest in
performance may make it just and equitable that the defendant should retain no benefit from his
breach of contract."

103. His Lordship also observed at page 285, that:
The law recognises that damages are not always a sufficient remedy for breach of contract... When
the circumstances require, damages are measured by reference to the benefit obtained by the
wrongdoer. This applies to interference with property rights. Recently, the like approach has been
adopted to breach of contract. Further, in certain circumstances an account of profits is ordered in
preference to an award of damages. Sometimes the injured party is given the choice: either
compensatory damages or an account of the wrongdoer's profits... With the established authorities
going thus far, I consider it would be only a modest step for the law to recognise openly that,
exceptionally, an account of profits may be the most appropriate remedy...
"An account of profits will be appropriate only in exceptional circumstances. Normally the remedies
of damages, specific performance and injunction, coupled with the characterisation of some
contractual obligations as fiduciary, will provide an adequate response to a breach of contract. It
will be only in exceptional cases, where those remedies are inadequate, that any question of
accounting for profits will arise. No fixed rules can be prescribed. The court will have regard to all
the circumstances, including the subject matter of the contract, the purpose of the contractual
provision which has been breached, the circumstances in which the breach occurred, the
consequences of the breach and the circumstances in which relief is being sought. A useful general
guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the
defendant's profit-making activity and, hence, in depriving him of his profit."

104. Lord Steyn who delivered a separate judgment stated at page 291 that:
"...an action for disgorgement of profits against a contract breaker [will lie] where four conditions
are fulfilled: (1) There has been a breach of a negative stipulation. (2) The contract breaker has
obtained the profit by doing the very thing which he promised not to do. (3) The innocent party ...
has a special interest over and above the hope of a benefit to be assessed in monetary terms. (4)
Specific performance or an injunction is an ineffective or virtually ineffective remedy for the
breach."

105. These statements found an echo in the judgment of Peter Gibson U in Experience Hendrix LLC v
PPX Enterprises Inc., [2003] EWCA Civ 323 was considering an award of damages for breach of a
licensing agreement made by the parties which granted PPX the right to use master recordings.
His Lordship held at para. 58:
"In my judgment, because (1) there has been a deliberate breach by PPX of its contractual
obligations for its own reward, (2) the claimant would have difficulty in establishing financial loss
therefrom, and (3) the claimant has a legitimate interest in preventing PPX's profit-making activity
carried out in breach of PPX's contractual obligations, the present case is a suitable one ... in which
damages for breach of contract may be measured by the benefits gained by the wrongdoer from
the breach. To avoid injustice, I would require PPX to make a reasonable payment in respect of the
benefit it has gained."

106. This passage was considered by Lord Reed Morris-Garner v One Step (Support) Ltd. and another
[2018] UKSC 20, the first opportunity the Supreme Court had to consider the availability of
Wrotham Park, or negotiating, damages for breach of a non-compete covenant. Lord Reed's
observations on this formulation of the test for the award of damages by Peter Gibson U are
apposite, as the learned Judge used language intended to evoke the principles on which AG v Blake
had been decided. Indeed, Lord Reed was prompted to observe at para. 81:
"...in relation to Lord Nicholls's speech (in Blake), the connection which he drew between Wrotham
Park and an account of profits has had consequences in the later case law which ore unlikely to
have been intended."

107. With respect that passage from the judgment of Peter Gibson U, his Lordship said:
"90. ...in so far as the reasoning might convey the impression... that it is relevant to an award of
damages that the breach of contract was deliberate or the party in breach benefited from his
conduct, or that it is relevant to an award of damages that the claimant has a "legitimate interest"
in preventing an activity carried out in breach of contract, or that damages for breach of contract
and an account of profits are similar remedies at different points along a continuum, that
impression would be mistaken."

108. If it were right to approach the Plaintiffs' wrongdoing as analogous to a breach of contract, the
Defendant would not be entitled to an account of profits on any of the bases identified by Mr.
Griffiths whether the lack of an alternative remedy or that the breach was flagrant or that the
Plaintiff had a "legitimate interest in preventing the activity." I would say further, that such an
account could never be necessary "to deter [their] wrongdoing," as Mr. Griffiths suggests, as the
Strata by-laws make provision for the imposition of fines for that precise purpose.

109. The exceptionality of AG v Blake's case was succinctly expressed by Mance U in the Hendrix case
who stated at para 29 of the judgement:
"The exceptional nature of Blake's case lay, first of all, in its context-employment in the security
and intelligence service, of which secret information was the lifeblood, its disclosure being a
criminal offence... Blake had furthermore committed deliberate and repeated breaches causing
untold damage, from which breaches most of the profits indirectly derived in the sense that his
notoriety as a spy explained his ability to command the sums for publication which he had done ...
Thirdly, although the argument that Blake was a fiduciary was not pursued beyond first instance,
the contractual undertaking he had given was 'closely akin to a fiduciary obligation, where an
account of profits is a standard remedy in the event of breach. It is those facts which made the
Blake case exceptional, not the inadequacy of the remedy of conventional damages.

110. None of the features of this case are exceptional and the claim for an account of profits is
dismissed.

Wrotham Park/Negotiating Damages
111. In the alterative, Mr. Griffiths submits that the Plaintiffs should pay negotiating damages, which
he describes as a restitutionary measure representing the benefit obtained by the Plaintiffs' failure
to negotiate release from the obligation to comply with the by-laws, as ordinary compensatory
damages would be insufficient.

