The Sands Gold Coast Pty Ltd v The Body Corporate for the Sands
[2018] QCATA 160
•7 November 2018
QUEENSLAND CIVIL AND
ADMINISTRATIVE TRIBUNAL
CITATION:
The Sands Gold Coast Pty Ltd v The Body Corporate for the Sands [2018] QCATA 160
PARTIES:
THE SANDS GOLD COAST PTY LTD ACN 079 743 561
(applicant/appellant)v THE BODY CORPORATE FOR THE SANDS COMMUNITY TITLES SCHEME 14967
(respondent)
APPLICATION NO/S:
APL368-16
ORIGINATING APPLICATION NO/S:
OCL026-14
MATTER TYPE:
Appeals
DELIVERED ON:
7 November 2018
HEARING DATE:
4 October 2017
HEARD AT:
Brisbane
DECISION OF:
Judge Sheridan, Deputy President
Member Lumb
ORDERS:
1. The appeal is allowed.
2. Leave to cross-appeal is refused.
3. Orders 2 and 4 of the decision below are set aside.
4. In lieu of order 2 of the decision below, it is declared that the Body Corporate was not entitled to give effect to the resolution to terminate the Ground Maintenance Contract dated 20 April 2012, pursuant to clause 8.1(c) of that contract, by the resolution passed at the Extraordinary General Meeting held on 24 June 2014.
5. The parties shall file (and serve on the other party), within 14 days of the date of these orders, written submissions (no longer than eight pages) in respect of the question of costs of the proceeding below and of the appeal.
6. The matter is otherwise remitted to the tribunal for the determination of any other outstanding matters between the parties.
CATCHWORDS:
APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – RIGHT OF APPEAL – WHEN APPEAL LIES – OTHER CASES – where appeal by contractor of decision of tribunal below – where questions of mixed law and fact – whether grounds of appeal involve mixed questions of law and fact – whether leave required to bring appeal – whether leave should be granted to bring appeal – whether tribunal below provided adequate reasons for decision – whether the body corporate should be granted leave to cross-appeal
REAL PROPERTY – STRATA AND RELATED TITLES – BODY CORPORATE: POWERS, DUTIES AND LIABILITY – GENERALLY – where the tribunal below found that four valid remedial action notices had been issued by the body corporate under the contract for services with the contractor – whether error in fact or in law in the tribunal’s findings – whether the remedial action notices were valid notices under the services contract – whether any resulting resolution to terminate based on the notices was valid
REAL PROPERTY – STRATA AND RELATED TITLES – BODY CORPORATE: POWERS, DUTIES AND LIABILITY – GENERALLY – where the tribunal below found that the body corporate had acted reasonably in issuing the remedial action notices – whether error in fact and in law in the tribunal’s findings – whether the body corporate acted reasonably in issuing the remedial action notices the subject of the appeal – whether the body corporate acted reasonably in passing any resulting resolutions to terminate under the relevant contract for services with the contractor – whether any resulting resolutions were invalid
STATUTES – ACTS OF PARLIAMENT – INTERPRETATION – GENERAL APPROACHES TO INTERPRETATION – CONSTRUCTION WITH REFERENCE TO CONSEQUENCES – where the tribunal below found that the contract for services with the contractor did not contract out of the provisions of the Body Corporate and Community Management (Standard Module) Regulation 2008 (Qld) – whether error in law in the tribunal’s findings – whether the body corporate’s termination in accordance with the services contract fell within the scope of the Body Corporate and Community Management (Standard Module) Regulation 2008 (Qld) – whether the termination clause of the services contract contracted out of the provisions of the Body Corporate and Community Management Act 1997 (Qld) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (Qld) – whether, notwithstanding the terms of a services contract, Part 5 of Chapter 6 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (Qld) should be construed to require a body corporate to follow the statutory regime of termination in order to validly terminate a services contract
Acts Interpretation Act 1954 (Qld), s 14A
Body Corporate and Community Management Act 1997 (Qld) s 94, s 94(2), s 100(5), s 122, s 122(1)(d), s 152(1), s 318
Body Corporate and Community Management (Standard Module) Regulation 2008 (Qld), s 89, s 90, s 128, s 129, s 129(1), s129(1)(c), s 129(2), s130(1), s 131, s 131(3)(b), s 131(3)(d), s 131(4)(c)
Statutory Instruments Act 1992 (Qld), s 7
Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 142(1), 142(3)(b), 142(3)Electricity Generation Corp v Woodside Energy Ltd (2014) 251 CLR 640
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Strbak v Newton (unreported, New South Wales Court of Appeal, Gleeson CJ, Samuels and Priestley JJA, 18 July 1989).APPEARANCES & REPRESENTATION:
Applicant:
D A Savage QC and B Kidston of counsel, instructed by Mahoneys Lawyers
Respondent:
J C Faulkner of counsel, instructed by Mathews Hunt Legal
REASONS FOR DECISION
The appellant in these proceedings and the applicant in the initial proceedings, The Sands Gold Coast Pty Ltd ACN 079 743 561 (the Contractor), seeks leave to appeal or to appeal[1] a decision of a Tribunal Member (the Member) made on 22 September 2016 (the Decision).[2] The respondent is the Body Corporate for the Sands Community Titles Scheme 14967 (the Body Corporate).
[1]The Application for leave to appeal or appeal (the Application) was filed on 8 November 2016.
[2]The Sands Gold Coast Pry Ltd v Body Corporate for the Sands (No 2) [2016] QCAT 365 (the Reasons).
