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[2013] QCAT 387
General information, not legal advice.
Queensland Civil and Administrative Tribunal
2013-07-22
Original judgment source is linked above.
Johjen Pty Ltd v Body Corporate for Aegean [2013] QCAT 387
BODY CORPORATE - whether remedial action notices valid and complied with - whether negligence by body corporate manager in carrying out its duties - costs arising from the late supply of statements of evidence
Body Corporate and Community Management Act 1997 (Qld), section 94, Schedule 2
Kehl v Board of Professional Engineers of Queensland [2010] QCATA 77
Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412
Seed and Anor v Body Corporate for Renaissance Golden Beach [2011] QCAT 246
Johjen Pty Ltd represented by Mr Benjamin Kidston of counsel instructed by Mahoney Lawyers
Body Corporate for Aegean CTS 9646 represented by Mr Keith Howe of counsel instructed by Carter Newell Lawyers
[1] The Aegean is a high rise apartment building in Surfers Paradise. Johjen is the resident unit manager engaged by the body corporate. It has been the manager since 2003. Johjen is also the letting agent for a substantial number of apartments in the building.
[2] A dispute has arisen between the body corporate and Johjen about whether Johjen has been properly performing its duties. For example the body corporate says that Johjen failed to properly supervise cleaning and maintenance staff employed by the body corporate; and that it failed to advise the body corporate of deterioration in the balustrading, the roof membrane, and ventilation ductwork on the roof.
[3] In 2010 the body corporate gave Johjen a series of five remedial action notices under section 129 of the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Qld):
one dated 14 May 2010 (the first notice);
one dated 20 October 2010 relating to balustrading (the second notice);
another dated 20 October 2010 relating to staff supervision (the third notice);
one dated 20 December 2010 and given on 22 December 2010 relating to balustrading (the fourth notice); and
another dated 20 December 2010 and given on 22 December 2010 relating to staff supervision (the fifth notice).
[4] When a remedial action notice is given to a manager, and the manager fails to comply within the period specified in the notice, a body corporate may proceed to terminate the manager's engagement: section 129 of the Regulation.
[5] Johjen has applied to QCAT for declarations that the five notices are invalid, or that the notices have been complied with. Johjen also seeks injunctions restraining the body corporate from relying on the notices, and orders that the notices be withdrawn. The body corporate opposes the application and seeks declarations of validity and non-compliance. It seeks declarations that Johjen failed or neglected to carry out its duties, and that this continued for a period of 28 days after each notice was given. It also seeks a declaration that Johjen has, in the ways set out in the notices, been guilty of gross negligence in the performance of its duties.
[6] At the hearing, Jennie and Paul Burnell (a current and past director respectively of Johjen) gave evidence on behalf of Johjen. The other witnesses for Johjen were Ian Brown (a former employee at the Aegean) and Bryan Hateley. The witnesses for the body corporate were Gerard Blodorn (a civil engineer), Suzie Bugden and Marjory Johnston. Mr Hateley, Ms Bugden and Ms Johnston have all served on the body corporate committee at various times.
[7] It is undisputed that Johjen is bound, via a series of assignments, to a management agreement signed in 1999, as varied by a deed in 2000. It is also undisputed that Johjen is bound by the code of conduct for body corporate managers and caretaking service contractors contained in Schedule 2 to the Body Corporate and Community Management Act 1997 (Qld).
[8] Useful guidance as to what might make a remedial action notice invalid can be found in the case of Seed and Anor v Body Corporate for Renaissance Golden Beach,[1] a decision of Judicial Member Thomas. While Seed involved a code contravention notice under section 139 of the Act, I consider that the principles adopted in that case are also applicable to remedial action notices under section 129 of the Regulation. This is because the sections operate in a similar way. The principles expressed in Seed include that a notice must be capable of permitting the recipient to understand with reasonable certainty what he or she is required to do to comply.
[9] One difference between the sections is that section 139 requires a code contravention notice to specify a 'reasonable period' for the contravention to be remedied, while section 129 requires a remedial action notice to specify a period not less than 14 days. However, there would be an implied requirement that the period specified in a remedial action notice be reasonable. This is because a body corporate must act reasonably in carrying out its functions: section 94(2) of the Act.
[10] More broadly in my view, any unreasonable demand made in a remedial action notice, not just a demand about time, will be invalid.
[11] The first notice was dated 14 May 2010. It dealt with a number of matters: rooftop problems, absence from the building, staff doing work for residents or Johjen, and three particular tasks (concerning artificial plants, a greasetrap, and some barbeque table settings). I will consider each of these in turn. The notice said that Johjen's actions involved failures to carry out duties under the management agreement, and contraventions of the code of conduct. The notice said that a number of Johjen's actions amounted to misconduct. The notice required Johjen to carry out the duties, remedy the contraventions, and remedy the misconduct, within 28 days.
