The Sands Gold Coast Pty Ltd v Body Corporate for the Sands [No 2]
[2016] QCAT 365
•22 September 2016
| CITATION: | The Sands Gold Coast Pty Ltd v Body Corporate for the Sands [No 2] [2016] QCAT 365 |
| PARTIES: | The Sands Gold Coast Pty Ltd (Applicant) |
| v | |
| The Body Corporate for The Sands CTS 14967 (Respondent) |
| APPLICATION NUMBER: | OCL026-14 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 23 to 27 May 2016 |
| HEARD AT: | Brisbane |
| DECISION OF: | Member Gordon |
| DELIVERED ON: | 22 September 2016 |
| DELIVERED AT: | Brisbane |
| ORDERS MADE: | 1. The body corporate may not give effect to the resolution to terminate the Ground Maintenance Contract dated 20 April 2012 which was passed at the Annual General Meeting on 28 March 2014. 2. The body corporate may give effect to the resolution to terminate the Ground Maintenance Contract dated 20 April 2012 (relying on three breach notices within six months) which was passed at the Extraordinary General Meeting on 24 June 2014. 3. The injunction granted on 24 June 2014 is lifted. 4. Unless otherwise ordered by the Tribunal, any applications on the question of costs (including any interlocutory costs and the costs of and occasioned by the application for miscellaneous matters filed on 6 June 2016) shall be made by 18 November 2016. |
| CATCHWORDS: | REAL PROPERTY – STRATA AND RELATED TITLES – MANAGEMENT AND CONTROL - BODY CORPORATE: POWERS, DUTIES AND LIABILITIES – where body corporate wishing to terminate service contractor contract – where body corporate issued remedial action notices under section 131 of the Standard Module – whether contractor was in breach – whether notices complied with section 131 by giving sufficient time or were sufficiently accurate and clear – whether body corporate acted reasonably - whether body corporate entitled to terminate REAL PROPERTY – STRATA AND RELATED TITLES – MANAGEMENT AND CONTROL - BODY CORPORATE: POWERS, DUTIES AND LIABILITIES – where body corporate wishing to terminate service contractor contract – where contract provides that body corporate could terminate if it issued three remedial action notices in a six month period – whether this contractual provision could be relied on – whether three valid notices were served – whether reasonable to issue a number of notices - whether body corporate entitled to terminate Body Corporate and Community Management Act 1997 (Qld) s 94, s 122, s 318 The Sands Gold Coast Pty Ltd v Body Corporate for the Sands CTS 14967 [2016] QCAT 069 referred to |
APPEARANCES:
| APPLICANT: | B W J Kidston (counsel) instructed by Mahoneys |
| RESPONDENT: | J C Faulkner (counsel) instructed by Mathews Hunt Legal |
REASONS FOR DECISION
This decision concerns the Sands Apartments complex in Surfers Paradise. This is a 10 storey property standing between Orchid Avenue and the Esplanade, which has 99 units. At the time of the events with which this decision is concerned it was 48 years old.
The Applicant, The Sands Gold Coast Pty Ltd, contracted with The Body Corporate for The Sands, (amongst other things) “to the best ability manage the Common Property and ensure that it is kept in first class order and repair”. The body corporate says that the Applicant failed to fulfil this and its other obligations and that it is entitled to terminate the Applicant’s contract.
In order to be able to terminate the contract the body corporate needed to serve one or more remedial action notices (“RANs”) on the Applicant.
The body corporate served two RANs alleging breaches by the Applicant of its gardening, cleaning and repair obligations. It also served two other RANs claiming breaches in other areas of the Applicants work. And it served four directions seeking information and documents from the Applicant. When these were not answered in the time allowed, the body corporate served four more RANs because of this.
The Applicant claims that it was not in breach of contract in any significant way sufficient to enable the RANs validly to be served at all. In order to prove breaches in respect of gardening cleaning and repair, the body corporate relies on the results of spot checks carried out by an expert who identified issues at the time of the inspection. From these results I am asked to find that the Applicant was in breach.
The Applicant takes many technical points about the RANs going to their validity. It is said that they were internally inconsistent about the time to remedy, did not comply with statutory requirements in that respect, and in any case did not give sufficient time to remedy. The notices are also said to have been inaccurate and unclear, affecting their validity.
Having served the RANs, the body corporate resolved to terminate the Applicant’s contract. It took two separate routes to try to do so: a statutory route and a contractual route. The Applicant says that neither of these routes were effective in law.
The Applicant says that the body corporate’s attempts to terminate the contract and the way this was done was unreasonable and unfair. It says the body corporate must act reasonably and fairly by statute and also this should be implied into the contract.
In order to resolve these issues between the parties, I shall set out the background facts in more detail, then set out the precise issues to be decided before attempting to deal with them.
The background facts
The body corporate was created pursuant to, and governed by, the provisions of the Body Corporate and Community Management Act 1997 (Qld) under a community titles scheme for the complex.
Ms Rockett, director of the Applicant, owned 12 or 13 units in the complex under various forms of ownership. For many years, the Applicant had performed caretaking and management duties for the complex under two separate contracts.
At its AGM on 29 March 2012 the body corporate resolved that the Applicant’s contracts be renewed for a further 10 years.
At the time with which I am concerned, there were three contracts current between the Applicant and the body corporate:-
(a) Ground Maintenance Contract under a Deed of Engagement dated 20 April 2012 (the GMC). This replaced an earlier contract dated 10 June 2003. It governed the Applicant’s obligations with respect to gardening, cleaning and repair of the common property of the complex, and other duties, and continued for a period of 10 years commencing on 1 January 2012.
(b) Management Agreement under a Deed of Engagement of the dated 20 April 2012. This replaced an earlier contract dated 11 November 2000. This appointed the Applicant as manager of the scheme for the complex and continued for a period of 10 years commencing on 1 January 2012. The Applicant’s obligations under this contract were to carry out various tasks as listed. In the context of this matter, it is significant that one of these tasks was to supervise the performance of “cleaning, maintenance and gardening”. In other words, the Applicant was obliged to supervise its own work done under the GMC.
(c) Letting agreement under a Deed of Authorisation dated 20 April 2012.
The dispute before me only concerns the GMC. Although the body corporate did express unhappiness about the way the Applicant was performing the Management Agreement, in the resolutions that I am asked to consider, it sought only to terminate the GMC.
The formal processes which the body corporate followed to terminate the GMC and which are relevant to this matter started in September 2013 when the body corporate requested David Leary of Leary & Partners, an expert in these matters, to inspect the common property of the complex and to prepare a report about the Applicant’s failures to comply with its obligations.
This report identified 101 ground maintenance items which, according to Mr Leary, needed attention. On 1 November 2013 the body corporate sent Mr Leary’s report to the Applicant asking it to attend to the issues within 28 days.
Mr Leary then carried out a second inspection and found 74 items not attended to. On 30 January 2014 the body corporate gave the Applicant a remedial action notice (RAN) requiring these issues to be remedied within 21 days. The parties have called this the “Leary Report Notice”. In these reasons I am going to call this “the first Leary report RAN”.
Following a further inspection by Mr Leary, on 24 March 2014 the body corporate gave the Applicant another RAN concerning ground maintenance. The parties have called this “the Leary Report 26 February 2014 Notice”. In these reasons I am going to call it “the second Leary report RAN”.
Also on 24 March 2014, the body corporate gave the Application a RAN complaining about rubbish being placed in the skip bin. This is called the Skip Bin RAN.
Also on 24 March 2014, the body corporate gave the Applicant four directions seeking information and documents as they were entitled to do under the GMC. They asked for the information and documents to be provided within 7 days. These directions covered the following matters:-
(a) Gardening.
(b) Cleaning.
(c) Pumps and motors.
(d) Fire fighting equipment.
When the Applicant failed to provide the information and documents requested in the directions, on 16 May 2014 the body corporate gave the Applicant four RANs alleging breaches of the GMC because of this failure.
On 23 May 2014 the body corporate gave the Applicant a RAN based on a notice of non-compliance issued by the Queensland Fire and Rescue Service. This is called the QFRS RAN.
The RANs were responded to by the Applicant in detail through solicitors. The Applicant accepted some items, but challenged others on the grounds that it was not obliged to do the work or it was not a defect or that the work had been done. The Applicant’s solicitors vigorously challenged the validity of those RANs which were based on the directions.
On 28 March 2014 the body corporate held an Annual General Meeting. The meeting resolved to terminate the GMC due to the alleged failure of the Applicant to comply with the first Leary report RAN. This resolution was not passed by secret ballot. This is relevant if the termination is regarded as being carried out under section 131 of the Standard Module because under that process, such resolutions should be passed by secret ballot.
On 24 June 2014 the body corporate held an Extraordinary General Meeting. At that meeting, the body corporate resolved to terminate the GMC pursuant to clause 8.1(c) of the GMC (relying on the fact of three RANs in a period of six months).
At that same meeting, in addition to, or as an alternative to the ground for termination under clause 8.1(c) of the GMC, the body corporate resolved to terminate the GMC under clause 8.1(d) (gross negligence or incompetence in the performance of its duties).
The matter was brought to QCAT by the Applicant when it commenced proceedings on 26 March 2014 relying on section 149B of the Body Corporate and Community Management Act 1997. This gives the Tribunal jurisdiction to determine a dispute about a contractual matter about the engagement of a person as a body corporate manager or caretaking service contractor for a community titles scheme. The application (amongst other things) sought a declaration that the first Leary report RAN was invalid.
In that application the Applicant sought an interim order restraining the body corporate from giving effect to the motion (if passed at the AGM to be held two days later) to terminate the GMC in reliance on the first Leary report RAN. That order was granted on an interim basis on 27 March 2014. On 4 April 2014, by consent this order was continued until the determination of the proceedings.
On 20 June 2014 the Applicant filed an amended application before the Tribunal seeking a declaration that the other seven RANs were invalid and seeking an injunction to restrain any action based on them.
On 24 June 2014 there was a further order made by consent. This was an injunction restraining the body corporate from taking steps with respect to the seven other RANs and restraining the body corporate from giving effect to a motion (if passed at the EGM to be held that day) to terminate the GMC.
The history of the proceedings show therefore that the Applicant started proceedings in order to obtain the injunctions and to seek declarations about the validity of the RANs – this is relevant to the question of burden of proof considered below.
