Hatchy Investments Pty Ltd as Trustee for the Hatch Family Trust v Body Corporate for Parkside Apartments Toombul
[2012] QCAT 411
•7 September, 2012
| CITATION: | Hatchy Investments Pty Ltd as Trustee for the Hatch Family Trust v Body Corporate for Parkside Apartments Toombul [2012] QCAT 411 |
| PARTIES: | Hatchy Investments Pty Ltd (ACN 093 643 513) as Trustee for the Hatch Family Trust (Applicant) |
| v | |
| Body Corporate for Parkside Apartments Toombul Community Title Scheme 39237 (Respondent) |
| APPLICATION NUMBER: | OCL043-11 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 21 February, 2012 |
| HEARD AT: | Brisbane |
| DECISION OF: | Ann Fitzpatrick, Member |
| DELIVERED ON: | 7 September, 2012 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | [1] That no amendment be made to the reviewable term of the Caretaking Agreement between the applicant and the respondent as to the rate of remuneration or method of review set out in Clause 4 of Schedule Three to the Agreement. [2] The applicant and respondent each file and serve any submissions in relation to costs by 20 September, 2012 and any reply by 27 September, 2012. |
| CATCHWORDS: | Service Contract dispute – review of remuneration payable to Service Contractor |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Hatchy Investments Pty Ltd (ACN 093 643 513) as Trustee for the Hatch Family Trust represented by Ian Erskine of Counsel, instructed by Mahoney Lawyers |
| RESPONDENT: | Body Corporate for Park Side Apartments Toombul Community Title Scheme 39237 represented by Greg Thomson of Counsel, instructed by Nicholsons Solicitors |
REASONS FOR DECISION
This is an application for review of terms of a Caretaking Agreement dated 8 April, 2009, in accordance with the Body Corporate and Community Management Act 1997 (BCCM Act). The applicant is the caretaking service contractor for Parkside Apartments, Toombul, Community Title Scheme 39237.
The Caretaking Agreement currently provides for remuneration of $95,864.70 exclusive of GST per annum.
The applicant seeks orders that:
·the reviewable terms be amended to increase the remuneration rate to $132,619.63 exclusive of GST per annum;
·the increase have retrospective effect from 9 October, 2010 (being one month after the review date);
·the respondent pay interest on any outstanding sums at 10% per annum pursuant to s 47 of the Supreme Court Act 1995 (Qld);
·the respondent pay the applicant’s costs of the proceedings on a standard basis.
Although these are the orders pressed by the applicant, its application seeks additionally or alternatively that the reviewable terms be amended to invest the applicant with the functions and powers set out in the Duties and Times Schedule annexed to the BMCS Report, dated 23 January, 2012, on which it relies. In view of the applicant’s submission that the only relevant dispute for determination by the Tribunal relates to those terms of the caretaking agreement providing for the remuneration payable, I have not addressed the issue of the caretaker’s functions and powers raised in the application.
The respondent seeks orders that:
·the remuneration rate should be reduced to $91,896.95, exclusive of GST per annum;
·clause 4(b) of Schedule 3 of the agreement should be omitted from the agreement because the current minimum yearly 5% increase in the remuneration rate is not fair and reasonable.
Legislative framework
Division 7 of the BCCM Act provides a mechanism for review of terms of service contracts to determine if the terms in relation to:
·the functions and powers; or
·remuneration of a service contractor
are fair and reasonable.
It is not in contention that the criteria set out in sections 130 and 132 of the BCCM Act have been met and that a dispute within the terms of section 133 of the BCCM Act has arisen.
The parties agree and I find that QCAT is seized of jurisdiction to resolve the dispute. I have had regard to and accept the supplementary submissions of the applicant, filed 28 February, 2012 in relation to jurisdiction. I note that the respondent agrees with the applicant’s submissions.