The Contractor and the Body Corporate entered into a “Deed of Engagement of Ground Maintenance Contract” on 20 April 2012 (the GMC) in respect of a complex known as “The Sands” at Surfers Paradise, under which the Contractor was granted rights to maintain and look after that property. The Contractor was also the manager and the letting agent of the complex pursuant to two further agreements between the parties also entered into on 20 April 2012.[3]
[3]Reasons, [13].
The Body Corporate sought to put before both an annual general meeting on 28 March 2014 (the AGM) and an extraordinary general meeting on 24 June 2014 (the EGM) of the Body Corporate motions for the termination of the GMC. The Contractor commenced proceedings seeking to challenge the validity of the motions. By consent, injunctions were granted restraining the Body Corporate from giving effect to the motions.
The Member upheld the resolution of the Body Corporate passed at the EGM to terminate the GMC. The Contractor has appealed that decision.
Background facts
Clause 8.1 of the GMC provided:
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 [Contractor] purporting to assign this Contract without the prior consent in writing of the Body Corporate.
(b) If the [Contractor] shall default in the performance of the duties of the [Contractor] 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 [Contractor] by the Body Corporate specifying the default and clearly stating what has to be done by the [Contractor] to remedy the default.
(c) If the [Contractor] shall receive three (3) valid notices under clause 8(b) in any of six (6) month period.
(d) If the [Contractor] is grossly negligent or incompetent in the performance of his duties.
(e) If the [Contractor] is a natural person and;
(i) becomes insolvent;
(ii) is convicted of or pleads guilty to an offence involving dishonesty or violence; or
(iii) is committed pursuant to any legislation relating to mental health.
(f) If the [Contractor] is a corporation, and an order is made or a resolution is effectively passed, for the winding up of the [Contractor] (other than for the purposes of an amalgamation or reconstruction), or is an Approved Nominee is convicted or pleads guilty to an offence involving dishonesty or violence, or is committed pursuant to any legislation or relating to mental health, and the Manager refuses to terminate the appointment of the Approved Nominee.
On 1 November 2013, the Body Corporate obtained an independent report into the state of the common property of the complex identifying ground maintenance items which required attention. A copy of the report was provided to the Contractor and it was requested that the Contractor attend to the maintenance items detailed in the report within 28 days.
The independent expert carried out a further inspection of the common property and, following that inspection, on 30 January 2014 the Body Corporate gave to the Contractor a “remedial action notice” (RAN) requiring the issues identified in the report from the further inspection to be remedied within 21 days (the First Leary Report RAN).
The Body Corporate held an AGM on 28 March 2014 where it was resolved to terminate the GMC due to the alleged failure of the Contractor to comply with the First Leary Report RAN (the March Resolution).
Proceedings were commenced on 26 March 2014 by the Contractor seeking an interim injunction restraining the Body Corporate from giving effect to that motion. That order was granted on 4 April 2014 and, by agreement, continued until the determination of the proceedings before the Member on 22 September 2016.
Following a further inspection by the independent expert, on 24 March 2014 the Body Corporate gave the Contractor another report concerning the ground maintenance (the Second Leary Report RAN).
On 24 March 2014, the Body Corporate also gave the Contractor a RAN complaining about rubbish being placed in the Skip Bin (the Skip Bin RAN).
On 24 March 2014, the Body Corporate also served on the Contractor four directions (the Direction/s) requesting information and documents relating to the gardening and cleaning duties of the Contractor and the maintenance and service of pumps and motors and firefighting equipment, to be provided within seven days of the Directions. The Directions were served by the Body Corporate’s solicitors by single email and called for all the information to be provided on the same date. The Contractor responded to the directions on 1 April 2014, requesting a further seven days to provide the information and documentation requested. No response was received from the Body Corporate, nor did the Contractor provide the information the subject of the Directions.[4]
[4]Reasons, [276]-[277].
Following non-compliance with each Direction, at its meeting on 16 May 2014, by single resolution of the committee of the Body Corporate, a decision was made for the Body Corporate, by its solicitors, to serve on the Contractor a RAN in relation to each Direction. The four RANs, each dated 16 May 2014 (which we will refer to as the “16 May RANs”), were served on the Contractor by a single email of that same date and required the defaults to be remedied on the same date within 14 days of receipt of those RANs.
At the same meeting on 16 May 2014, the committee resolved to put a motion to terminate the GMC based on the Contractor’s failure to comply with the RANs which the committee had determined to issue at that meeting and the previous RANs (the Termination Resolution). The previous RANs were described by the Member as the “Second Leary Report RAN” and the “Skip Bin RAN”; both of which were found by the Member to be invalid.[5] A further ground provided for the Termination Resolution was that the Contractor had been grossly negligent or incompetent in the performance of its duties.
[5]Reasons, [263], [269].
On 19 May 2014, the Body Corporate also gave to the Contractor a RAN based on a notice of non-compliance issued by the Queensland Fire and Rescue Service (the QFRS RAN).
By notice dated 23 May 2014, seven days prior to the period in which the Contractor had to remedy the breach the subject of the four 16 May RANs, notice was given of an EGM to be held on 24 June 2014 to vote on the Termination Resolution.
The explanatory memorandum, given in support of the Termination Resolution, referred to all eight previous RANs including the First Leary Report RAN.
By the date of the meeting on 24 June 2014, the breach of each of the Directions forming the basis of the 16 May RANs had been remedied on 28 May 2014 but that fact was not told to those voting on the Termination Resolution, either at the meeting or prior to the meeting.