At one stage during the proceedings, the Applicant applied to strike out part of the body corporate’s response. The strike out was on the same grounds as I have considered in these reasons under “Is termination route 2 available to the body corporate?” The application to strike out failed because it was considered to be inappropriate to seek a strike out on matters which ought to be dealt with at final hearing.[1]
[1]The Sands Gold Coast Pty Ltd v Body Corporate for the Sands CTS 14967 [2016] QCAT 069.
The issues
The dispute is about whether the body corporate was entitled to resolve to terminate the GMC in the way it has done. To answer this, there are a number of technical issues to resolve. Counsel set out those issues in their own separate lists, but on day 2 of the hearing Mr Kidston on behalf of the Applicant presented a revised list of issues with which Mr Faulkner on behalf of the body corporate, was largely in agreement.
Whilst ultimately I shall be dealing with all the issues in counsel’s lists, in these reasons I am going to set out the issues in a slightly different way from counsel.
The first issue is whether the Applicant was in breach of the GMC so that the body corporate was entitled to give remedial action notices (RANs) in respect of pressed breaches[2] in the first Leary report RAN and so that it was entitled to give the other RANs. It is denied by the Applicant that this was the case.
[2]The pressed breaches are those which the Tribunal is asked by the parties to consider. There were other alleged breaches in the first Leary report RAN which neither party has asked the Tribunal to consider.
In deciding the first issue, I need to decide the extent of the Applicant’s obligations under the GMC. This is a matter of disagreement between the parties.
The issues then divide, because the body corporate relies on two different routes which it has taken, and may wish to take, to try to terminate the GMC. They are:-
Termination route 1: A statutory route under section 131 of the Standard Module, relying on the Applicant’s failure to remedy following a RAN.
Termination route 2: A contractual route under the terms of the GMC itself. This route has three sub routes: under clause 8.1(b) - relying on the Applicant’s failure to remedy following a RAN; under clause 8.1(c) – relying on the giving of three valid RANs in a six month period, and under clause 8.1(d) – relying on the Applicant’s gross negligence or incompetence.
The issues under termination route 1 are whether the RANs complied with the provisions of section 131 of the Standard Module and if so, whether the Applicant remedied within the time to remedy allowed by the RANs. The RANs are challenged as being internally inconsistent about the time to remedy and not giving enough time to remedy. With respect to the first Leary report RAN there is an issue whether, in the light of any technical defects and the need for a secret ballot, the body corporate was entitled to resolve to terminate the GMC as it attempted to do on 28 March 2014. With respect to the other RANs there is an issue whether, in the light of any technical defects in those RANs, the body corporate would be entitled to resolve to terminate the GMC using termination route 1.
As for termination route 2, the Applicant challenges this route entirely. It contends that the route is not available at all. This argument is based on the statutory provisions which, it is said, do not permit the parties to agree a termination process other than that in section 131 of the Standard Module. If the route is available, there is an issue as to whether the RANs satisfied the requirements of the GMC (in so far as that was necessary). Then there is an issue whether, in the light of these technical issues, the body corporate was entitled to resolve to terminate the GMC as it attempted to do on 24 June 2014 or whether it is now entitled to do so using termination route 2.
Finally, there is an issue which applies to both termination routes: whether overall, termination of the GMC was, or would be, reasonable. It is also said that some of the steps the body corporate has taken to get itself in a position to terminate the GMC (if this is the case) were not reasonable. The Applicant says that if the statutory obligation of reasonableness does not cover the events in this case, there is a term of fairness and reasonableness which should be implied into the GMC.
In order to resolve these issues, I need to examine:-
(a)each alleged breach set out in the RANs, and decide for each one whether the Applicant was in fact in breach as alleged and if so, whether the Applicant remedied the breach in the time to remedy in the RAN; and
(b)each RAN and decide whether sufficient time to remedy was given by the RAN and otherwise whether the RAN satisfied the statutory or contractual requirements as the case may be.
Before examining the breaches and RANs in this way, I am going to:-
(a)set out the statutory regime in section 131 of the Standard Module;
(b)set out the provisions of the GMC which apply - in doing so, I can deal with the Applicant’s challenge to termination route 2;
(c)consider the extent of the Applicant’s obligations under the GMC;
(d)consider how accurate a RAN must be (when setting out the breaches and what is required to remedy the breaches); and
(e)consider whether the time to remedy in the RANs complied with section 131(4)(c) of the Standard Module;
(f)consider whether in any case, the time to remedy in a RAN needs to be reasonable.
On the question of reasonableness, I shall consider the extent of the statutory requirement for the body corporate to act reasonably, and in that context whether a term of fairness and reasonableness should be implied into the GMC.
I also need to consider which side has the burden of proof on the question of reasonableness.
I shall also mention some other evidential issues that have arisen in this case.
Section 131 of the Standard Module
This concerns termination route 1 in this case. The route relies on RANs given by the body corporate to the Applicant. These RANs were, or purported to have been, given under section 131 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (Qld):-
131 Termination for failure to comply with remedial action notice
(1) The body corporate may terminate a person’s engagement as a body corporate manager or service contractor if the person (including, if the person is a corporation, a director of the corporation)—
(a) engages in misconduct, or is grossly negligent, in carrying out functions required under the engagement; or
(b) fails to carry out duties under the engagement; or
(c) contravenes—
(i) for the body corporate manager—the code of conduct for body corporate managers and caretaking service contractors; or
(ii) for a service contractor who is a caretaking service contractor—the code of conduct for body corporate managers and caretaking service contractors or the code of conduct for letting agents; or
(d) fails to comply with section 133(2), 134(2) or 135(2); or
(e) for a body corporate manager—
(i) fails to comply with section 147(2); or
(ii) if the body corporate manager is acting under a chapter 3, part 5 engagement—fails to give a report as required under section 62.
(2) Also, the body corporate may terminate a person’s authorisation as a letting agent if the person (including, if the person is a corporation, a director of the corporation)—
(a) engages in misconduct, or is grossly negligent, in carrying out obligations, if any, under the authorisation; or
(b) fails to carry out duties under the authorisation; or
(c) contravenes the code of conduct for letting agents or, for a caretaking service contractor, the code of conduct for body corporate managers and caretaking service contractors; or
(d) for a caretaking service contractor—fails to comply with section 133(2), 134(2) or 135(2).
(3) The body corporate may act under subsection (1) or (2) only if—
(a) the body corporate has given the person a remedial action notice in accordance with subsection (4); and
(b) the person fails to comply with the remedial action notice within the period stated in the notice; and
(c) the termination is approved by ordinary resolution of the body corporate; and
(d) for the termination of a person’s engagement as a service contractor if the person is a caretaking service contractor, or the termination of a person’s authorisation as a letting agent—the motion to approve the termination is decided by secret ballot.
(4) For subsection (3), a remedial action notice is a written notice stating each of the following—
(a) that the body corporate believes the person has acted—
(i) for a body corporate manager or a service contractor—in a way mentioned in subsection (1)(a) to (e); or
(ii) for a letting agent—in a way mentioned in subsection (2)(a) to (d);
(b) details of the action sufficient to identify—
(i) the misconduct or gross negligence the body corporate believes has happened; or
(ii) the duties the body corporate believes have not been carried out; or
(iii)the provision of the code of conduct or this regulation the body corporate believes has been contravened;
(c) that the person must, within the period stated in the notice but not less than 14 days after the notice is given to the person—
(i) remedy the misconduct or gross negligence; or
(ii) carry out the duties; or
(iii) remedy the contravention;
(d) that if the person does not comply with the notice in the period stated, the body corporate may terminate the engagement or authorisation.
(5) Despite subsection (3)(a), if the person is a body corporate manager acting under a chapter 3, part 5 engagement, the owners of at least one-half of the lots included in the community titles scheme may, on behalf of the body corporate, give the person a remedial action notice.
It is agreed by the parties that the Applicant was a service contractor and that the GMC was an engagement within section 131(1). It is not agreed that the Applicant had failed to carry out its duties so as to come within that subsection.
There are two other things of importance in these provisions which have an impact in this case. The first is that subsection (4) requires the RAN to be in a certain form. Here the Applicant says that none of the RANs complied with the requirements of that subsection. In particular, it is said that they did not comply with the requirement as to time to remedy required by paragraph (c) of subsection (4).
This issue about time arises because in the RANs the time to remedy was stated in different ways. It is said that the descriptions of the time to remedy were internally inconsistent and in any case the time to remedy was insufficient and therefore the RANs are invalid.
The second thing of importance here is the need for a secret ballot which is required by section 131(3)(d) when terminating the contract of a caretaking service contractor. It is accepted by both sides that there was no secret ballot when the resolutions were made by the body corporate to terminate the GMC. The requirements of a secret ballot are in sections 89 and 90 of the Standard Module and require a returning officer to ensure that the identity of the person voting is not disclosed.
Is termination route 2 available to the body corporate?
This is the body corporate’s second route for termination of the GMC. It relies on the terms of the GMC itself which provide, it submits, for three standalone methods to terminate the GMC – in clause 8.1(b), clause 8.1(c) and clause 8.1(d).
Clause 8.1 was in the earlier Ground Maintenance Contract dated 10 June 2003. This clause was continued in effect by the 20 April 2012 deed.
Clause 8.1 reads as follows:-
8. TERMINATION
8.1 This Contract may be terminated by the Body Corporate pursuant to an ordinary resolution in general meeting by notice in writing to the Manager in any of the following events:
(a) In the event of the Ground Maintenance Person purporting to assign this Contract without the prior consent in writing of the Body Corporate.
(b) If the Ground Maintenance Person shall default in the performance of the duties of the Ground Maintenance Person pursuant to this Contract and such failure or neglect to remedy the default shall continue for a further period of fourteen (14) days after notice in writing shall have been given to the Ground Maintenance Person by the Body Corporate specifying the default and clearly stating what has to be done by the Ground Maintenance Person to remedy the default.
(c) If the Ground Maintenance Person shall receive three (3) valid notices under clause 8(b) in any of six (6) month period.
(d) If the Ground Maintenance Person is grossly negligent or incompetent in the performance of his duties.
(e) and (f) cover insolvency etc and are not pertinent to these reasons
Clause 8.1(b) applies following a default notice as described in that clause remaining unremedied after 14 days; clause 8.1(c) applies if there are three valid default notices in a six month period. And clause 8.1(d) applies if there is gross negligence or incompetence.