112. Ms. Jordan contends that the Defendant has not pleaded any such relief and that Wrotham Park
damages are compensatory and not restitutionary.

Discussion

113. Mr. Griffiths' contention that Wrotham Park or negotiating damages are restitutionary is not
supported by the authorities.

114. In laggard v Sawyer, Sir Thomas Bingham MR, with whose judgment Kennedy U agreed, stated
[1995] 1 WLR 269, 281-282:
"1 cannot, however, accept that Brightman l's assessment of damages in the Wrotham Park case
was based on other than compensatory principles. The defendants had committed a breach of
covenant, the effects of which continued. The judge was not willing to order the defendants to
undo the continuing effects of that breach. He had therefore to assess the damages necessary to
compensate the plaintiffs for this continuing invasion of their right."

115. The compensatory nature of negotiating damages was confirmed by the Court of Appeal in World
Wide Fund for Nature v World Wrestling Federation Inc [2008) 1 WLR 445.8

116. That Wrotham Pork damages are compensatory is also clear from the fact that the courts ordering
Wrotham Park damages have made partial awards of profits' meant to compensate for the
claimants for their putative loss.

117. The decision of the Supreme Court in Morris-Garner which was decided after Counsel made their
submissions in this matter, put the question beyond doubt.

118. Lord Reed observed at para. 91 of the judgment that:
"The use of an imaginary negotiation can give the impression that negotiation damages are
fundamentally incompatible with the compensatory purpose of an award of contractual damages.
Damages for breach of contract depend on considering the outcome if the contract had been
performed, whereas an award based on a hypothetical release fee depends on considering the
outcome if the contract had not been performed but had been replaced by a different contract.
That impression of fundamental incompatibility is, however, potentially misleading. There are
certain circumstances in which the loss for which compensation is due is the economic value of the
right which has been breached, considered as an asset. The imaginary negotiation is merely a tool
for arriving at that value. The real question is as to the circumstances in which that value
constitutes the measure of the claimant's loss."

119. From the authorities then, it is plain that negotiating damages are not gain based but
compensatory: not concerned with stripping a defendant of his profits but with compensating the
claimant for the economic value of the right that he has relinquished.

120. Although no claim for negotiating damages was pleaded by the Defendant, I would observe, on
the question of whether the Defendant would have been entitled to such damages, that the
decision in Morris-Gamer has significantly narrowed the availability of such damages.

121. In the course of his judgment, Lord Reed made it plain that for a claim to succeed, the claimant
would have to establish economic loss resulting from the breach:
"92...circumstances can exist in cases where the breach of contract results in the loss of a valuable
asset created or protected by the right which was infringed, as for example in cases concerned with
the breach of a restrictive covenant over land, an intellectual property agreement or a
confidentiality agreement...the claimant has in substance been deprived of a valuable asset, and
his loss can therefore be measured by determining the economic value of the asset in question. The
defendant has taken something for nothing, for which the claimant was entitled to require
payment.
"93. It might be objected that there is a sense in which any contractual right can be described as
an asset, or indeed as property. In the present context, however, what is important is that the
contractual right is of such a kind that its breach can result in an identifiable loss equivalent to
the economic value of the right, considered as an asset, even in the absence of any pecuniary
losses which are measurable in the ordinary way. That is something which is true of some
contractual rights, such as a right to control the use of land, intellectual property or confidential
information, but by no means of [emphasis mine]
"94. It is not easy to see how, in circumstances other than those of the kind described in paras
91-93, a hypothetical release fee might be the measure of the claimant's loss."

122. His Lordship then set out his conclusions in paragraph 95, from which I excerpt the following as of
particular relevance:
"(3) Damages can be awarded under Lord Cairns' Act in substitution for specific performance or
an injunction, where the court had jurisdiction to entertain an application for such relief at the time
when the proceedings were commenced. Such damages are a monetary substitute for what is lost
by the withholding of such relief.
"(4) One possible method of quantifying damages under this head is on the basis of the economic
value of the right which the court has declined to enforce, and which it has consequently rendered
worthless. Such a valuation can be arrived at by reference to the amount which the claimant might
reasonably have demanded as a quid pro quo for the relaxation of the obligation in question. The
rationale is that, since the withholding of specific relief has the same practical effect as requiring
the claimant to permit the infringement of his rights, his loss can be measured by reference to the
economic value of such permission.
"10) Negotiating damages can be awarded for breach of contract where the loss suffered by the
claimant is appropriately measured by reference to the economic value of the right which has been
breached, considered as an asset. That may be the position where the breach of contract results in
the loss of a valuable asset created or protected by the right which was infringed. The rationale is
that the claimant has in substance been deprived of a valuable asset, and his loss can therefore be
measured by determining the economic value of the right in question, considered as an asset. The
defendant has taken something for nothing, for which the claimant was entitled to require
payment."

117. The Plaintiffs' breach of the restriction on use of the strata lots has not caused the Defendant any
loss. The Defendant does not rent the units at OCW. It does not make profits from engaging in
rental activity of which it has been deprived of profits by the Plaintiffs activity. The by-law is not
intended to preserve such right for the benefit of the Defendant. In my judgment, it cannot be
said that the Plaintiffs have taken something for nothing for which the Defendant is entitled to
require payment and the Defendant would not be entitled to negotiating damages.

118. I invite submissions from Counsel on the form of Order as well as on costs.

DATED 7 DECEMBER 2018

 

CHIEF JUSTICE