At the EGM on 24 June 2014, the resolution to terminate the GMC was passed (the June Resolution). By consent, the parties agreed to the grant of an interim injunction restraining the Body Corporate giving effect to the motion.
The issue before the Member was whether the Body Corporate was entitled to give effect to either the March Resolution or the June Resolution.
The Body Corporate submitted that it was entitled to do so pursuant to, respectively, clauses 8.1(b), (c) and (d) of the GMC and s 131 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (the Standard Module). The asserted right to terminate arose out of the service by the Body Corporate on the Contractor of a number of RANs; the March Resolution relying on the giving of the First Leary Report RAN and the June Resolution relying on the giving of eight RANs, including the First Leary Report RAN.
The Member held that the First Leary Report RAN was invalid, and hence it could not be relied upon as a basis for any resolution to terminate.[6] The Member found that the Body Corporate could give effect to the June Resolution to terminate the GMC, relying on three breach notices given within six months pursuant to clause 8.1(c) of the GMC.[7] The three breach notices which the Member found could be relied on were the (four) 16 May RANs.[8] The Member held that the Body Corporate could not rely upon the Second Leary Report RAN, the Skip Bin RAN and the QFRS RAN as valid notices for the purpose of clause 8.1(b) or s 131 and nor could the Body Corporate rely on the Contractor’s gross negligence or incompetence for the purpose of clause 8.1(d) of the GMC.
[6]Reasons, [256].
[7]Order number 2 of the Decision.
[8]Reasons, [285].
Subsequent to the hearing before the Member and the filing of the Notice of Appeal, the Body Corporate purported to terminate the GMC based on the June Resolution and order 2 of the tribunal made on 22 September 2016 (the Post Decision Termination). The Contractor says that this was a repudiation of the agreement which it has accepted. It seeks as part of the appeal an order awarding damages for breach of contract in a sum to be assessed, and also that the matter be remitted to the tribunal for such amount to be determined.
Grounds of appeal
In the Application, the grounds of appeal relied upon by the Contractor allege that the Member erred in fact or in law as follows:
(a)finding that there had been four valid notices issued to the Contractor meeting the description set out in clause 8 of the GMC (Ground 1);
(b)holding that clause 8 of the GMC did not contract out of mandatory provisions of the Body Corporate and Community Management Act 1997 (Qld) (BCCM Act) which, if applicable, would not have authorised the purported termination of the GMC (Ground 2);
(c)holding that the Body Corporate had acted reasonably (as it was found was required) both procedurally and substantively in issuing the notices and holding requisite meetings of the Committee of the Body Corporate or the general meeting of the Body Corporate (Ground 3); and
(d)failing to give any or any adequate reasons in respect of the matters the subject of Grounds 1 to 3 (Ground 4).
The Body Corporate seeks leave to pursue what it submits is a notice of contention or, alternatively, a cross-appeal in relation to the First Leary Report RAN.
Leave to Appeal
The Contractor’s appeal, so far as it concerns a question of law, can be brought without leave.[9] However, to the extent that the appeal raises questions of fact or questions of mixed law and fact, leave of the Appeal Tribunal is required.[10]
[9]QCAT Act, s 142(1).
[10]QCAT Act, s 142(3)(b).
The Appeal Tribunal’s powers depend on whether the appeal is being decided in relation to a question of law only or whether it concerns a question of fact only or a question of mixed law and fact. In deciding an appeal against a decision on a question of law, the Appeal Tribunal is not engaged in a rehearing of the matter. Appeals involving questions of fact or questions of mixed law and fact proceed by way of rehearing with or without the hearing of additional evidence.
Here, the Contractor has raised four grounds of appeal. For the Contractor, it was submitted that the issues raised by grounds 1 and 2 involved questions of law but conceded that the question of reasonableness raised by ground 3 was a question of mixed law and fact.[11] In making that submission, counsel for the Contractor, conceded that if it be found that all grounds of appeal involved mixed questions of law and fact, leave would be necessary.
[11]Transcript of Proceedings, The Sands Gold Coast Pty Ltd v Body Corporate for the Sands (Queensland Civil and Administrative Tribunal, APL368-16, Judge Sheridan, Sessional Member Lumb, 18 September 2017) T1-50, l 35; T1-51, l 1-5 (D Savage) (Appeal Transcript).
On behalf of the Contractor, it was submitted that it had a sufficiently arguable case and that the appeal was necessary to correct an injustice, being the removal of valuable commercial rights, and that these matters justified the grant of leave.
There is no doubt that ground 2 of the appeal raises a question of statutory construction, relevantly the interplay between s 129 and s 131 of the Standard Module. That is clearly a question of law for which no leave is required.
The other grounds of appeal arguably raise mixed questions of fact and law for which leave to appeal pursuant to subsection 142(3) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) is required.
Given the importance of the outcome of the decision to the Contractor and the important question of statutory construction, it is appropriate that leave be granted and the matter proceed to be determined by way of a rehearing. Except in relation to the evidence concerning the Post Decision Termination, the Contractor does not seek to adduce further evidence but relies on the primary facts as found.
We will address each of the grounds relied upon by the Contractor and, after doing so, we will consider the notice of contention or cross-appeal filed on behalf of the Body Corporate. We will commence with a consideration of ground 2, given the significant question of construction raised.