All these methods of termination, the body corporate submits, are available to it, having regard to the terms of section 129 of the Standard Module, which provides:-
129 Termination under the Act, by agreement etc.
(1) The body corporate may terminate a person’s engagement as a body corporate manager or service contractor, or authorisation as a letting agent—
(a) under the Act; or
Note—
See, for example, section 145 (Termination of letting agent authorisation if management rights not transferred) of the Act.(b) by agreement; or
(c) under the engagement or authorisation.
(2) The body corporate may act under subsection (1) only if the termination is approved by ordinary resolution of the body corporate.
The Applicant responds to this by contending that despite section 129, clauses 8.1(b), (c) and (d) are invalid in the face of the Act. The submissions made by Mr Kidston on behalf of the Applicant are as follows:-
(a) Section 318 of the Act provides that parties cannot waive or limit their rights under the Act or contract out of the provisions of the Act. The provisions of the Act include the termination process required by section 131 of the Standard Module. And in clauses 8.1(b), (c) and (d) the parties attempt to agree a different termination process than that provided by section 131 of the Standard Module.
(b) Although section 129 of the Standard Module seems expressly to permit the parties to agree a different termination process, there is no power in the Act which authorises the Standard Module to permit this.
(c) In any case, section 131 of the Act is part of a set of prescribed circumstances which govern all contracts of this kind and therefore applies to all such contracts irrespective of what the parties have agreed.
Section 318 is in these terms:-
318 Prevention of contracting out
A person can not waive, or limit the exercise of, rights under this Act or contract out of the provisions of this Act.The regulation making power in the Act is in section 122:-
122 Regulation module
(1) The regulation module applying to a community titles scheme may prescribe all or any of the following things about the engagement of a person as a body corporate manager or service contractor, or the authorisation of a person as a letting agent, for the scheme—
(a) requirements with which the engagement or authorisation must comply, including, for example, the term of the engagement or authorisation;
(b) consequences of not complying with the requirements mentioned in paragraph (a);
(c) extending or renewing the engagement or authorisation;
(d)particular circumstances under which the engagement or authorisation may or may not be terminated or transferred, despite anything in the engagement or authorisation or in another agreement or arrangement;
(e) disclosure requirements;
(f) provisions about the occupation of common property for the engagement or authorisation, including whether the provisions are the only way in which the occupation may be authorised;
(g) matters about a service contractor’s right of access over common property for performing obligations, other than an obligation to supply utility services, under the engagement.
(2) Subsection (3) applies to an engagement or authorisation if section 113 has previously applied to—
(a) the engagement or authorisation; or
(b) the extension of the term of the engagement or authorisation.
(3) The regulation module applying to a community titles scheme may also provide for the payment of an amount to the body corporate by the service contractor or letting agent under the engagement or authorisation if any rights under the engagement or authorisation are transferred to another entity within a period prescribed under the regulation module.
Mr Kidston submitted that there is no power in section 122 for the Standard Module to permit a derogation from section 131 of the Standard Module and section 318 of the Act.
The first thing to examine when considering whether the parties can agree their own termination process for a service contract is whether section 131 of the Standard Module (ignoring for the moment section 129 of the Standard Module) provides an exclusive framework for such terminations. There is nothing in the wording of section 131 saying that it must be used to terminate a service contract. Instead, subsections (1) and (2) say that they “may” be used. Subsection (3) says that if subsection (1) or (2) is used then certain steps must be taken. But it seems to me that if neither subsection (1) or (2) is used, then subsection (3) is not engaged.
But Mr Kidston argues that the intention of the legislature is to provide an exclusive framework providing a process for termination which must apply even if the parties agree otherwise. Whilst I would agree that because of section 318, the termination processes provided for in section 131 of the Standard Module cannot be contracted out of by the parties, this does not mean the parties cannot agree additional methods of termination.
Clause 8.1 does not attempt to contract out of the provisions of the Act, and I think it is difficult to say that clause 8.1 amounts to a waiver of, or a limitation of the exercise of rights, under the Act. Therefore clause 8.1 does not directly infringe section 318.
In any case, in my view section 129 of the Standard Module expressly provides that parties to a service contract can agree additional methods of termination. Section 129(1)(b) permits this to be “by agreement”. This would seem to apply where the parties agree to terminate by mutual agreement during the currency of the service contract. Allowing parties to a contract to do this makes perfect sense. Section 129(1)(c) permits the parties to agree termination “under the engagement or authorisation”, which must mean under the service contract itself.
But it is said that there is no power to make these provisions in section 129. Section 122 of the Act is the regulation making power. Section 122 allows the regulation module to govern certain aspects of the “engagement” of a service contractor. The word engagement is used in the Act widely, not only referring to the time of the actual appointment but also while it continues during the term. As can be seen from subsection (d) in section 122(1), the regulation module may also govern how the engagement may come to an end.
But it is said that subsection (d) in section 122(1) only permits “particular circumstances” of termination to be prescribed and permitting parties to agree their own methods of termination are not particular circumstances. It seems to me however, that permitting parties to agree an additional process of termination under the engagement [as section 129(1)(c) permits] does prescribe a particular circumstance.
Then it is said that the second clause in subsection (d) – “despite anything in the engagement or authorisation or in any agreement or arrangement” – demonstrates that subsection (d) is intended to be restrictive rather than enabling. But it seems to me that this simply means that the regulation module is capable of overriding any agreement between the parties in this respect. A simple example can be seen in section 129(2). This requires any termination under section 129 to be by ordinary resolution. This would appear to be a mandatory requirement capable of overriding the parties’ agreement to the contrary.
It follows that I do not accept the submission that section 129 of the Standard Module, in so far as it permits the parties to agree their own termination process, is beyond the power given by section 122 of the Act.
There is also a policy reason for allowing the parties to agree their own termination arrangements. Quite apart from the obvious sense in permitting parties to end a service contract by mutual agreement, the parties may well wish to provide for various contingencies not covered by the statutory provisions.
What the parties agreed here in clause 8.1(c), as submitted by Mr Faulkner, stops a contractor from continuously falling behind on its duties but then complying with a RAN at the last moment to avoid termination. Such an approach would be extremely inconvenient, time consuming and possibly expensive for the body corporate if it were allowed to continue. In a long contract like this such an approach could potentially continue for years. In an appropriate case, a clause like 8.1(c) stops this happening. The parties are of course free to include such a clause if they wish or exclude it if they wish. It would be one of the things which contribute to their decision whether to enter into the contract at all, or the correct remuneration to set.
For these reasons I do not regard clauses 8.1(b), (c) and (d) as invalid because of the statutory provisions.
The extent of the Applicant’s obligations under the GMC
The Applicant’s legal obligations under the GMC appear to be very wide. I say that for the following reasons.
The GMC was made by deed dated 20 April 2012. By clause 1 of this deed the Applicant was engaged:-
to look after and maintain the common property and other property of the Body Corporate for a period of ten (10) years commencing on the 1st day of January 2012 and expiring on the 31st day of December 2021 (“the Term”)
The Applicant’s main duties were spelt out paragraph (a) of clause 2(e):-
Generally, to the best ability manage the Common Property and ensure that it is kept in first class order and repair and protect the interests of the Common Property of the Body Corporate and the Owners of lots.
Of relevance to the directions which were given by the body corporate, paragraph (b) of clause 2(e) required the Applicant to:
Comply with all reasonable directions from time to time given by the Committee Appointee to the (Applicant) in and about the administration and management of the Common Property and the performance by the Body Corporate of its lawful obligations and duties.
Paragraph (c) of clause 2(e) required the Applicant to:-
Report promptly to the Committee Appointee on all things requiring repair and on all matters creating a hazard or danger and take remedial action where appropriate.
Of relevance also to at least one RAN, paragraph (d) of clause 2(e) required the Applicant to:
Ensure that all pumps and motors are operating properly and being serviced regularly.
Of relevance also to two RANs, paragraph (e) of clause 2(e) required the Applicant to:
Regularly inspect the firefighting equipment and ensure that the Fire Department inspections are made at prescribed intervals.
Of relevance to two items in the first Leary report RAN, paragraph (f) of clause 2(e) required the Applicant to:-
Ensure that all drainage is clear and functioning.
Paragraph (g) of clause 2(e) provided:-
The Ground Maintenance Person must be aware of the general condition of the Common Property and all service equipment used on the Common Property of the Body Corporate and so far as the Ground Maintenance Person is capable arrange for rectification by an appropriate person.
That clause appears to suggest that the Applicant would need to engage others if it could not itself carry out its obligations, although the clause would have been happier if the word “capable” had been “incapable”.
That this is indeed the intention of paragraph (g) of clause 2(e) appears from some provisions of an earlier deed dated 10 June 2003 which were adopted in the GMC, with some provisions removed or replaced.[3]
[3]As set out in clause 2.
Clause 3.1 of the earlier deed was one of the clauses which was adopted in the GMC. This provided:-
The Ground Maintenance Person must perform the duties in Schedule 3 personally or by agents, employees or contractors for the Ground Maintenance Person PROVIDED that the Ground Maintenance Person must adequately supervise and be aware of the performance of such persons.
The duty to clean was in clause 3.2 of the earlier deed. This was another clause which was adopted in the GMC. That provided:-
The Ground Maintenance Person must keep the Common Property and other property of the Body Corporate clean and tidy in accordance with the duties set out in Schedule 3.
Schedule 3 referred to in these two clauses and in other places in the earlier deed, was removed and replaced by a new schedule 3 in the new deed, which is also numbered clause 2(e) as referred to above.
Clause 3.4 of the earlier deed was another clause which was adopted in the GMC. This provided:-
The Body Corporate must pay for the materials, equipment and maintenance of equipment necessary to enable the Ground Maintenance Person to perform the Ground Maintenance Duties.
It was submitted by Mr Kidston that the words “to the best ability” in paragraph (a) of clause 2(e) modified the obligations somewhat, and meant that if the Applicant did not have the skills to something, then it would not need to do it. But this ignores paragraph (g) of clause 2(e) and clauses 3.1 and 3.4 of the earlier deed which were adopted in the GMC. It also introduces an element of uncertainty, because it would be very difficult to ascertain the limit of the Applicant’s skills bearing in mind it was a body corporate. And in the unlikely event that it was right to apply the test to the Applicant’s director, the same problem arises because Ms Rockett’s skills were not objectively identified. In my view, the meaning of the words “to the best ability”, in the light of the remainder of the GMC and those parts of the earlier contract adopted in the GMC, and therefore the objective intention of the parties to the GMC, is that the Applicant is obliged to do its best.
