Lawand Property Management Pty Ltd ATF Lawand Property Family Trust v Body Corporate for Paradise Palms CTS 23869
[2012] QCAT 669
| CITATION: | Lawand Property Management Pty Ltd ATF Lawand Property Family Trust v Body Corporate for Paradise Palms CTS 23869 [2012] QCAT 669 |
| PARTIES: | Lawand Property Management Pty Ltd ATF Lawand Property Family Trust (Applicant) |
| v | |
| Body Corporate for Paradise Palms CTS 23869 (Respondent) |
| APPLICATION NUMBER: | OCL102-12 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 12 November 2012 |
| HEARD AT: | Brisbane |
| DECISION OF: | Charles Brabazon QC, Member |
| DELIVERED ON: | 19 December 2012 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The application for an injunction to restrain the body corporate of “Paradise Palms” from considering Motion 13 is dismissed. 2. The second and third parts of by-law 30 of “Paradise Palms” are invalid. |
| CATCHWORDS: | REAL PROPERTY – STRATA AND RELATED TITLES – MANAGEMENT AND CONTROL – BODY CORPORATE: POWERS, DUTIES AND LIABILITIES – where Applicant purchased lot and management rights in property – where management agreements were for three years with option to renew – where both parties overlooked option to renew – where body corporate became aware that option to renew had not been extended – where body corporate asserted that caretaking arrangement had continued after expiry on a month-to-month basis – where body corporate sought to terminate monthly caretaking arrangement – where Applicant alleges body corporate should be estopped from terminating arrangement – whether grounds for injunction to restrain body corporate from considering motion to terminate caretaking arrangement – whether by-law purporting to regulate use of property is valid Body Corporate and Community Management Act 1997, ss 149B, 169, 180, Schedule 6 Mineralogy Pty Ltd v Body Corporate for “The Lakes Coolum” [2002] QCA 550 |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Miss S McNeil of Counsel |
| RESPONDENT: | Mr A Lonergan of Counsel |
REASONS FOR DECISION
The Issues
Lawand Property Management Pty Ltd (‘LPM’) is a company controlled by Mr and Mrs Toufic Lawand. LPM owns Lot 1 in a strata title building called Paradise Palms, and wishes to be the continuing caretaker and letting agent for Paradise Palms.
However, the body corporate of Paradise Palms asserts that LPM has lost any entitlement to keep the management and letting rights.
In response, LPM asserts that the body corporate has behaved in such a way that it is now estopped from relying on any legal right it may have had to insist that LPM give up the management rights.
In order to determine how the matter is to be resolved, it is necessary to look closely at the facts.
Jurisdiction
A preliminary submission was made to the effect that QCAT did not have jurisdiction to decide this dispute. The written application lodged by LPM says that s 149B of the Body Corporate and Community Management Act 1997 (‘BCCM Act’) applies, thereby granting QCAT jurisdiction to determine the matter:
149B Specialist adjudication or QCAT jurisdiction
(1) This section applies to a dispute about a claimed or anticipated contractual matter about—
(a) the engagement of a person as a body corporate manager or caretaking service contractor for a community titles scheme; or
(b) the authorisation of a person as a letting agent for a community titles scheme.
(2) A party to the dispute may apply—
(a) under chapter 6, for an order of a specialist adjudicator to resolve the dispute; or
(b) as provided under the QCAT Act, for an order of QCAT exercising the tribunal’s original jurisdiction to resolve the dispute.
Schedule 6 of the BCCM Act says that the term “contractual matter” in relation to the engagement or authorisation of a body corporate manager, service contractor or letting agent, means—
(a) a contravention of the terms of the engagement or authorisation; or
(b) the termination of the engagement or authorisation; or
(c) the exercise of rights or powers under the terms of the engagement or authorisation; or
(d) the performance of duties under the terms of the engagement or authorisation.