Ground 2
The findings below
The Member found that clauses 8.1(b), (c) and (d) were not invalid because of the statutory provisions contained in s 122 of the BCCM Act and the termination process contained in the Standard Module.[12] The Member’s findings relevant to this can be summarised as follows:
(a)The termination processes provided for in s 131 of the Standard Module cannot be contracted out of by the parties but that does not mean the parties cannot agree additional methods of termination;
(b)Clause 8.1 of the GMC does not attempt to contract out of the provisions of the BCCM Act;
(c)Section 129 of the Standard Module expressly provides that parties to a service contract can agree additional methods of termination, including by mutual agreement;
(d)Section 122 of the BCCM Act allows the regulation module applying to a community title scheme, here the Standard Module, to govern certain aspects of the “engagement” of a service contractor, including how the engagement comes to an end;
(e)Section 122(1)(d) of the BCCM Act only permits “particular circumstances” of termination to be prescribed and otherwise permits parties to agree their own methods of termination that are not particular circumstances;
(f)Section 129(2) of the Standard Module is capable of overriding any agreement of the parties and requires that any termination pursuant to an agreement between the parties to be by ordinary resolution; and
(g)Otherwise, the fact that s 129 of the Standard Module permits the parties to agree their own termination process is not beyond the power given by s 122 of the BCCM Act.
[12]Reasons, [70].
The principal question
The core issue is whether clause 8.1(c) (in conjunction with clause 8.1(d)) was inconsistent with s 131 of the Standard Module and whether the inclusion of clause 8 in the GMC amounted to a contracting out of the provisions of the BCCM Act, contrary to s 318 of that Act (and whether clause 8 was therefore invalid).
It was not disputed that contracting out of the BCCM Act would include contracting out of a regulation made pursuant to that Act.[13]
[13]See subsections 7(1), 7(2)(a) and 7(3) (first dot point) of the Statutory Instruments Act 1992 (Qld) and subsection 122(1)(d) of the BCCM Act.
Operation of s 131 of the Standard Module
In addressing the question as to the extent of the operation of s 131 of the Standard Module, it is necessary to consider the statutory framework involving the termination of service contracts.
Relevantly, s 122 of the BCCM Act provides:
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 —
…
(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;
Two observations may be made about this provision. First, it contemplates that a regulation module may prescribe not only the circumstances in which an engagement or authorisation “may be” terminated but also the circumstances in which it “may not be” terminated; that is, the regulation module may prescribe a positive means to terminate such engagement or authorisation and also prescribe a restraint on the ability to terminate. Secondly, those matters apply “despite” anything in the engagement or authorisation; that is, the regulations can override the terms of the engagement or authorisation.
The relevant provisions of the Standard Module are found in Part 5 of Chapter 6 (Part 5) of the Standard Module, which is headed “Termination of engagements and authorisations”.
Section 128 of the Standard Module provides the “purpose” of Part 5. It states:
This part provides for –
(a) the grounds on which the body corporate may terminate a person’s engagement as a body corporate manager or service contractor, or authorisation as a letting agent; and
(b) the steps the body corporate must follow to terminate the engagement or authorisation.
Section 129(1) of the Standard Module provides that a relevant engagement may be terminated in one of three ways, namely:
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.
Section 129(2) of the Standard Module expressly provides that termination of a relevant engagement in each of the three respects identified in subsection (1) is subject to the passing of an ordinary resolution of the body corporate in general meeting.
The Body Corporate contends that s 129 is clear and unambiguous and that subsection (1)(c) operates such that if the engagement or authorisation provides for a ground of termination, the right of termination may be exercised subject only to the statutory constraint that the termination must be approved by an ordinary resolution of the body corporate (and, as accepted by both parties, the obligation to act reasonably).
The Contractor contends that s 129(1)(c) should be also construed as being subject to the operation of s 131, where the grounds of termination are specified within that section.
Section 131 of the Standard Module provides, in part:
(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.
…
(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.
Section 130(1) of the Standard Module also provides for a right to terminate in a variety of circumstances, including where the body corporate manager, service contractor or letting agent (and, if such entity is a corporation, a director of the corporation) is convicted (whether or not a conviction is recorded) of an indictable offence involving fraud or dishonesty[14] or convicted on indictment of an assault or an offence involving an assault.[15] In the circumstances identified in subsection (1), the engagement or authorisation may be terminated if the termination is approved by an ordinary resolution of the body corporate and where the person is a caretaking service contractor or a letting agent, the motion to approve the termination is decided by secret ballot.[16]
[14]Section 130(1)(a).
[15]Section 130(1)(b).
[16]Section 130(2)(a) and (b).
In our view, for the reasons that follow, notwithstanding the terms of an engagement or authorisation, where a purported ground of termination falls within the scope of s 131 (or s 130) of the Standard Module the requirements of that regulation must be followed in order to validly terminate the engagement or authorisation.
In the interpretation of a provision of an Act, the interpretation that will best achieve the purpose of the Act is to be preferred to any other interpretation.[17] Save as excluded in Schedule 2 of the Statutory Instruments Act 1992 (Qld),[18] the provisions of the Acts Interpretation Act 1954 (Qld) (as relevantly modified) apply to the interpretation of the Standard Module.[19]
[17]Acts Interpretation Act 1954 (Qld), s 14A.
[18]Sections 14 to 14D inclusive of the Acts Interpretation Act are not excluded by Schedule 2.
[19]See sections 14 to 19 inclusive of the Statutory Instruments Act 1992 (Qld).
Section 129 stipulates the three mechanisms by which an engagement or authorisation may be terminated. It also imposes a requirement that the termination be approved by an ordinary resolution of the body corporate.