The obligation is therefore that the Applicant must do its best to keep the common property in first class order and repair and if necessary to engage others to achieve that. If others were engaged, then the body corporate would have to pay the cost of materials, but not the cost of labour which would have to be paid for by the Applicant.
The fact that the Applicant would be expected to engage others if necessary is, I think, consistent with the Management Agreement under which the Applicant was required to supervise the work done under the GMC. The existence of this second agreement which was also compensated by an annual sum, is strange, and meant that the Applicant had responsibility to supervise its own work. The supervisory role meant that the Applicant wearing its hat under the Management Agreement would have to ensure that the Applicant wearing its GMC hat engaged other contractors at the right time.
It was also submitted by Mr Kidston that the body corporate was estopped from requiring the Applicant to engage contractors to do work that it could not do itself. This estoppel, it was submitted, arose because the RANs did not require this. Mr Faulkner in reply, submitted that this fact merely went to reasonableness. The possibility of an estoppel arising was a new point which arose in submissions. It was not in the list of issues, and since evidence would be needed to support the point, it would need to be on that list if it were to be relied on. I do not think it is right for me to consider it.
The remedial action notices – how accurate do they need to be?
The Applicant challenged the validity of the RANs in many ways. It was said that they alleged duties which did not exist, contained allegations of breaches which had not happened, were internally inconsistent about the time to remedy, gave insufficient time to remedy, and were unclear as to the remedial action required. It was said therefore that they were invalid as RANs under section 131 of the Standard Module and could not be relied on as clause 8.1(b) RANs either.
In these reasons, apart from the inconsistency about time to remedy point, I have decided that these challenges are factually successful to a greater or lesser degree with respect to some of the RANs.
For each RAN therefore, it is necessary for me to consider in the light of any deficiencies in the RAN whether it was effective as a RAN under section 131 of the Standard Module, or under clause 8.1(b) of the contract. It comes down to the question how accurate must a RAN in this context be? I need to explain how I have approached the answer to this question.
Some, but not total, guidance is available from the authorities. Effectively both section 131 and clause 8.1(b) required the RAN to set out the breach, require a remedy, and to give a time for the remedy to happen. Authorities which consider other statutes and types of contracts which require the same things are therefore analogous.
The authorities are unanimous that the recipient of the RAN must be left with reasonable certainty about what it is necessary to do, although it will be for the recipient to decide how this can be achieved in a manner consistent with the contractual duties.[4]
[4]Fox v Jolly [1916] 1 AC 1 (English House of Lords: Lord Buckmaster LC at pages 11 and 13 speaking also for Lord Parker of Waddington, and Lord Parmoor at page 22).
The authorities are unanimous that a notice which accurately says that an amount of money is owed under a certain head, but exaggerates the amount owing, is not automatically invalid because of the inaccuracy. This has arisen for example in notices given by mortgagees prior to exercising a power of sale where interest has been incorrectly calculated, but it has also been applied to body corporate levies.[5]
[5]Body Corporate for Sunseeker Apartments CTS 618 v Jasen [2009] QDC 162: Newton DCJ.
The notice may be so inaccurate however, that the statutory requirements are not complied with. An example is Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 QdR 404 where the Full Court found the notice in that case to be bad because it failed to give the recipient any clear lead on the nature of the obligation which had to be fulfilled nor any clear appreciation of what was owing.
Thomas J giving judgment of the court said (at page 413):-
A question of fact and degree is involved in every case. The most relevant factors determining validity will be the extent of the error, and the capacity of the notice to give the mortgagor a reasonable opportunity to do what he is obliged to do.
In Deputy Commissioner of Taxation v Gruber (1998) 43 NSWLR 271 a case cited to me, the NSW Court of Appeal was considering notices to pay a tax penalty served under section 222AOC of the Income Tax Assessment Act 1936 (Cth). The main notice contained errors, including miscalculation of the sums demanded, and a failure to specify the date on which the tax fell due. Its validity was challenged. The Court found that whilst a notice does not have to be absolutely correct, it must fulfil its statutory purpose, which (in this instance) was to set out accurately the amount of the penalty that is to be paid. Errors in the amount were liable to mislead, and in this case left the recipient guessing as to the figures. If the incorrect information in the notice was removed then the sense, nature and substance of the document which remained was affected. These errors affected the notice to an extent which invalidated it.
A similar situation arose in Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd [2007] QSC 394 where the recipient of the notice was misled by the figures in the notice because it was not in a positon to verify them.
The above cases discuss errors in the figures. Here we have allegations of breaches which did not happen.
In this respect, it has been held in New South Wales that a notice which incorrectly identifies a default which is alleged to have occurred even if another default is correctly identified, will automatically be invalid because the statute requires the notice to identify the default.[6] This has also been said in Victoria.[7]
[6]The Court of Appeal in Websdale v S & J D Investments Pty Ltd (1991) 24 NSWLR 573 at 579C when expressly disapproving the contrary stated by Powell J in Mir Bros Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907 at [58].
[7]Croft J in Whild v GE Mortgage Solutions Ltd [2012] VSC 212.
The view in Queensland however, appears to be that a notice which refers to a default which did not in fact happen is not automatically invalid for that reason (provided of course there was some default which was properly identified).[8]
[8]It was accepted as common ground between the parties that a notice is not invalid in every case where it complains of a default which does not exist or which has been remedied: Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd [2007] QSC 394 at [86]. Also Ryrie DCJ in Wash Investments Pty Ltd & Ors v SCK Properties Ltd & Ors [2016] QDC 77 at [58] said “it is trite to say that a notice is not invalid in every case where it complains of a default which does not exist or which has been remedied, or where it demands an excessive sum”.
This approach is more consistent with the English authorities, that provided there is a breach identified in the notice and the recipient of the notice is given the chance to remedy that breach, then it does not matter that the notice contains other material which erroneously alleges other breaches; if it does, it simply means that the party giving the notice cannot ultimately rely on that other material. It does not invalidate the notice – the notice complies with the statutory requirements.[9]
[9]Pannell v City of London Brewery Co [1900] 1 Ch 496 at 499, approved in Fox at page 15. Also Blewitt v Blewitt [1936] 2 All ER 188 (English Court of Appeal, where a notice required work to be done which was beyond the covenant to repair in the lease). A notice which properly alleged a breach of duty which did exist but which also alleged a breach of a non-existent duty was found to be valid in Silvester v Ostrowska [1959] 3 All ER 642 (Official Referee) because it was a case seeking compensation only - the recipient’s property rights were not at risk and so the recipient would not ultimately be prejudiced by the error. Contra Guillemard v Silverthorne (1908) 99 LT 584 where the wrong lease was referred to in the notice, which therefore did not properly identify the breach as required by the statute – the notice was invalid.
The Queensland approach also permits some flexibility when considering notices and is helpful when considering a case such as this. It is possible to envisage a notice for example, which alleges 10 failures of varying importance. Some more trivial failures are found at the hearing not to have happened, or to be outside the contractor’s responsibility. The Queensland approach allows such a notice to be regarded in the same way as a notice which has exaggerated the extent of a single breach (it would not automatically be invalid).
The authorities make it clear that close regard should be had to the statutory requirements and their aim in the context of the specific jurisdiction being considered when deciding whether a notice is sufficient.
Here section 131 would, when valid notices are served, have a number of effects. Firstly the section would provide a mechanism whereby a body corporate could terminate a contract for breaches other than repudiatory ones. The common law position which requires a repudiatory or fundamental breach by one party before the other party can terminate is therefore adjusted. How serious a breach needs to be before a section 131 notice can be served is not specified. In theory therefore, a section 131 notice could be served for a trivial breach and if the contractor failed to remedy, the body corporate could terminate under the statutory mechanism. In practice however, such action would not be reasonable and therefore would be outside section 131 for that reason. But other non-repudiatory breaches, of sufficient importance to the body corporate or the lot owners, could be pursued under the mechanism provided by section 131 – the sanction being termination if the contractor failed to remedy the breach.
This tends to emphasise therefore, the importance of such notices giving the contractor a clear indication of what is needed to remedy.
This is also emphasised by the context in which the section operates. Service contracts can often be fairly long term like the one I am considering here: 10 years. The contractor will often have committed itself therefore to providing services over that time and made appropriate plans and investments to achieve that. Since the contract would be, over such period of time, a valuable one, the contractor may have regarded it as a long term investment and may have purchased the contract or at least negotiated remuneration under it to suit the contract period. Termination therefore could be more detrimental to the contractor than it would be if the contract term were shorter.
Another thing the mechanism achieves, or appears to attempt to achieve, is to avoid disputes as far as possible. The requirement of the body corporate to specify the breach concerned means that if there is a dispute about whether there is a duty to do the thing or whether that duty was breached, the dispute can be aired on receipt of the notice. Where the parties remain in disagreement about such things however, then the contractor is placed in a dilemma. Does the contractor remedy the alleged breach anyway despite disagreeing that it is part of the contractor’s duties or that the default exists? Or does at that point (as happened here) the contractor resort to litigation to resolve the issue.
All the above matters demonstrate the importance of section 131 notices providing sufficient particulars so that the contractor can identify the duty alleged, and the breach of that duty which is alleged. The notice ought to be specific enough for the contractor to be able to decide whether to challenge the contents of the notice either informally or formally or possibly both. And since the mechanism requires the contractor to carry out the duties which are alleged not to have been carried out within the time given, this also means that the notice must be sufficient for the contractor to be clear what needs to be done to remedy the matter.
In so far as the notices are relied on as a step to contractual termination under clauses 8.1(b) and (c), I take a similar approach when considering the duty and the breach. But it seems to me that since clause 8.1(b) requires a notice to state clearly “what has to be done by the Ground Maintenance Person to remedy the default”, this may go further than the requirements of section 131. In some types of alleged breach a valid notice under clause 8.1(b) may need to be more specific about the remedial action required than a notice under section 131.
Whether the RANs time to remedy complies with statutory requirements
The Applicant contends that none of the RANs complied with the minimum time to remedy which is prescribed in section 131 of the Standard Module, and in any case that the RANs were internally inconsistent about the time to remedy.
I need to consider this in two parts:-
(a) What is the minimum time to remedy which must be given by a RAN under section 131 of the Standard Module?