[12] The notice said that Johjen had failed, between 1 July 2008 and 17 July 2009, to ascertain or report to the body corporate the deteriorating condition of the waterproofing membrane and the ventilation ductwork on the rooftop. According to the notice, Johjen failed to raise the problems at committee and subcommittee meetings dealing with maintenance issues.
[13] The body corporate says that the problems with the membrane and the ductwork first came to its attention on 13 August 2009, when committee members on their own initiative inspected the rooftop. They immediately discussed the matter with the engineer Mr Blodorn, who was on site for other work. The body corporate then set about attending to the problem.
[14] Assuming for the moment that between July 2008 and July 2009 Johjen had failed to carry out duties and had contravened the code of conduct, clearly it was too late by May 2010 for it to do anything to remedy those shortcomings.
[15] In Seed,[2] the tribunal observed that the statutory scheme for a code contravention notice, with its requirement to allow the recipient to remedy the contravention, contemplates an ongoing contravention rather than one that is over and done with. This observation is equally applicable to a remedial action notice under section 129 of the Regulation. The purpose of such a notice is to give a manager the opportunity to remedy its breach (such as misconduct, gross negligence, failure to carry out a duty, or contravention of the code of conduct) before the body corporate can terminate the manager's engagement. It cannot have been Parliament's intention to allow a notice to be given under section 129 in respect of a breach that can no longer be remedied.
[16] That is not to say that a body corporate might not have some other remedy for a breach that has been and gone. The body corporate might, for example, be permitted to terminate the engagement under a term of the contract. Termination in that situation appears to be permitted under section 127(1)(c) of the Regulation.
[17] So far as remedial action notices are concerned, the mention of a past breach that can no longer be remedied will not necessarily render the notice invalid. It may have to be mentioned to meet the requirement to give details under section 129(4)(b). Accordingly, a body corporate might mention a past breach not by way of demand that it be reversed, but rather as a particular designed to inform the manager of where it has gone wrong, so that it can ensure that similar breaches are not repeated. A fair reading of the notice in its context is required in determining whether the notice impossibly calls for the remedying of a past breach, or for the non-repetition of similar breaches during the compliance period.
[18] As observed in Seed,[3] the validity of a notice of default is to be determined objectively on the basis of what would be conveyed to a reasonable recipient with his or her background knowledge.
[19] The portion of the first notice dealing with the rooftop problems complained, on its face, of past breaches that could not be remedied. I do not consider that the notice was in effect calling for the non-repetition of the alleged breach during the 28 day compliance period. It was well known to the parties that the rooftop problems had been identified by that time. The relevant portion of the notice would reasonably have been understood as demanding, impossibly, the remedying of a breach that could no longer be remedied. It is, therefore, invalid.
[20] The notice said that between about 29 November 2009 and 9 December 2009, Johjen failed to attend the Aegean building and to supervise the body corporate staff.
[21] If this part of the notice is properly understood as requiring Johjen, in May/June 2010, to remedy its alleged breach in November/December 2009, then this demand was impossible and therefore invalid. The better view, though, is that the alleged absence was mentioned by way of an informative particular. This part of the notice would have been understood by a reasonable recipient as requiring proper attendance during, or at least by the end of, the 28 day compliance period. Accordingly, it did not demand the impossible. This portion of the notice was valid.
[22] There is no suggestion that Johjen has been absent for any period since November/December 2009. I find that Johjen has complied with this part of the notice.
[23] The notice refers to four events that had occurred on specified dates between September and November 2009 involving body corporate employees, Mark Brandon and Ian Brown, who were under the supervision of Johjen. The first involved Johjen instructing Mr Brandon to repair a picture frame in an apartment for which Johjen was the letting agent. The second involved Johjen instructing Mr Brandon to assist with the handling of laundry in apartments for which Johjen was the letting agent. The third involved Johjen instructing Mr Brown to attend to Johjen's private business banking. The fourth involved Johjen instructing Mr Brown to repair a towel rail in an apartment for which Johjen was the letting agent.
[24] The notice said that Johjen's actions contravened terms of the agreement including terms requiring Johjen to supervise the staff and to use its best endeavours to see that the building was kept in good order and repair. The notice said that Johjen's actions contravened sections of the code of conduct, and amounted to misconduct.
[25] As with the portion of the notice relating to absences discussed above, I consider the proper reading of this portion is that it required the non-repetition of such conduct during the compliance period, rather than demanding the impossible task of remedying past breaches. Accordingly, this part of the notice is valid. It clearly conveyed to Johjen that it was not to have body corporate staff conduct non-body corporate business such as doing repairs for residents in their apartments.