In permitting termination under the engagement or authorisation, subsection 129(1)(c) is, as the Body Corporate submits, unqualified. Neither that subsection nor s 129 generally is expressly made subject to s 131 (or s 130) of the Standard Module. The question is whether it should be construed that way.
Section 131 permits termination in various circumstances including misconduct, failure to carry out duties under the engagement and a breach of the relevant code of conduct. In those circumstances, s 131 prescribes the preconditions to termination, including the giving of a RAN providing sufficient detail of the conduct complained of and allowing at least 14 days for such conduct to be remedied.
The effect of the Body Corporate’s contention is that the only limitation on termination under the terms of an engagement in identical circumstances imposed by the Standard Module is approval by a resolution of the body corporate. On that construction, the terms of an engagement could permit termination without the giving of any notice or may require the giving of a notice but on terms, for example, that the conduct be remedied within 24 hours. Further, on that construction the terms of the engagement need not require a secret ballot, despite the terms of subsection 131(3)(d). If subsection 129(1)(c) permitted termination in those circumstances, there would be little scope for the operation of s 131. Both s 129 and s 131 would have scope for operation if s 131 were held to apply to the circumstances set out in s 131(1) and s 129 were held to apply otherwise.
Part 5 of the Standard Module, construed in the context of subsection 122(1)(d) of the BCCM Act, requires a body corporate to follow the statutory regime of termination in the circumstances identified in s 131 (and s 130 where applicable) and otherwise in accordance with s 129. Section 129 is a general provision identifying the broad mechanisms for termination of a relevant engagement or authorisation while s 131 (and s 130) are specific provisions identifying particular circumstances for termination (in which event the statutory requirements must be satisfied).
In our view, the primary purpose of Part 5 of the Standard Module is to provide protection to parties contracting with a body corporate pursuant to contracts which often carry with them valuable rights, namely, management agreements, service contracts and letting authorisations. That purpose would not be achieved if the terms of the agreement take precedence over the express statutory requirements in circumstances where the respective rights of termination are coextensive.
While, in terms, s 131 is not expressed to be a mandatory code excluding rights that may exist under a service contract, it does impose mandatory requirements to be satisfied in the event of a body corporate seeking to terminate on one of the grounds set out in subsection 131(1).
The purported ground of termination under clause 8.1(c)
The remaining issue in relation to Ground 2 is whether the Body Corporate’s termination purportedly pursuant to clause 8.1(c) of the GMC fell within the scope of s 131.
The Body Corporate submits that the right to terminate under clause 8.1(c) was a separate contractual right arising in circumstances where s 131 had no operation. If that is correct, it would follow that clause 8.1(c) would not operate so as to contract out of the operation of s 131 of the Standard Module, such that s 318 of the BCCM Act would not have application.
Read in isolation, clause 8.1(c) does not, in its terms, engage one of the grounds set out in s 131 of the Standard Module. Clause 8.1(c) only permits termination in the event that three valid notices are given to the Contractor under clause 8.1(b) within any six-month period.[20] In order to be a valid notice under clause 8.1(b), the Contractor must be in “default in the performance of the duties” of the Contractor pursuant to the GMC (and such failure or neglect to remedy the default shall continue for a further period of 14 days after the giving of the notice). The relevant duties of the Contractor are set out in Schedule 3 to the GMC. The Schedule is headed “Ground Maintenance Person’s Duties” and identifies those duties that “must” be undertaken by the Contractor.
[20]Incorrectly referred to in clause 8.1(c) of the GMC as “clause 8(b)” rather than “clause 8.1(b)”.
We consider that the language of clause 8.1(b), in conjunction with Schedule 3, is consistent with the concept of a failure to carry out duties under the engagement in terms of s 131(1)(b). It is not without significance that the parties submitted a Statement of Agreed Facts at first instance in which it was agreed that each of the various Notices in issue before the Member “related to alleged failures by the [Contractor] to carry out duties under the GMC”.[21]
[21]See Exhibit 1 before the Appeal Tribunal, ‘Statement of Agreed Facts’, [9].
As such, s 131 of the Standard Module governed the Body Corporate’s entitlement to terminate the GMC and any right contained in clause 8.1(c) of the GMC must be exercised subject to s 131 of the Standard Module.
In order to terminate the GMC by reason of the failure to carry out the duties identified in the RANs, it was necessary that the Body Corporate satisfy the requirements of s 131 of the Standard Module including each of the requirements set out in subsection (3); particularly, subsection (3)(b) which required the [Contractor] to have failed to comply with the RAN within the period stated in the notice, and subsection (3)(d) which required a motion to approve the termination of a caretaking service contractor to be decided by secret ballot.
In terms of the 16 May RANs, being the RANs determined by the Member to be valid, the Member found that the Contractor had remedied the default within the time to remedy by providing the information and documents.[22]
[22]Reasons, [286].
The requirements of a secret ballot are set out in s 89 and s 90 of the Standard Module. The Reasons do not suggest that either of the March or June resolutions were conducted by secret ballot. Further, the content of the Notice of an EGM, particularly the wording of the second motion and the content of the Voting Paper indicate, in our view, that the motion could not have been decided by a secret ballot. In the circumstances, we are satisfied that the Body Corporate did not satisfy the requirements of subsection 131(3)(d) of the Standard Module on the passing of either resolution.
For the reasons set out above, we are of the view that the Body Corporate was not entitled to terminate the GMC in reliance on the 16 May RANs because of its non-compliance with s 131 of the Standard Module.