(b) Did the RANs give this minimum time to remedy and describe the time to remedy in compliance with section 131 of the Standard Module?
In order to consider (a), I need to set out section 131(4)(c) which contains the time requirement, together with the governing words of subsection (4):-
(4) For subsection (3), a remedial action notice is a written notice stating each of the following—
(c) that the person must, within the period stated in the notice but not less than 14 days after the notice is given to the person—
(i) remedy the misconduct or gross negligence; or
(ii) carry out the duties; or
(iii) remedy the contravention;
This provision has two possible constructions.
The first construction applies if the words “but not less than 14 days” simply specify the number of days which must be stated in the notice as the period within which the person must remedy the breach. Read in this way, the number of days stated in the notice must be at least 14. Under this construction the provision is read as meaning:-
A RAN is a written notice stating that the person must remedy the breach within 14 days or more, after the notice is given to the person.
If this construction is correct, a notice which stated that the contractor must remedy the breach within a period of 14 days after the notice is given to the contractor would comply with section 131(4)(c). This is because the period expressed in days within which the remedy is required, is not less than 14 days. Instead, it is exactly 14 days.
The second construction applies if the words “but not less than 14 days” specify the time to remedy. Then the provision can properly be read as follows:-
A RAN is a written notice stating that the person must remedy the breach within a period. That period must not be less than 14 days after the notice is given to the contractor.
It seems to me that both constructions are open on the wording of the provision. In those circumstances, it is permissible to consider which of the two constructions are more likely to fulfil the purpose of the provision in its context or if that does not provide the answer, which is more convenient or just. Such an approach is permissible as said by Gibbs C J in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 305 (having stated that statutory provisions have to be given their ordinary meaning even if this seems inconvenient or unjust):-
On the other hand, if two constructions are open, the court will obviously prefer that which will avoid what it considers to be inconvenience or injustice. Since language, read in its context, very often proves to be ambiguous, this last mentioned rule is one that not infrequently falls to be applied.[10]
[10]Cited in CIC Insurance v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408.
Having regard to the purpose of the provision in its context there seems little to choose between the two constructions. They both ensure that the contractor will have a minimum period of time to remedy.
However, it seems to me that there is a real difference between the two constructions when considering convenience.
If the second construction is correct, there is room for confusion and error. In turn, this is likely to result in the need for legal advice and possibly litigation.
The likelihood of confusion and error arises from that fact that on the second construction, a contractor must be given an extra day in which to remedy. The reason for this is that at common law a period of “not less than 14 days” should usually be read as “14 clear days”: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421.
This is also required by section 38(1)(a) of the Acts Interpretation Act 1954 (Qld), which by section 7 applies to statutory instruments, and reads as follows:-
(1) If a period beginning on a given day, act or event is provided or allowed for a purpose by an Act, the period is to be calculated by excluding the day, or the day of the act or event, and—
(a) if the period is expressed to be a specified number of clear days or at least a specified number of days—by excluding the day on which the purpose is to be fulfilled; and
(b) in any other case—by including the day on which the purpose is to be fulfilled.
This makes it more difficult to get the time to remedy in the RAN correct. Section 131(4)(c) appears to require that the RAN states that remedy is required “within the period stated in the notice”. So it may well be necessary to use the expression “within so many days” in the RAN. But the second construction means that the RAN would have to state that the contractor must remedy “within 15 days”. This is because, assuming that the 15 day time to remedy starts immediately on the stroke of midnight at the end of the day the notice is given (which is correct as I discuss below), 14 clear days do not pass until day 15 starts, and that is upon the stroke of midnight at the end of day 14. Requiring a remedy “within 14 days” does not give 14 clear days to remedy as was stated by Member Favell in Peterson Management Services Pty Ltd v Body Corporate for the Rocks Resort [2015] QCAT 255.
This could result in confusion and lead to errors, because it appears contrary to the natural reading of section 131(4)(c) which is that 14 days to remedy is sufficient whilst less than 14 days is not sufficient.
Bodies corporate may attempt to satisfy the statutory provision by following the words of section 131(4)(c) exactly, and requiring the breach to be remedied “within a period not less than 14 days after you receive this notice”. However, this would be void for uncertainty because no time to remedy is in fact specified at all.
Bodies corporate may attempt to satisfy the statutory provision by specifying in a RAN, for example, that “you have 14 days after today to remedy”. This could be challenged because it seems to require that the remedy is achieved by the stroke of midnight at the end of day 14, in which case it suffers from the same problem as a notice requiring the breach to be remedied within 14 days.
These problems do not arise if the first construction is used. This because an extra day is not added, either by the common law rule, or by section 38(1)(a), because on that construction section 131(4)(c) does not specify a period of not less than 14 days.
This would mean therefore, that a RAN which required a remedy “within 14 days” after the notice is given would suffice because it follows the statutory wording exactly. A RAN which gave “14 days to remedy after today” would also suffice because it means the same thing.
The first construction also seems to be more in accordance with the function of subsection (4) of section 131. Subsection (4) sets out the formal requirements of the remedial action notice. It establishes the contractor’s right to a period of time in which to remedy in that way, rather than directly. The second construction changes this, by setting a time to remedy. It therefore establishes the contractor’s rights to that time directly.
For these reasons therefore, I think the first construction is more likely to have been the objective intention of the legislature. In my view therefore section 131(4)(c) specifies the number of days which must be stated in the notice as the time to remedy.
I therefore turn to question (b), whether the RANs provided this minimum time to remedy and described the time to remedy in compliance with section 131 of the Standard Module.
It is useful to set out the wording used in the RANs. The following different expressions were used, often within the same RAN:-
(a)You must remedy “within 14 days of the date of this notice”.
(b)You must remedy “within 14 days after today”.
(c)You have “14 days after today” to remedy the breaches.
It is common ground that the notices were given on the date shown in the notice, so there is no difficulty with (a) arising from any delay in that respect.
In each of these expressions it is clear that the 14 day period starts at the stroke of midnight at the end of the day when the notice is given. In other words, if the notice is given on the 1st of the month, the 14 day period starts at the beginning of the 2nd of the month.
It seems possible if I have understood counsel’s submissions correctly, that there is some doubt about this. So I need to explain why I take this view. It can be tested by considering a notice which says “you must remedy within one day of the date of this notice” or even “you must remedy within one day of being served with a copy of this notice”. Such a notice would not mean “you must remedy today”, nor would it mean you must remedy within 24 hours of the date of this notice”. Instead, since the notice could be given at the beginning of the day or at the end of the day just before midnight, the one full day must start immediately after midnight on the day of the date of the notice. In other words, the day the notice is given is ignored. The 14 days actually given by the notice must start at the same time.
This is in accordance with the usual common law rules,[11] and also appears to accord with the provisions of section 38(1) of the Acts Interpretation Act.
[11]There are two applicable common law rules: firstly that usually when computing a period of time from a given date or the happening of an event, the period will commence at the end of the day of that date or event, and secondly that fractions of a day should be ignored - described with supporting authorities in Halsbury’s Laws of Australia paragraphs [410-130] and [410-165] respectively.
On this basis, in my opinion all the above expressions mean the same, and require the contractor to remedy within 14 days after the RAN is given, which on the construction of section 131(4)(c) which I prefer, is compliant with that section. Accordingly, there is no internal inconsistency in the RANs with respect to time to remedy.
I appreciate that my view does not accord with the view taken by Member Favell in Peterson Management Services Pty Ltd v Body Corporate for the Rocks Resort [2015] QCAT 255. In that case the learned member was considering a remedial action notice given under section 129(4) of the Accommodation Module [which is in the same terms as section 131(4) of the Standard Module]. The RAN required remedy “within 14 days of being served with a copy of this notice”. He found that the RAN did not comply with the statutory requirements.
In his written submissions, Mr Faulkner on behalf of the body corporate conceded that a RAN which merely required a remedy “within fourteen (14) days of the date of this notice” would not comply with section 131(4)(c) having regard to the Rocks. However, Mr Faulkner went on to argue that in fact all the RANs did comply with section 131(4)(c) because there were other words giving time to remedy which did comply with the statutory requirements. I do not regard this concession as an admission of fact as to the RANs’ compliance with section 131(4)(c) which would make it difficult for me to find otherwise.
Therefore I find that the RANs gave the minimum time and described the time to remedy in compliance with section 131 of the Standard Module.
Must the time to remedy in the notice be reasonable?
If a notice must also give a reasonable time to remedy then it may have to give more than the statutory minimum of 14 days to remedy.
This was considered in Johjen Pty Ltd v Body Corporate for Aegean [2013] QCAT 387. At [9] and [10] Member Kanowski held that notices under the section must give a reasonable time to remedy, and if they do not do so then the notice is invalid.
Member Kanowski’s reasoning was that although section 131 of the Standard Module did not specify that the notice should give a reasonable time to remedy (in contrast to a code contravention notice under section 139 of the Act), this requirement would be implied because section 94(2) required a body corporate to act reasonably in carrying out its functions.
I would respectfully agree with this reasoning.
As for whether a notice given under clause 8.1(b) would need to give a reasonable time to remedy, Mr Faulkner on behalf of the body corporate submitted that there is no scope for this because clause 8.1(b) specifies that a period of 14 days should be given for remedy. I tend to agree with this submission, but a 14 day notice under clause 8.1(b) would be invalid if it required a remedy which could not be achieved in that time. Such a notice would be unreasonable and therefore contrary to section 94(2).
The requirement of the body corporate to act reasonably
At the heart of the Applicant’s case is the question whether the body corporate acted reasonably in attempting to terminate the GMC, or in positioning itself to be able to do this, and whether it would act reasonably if it attempted to terminate the GMC relying on the RANs which have been given.
A body corporate must act reasonably in administering the common property and in carrying out its functions, and in making decisions about these things. This is required by section 94(2) of the Body Corporate and Community Management Act 1997. The Applicant also relies on section 100(5) which requires the body corporate’s committee to act reasonably in making a decision, and section 152(1) which requires the body corporate to administer, manage and control the common property reasonably and for the benefit of lot owners. The body corporate accepts that these statutory provisions apply to this matter.
Is there an implied term of fairness and reasonableness?
The Applicant contends that a term should be implied in the GMC and/or the Management Agreement as follows:-
That the body corporate was to act fairly and reasonably, or reasonably, in its dealings with the Applicant in connection with, relevantly, the GMC and/or Management Agreement.