[26] Johjen concedes that it had body corporate staff undertake small tasks for residents prior to the May 2010 notice. It says it did not direct staff to help residents after the notice was given. It says a letter dated 9 June 2010 was sent to the owners of each apartment advising that no further assistance would be provided.
[27] There is no firm evidence to contradict the Burnells' evidence that the conduct ceased. Their evidence is inherently probable. Even assuming the correctness of the body corporate's submission that there was a financial incentive for Johjen to engage in the conduct because it aided Johjen's letting business, it cannot be overlooked that Johjen also had much to lose if it was caught flouting the remedial action notice. I consider it unlikely that Johjen would have taken the risk.
[28] The only evidence arguably to the contrary of the Burnells' on this point came from Mr Brown. He had been an employee for some time as at May 2010. He gave evidence that in the course of his work he undertook 'odd tasks' for residents such as changing light bulbs and fixing towel rails. He also said that he was not given a direction by Johjen to stop this. It might be inferred from this that he continued to perform such tasks after the May 2010 notice, but that is not a necessary inference. It may be that no general instruction was necessary because Johjen simply stopped sending him off to perform such tasks, and it guarded against the possibility that an owner might approach employees directly by sending out the letter to the owners. Significantly, Mr Brown did not give evidence of any occasion in the period after the notice was given when Johjen told him to perform a task for a resident.
[29] The evidence of Mr Brown as to whether he continued to perform such tasks after the notice is unclear. In the absence of clear evidence that Johjen persisted in having staff perform such tasks after the May 2010 notice, I am not satisfied that it did so.
[30] Accordingly, I find that Johjen complied with this part of the notice.
Three particular tasks: concerning artificial plants, greasetrap, and barbeque table settings
[31] On 2 February 2010 the body corporate gave Johjen five written directions to complete tasks. The tasks related to replacing artificial plants in the indoor pool area; the cleaning arrangements for the greasetrap; cleaning outdoor showers; cleaning a pond; and cleaning certain stairs and a street wall. On 24 March 2010 the body corporate gave Johjen a written direction about stabilising certain table and chair settings in a barbeque area.
[32] The first notice said that the directions concerning the artificial plants, the greasetrap and the barbeque tables had not been complied with. It said this was in breach of the management agreement, including a term requiring Johjen to comply with all reasonable directions given by the body corporate, and was in breach of the code of conduct.
[33] The artificial plants direction required Johjen, within seven days, to have the body corporate employees remove broken plants and replace them with similar plants. If similar plants were not available, Johjen was to research alternative plants and discuss the matter with the liaison person (Ms Johnston).
[34] The greasetrap direction required Johjen, within 14 days, to undertake a series of steps to clarify and facilitate a cleaning program by the company responsible for the greasetrap.
[35] The barbeque table settings direction required Johjen, within 14 days, to organise and have completed a 'scope of works'. The direction included detailed requirements about the components to be used and the methods to be employed. A comment in the direction indicated that Johjen had previously protested that it was not its task to do this work after it was given a direction on 10 February 2010.
[36] In a letter to the body corporate on 10 June 2010, Johjen's solicitors said that in or around February 2010 Johjen had emailed the body corporate in response to the directions, and had not yet received a response. The Burnells gave evidence to the same effect at the hearing. They produced printouts of the emails they said were sent to Ms Johnston about the artificial plants and the greasetrap.
[37] According to the printouts, the email about the artificial plants requested that the committee supply the new plant parts, as the committee had sourced and purchased the original plants. The email about the greasetrap advised the committee of the name of the responsible company and said that the committee should advise that company of the frequency and program required etc.
[38] No printout has been produced in relation to the barbeque table settings, but in an affidavit Ms Burnell said that the February 2010 email addressed all the matters regarding the table settings and the scope of works proposed by the body corporate. In the affidavit, sworn in November 2012, Ms Burnell said that Johjen had still not received a response to its email about the barbeque tables, or its emails about the artificial plants and the greasetrap.
[39] I do not know what issue or issues Johjen raised in its email about the barbeque table settings, but I do accept Johjen's submission at the hearing that a 14 day timeframe for the works was inadequate. The direction required particular types of materials to be used, and for the work to be done in quite specific ways: for example that each vertical stabiliser have galvanised bolts fixed in particular ways. A sketch was attached. To properly comply with this direction, it is likely that Johjen would have needed to engage a tradesperson or tradespersons. Fourteen days did not allow a reasonable time for tradespersons to be engaged and the work completed. So I am satisfied that there was at least one genuine issue to be taken with the direction about the barbeque table settings.