Subject to a consideration of the matters raised by the Body Corporate by way of an asserted notice of contention or cross-appeal, we consider that the appeal should be allowed and that order 2 of the Decision should be set aside and, in lieu thereof, it be declared that the Body Corporate was not entitled to give effect to the resolution to terminate the GMC dated 20 April 2012, pursuant to clause 8.1(c) of that contract, by the resolution passed at the EGM on 24 June 2014.
Despite the conclusion reached on ground 2 of the appeal, it is appropriate to proceed to consider the other grounds of appeal.
Ground 1
In support of ground 1, the Contractor contends that the Member erred in fact or in law in finding that there had been four valid notices issued to the Contractor meeting the description set out in clause 8.1(c) of the GMC and that the Body Corporate could rely on the four 16 May RANs under clause 8.1(c) of the GMC.
Contractor’s Submissions
In challenging the decision of the Member, the Contractor referred to the manner in which both the direction and the subsequent RANs were issued under cover of a single email; the fact that all RANs required the information to be provided at the same time; the calling of the EGM based on the failure to remedy being made seven days prior to the period stated in the RANs expiring and the failure to disclose the fact of the defaults having been remedied. The Contractor also relied upon an email exchange contained in exhibit 10 at the hearing below, indicating the Chairman of the committee’s motivation was to end the contractual relationship and his denial of that purpose was worthless, given the Member’s finding that the Chairman’s evidence was “wholly unreliable”.[23]
[23]Reasons, [176].
The Contractor submits that there was one valid notice comprised of four pieces of paper and, to hold otherwise, was to allow form to triumph over substance. Further, it was said no satisfactory explanation had been given by the Body Corporate for its decision to issue four separate determinations, followed by four separate RANs. It is said by the Contractor that the evidence reveals that the purpose for which the decision was made to issue the four 16 May RANs was improper and extraneous and the purported exercise of a lawful contractual right for an improper or ulterior purpose constitutes a breach of the implied duty of reasonableness, either contractual or statutory.
Body Corporate’s submissions
The Body Corporate accepted that, pursuant to s 94(2), s 100(5) and s 152(1) of the BCCM Act, the Body Corporate had a duty to act reasonably. It says it was reasonable for the Body Corporate to pursue the Contractor and to protect the rights of lot owners given the Contractor’s conduct, the ongoing disputes and its serial breaches of the GMC as evidenced by the Leary Report. The Body Corporate says it was entitled to exercise the rights available to it to terminate the GMC. The Body Corporate submits that given the Contactor’s conduct and the long history of disputation, there was a compelling basis for issuing the directions and the RANs.
The Body Corporate says the onus was on the Contractor to establish that the decision made by the Body Corporate was unreasonable and the Member had rightly held that the Body Corporate had taken a reasonable approach.
Consistent with the finding of the Member, the Body Corporate said, “There was no splitting of a single issue. Four separate issues are being addressed.” The Body Corporate says the GMC permitted the giving of separate notices and the insertion of the requirement for the notices to be “valid” in clause 8.1(c) of the GMC does not change that. The Body Corporate says it would be wrong to imply a term such that there could only be a single notice ever issued on the one day.
Discussion
Whether the four 16 May RANs were “valid notices” for the purposes of clause 8.1(c) entitling the Body Corporate to terminate the GMC will depend on the proper construction to be given to that clause. The determination of that question must depend on the relationship between clause 8.1 and in particular clause 8.1(c) and the contract as a whole.
In Electricity Generation Corp v Woodside Energy Ltd,[24] the High Court confirmed that an objective approach is to be adopted in determining the rights and liabilities of parties to a contract. The Court stated:
…it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating.” As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties… intended to produce a commercial result.”[25]
[24](2014) 251 CLR 640.
[25]Ibid, [35].
The GMC is a 10 year contract. Under it, the Contractor is paid an annual salary of around $88,000. Whilst separate from and a stand-alone agreement, the GMC is part of a suite of contracts entered into between the parties which entitled the Contractor to operate a management and letting business from premises within the community title scheme.
For the purposes of resolving this ground, clause 8.1 is taken to regulate the circumstances in which the GMC can be terminated. Apart from subsection (c), the other provisions of clause 8.1 permit termination where the contract is assigned without consent, the contractor defaults and despite further request fails to remedy the default or the Contractor is grossly negligent or incompetent.
The Member held that the breaches which he found had occurred (being the pressed breaches of the First Leary Report and the failure to answer the four Directions within seven days) could not be said to amount to gross negligence or incompetence. The Member found that the breaches were not trivial but “they cannot be placed in that higher bracket”.[26]
[26]Reasons, [300].
Nevertheless, the Member found it was reasonable for the Body Corporate to issue the Directions and the RANs. The Member referred to the evidence of Ms Rockett, as the sole director of the Contractor, that it was a deliberate decision not to provide the information and the documents. The Member commented that the Contractor had deliberately refused to co-operate with the Body Corporate to seek information which it was entitled to have and which was reasonable for it to pursue.[27] The Member found that each of the 16 May RANs was “sufficiently separate” for the purposes of clause 8.1(c).[28] In failing to provide the information the Contractor was in breach of its obligations under paragraph (b) of clause 2(e) of the GMC. The Member held it was reasonable to issue the Directions and the RANs and to rely on clause 8.1(c).
[27]Reasons, [312].
[28]Reasons, [309]-[310].
That the Body Corporate may have had reason to terminate is not, however, the issue. The issue is whether the contract permitted the process undertaken by the Body Corporate to achieve that end. The three other means of termination contained in clause 8.1 involved serious defaults. On any view, it is difficult to regard the late provision of the information requested as a serious default.