Section 133(3) of the BCCM Act provides that this Tribunal must have regard to the review criteria in deciding the application. The review criteria are set out in section 134 of the BCCM Act, being:
(a)the appropriateness of the reviewable terms for achieving a fair and reasonable balance between the interests of the reviewing parties;
(b)whether the reviewable terms impose conditions that-
(i)are unreasonably difficult to comply with; or
(ii)are not necessary and reasonable for the protection of the legitimate interests of a reviewing party;
(c)the consequences of complying with, or contravening, the reviewable terms and whether the consequences are unfairly harsh or beneficial to a reviewing party;
(d)whether the reviewable terms are appropriate for the scheme; (having regard to the nature, features and characteristics of the scheme);
(e)the term of the engagement as service contractor and the period of the term remaining.
Evidence
The applicant called evidence from Mr Bruce Hatch, a Director of the applicant and the person directly involved in the provision of caretaking services at Parkside Apartments, Toombul. It tendered Mr Hatch’s statement of evidence, filed 25 August, 2011, exhibit 1.
The applicant also relies upon an expert report prepared by Mr Barry Turner of Building Management Consulting Services, dated 23 January, 2012, exhibit 2. Mr Turner gave evidence at the hearing.
The respondent relies upon an expert report prepared by Mr David Leary of Leary and Partners Pty Ltd, dated 12 April, 2011, exhibit 10. Mr Leary gave evidence at the hearing.
A joint experts’ report, dated 17 June, 2011 was prepared pursuant to a conclave as part of these proceedings and is exhibit 4.
Matters for determination
The respondent submits that the nub of the dispute relates to quantum, that is whether the annual remuneration provided for in the agreement is fair and reasonable, or whether that proposed by the experts is fair and reasonable. The respondent submits that the case amounts to a competition between experts. The applicant in its written submissions has said that the only relevant dispute remaining for determination by the Tribunal relates to those terms of the caretaking agreement providing for remuneration.
Analysis of the evidence
I acknowledge the expertise of both experts. Criticisms are made by each party in relation to the methodology adopted by the other party’s expert and the contents of their respective reports.
The joint experts’ report fails to reach any common ground in relation to any issue for determination, however, the report neatly highlights the difference between the experts. By reference to the joint report and the evidence of Mr Leary and Mr Turner, it appears that:
(a)Mr Leary calculates a total hourly rate at $28.96. Mr Turner calculates the total hourly rate at $32.90. This difference arises from use of different industrial awards to calculate the hourly rate. The experts agree that there is no industry standard award.
(b)The methodology used by Mr Leary was to inspect the premises with representatives of the body corporate. He did not talk to the manager. He estimated the time required based on his inspection, job difficulty and contract requirements. He assumed the duties would be undertaken as part of a coordinated work schedule and that where practical the caretaker would arrange his routine to efficiently group duties.
(c)Mr Turner inspected the building, spoke to the manager regarding times taken, developed a draft schedule which he had the manager road test and then adjusted the schedule. The remuneration has been individually calculated on the actual times necessary to perform the stated duties and responsibilities that the caretaker is required to carry out.
(d)The times allocated for each task varies considerably because of the different methodology.
(e)The experts agree that the checklists of task they have used, vary little in substance.
(f)The experts disagree on the business overhead costs/corporate costs. Mr Leary has not had reference to the applicant’s actual corporate expenses on the basis that the way an individual contractor arranges its business affairs is irrelevant. Mr Leary has estimated what he asserts is a fair allowance for the caretaker to meet its obligations by reasonable means. Mr Turner obtained actual costs from the caretaker’s accountant.
On balance, I prefer the evidence and report of Mr Leary. I accept the submissions of the respondent that Mr Leary’s evidence arises from his permissible knowledge base as an expert set out in his report.
I am persuaded by the respondent’s submissions that Mr Turner’s evidence and report should not be preferred for the following reasons:
(a)Business overheads
Mr Turner has relied upon the costs provided to him with respect to business overheads by the caretaker’s accountant, in an amount of $11,345.00. Mr Turner said that he had not audited the amount and that he was not qualified to conduct an analysis of the figure. It emerged in cross examination of Mr Hatch that he conducts caretaking duties for a neighbouring building, however he mostly occupies the Parkside office for all his work. Mr Turner’s evidence was that he was not aware of the caretaker’s other management rights.
I accept the respondent’s submissions that a factual basis for the sum allocated by Mr Turner for business overhead costs was not proven by the applicant, and the sum is unreliable because of the work Mr Hatch does for a neighbouring building while occupying an office at Parkside apartments. I accept that a more accurate figure would isolate the costs referable to work performed for the other building.