It is true that the contract expired on 31 October 2010. However, the whole purpose of the estoppel claim is to have that contract, or the next three years extension, restored for the benefit of LPM. It seems clear enough that the present claim amounts to an “anticipated contractual matter” as it is a claim about the “exercise of rights or powers under the terms of the engagement”.
It follows that QCAT has jurisdiction to deal with this dispute.
The Management Contracts
In March 2008 LPM spent $1,325,000 buying lot 1 and the management rights in Paradise Palms ($995,000 of that sum was for the purchase of the management rights).
The management agreements were for three years, expiring on 31 October 2010. The agreements provided for three options to renew, each for five years.
On 1 July 2008 the body corporate consented to the assignment of those agreements to LPM. The body corporate knew about the terms of the original agreements, including the options to renew the agreements.
An unusual feature of this dispute is the fact that each side forgot or overlooked the significance of 31 October 2010. LPM did not exercise its option to review the caretaker agreement (cl 2) and the letting agreement (cl 2).
For a time, each side went on as if the agreements were in force. LPM’s salary continued to be paid each month. The Body Corporate at an AGM of 27 October 2011 formally agreed to an increase in LPM’s remuneration according to the agreements. It was submitted here for the body corporate that the agreements had unknowingly became agreements on a month to month basis.
Mr Lawand realized that the options had not been exercised around March or April 2011. He spoke to his solicitor about that time. He had been taking legal advice about LPM’s purchase of the management rights for two other strata schemes – the contracts for those purchases were entered into on 4 February and 10 March 2011.
According to Mr Lawand, he entered into the other contracts by 10 March and then received his solicitors’ advice in late March or early April. The other contracts were signed before he realized the present difficulties.
His solicitor then wrote to the body corporate manager, Strata Sphere, on 2 June 2011. The letter requested Strata Sphere to ask the Paradise Palms committee to call an EGM. It enclosed a Deed of Authorisation, a Deed of Engagement and a proposed motion, with an explanatory note.
Counsel for the body corporate criticised the documents’ lack of candour in not plainly admitting that the option had been overlooked.
A recital to the Deed of Authorisation referred to the management rights as extending “for a term of 3 years from 1 November 2007 and ending on 31 October 2010 with certain option periods”. A copy of that document was attached. The recital went on, “the body corporate has resolved to re-adopt the letting authority … attached to this Deed … on the same terms and conditions contained in the setting Authority except as follows…”
Then followed a proposal for the appointment of the letting agent for 10 years from 1 November 2010.
A further condition to the option to renew stated:
The parties agree that the agreement contained in this Deed replaces the (old agreement), and the (old agreement) has now come to an end, except to the extent that it is reinstated in this Deed.
The Deed of Engagement was worded in similar terms. Mr Lawand took these documents to a body corporate committee meeting on 5 July 2011. There was a debate about their presentation to an EGM or the AGM. It seems likely that he did not literally say that the time to extend the agreements had expired. Ms Young, a member of the committee, did not fully understand the meaning of the documents – she was used to relying on Strata Sphere’s advice about such matters.
On 30 August 2011 the body corporate issued a “Remedial Action Notice” to Lawand. It complained about breaches of both the caretaking and letting agreements. It stated: “if LPM fails to comply within the period of notice, the body corporate may terminate the letting Authorities and Caretaker’s Agreement”.
Evidently, as at 30 August 2011 the body corporate was continuing to act on the belief that the two agreements were still in force. The usual relationship between the Lawands and the body corporate continued. Ms Lawand attended committee meetings dealing with body corporate issues and responsibilities.
In late 2011 the body corporate committee published a 2011 report. It said nothing about the contracts between LPM and the body corporate, or any termination of those contracts. The remedial action notice was mentioned. There was no ongoing complaint about it or mention of any termination of the contracts. The report referred to “looking ahead”, but it did not mention any intended resolution against LPM’s tenure.