Further, when viewed objectively, we consider that clauses 8.1(b) and (c) were not intended to permit the Body Corporate to split up into four pieces of paper given in one document its directions, and then subsequent notices, and thereby create a basis for termination under clause 8.1(c). While we see some force in the Contractor’s contention that the manner of the giving of the 16 May RANs amounted to the giving of one notice for the purpose of clause 8.1(c) rather than four notices, it is unnecessary to decide the point. The power in clause 8.1 is to be exercised reasonably. In our view, it was not reasonable to issue the four 16 May RANs when their contents could have been given in one notice and the only possible explanation for the giving of the four notices at the one time was to take advantage of the provisions of clause 8.1. The notices are invalid.
If the issue of the four 16 May RANs was not valid, then any resolution to terminate based on the four notices is not valid.
Ground 3
In support of ground 3, the Contractor contends that the Member erred in fact and in law in holding the Body Corporate acted reasonably in issuing the 16 May RANs and in holding the meetings of the Committee and the general meetings of the Body Corporate.
The reasonableness of the decision to issue the notices has been addressed in considering ground 1. The focus of this ground, assuming that the decision to issue the notices was valid and that the notices were valid, is whether the Body Corporate acted reasonably in passing the June Resolution.
At the hearing of the appeal, the Contractor pointed to various species of conduct in relation to the meeting that was said to be unreasonable including resolving at the same time as issuing the RANs to call a meeting (and proposing a motion to terminate the GMC) without waiting to see whether the notices were remedied; providing an “explanatory memorandum” in support of the motion that depended upon assertions that there had been large-scale breaches which were ultimately found not to have been breaches and terminating the GMC notwithstanding that the 16 May RANs had all been remedied. The Contractor submitted this was all against the background that the GMC was a valuable contractual right to the Contractor and was part of a suite of contracts which also included a management agreement and letting authorisation.
The Body Corporate accepted that the fact that the default had been remedied prior to the passing of the resolution was a relevant consideration but submitted that it had to be considered against all of the other factors including the background to the default, the terms of the contract and the manner in which the right of the Body Corporate arose.
In relation to the June Resolution and the reasonableness of the Body Corporate’s internal processes which resulted in the resolution to terminate the GMC, the Member said that, on the basis of the statement by Mr Evans, as chairman of the committee, the committee properly considered the factors relevant to the decision and he was “entitled to assume that the committee did consider things properly and reasonably” in the absence of any evidence to the contrary.[29] The Member had earlier expressed concern that there was scope 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 but that there was “hardly any evidence at all one way or the other” to show whether or not this sort of thing happened.[30]
[29]Reasons, [311].
[30]Reasons, [316]-[317].
The fact is that the Body Corporate voted on a resolution without being provided with the true status of compliance with the RANs. The true position was that the Contractor complied with the RANs prior to the meeting. In those circumstances, the actions of the Body Corporate were not reasonable and the passing of the June Resolution is invalid.
Ground 4
In support of ground 4, the Contractor contends that the member fell into error in not properly setting out the argument advanced at the trial and considering that, it is said, the Member failed to provide adequate reasons in terms of conclusions reached.
There is a requirement that a court or tribunal must state adequate reasons for its decisions and a failure to give sufficient reasons constitutes an error of law.[31]
[31]Drew v Makita (Australia) Pty Ltd [2009] QCA 66 at [57]
The reasons do not need to be lengthy or elaborate but “it is necessary that the essential ground or grounds upon which the decision rests should be articulated.”[32] Mahoney JA in Soulemezis v Dudley (Holdings) Pty Ltd described it as:
…And, in my opinion, it will ordinarily be sufficient if - to adapt the formula used in a different part of the law… by his reasons the judge apprises the parties of the broad outline and constituent facts of the reasoning on which he has acted.[33]
[32]McHugh JA in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 280, referred to with approval in Drew v Makita (Australia) Pty Ltd [2009] QCA 66 at [60].
[33]Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 273, referred to with approval in Drew v Makita (Australia) Pty Ltd [2009] QCA 66 at [59].
Samuels JA in Strbak v Newton said:
…What is necessary, it seems to me, is a basic explanation of the fundamental reasons which led the judge to his conclusions. There is no requirement, however, that reasons must incorporate an extended intellectual dissertation upon the chain of reasoning which authorises the judgment which is given.[34]
[34]Unreported, New South Wales Court of Appeal, Gleeson CJ, Samuels and Priestley JJA, 18 July 1989.
At the same time, the reasons for decision must be read fairly and in the context of the manner in which the trial was conducted.[35]
[35]Assad v Eliana Construction & Developing Group Pty Ltd [2015] VSCA 53 at [37].
It should also be borne in mind that “adequacy of reasons refers to their sufficiency in content and form, and not to their validity in point of law, or the correctness of matter of fact”.[36]
[36]Cypressvale P/L & anor v Retail Shop Leases Tribunal [1996] 2 Qd R 462 McPherson and Davies JJA at 482.
Reading the Reasons as a whole, the Appeal Tribunal is satisfied that the Member gave full consideration to the issues raised and, although the Appeal Tribunal has reached a different conclusion, the approach of the Member can be discerned from the reasons given. In our view, the Member gave adequate reasons for the conclusions reached.
Other matters
At the commencement of the appeal, on behalf of the Contractor, counsel indicated to the Appeal Tribunal that the Contractor had accepted the Post Decision Termination as a repudiation to the GMC and seeks as part of the appeal an order awarding damages for breach of contract in a sum to be assessed and seeks remission to the tribunal for the amount to be determined.