(b)Relevant Award
Mr Turner relies on the State Contract Cleaning Industry Award 2003 to determine a base rate of pay together with loadings and penalties, which he submits represents fair and reasonable remuneration for a caretaker.
I note that the applicant is not an employee of the respondent and that an Award rate of pay is not a legal requirement for payment to the applicant. However, I accept that an appropriate Award can provide a touchstone for a fair rate of remuneration without, in the context of this review, being bound to slavish compliance with the terms of an Award. To that end determining a current and relevant Award is helpful in arriving at fair and reasonable rate of remuneration.
In cross examination Mr Turner refuted that the Hospitality Industry (General) Award 2010 used by Mr Leary was more appropriate to the duties performed by a caretaker, but said there was room for debate because in this industry there is no appropriate Award.
I accept the submission of the respondent that the Award used by Mr Leary is more suited to the duties of a caretaker in an apartment building such as Parkside. The coverage clause of the federal Hospitality Industry (General) Award 2010 provides at Clause 4 that the Award applies in the hospitality industry, which includes “condominiums and establishments of a like nature…serviced apartments…or any other type of residential or tourist accommodation…” I accept the evidence of Mr Leary that the Hospitality Industry Award is appropriate because the Award covers a wide range of employees providing reception, guest services, administration, cleaning, and maintenance services in a reasonably equivalent setting.[i]
For that reason I prefer the evidence of Mr Leary over the evidence of Mr Turner.
Mr Turner acknowledged in cross examination that the Award used in his report may not be the correct award in that it is not current, having been replaced from April, 2009, as part of the Award modernization process, with the federal Cleaning Services Award 2010. Mr Turner said in evidence that he did not know how the modern award would affect his calculations. For that further reason I prefer the evidence of Mr Leary.
(c)Application of loading
The respondent submitted that Mr Turner’s calculation of an hourly rate was unjustified in that he had applied a 15% split shift allowance (rather than overtime rates) to take account of the fact that a caretaker can be called upon at any time of the day or night. That loading was applied to uplift the base rate to $761.95 per week or $23.66 per hour. Thereafter a loading for work on Saturdays, Sundays, public holidays and for annual leave was added to the hourly rate giving a loaded hourly rate of $26.49 before on–costs and business overhead costs.
I accept the respondent’s criticism of the application of an across the board 15% split shift allowance. The evidence was that the caretaker worked ordinary business hours during the week and worked on Saturday mornings. Callouts outside these hours occurred from time to time. I find that Mr Turner’s mode of calculation over-compensates the caretaker when the majority of its work is performed during ordinary hours. The caretaker does not work a shift on a regular basis outside ordinary hours.
I prefer the approach taken by Mr Leary in estimating a reasonable amount of time for work which is likely to be conducted out of ordinary hours and applying the award overtime rate. Similarly, I prefer Mr Leary’s approach of estimating a reasonable amount of time for work conducted on Saturdays, Sundays and public holidays and applying the award loadings.
The respondent submits that Mr Turner conceded some of the times in his report for performing tasks are too high. The respondent also submits that on Mr Turner’s approach there was a doubling up of tasks which could be performed at the one time. These issues have been accorded little weight by me, given that I have formed my preference for Mr Leary’s evidence based upon the methodology adopted by him and the criticisms of Mr Turner’s evidence set out above.
In relation to the applicant’s submissions as to why Mr Turner’s evidence should be preferred, I do not accept the applicant’s assertion that Mr Leary did not have access to all areas of the building and understated the size of the property. Mr Leary refuted this suggestion when put to him in cross examination and I accept his evidence.
I do not accept the applicant’s submission that Mr Turner’s evidence should be preferred because of his detailed approach. I am satisfied based upon Mr Leary’s evidence that he adopted a thorough approach to determining a fair and reasonable level of remuneration. Although Mr Turner undoubtedly adopted a detailed approach, it could not be said that Mr Leary did not. The approach is simply different. Likewise I do not consider the approach of Mr Leary to be less practical or less apt than that of Mr Turner, as submitted by the applicant. I find Mr Leary’s methodology to be sound and well supported by his expertise and experience.