As Mr Kidston explained in argument, this implied term is relied on only in the alternative, in an attempt to cover the possibility that:-
(a) the body corporate is able to terminate the GMC by invoking section 129 of the Standard Module and either clause 8.1(b), (c) or (d) in the GMC; and
(b) the Tribunal is then of the view that this falls outside the provisions of sections 94(2), 100(5) and 152(1) requiring the body corporate to act reasonably.
As for (b), I take the view that the requirement for the body corporate to act reasonably applies also to the manner in which a body corporate makes decisions about, and exercises any rights which it has under its agreements with service contractors. This is because in doing these things the body corporate is administering the common property or otherwise carrying out its other functions under the Act. Section 94 expressly imposes an obligation on the body corporate to act reasonably when doing these things and in making, or not making, decisions about these things.
It follows that since the suggestion that there was an implied term in the GMC to the effect that the body corporate must act reasonably was only to cover the possibility that the Tribunal would think otherwise, and since whether a term is implied is a question of law, it is not necessary for me to decide whether such a term was implied in the GMC.
Burden of proof: breach of contract and validity of the RANs
In so far as the issue whether the body corporate has a legal right to terminate the GMC turns on whether the Applicant was in breach of contract, it seems to me that the evidential burden of proof is upon the body corporate to show a breach, as confirmed by Hometeam Constructions Pty Ltd v McCauley [2005] NSWCA 303 at [166]. It seems to me that the burden arises whether the body corporate is an applicant or a respondent which, as mentioned earlier in “the background facts”, was dictated in this case by the Applicant’s desire to obtain an injunction.
On the question whether appropriate statutory and/or contractual steps under clauses 8.1(b) and (c) were taken by the body corporate to attain a right to terminate the GMC, again I take the view that the body corporate has the evidential burden to show this. This is because the statutory requirements are mandatory. And contractually (under those subclauses) no rights of termination arise unless valid RANs were given.
Burden of proof: reasonableness
On the question whether the body corporate acted reasonably in its decision to try to terminate the GMC, and also whether the body corporate used reasonable means to that end, the position is different. On these issues, it is clear that the evidential burden of proof is upon the party asserting that the decisions and actions of the body corporate are unreasonable to show that this is so. It is not for the body corporate to show that its decisions and actions were reasonable. Usually the party asserting unreasonableness will be the applicant. If so, then the evidential burden of proof to show unreasonableness will coincide with the legal burden which is on every applicant, that the elements of the applicant’s case are established. Sometimes however, the party asserting unreasonableness will be a respondent. This could be for example if the body corporate is bringing some action against a lot owner or service contractor. If the defence to such a claim is that the body corporate acted unreasonably then the evidential burden to show this will be on the respondent.
Although Albrecht v Ainsworth & Ors [2015] QCA 220 was cited on the question of reasonableness, that was a case which concerned a particular statutory test - the “no opposition which was unreasonable” test in item 10 of schedule 5 which applies in the case of motion which can only be passed without dissent.
Clarke v Turner Park Shopping Village Body Corporate [2016] QCATA 105 and McLeod v Body Corporate for Stradbroke Tower and Villas [2015] QCATA 146 were both straightforward section 94 reasonableness cases which confirm the position.
Mr Kidston however, submits that this is not the end of the matter. He argues that where the knowledge of the party asserting unreasonableness is limited, then the amount of evidence required to show unreasonableness will not be high. There comes a point when the court or tribunal will look to the other side (the body corporate) for evidence of the reasonableness of its actions if an inference is not to be drawn that the decision was unreasonable.
There is a difficulty with this proposition when considering reasonableness. As was pointed out in Clarke v Turner Park Shopping Village Body Corporate [2016] QCATA 105 the question of reasonableness is not a yes or no matter - there may be more than one way to act reasonably (there will probably be a band of reasonable responses to events). This makes it more difficult to infer unreasonableness, because such an inference would only be available if it is the only realistic conclusion from the evidence that has been adduced.
The other difficulty in inferring unreasonableness in this case is that the Applicant does in fact have knowledge of the motives of those in control of the body corporate (as disclosed by Ms Rockett’s own filed evidence) and probably is aware of the procedures followed by the body corporate which resulted in the decisions and resolutions reached (this is because Ms Rockett attended committee meetings and also held several units in the complex, and was aware of the motions put to the general meetings). She gave evidence that there was ill-will against her and that there an orchestrated campaign to terminate the GMC. She exhibited a number of documents showing past formal disagreements and litigation between the two sides. Any gaps in her knowledge could have been filled by an application to the Tribunal for production of documents or information.[12]
[12]This can be applied for against another party under section 62(3) of the Queensland Civil and Administrative Act 2009 (Qld), or against a third party under section 63 or section 97.
In this case, it is clear that such an order may well have provided a much better insight into the body corporate’s motives and processes[13].
[13]That such documents probably exist appears from exhibit 10 which fell into the hands of the Applicant and which was put to Mr Evans in cross-examination, and from some documents referred to, and exhibited by Ms Rockett.
I need also to point out that the issue of procedural unreasonableness was never identified as a discrete issue. At the beginning of the case there was a discussion about the issues. A more general view of reasonableness was identified but not one which went to the body corporate’s process of decision making. It is in this light that Mr Kidston’s submissions at the end of the case that the process had been unfair and therefore unreasonable have to be considered.
In the circumstances, I cannot infer unreasonableness as I am invited to do by Mr Kidston on behalf of the Applicant. I must reach a conclusion about reasonableness on the evidence that has been adduced.
Evidential difficulties faced by the body corporate
I have found that one of the most important contractual obligations of the Applicant was to do its best to keep the common property in first class order and repair and if necessary to engage others to achieve that.
In order to comply with this obligation with respect to maintenance and repair, the Applicant would need to:-
(a)establish a proper regime of inspection and reporting of maintenance and repair issues (including allowing others to report issues and have them properly categorised); and
(b)do its best to deal with those identified issues.
As for gardening and cleaning, there was no daily and weekly schedule for such work in the GMC, and the experts in this case told me that this was unusual. There had been a schedule in the 2003 contract but the 2012 contract expressly removed it. Although lawyers were involved in drafting the GMC, I doubt whether they approved its final terms. Ms Rockett told me that she did not intend the schedule to be removed. The fact is that it was. So in order to comply with its obligation with respect to gardening and cleaning it seems to me that the Applicant would need to:-
(a)establish a gardening and cleaning regime sufficient to keep the common property clean and in first class order having regard to the age and condition of the property, its proximity to the sea and exposure to the weather, its proximity to the local activities, and the changing weather through the seasons; and
(b)to provide sufficient flexibility in the gardening and cleaning regime to keep the common property clean and in first class order; and
(c)do its best to perform the regime.
Apart from Mr Kidston’s submission about the meaning of the words “to the best ability”, neither side has suggested that the Applicant’s legal obligations should be regarded as tempered in any way. It is not suggested for example that it should be implied into the contract that the obligations are limited by words such as “in so far as reasonably practicable” or “to the extent which is reasonable”.
To a limited extent, the contractual obligations are not absolute however. This is because they require the Applicant to “do its best”. So for example, if after the cleaner has finished for the day and after dark, someone drops some litter on the ground, although at that point in time the common property would not be in first class order, the Applicant would have done its best to keep it so. This is of course if there was a cleaning regime sufficient to fulfil the obligation.
And it would not be every failure to perform the obligation which would entitle the body corporate to terminate the GMC. The body corporate has to act reasonably and it would be unreasonable to expect the common property to be in first class order at all times even if failure to achieve that was actually a breach of the obligation to do so.
Having regard to the legal obligations in this case, the best way to show that the Applicant was in breach of the legal obligations would have been to show that (a) it had failed to establish sufficient maintenance, repair, gardening and cleaning regimes which would enable it to carry out its obligations, or (b) if it had established sufficient regimes it had failed to perform them.
However, the factual evidence and expert opinion only touched on point (a) in passing. The way in which the body corporate attempted to show that the Applicant was in breach of contract was to rely on the result of spot checks when the common property was, on the body corporate’s case, found to be out of order or unclean. Relying only on this circumstantial evidence, I was then asked to say that the Applicant was in breach.
As Mr Kidston rightly submitted, breach of the GMC is not proved by such circumstantial evidence. However, it seems to me that it is open to me to infer from sufficiently strong circumstantial evidence that there was a breach in any particular issue. And I think it is right for me to rely on what evidence there was about maintenance repair and cleaning regimes to decide whether there was a breach.
The evidence from the body corporate itself, as opposed to its expert, on this issue was very poor. That evidence suffered from almost useless statements of evidence from the Chair of the body corporate, Mr Evans.
The problem with the statements of evidence was that they were not in fact the evidence of Mr Evans. Mr Evans explained that they came about from his own draft as a starting point, followed by input from the solicitors. But it was abundantly clear under cross examination that he had very little idea what was in the final statements despite attesting to their truth, and that there were large parts of them which were not his words but instead had been added by others. His recollection of events was insufficient for me to have any confidence that any factual matters in the statements had been proved by their acceptance in evidence. In so far as the statements contained argument (and there were numerous instances of this in the statements about which Mr Kidston rightly objected) this was not Mr Evans’ arguing the matter at all: it was somebody else.
In these days of statements of evidence prepared in advance, courts and tribunals have had to get used to identifying those parts of the statements which actually can be relied on as the evidence of the witness. In almost every case this emerges in cross-examination. The difficulty here, however, was that Mr Evans was so defensive in cross-examination, and so often prevaricated or looked for the motive of the questioner that he never gave any straightforward evidence in cross-examination which could be relied on. The first time he explained in a nutshell the facts as he saw them was in re-examination. Overall, his evidence was wholly unreliable.
The experts
On behalf of the body corporate, David Leary of Leary & Partners Pty Ltd inspected the property on four occasions. The first three inspections were on 10 October 2013, 27 November 2013, and 24 February 2014 and from these inspections he produced reports dated 25 October 2013, 6 December 2013 and 26 February 2014. After commencement of the proceedings, Mr Leary attended again on 13 February 2015, and produced a report on that day. Mr Leary provided a statements of evidence dated 8 May 2014 and 15 July 2015 and an affidavit made on 17 May 2016. He gave evidence at the hearing and was cross examined.