Ultimately, counsel for the Contractor appeared to accept that it would be adequate for the Appeal Tribunal to determine whether the passing of the resolution was valid and that any further issues could be left to another day. No submissions, either oral or in writing, were made by either party with respect to the making of an award of damages.
In the circumstances, the proceeding should be returned to the tribunal for any issues that arise as a result of this decision to be resolved.
Notice of contention or cross-appeal
In its submissions, the Body Corporate contends that the Member erred in finding that the First Leary Report RAN failed to comply with either the statutory regime or the GMC and stated that the purported termination of the GMC can be upheld on the basis that the First Leary Report RAN was valid and not complied with by the Contractor.[37]
[37]Body Corporate's submissions filed 10 July 2017, [88]-[111].
For the Contractor, it is submitted that the Body Corporate’s contentions amount to a cross-appeal, that the cross-appeal is out of time and that an extension of time should not be granted.[38]
[38]Contractor's outline of argument on cross-appeal filed 22 August 2017, [16]-[19]; Appeal Transcript T1-51, l 10; T1-53, l 17.
In the course of oral submissions, it became apparent that the Body Corporate was seeking to vary the orders made below.[39] That is, the Body Corporate was not merely seeking to uphold an existing order on a different ground but was seeking what was in effect a different order. In the circumstances, we consider that the contentions raised by the Body Corporate were in the nature of a cross-appeal rather than a notice of contention.
[39]Appeal Transcript, T1-60, l1; T1-61, l 42.
The Body Corporate makes three complaints about the Member’s finding that the First Leary Report RAN failed to comply with either the statutory regime or the GMC.
First, the Body Corporate contends that the Member incorrectly found that the Contractor’s skills could not objectively be assessed, and there was a dispute about its skills, and overall the RAN did not give the Contractor a reasonable opportunity to do what it had to do.[40] The Body Corporate also contends that on receiving the First Leary Report RAN, the Contractor was left with reasonable certainty in respect of what was necessary to comply with that document.[41] These matters necessarily involve a challenge to the factual findings by the Member. The Body Corporate's contentions raise either a pure question of fact or, perhaps, a mixed question of fact and law, the question of law involving a consideration of the requirements of s 131 of the Standard Module, in particular, subsection 131(4)(c). If it be the latter, there appears to be no dispute as to the scope or content of those requirements such as to raise a question of general importance.
[40]Body Corporate's submissions filed 10 July 2017, [89]; Reasons, [188]–[189].
[41]Body Corporate's submissions filed 10 July 2017, [95].
Secondly, the Body Corporate contends that the Member erred in finding that the first Leary Report RAN did not grant the Contractor a reasonable time within which to comply. What is a reasonable time is a question of fact and depends upon the circumstances.[42] Central to the Body Corporate's arguments are the factual matters contained in paragraph [100] of the Body Corporate’s submissions.
[42]See Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 567-568 per Brennan J (as he then was).
The third matter, which related to the alleged onerous nature of obtaining two quotes, also involved a contest of factual matters.[43]
[43]Body Corporate's submissions filed 10 July 2017 [107]-[108].
The point of the cross-appeal is to establish that the first Leary Report RAN was a valid RAN. However, it appears to be accepted by the Body Corporate that, even if that notice had been valid, the purported resolution consequential on that notice could not have been effective to terminate the GMC pursuant to s 131 of the Standard Module because the resolution was not passed by way of secret ballot.[44] If the Body Corporate's arguments were to be accepted, it appears that the Body Corporate contemplates that it could now bring a further EGM or an AGM and resolve to terminate the GMC pursuant to s 131 of the Standard Module (notwithstanding that the notice was served more than three years ago). In short, the orders sought by the Body Corporate would not establish any previous right to terminate the GMC.
[44]Appeal Transcript, T1–61, ll9-42.
We would not refuse the Body Corporate leave to appeal because of the delay in seeking the leave to cross-appeal notwithstanding that we consider that it was open to the Body Corporate, upon receipt of the Contractor’s Application, to either file its own application for leave to appeal and seek an extension of time to do so or to seek directions that it be permitted to file an application in the nature of a cross-appeal. The Body Corporate’s contentions were raised in its written outline of argument and the Contractor had a proper opportunity to respond to such matters.
However, in our view, the Body Corporate should be refused leave to cross-appeal because, firstly, the grounds are premised upon what are largely, if not entirely, factual disputes; secondly, leave is not necessary to correct any demonstrable substantive injustice to the Body Corporate (the Body Corporate having failed to satisfy the statutory requirements in order to terminate the GMC even if the First Leary Report RAN was held to be valid), and thirdly, the Body Corporate’s submissions raise no question of general importance and a decision of the Appeal Tribunal would not be to the public advantage.
Conclusion
Accordingly, the Appeal Tribunal orders that:
1. The appeal is allowed.
2. Leave to cross-appeal is refused.
3. Orders 2 and 4 of the decision below are set aside.
4. In lieu of order 2 of the decision below, it is declared that the Body Corporate was not entitled to give effect to the resolution to terminate the Ground Maintenance Contract dated 20 April 2012, pursuant to clause 8.1(c) of that contract, by the resolution passed at the Extraordinary General Meeting held on 24 June 2014.
5. The parties shall file (and serve on the other party), within 14 days of the date of these orders, written submissions (no longer than eight pages) in respect of the question of costs of the proceeding below and of the appeal.
6. The matter is otherwise remitted to the tribunal for the determination of any other outstanding matters between the parties.
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