The applicant criticises Mr Leary’s report as being unrealistic in terms of time allocated to particular tasks and says that inaccurate daily task estimates impact on the calculation of loadings for weekends and public holidays. The applicant says that Mr Leary was unduly conservative, always estimating duty times and monetary amounts at the lower end rather than seeking to achieve a balance both fair and reasonable in the interests of the reviewing parties. My impression of Mr Leary during cross examination and upon reading his report is that his timeframes are conservative.
On the basis that I have preferred the methodology of Mr Leary, but recognize that the time estimates he has given may be conservative, I consider the remuneration rate he submits as fair and reasonable is at the lower end of the range of rates which may be objectively considered to be fair and reasonable.
Fair and reasonable remuneration rate
I note that the current annual remuneration rate is $95,864.76, excluding GST. That is $3,967.81 more than the sum Mr Leary submits as fair and reasonable. There is no significant disparity between the two sums, especially if one considers Mr Leary may have erred on the conservative side in arriving at time estimates.
I am guided by the comments of Specialist Adjudicator Mr P J Favell in High Point Apartments[ii] that “…the agreement needs to be given some considerable weight in the current determination and there must be a recognition that when the agreement was entered into and the rate of pay accepted the amount of work and services was the same.”
Having been tested against the preferred evidence of Mr Leary, it does not appear there is such a significant disparity between what is currently set as the caretaker’s remuneration and the rate submitted by Mr Leary, that one could conclude the term as to remuneration does not achieve a fair and reasonable balance between the interests of the reviewing parties. This is particularly so when one gives the agreement between the parties appropriate weight.
Tested against the preferred evidence of Mr Leary, I do not consider:
· that the reviewable term as to remuneration imposes conditions that are unreasonably difficult to comply with or are not necessary and reasonable for the protection of the legitimate interests of a reviewing party;
· that the consequence of complying with the reviewable term as to remuneration is unfairly harsh or beneficial to a reviewing party; or
· that the reviewable term is inappropriate for the scheme.
For these reasons, I find that the term as to remuneration in the Caretaking Agreement is fair and reasonable and that as at the time relevant to this review the current remuneration of $95,864.76 is fair and reasonable. I can find no good reason to disturb the current remuneration term in the Agreement.
I have had regard to the fact that the expiry date of the Agreement is 16 November, 2033. There is a long period of the term remaining, during which the applicant can enjoy certainty and security of income. That is a considerable benefit to be taken into account when seeking to strike a reasonable balance between the interests of the reviewing parties. It is a reason why the remuneration rate need not be increased.
Also relevant is the fact that there is an assured annual increase to the remuneration rate by the greater of the Consumer Price Index (All Group) for Brisbane (CPI), or 5%.
The respondent has sought an order that clause 4(b) of Schedule Three of the Agreement be omitted to remove the entitlement to an increase of 5% if that is greater than the CPI. The applicant makes the point that the only evidence given in relation to this point was from Mr Leary to the effect that 5% was “a little excessive”. The issue was not addressed in his written report.
I accept the submission of the applicant that I would need more evidence to interfere with a commercial agreement. The principle in the High Point case that the agreement needs to be given due weight is again relevant.
I accept the applicant’s submission that the annual increase is a factor to be taken into account when considering the review criteria under s 134 of the BCCM Act. I have done so. The annual increase entitlement supports my view that an increased remuneration is not fair or reasonable.
Orders
On the basis of my finding that the remuneration rate is fair and reasonable the question of interest does not fall to be decided.
The applicant has sought an order that the respondent pay its costs of and incidental to the proceedings on a standard basis. The respondent has indicated that it will await the outcome of the application before making any submission in relation to costs.
I order that no amendment be made to the reviewable term of the Caretaking Agreement between the applicant and the respondent as to the rate of remuneration or method of review set out in Clause 4 of Schedule Three to the Agreement.
I order that the applicant and respondent each file and serve any submissions in relation to costs by 20 September, 2012 and any reply by 27 September, 2012.
[i] Leary and Partners Pty Ltd report, dated 12 April, 2011 at page 6.
[ii] [2006] QBCCmr 287.
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