On behalf of the Applicant, Danny Little of MIRAS Consultants inspected the property on 3 February 2014 and 4 April 2014 and produced a report dated 17 February 2015. He provided statements of evidence dated 19 June 2014 and one received by the Tribunal on 20 August 2015. He gave evidence at the hearing and was cross examined.
In their evidence, the experts expressed a view as to the extent of the Applicant’s legal obligations under the contract. This was probably inevitable, because they had been asked to give their opinion whether the Applicant had failed in its duty having regard to the condition of the property on the date of their inspections. In order to express that opinion the experts would need to take a view as to the extent of the duty.
I do accept the submission made by Mr Kidston that it is for me to decide the extent of the Applicant’s legal obligations under the contract and not to rely on an opinion about this from the experts. However the experts can give evidence about standard practice in the industry which affect this question in so far as this may be relevant.
The alleged breaches and RANs
I can now turn to the detailed facts in this case and examine whether for each alleged breach set out in the RANs, the Applicant was in breach. I shall also decide whether the Applicant remedied the breach in the manner provided for in the notice, and in the time given for remedy in the notice. This is relevant for section 131 of the Standard Module and also for clause 8.1(b) of the GMC, but not for clauses 8.1(c) and (d).
I also need to decide for each RAN whether sufficient time to remedy was given by the RAN. This latter question is relevant for section 131 of the Standard Module and also for clauses 8.1(b) and (c), but not for (d).
The first Leary report RAN
This was a RAN given by the body corporate to the Applicant on 30 January 2014 together with a “Common Property Condition Assessment”, which was Mr Leary’s report dated 6 December 2013. This report identified 74 items out of 101 items in his previous report dated 25 October 2013 which, despite having been sent to the Applicant, he said had not been dealt with.
The Applicant’s failure to remedy the remaining 74 items was said in the RAN to be breaches of the GMC and the Management Agreement.
Of these 74 items, only 14 were formally pressed at the hearing. These are the “pressed breaches”. It was said that this was to save time at the hearing. I heard no evidence about the other 60 items although they can be seen in Mr Leary’s report and are described in the RAN. I propose not to make any findings about them or reach an inference about them. However, they may become relevant when considering the time to remedy of all the items which was given in the RAN.
It is right therefore that this was a busy time for the Applicant, but despite this, I do not agree that 7 days to provide the information required by the directions was unreasonably short. Although Ms Rockett says that the information and documents had to be compiled from numerous sources, I cannot accept that this is the case. All the information and documentation requested should have been immediately available to the Applicant. I do not accept that the directions required a time consuming trawl through emails as suggested by Ms Rockett under cross examination.[35] Even if this were the case, it would have been because of inadequate record keeping on these issues.
[35]Transcript 2-89 and 2-90. At 2-90 line 5 Ms Rockett accepted that if she had kept a file it would be a simple process to respond to the fire fighting equipment direction.
The extent of the work required to provide the information and documents can be seen from the eventual responses to the RANs based on the directions. The gardening direction and the cleaning direction were answered very simply in a few lines, and by attaching the relevant checklist.[36] The pumps and motors direction required a longer letter, but which was still on one page, and some copy invoices. [37] The fire fighting direction was answered by copying inspection reports, emails and invoices covering some 200 pages odd. [38] Not all these documents were necessary to answer the direction however, and it could have been answered more efficiently.
[36]Pages 483, 484 and 638 of the compendium.
[37]Pages 489 to 505 of the compendium.
[38]Pages 155 to 366 of the documents attached to the Amended Application.
Dealing with the responses to the second Leary report RAN and the Skip Bin RAN should not have caused problems because they had a time to remedy of 14 days, so the following week was also available to deal with those.
Whilst it would probably have been better to give more than 7 days in the direction in the light of the other things the Applicant was required to do at that time, in the circumstances I do not think it was unreasonable to limit the time to respond to the directions to 7 days. It follows that, subject to the question of reasonableness which I deal with below, the directions were properly given under paragraph (b) of clause 2(e) of the GMC.
Turning now to the RANs given on 16 May 2014 which were based on the Applicant’s failure substantially to respond to the directions, I have found elsewhere that the time to remedy in these RANs complied with section 131 of the Standard Module, and the descriptions of the time to remedy were not internally inconsistent.
However, I note that these RANs attached copies of the directions with the wrong date. The directions which were attached were dated 6 March 2014. Otherwise they were in the same terms as those actually received by the Applicant. I do not think this error would have been misleading and therefore would have invalidated the RANs.
On the question whether these RANs were remedied, my findings are that the Applicant remedied them all, by providing the information and documents requested in the directions within the time to remedy in the RANs.
The QFRS RAN
On 23 May 2014 the body corporate served on the Applicant a RAN concerning the fire fighting equipment.[39] The Queensland Fire and Rescue Service had inspected the complex on 2 May 2014 and as a result of that inspection on 5 May 2014 the Commissioner issued a notice of non-compliance with the fire regulations in that:-
(a)The fire evacuation plan for the building had not been reviewed annually and recorded and did not contain up to date contacts for Evacuation Coordinator or procedures to follow in an emergency situation.
(b)Evacuation signs and diagrams were not displayed in an acceptable format.
(c)There was no water available for the fire hose reels.
[39]Page 507 of the compendium.
The QFRS had required these matters to be attended to by 5 June 2014.
The RAN issued to the Applicant recited a report previously obtained about fire safety whose recommendations (it was said) had not been implemented, and a request by the Chair to be advised when the tank feeding the hose reels was operational, which had not happened.
The RAN listed the clauses in the GMC which brought these issues within the duties of the Applicant. I am satisfied that all the things mentioned here were the Applicant’s duties and came within one or other of the clauses recited in the RAN.
The RAN set out the remedial action required of the Applicant in some detail and quite specifically. I am satisfied that it was sufficiently certain to make it clear to the Applicant what needed to be done. This is despite the possibility that an email referred to in the RAN was missing from it as an attachment,[40] and despite the contents of letters written by the Applicant’s solicitors on 27 May 2014 and 28 May 2014 complaining that the RAN was unclear.[41] On 10 June 2014 the Applicant’s solicitors argued that for technical reasons set out in the response that the RAN was defective.[42]
[40]In my view this email was not essential to the RAN.
[41]Pages 522 and 486 of the compendium respectively.
[42]Page 527 of the compendium.
However, there was little evidence adduced at the hearing about the factual matters supporting this RAN and whether the Applicant was in fact in breach of its duties because of these matters. The Applicant gave a detailed response to the RAN on 10 June 2014. The response suffers from arguing the validity of the RAN legalistically and repeatedly. Of more importance for my purposes are its arguments as to the factual basis for the RAN and whether the QFRS notice of non-compliance was caused by the body corporate’s failure to deal with quotes submitted. These arguments also appear in Ms Rockett’s evidence.[43] In effect, the Applicant’s case is that the body corporate accepted that it was its responsibility, rather than the Applicant’s responsibility, to accept the quotes obtained to deal with issues about fire equipment and evacuation plans.
[43]Paragraph 201 of her statement of evidence of 17 January 2015.
I those circumstances, whereas on the face of it I could have been satisfied from the mere fact of the QFRS notice of non-compliance that the Applicant was in breach of its obligations under the GMC, I do not think this approach is fairly open to me.
It is for the body corporate to prove to me that the Applicant was in breach sufficient to support the QFRS RAN and this it has failed to do.
As for whether 14 days was sufficient to comply with the RAN, it is significant that Ms Rockett had signed the earlier fire safety report and therefore would already be acquainted with most of the issues. I note that in the response to this RAN the Applicant’s solicitors did not say that the time was insufficient or that the issues were a surprise. In the circumstances it would appear that the Applicant was well aware of these issues or should have been, and would therefore either have started to take remedial action or should have done. In these circumstances the 14 days in the notice was reasonable.
It follows from my finding that the Applicant was not in breach as alleged in the RAN however, that this RAN cannot be relied on by the body corporate as a section 131 RAN or a clause 8.1(b) RAN.
There is also no clear evidence whether or not this RAN was complied with. However, having decided that the alleged breach supporting this RAN has not been proved, it is unnecessary to make any findings about this.
The question of reasonableness
I have found that the only RANs upon which the body corporate can rely are the four RAN’s based on the unanswered directions. And I have found that these RANs can only be relied on under clause 8.1(c), and not for any other purpose because they were remedied.
It is necessary for me to consider whether it was reasonable for the body corporate to resolve to terminate the GMC at its Extraordinary General Meeting on 24 June 2014 relying on clause 8.1(c) (three RANs in the last four months) or 8.1(d) (gross negligence or incompetence).
Dealing with clause 8.1(d) first, I do not think that the breaches which did occur[44] can be said to amount to gross negligence or incompetence. Whilst I think they were more than trivial breaches, they cannot be placed in that higher bracket. Accordingly it was not reasonable for the body corporate to resolve to terminate the GMC on that basis.
[44]That is to say the failures identified in the pressed breaches of the first Leary report RAN which I have found as breaches, and the failure substantially to answer the directions in the 7 days given to do so.
As for whether it was reasonable for the body corporate to resolve to terminate the GMC under clause 8.1(c), it is necessary to consider whether the body corporate’s actions in getting itself in a position to utilise clause 8.1(c), by issuing a series of directions and RANs based on those directions, was reasonable. It is said on behalf of the Applicant that it was not, and Ms Rockett says that in fact there was an orchestrated campaign against her and a campaign to terminate the GMC.
I am satisfied that in 2013 Mr Evans and Mr Yeates who were the leading members of the committee of the body corporate, had concerns about the quality of the work done by the Applicant, and that this was one of the reasons Mr Leary was commissioned to produce a report.
Mr Evans also had a number of other reasons to want to terminate the GMC. He had been against the 29 March 2012 motion to renew the Applicant’s contracts,[45] he believed that there had been a conflict in the negotiations of the terms of the contracts which the Applicant had taken advantage of at that time, he held a belief that the Applicant had paid “bogus” contractors’ invoices,[46] and he also held a belief that the Applicant had deliberately notified the insurers about concrete spalling at the complex which resulting in higher premiums. There had been a number of disagreements and also litigation involving the Applicant which had been referred to the Commissioner, and also previous litigation in the Tribunal.[47]
[45]He unsuccessfully challenged this with the Body Corporate Commissioner.
[46]Mr Evans sent an accountant’s report about this to the police.
[47]Including a challenge to a decision by the body corporate not to investigate financial affairs, a dispute about car parking, and about authorisation for concrete and painting work.