LPM took steps to comply with the notice. The effect of the notice was withdrawn by the Body Corporate.
The AGM of the body corporate was held on 27 October 2011. Up to that time, the Committee had received no advice from Strata Sphere to the effect that the options to extend had not been exercised. A resolution proposing new management and letting contracts was rejected. There was discussion about better communications between Ms Lawand and the committee, and regarding the appointment of three liaison officers to allow more regular communication between the committee and Ms Lawand.
At that AGM, Mrs Judith Young was appointed secretary.
Ms Young then started to review the body corporate’s position. She noticed that the two agreements had expired. She contacted Strata Sphere, who told her for the first time that the options had not been exercised. On 24 November 2011 she advised the Committee about the true position.
On 13 January 2012 the body corporate wrote to LPM, proposing its engagement as caretaker for a further month, from 1 February to 29 February 2012. That proposal was accepted.
The Committee retained Brisbane solicitors. They wrote to Lawand Property Management on 16 December 2011. Their letter asserted that LPM had been operating on a month to month basis, and that, “the body corporate hereby terminates the month to month arrangement with an effective determination date of 31 January 2012”. The letter stated that the agreement expired on 31 October 2010, and that Lawand has been operating as a resident unit manager for the scheme on a month to month basis.
On 24 February 2012 the body corporate’s solicitors advised that the body corporate would not be renewing the monthly caretaking arrangement after 29 February 2012.
Then followed a lengthy period in which LPM sought the support of the unit owners. Its solicitors wrote and requested the holding of an EGM. If LPM could persuade a majority to vote for its retention, then its difficulties would be at an end.
The EGM was finally held on 12 September 2012. LPM’s motions, which would have secured its position, were defeated.
The AGM scheduled for 22 October 2012 would have discussed motions proposing that the caretaking and letting agreements be entered into with other applicants for these positions. However, that meeting was not held because of these proceedings.
When Mr Lawand came to realize the difficulty facing LPM, he said nothing about it to any member of the Committee. For example, Ms Young did not appreciate the position LPM was in by the time of the meeting of 24 November 2011.
Counsel for the body corporate submitted that Mr Lawand and his solicitors had acted in a deceptive way in not making the position of LPM quite clear when asking for a new legal arrangement – a bold suggestion that also extended the length of the purposed management agreement.
It is true, to take one case, that Ms Young did not understand the difficult position that LPM was in. However, Mr Lawand and his solicitors must have known that the professional body corporate manager was available to give advice to the Committee. The proposals put forward by his solicitors were not dishonest, though expressed in cautious and guarded language that did not literally state that the option to renew had expired because of an oversight. LPM should not be penalised for failing to state plainly the difficulty that it was in.
There is no good reason to link the purchase of the additional management rights to the behaviour of the body corporate. There is, at best, only the slim evidence that the body corporate knew what Mr Lawand was going to do. There is no evidence to show that the body corporate encouraged any assumption that he might have made by saying nothing to him.
I find that there is no basis to find that the body corporate encouraged Mr Lawand to take those steps, to the extent that it would be improper for it now to depart from that position.
Estoppel
Ms Lawand’s purchases of management rights and units in “Sunrise” and “Orchard Park” were entered into between 4 February and 10 March 2011. It might be accepted, for present purposes, that the Committee for Paradise Palms knew about those purchases because of discussions between Mr Lawand, Judy Young, David Filmer, and Shane Barton. The purchases meant that LPM had to expend some $3,464,000.
Mr Lawand says that, had there been any doubt concerning the continued existence and validity of the Paradise Palms management rights, these purchases would not have proceeded. There is no reason to doubt that assertion. It also demonstrates, as the dates suggest, that he entered into these purchases before learning about the failure to exercise the option to review. He did learn about that, by about April 2011.