One of the main problems for both sides which was difficult for them to resolve, and which had been responsible for some of the disputes between them, was the uncertainty about the extent of the Applicant’s duties, caused by the poor drafting of the GMC. As Mr Leary put it:-
This particular contract is one of the most unusual I have ever seen. It has an absence of clauses everywhere.
Mr Leary was, I think, referring to the absence of schedules in the contract listing the regular work which the Applicant was required to do (they had been removed from it, probably inadvertently). The precise obligations under the GMC were unclear to the parties, for example there was disagreement about whether the Applicant had responsibility for mulching the garden areas. It was also unclear to both parties and to their experts, whether the Applicant had duties under the GMC which went beyond the skills of its director and the skills of the gardener and cleaner employed on site. It was unclear to the parties whether the Applicant needed to obtain quotes for work beyond these skills and obtain the body corporate’s approval to do it, or whether it was obliged simply to proceed to do the work anyway. The difficulty was exacerbated by the fact that the Applicant was contractually obliged to monitor its own performance, so there was no third party supervisor to assist.
This uncertainty needs to be taken into account when considering the reasonableness of serving the gardening and cleaning directions dated 24 March 2014 on the Applicant. If the object of these directions was as stated on their face, to reduce the possibility of disputes about the performance of the duties by the Applicant then they were not only reasonable but sensible. There is nothing to suggest that the stated aim was not the true aim, and it is my finding that this was the intention when these directions were served.
As for the pumps and motors direction and the fire fighting equipment direction, as was submitted by Mr Faulkner, it was then some two years into this GMC and it was therefore an appropriate time to ensure that these matters were being attended to properly. The importance of the fire fighting equipment direction is demonstrated by the QFRS non-compliance notice which was subsequently issued.
However, Ms Rockett says that the directions were served “with ill will”. Whilst her evidence does suggest that the body corporate had received detailed information from time to time about what repairs were required in these areas, this needs to be considered in the light of uncertainty between the parties as to whether the Applicant was itself obliged to organise these repairs. My overall view is that the body corporate was justified in seeking the information which it sought in the directions about pumps and motors and fire fighting equipment.
Mr Kidston submitted that it was unreasonable of the body corporate to serve separate RANs based on four separate directions, and it was suggested that this was contrived by the body corporate to permit it to invoke clause 8.1(c). This needs to be considered in the light of the Applicant’s case, as now submitted by Mr Kidston, that a RAN alleging numerous breaches must give sufficient time to remedy all the breaches to avoid being invalid as a whole. This tends to make the service of a separate RAN for each breach reasonable, because it reduces the chance of a RAN being invalid.
Of course it would be unreasonable artificially to divide an issue into parts so that more than one direction, and more than one RAN could be served with respect to that issue. In effect, each issue should be capable of being sued upon separately (each should be capable of being a separate cause of action). I think each of the RANs were sufficiently separate for the purposes of clause 8.1(c).
It is right also when considering whether it was reasonable of the body corporate to invoke clause 8.1(c) to take into account that the terms of the GMC were freely negotiated in a commercial environment, and that the Applicant had solicitors at that time (although as I have said earlier, I think it is unlikely that the solicitors would have approved the final terms of the GMC). It was submitted to me by Mr Faulkner on behalf of the body corporate that the need to act reasonably does not require the body corporate to abandon its own contractual rights on which it would wish to rely in order to achieve its reasonable purpose. I tend to agree with this submission.
Ms Rockett says that it was a deliberate decision not to provide the information and documents because it was an onerous task. It appears that the Applicant decided only to respond if RANs were given based on the unanswered directions. This was a deliberate refusal by the Applicant to co-operate with the body corporate to seek information which it was entitled to have and which was reasonable for it to pursue. In doing so the Applicant was in breach of paragraph (b) of clause 2(e).
It was reasonable therefore for the body corporate to issue the directions and the RANs which were based upon them. It follows that the body corporate can rely on these RANs under clause 8.1(c).
As for the reasonableness of the body corporate’s internal processes which resulted in the resolutions of 28 March 2014 and 24 June 2014 to terminate the GMC, the Applicant raises some concerns. In the light of my findings, I shall concentrate on the resolution of 24 June 2014 although the same questions arise for both resolutions.
These concerns circulate around the process being largely committee led, with many committee meetings being on paper only, and decisions based on limited and misleading information. And it is said that the general meetings suffer from the same problem, with the lot owners largely voting by proxy on motions presented by the committee and without full and accurate information.
The concern here expressed by the Applicant, which I share, is that there was scope here for overbearing influence to be exercised by those in control of the body corporate over those other members of the committee, and the lot owners, to vote in a certain way.
However, there is hardly any evidence at all one way or the other, to show whether or not this sort of thing happened and so it cannot be said to be anything more than conjecture. As said earlier under “Burden of proof: reasonableness”, this is not a case where in the absence of such evidence it is appropriate to infer unreasonableness.
The agenda for the EGM of 24 June 2014 referred to the eight RANs given to the Applicant. Of those, the first – the first Leary report RAN, I have found was largely justified because of the Applicant’s breach. This RAN mainly failed on drafting and time issues, which I do not think the body corporate could have foreseen at the time of the resolution. Of the other seven RANs referred to in the agenda on my findings three cannot be relied on. Of these, the factual basis of the Skip Bin RAN was correct although the legal liability was not, and the QFRS notice has simply failed before me because of evidential inadequacies. There is one notice, the second Leary report RAN, which ought not to have been given.
The agenda needs to be read as a whole, and clearly states under “Termination” that the ground relied on is gross negligence or incompetence [relying on clause 8.1(d)] or alternatively that three breach notices had been issued in the last four months [relying on clause 8.1(c)].
The basis for the alternative motion which I am considering here (three breach notices in the last four months), was factually correct.
The meeting was attended by seven people. Six of these it seems had voting rights: Ms Rockett also attended but had no voting rights. Numerous lot owners attended by proxy and submitted voting papers. There is no information about how this was achieved. The vote to terminate the GMC was passed by 38 votes to 25 with 1 abstention.
Those who voted at the general meeting would be entitled to expect that the committee in making the recommendation would properly have considered factors relevant to the decision. Mr Evans said that this had happened, but did not go into detail. In the absence of any evidence to the contrary I am entitled to assume that the committee did consider things properly and reasonably.
In the circumstances, my overall view is that it was reasonable for the EGM on 24 June 2014 to pass the motion to terminate the GMC.
Summary of conclusions
Subject to the requirement to act reasonably and provided the provisions in these clauses are satisfied, the body corporate may rely on clauses 8.1(b), (c) and (d) of the GMC (termination route 2) as a means to terminate the GMC.
The Applicant’s obligation was to do its best to keep the common property in first class order and repair and if necessary to engage others to achieve that. It had other specific duties, including a duty to keep the common property and other property of the body corporate clean and tidy and to ensure all drainage was clear and functioning. It was also obliged to report repair, hazard and danger issues to the committee, and to protect the interests of the common property of the body corporate and the lot owners.
By describing the breach and the remedial action required with sufficient certainty, a remedial action notice (a RAN) must give a contractor a reasonable opportunity to do what it is obliged to do. Under section 131 of the Standard Module a RAN which requires a remedy within 14 days after the notice was given is valid, provided this is a reasonable time to remedy.
The descriptions of the time to remedy in the RANs were not inconsistent.
The body corporate is obliged by the statutory provisions to act reasonably in making decisions and in exercising its functions and this includes its decisions about the contents of directions and RANs and its decisions about termination of service contracts.
The evidential burden of proof is upon the body corporate to show that the Applicant was in breach of the GMC and that the statutory or contractual provisions were complied with, but the Applicant has the evidential burden of proof to show that the body corporate has acted unreasonably.
The body corporate cannot rely on the following RANs under section 131 of the Standard Module or clauses 8.1(b) or (c):-
(a)The first Leary report RAN because it did not give the Applicant a reasonable opportunity to do what it was obliged to do. It was not sufficiently certain for the Applicant to be sure what it was obliged to do, and it required a remedy which was excessive in the time allowed.
(b)The second Leary report RAN because none of the five alleged breaches were in fact breaches.
(c)The Skip Bin RAN because it was not based on a breach by the Applicant.
(d)The QFRS RAN because the evidence showing that there was a breach by the Applicant is insufficient.
The resolution passed by the body corporate at its AGM on 28 March 2014 to terminate the GMC based on the first Leary report RAN was not valid because that RAN could not be relied on. In any case the resolution was not valid if it is regarded as action under section 131 of the Standard Module, because it was not by secret ballot.
The only RANs which the body corporate can rely on are:-
(a)The RAN based on the unanswered gardening direction.
(b)The RAN based on the unanswered cleaning direction.
(c)The RAN based on the unanswered pumps and motors direction.
(d)The RAN based on the unanswered fire fighting equipment direction.
All these RANs were remedied, so they can only be relied on by the body corporate for the purposes of clause 8.1(c).
It was not reasonable for the body corporate at its EGM on 24 June 2014 to resolve to terminate the GMC pursuant to clause 8.1(d) (gross negligence or incompetence).
It was reasonable for the body corporate at its EGM on 24 June 2014 to resolve to terminate the GMC pursuant to clause 8.1(c) (three RANs within six months) relying on the RANs based on the unanswered directions. I am not asked to decide whether the GMC has already ended pursuant to this resolution or whether a further step is required.
As for whether the body corporate could now resolve to terminate the GMC pursuant to clause 8.1(c) relying on these RANs (which is one of the issues in counsels’ lists of issues) in the light of my findings it may not be necessary for me to consider this. However for the sake of completeness, in my view this option is probably open to it. This is because there is no time limit to invoke clause 8.1(c) in the GMC. If the body corporate delayed in invoking that clause, it is possible it would face waiver or estoppel issues, but here the delay has been caused by this litigation and by nothing else.
Since I have found that the resolution of the EGM on 24 June 2014 to terminate the GMC was valid on one of its grounds, the Tribunal’s injunction of 24 June 2014 which restrained the giving effect to this termination motion needs to be lifted.
That injunction also restrained any steps from being taken with respect to the seven RANs other than the first Leary report RAN. In lifting this order, I am not saying that all these seven RANs were valid. As stated above, I have only found that four of the RANs could be relied upon, and then only for the purposes of clause 8.1(c) because they were all remedied.
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