So, from April 2011 to 24 November 2011, the body corporate was unaware of the failure to renew the contract. It was “business as usual” for the body corporate. Mr Lawand and his solicitor set out to rescue his position by proposing the extended agreement, framed in subtle language by his solicitor. That period cannot be regarded as raising any sort of estoppel by conduct by the body corporate. Mr Lawand knew it was ignorant of the true position, after speaking to his solicitor in about April 2010.
Some 11 months has passed, from 16 December 2011 to the present time. The body corporate has made its position plain – LPM might stay for a short time, but its long term contracts would not be renewed.
In this case, the body of law around “an estoppel” can be shortly expressed. If LPM relied on the body corporate’s conduct or promises about long term contracts to the extent that it would suffer an unfair detriment if the body corporate changed its position then the body corporate might be “estopped” from changing its positions.
An authoritative explanation of the estoppel principle is that by Justice Priestly of the Federal Court in Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd 153 ALR 198 at 234:
For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable.
Here, the body corporate made no encouraging representations up to 16 December 2010. After that, despite LPM’s efforts to retrieve its position, it made no commitment to secure LPM’s future. On the contrary, despite some delays and hesitation, it refused to accept LPM’s long-term claims. It is not now estopped from demanding LPM’s departure. The body corporate has done nothing that is unconscionable.
By-law 30
Attention was also paid to by-law 30 of the applicable by-laws:
30 Management / Letting Unit
Lot 1 may be used for residential purposes and for the purposes of management of the Scheme and/or for the letting of lots in the Scheme on behalf of the owners and/or the provision of such services as the Body Corporate may from time to time determine to occupants of lots in the scheme.
For the purposes aforesaid, the Body Corporate shall grant to the owner or occupier of Lot 1 the right to carry on in the Scheme the business of managing and/or letting of lots in the scheme and for that purpose, may enter into, from time to time, an appropriate agreement or agreements on such terms and conditions as the Body Corporate may deem fit.
The Body Corporate will not allow any person or corporation to use any part of the common property to conduct the business of the letting of lots within the scheme and/or the providing of any of the services referred to in this By-law.
The relevant question here is this: is by-law 30 valid and enforceable or is it invalid, and of no lawful effect?
By-law 30 is intended to prohibit the use of common property for the purposes of building management and the letting of lots. Those activities may be carried on lot 1.
Section 169(b) of the BCCM Act provides for the regulation of the use and enjoyment of lots included in the scheme and common property. Regulation is not the same things as prohibition. A by-law is invalid if it only prohibits, rather than regulates – see the decision of the Court of Appeal in Mineralogy v The Body Corporate for “The Lakes Coolum” [2002] QCA 550. In that case, the by-law set out to control the appearance of houses that could be built within scheme land. The by-law regulated rather than prohibited as the committee was required to apply certain standards and make a reasonable decision. Here, by-law 30 gives the committee no discretion to allow letting or management activities on the common property. That is a prohibition, so that part of the by-law is invalid. Section 180(7) of the BCCM provides that:
A by-law must not be oppressive or unreasonable, having regard to the interests of all owners and occupiers of lots included in the scheme and the use of the common property for the scheme.
It seems clear that by-law 30 cannot stand if it is capable of being “oppressive or unreasonable”. For example, the incapacity of the owners of Lot 1, through accident or injury or enforced absence, would make the management of the property unworkable. That situation has arisen in this case.
Section 112 of the Body Corporate and Community Management (Accommodation Module) Regulation 2008 deals with the appointment of a letting agent or body corporate manager. The appointment requires an ordinary resolution by secret ballot at a general meeting. It can be seen that by-law 30 is inconsistent with those provisions. In this case, the owners have resolved not to authorise LPM as a letting agent. It follows that by-law 30 is invalid.
For the reasons set out above, the second and third parts of the relevant by-law is invalid.
Orders
The application for an injunction to restrain the body corporate for “Paradise Palms” from considering motion 13 is dismissed.
The second and thirds parts of by-law 30 of “Paradise Palms” are invalid.
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