[40] At the hearing, Ms Johnston said she was not in a position to comment on whether she had received the emails contained in the printouts: the printouts had not been produced prior to the hearing, and so she had not had a chance to check her records. I accept this. However, I consider it likely that emails suggesting alternative courses of action were sent by Johjen to the body corporate in or around February 2010. It is improbable that emails would have been mentioned in the solicitors' letter in June 2010, or in Ms Burnell's affidavit of November 2012, if that were not the case. On balance, I accept that such emails, including the two contained in the printouts, were sent, and that Johjen received no response.
[41] Johjen is required under the management agreement to carry out reasonable directions given by the body corporate. It is not at liberty to wilfully refuse to carry out a direction. Nor can it avoid its responsibility simply by shooting off an email. On the other hand, Johjen was entrusted with significant responsibilities under the agreement, and it was no doubt expected to exercise judgment. There would be nothing improper in Johjen suggesting an alternative course of action when it received a written direction, provided of course that this was not simply a way of fobbing off the body corporate. On balance, I am satisfied that the emails sent by Johjen in or around February 2010 were genuine suggestions about how the matters should be progressed.
[42] It was unreasonable for the body corporate to issue a remedial action notice demanding compliance with the original directions, without having engaged in some form of dialogue with Johjen about the points and suggestions made by Johjen in its emails.
[43] This part of the first notice is not valid.
[44] The second notice was dated 20 October 2010. It said that Johjen failed between about 1 July 2008 and 13 August 2010 to ascertain or report to the body corporate the deteriorating condition of balcony balustrades in the building, including the existence and location of broken welds and loose and twisted balusters. The notice said that Johjen had failed to inform the body corporate of this problem at committee and subcommittee meetings dealing with maintenance issues. These failures, it was said, amounted to failures to carry out duties under the management agreement, and involved contraventions of the code of conduct. The notice required Johjen to carry out the duties and remedy the contraventions within 14 days.
[45] By 20 October 2010, when the second notice was given, the body corporate was well aware of a problem of balustrade deterioration. The problem had been brought to the body corporate's attention by Mr Blodorn in September 2010, when he observed deterioration on two balconies.
[46] The body corporate contended in the fourth notice that the second notice required Johjen to provide a written report to the body corporate about the condition of all balustrades within the building. From the context, it seems that the body corporate meant a written report as directed by the committee on or about 8 October 2010. However, there was no express requirement in the second notice for a written report. I do not consider that there was any implied requirement either, bearing in mind that the management agreement does not impose an obligation upon Johjen to report faults in writing. If the body corporate expected Johjen to provide a written report in order to comply with the notice, this expectation should have been stated explicitly.
[47] The notice said that the failures in question had occurred between 1 July 2008 and 13 August 2010. A reasonable recipient of the second notice would have understood it to be a complaint about alleged breaches that had been and gone, and which could no longer be remedied. In demanding compliance within 14 days, when compliance was not possible, the notice placed an impossible demand upon Johjen. This was unreasonable, and the notice is therefore invalid.
[48] The third notice was also dated 20 October 2010. It said that from 12 July 2010 to 20 October 2010 employees of the body corporate engaged in cleaning or building maintenance had regularly spent excessive periods of their shifts in the staff room and/or the maintenance room instead of performing their duties; and that the cleaners had spent periods of their shifts attending to personal chores (including laundry) instead of performing their duties. The notice said that Johjen had failed to properly supervise the employees so as to identify the behaviour or to take reasonable steps to prevent it. The notice said that this involved failures by Johjen to perform its duties under the management agreement to supervise the employees. The notice said that Johjen must carry out the duties within 14 days.
[49] Johjen argues that the alleged breaches were not sufficiently particularised. The notice should have said, for example, that employee X was spending too much time looking in the mirror. Further, it should have specified some particular regime of supervision that was required. A broadly-stated notice such as the third notice is unreasonable and invalid, Johjen contends.
[50] I consider that the third notice was sufficiently detailed. It informed Johjen where and how staff were wasting time, in the body corporate's opinion. It was not necessary for the notice to spell out to Johjen how it was to supervise the staff. The body corporate was entitled to leave that to the judgment and skill of Johjen.
[51] Further, I do not think the notice was 'issued unreasonably', or was 'incapable of being substantiated', as contended by Johjen in its originating application to QCAT. Ms Bugden and Ms Johnston, as committee members of the body corporate, had undertaken surveillance of the staff. They say that their surveillance observations, coupled with the fact that less cleaning work was being carried out than the committee expected, led them to believe that Johjen was not properly supervising the staff. While, as I will explain later, I do not accept their ultimate conclusion, I do accept that they honestly and reasonably held this belief. This is sufficient, in my view, for the giving of a notice.
[52] The notice is valid.
[53] Covert surveillance of staff was undertaken by Ms Bugden or Ms Johnston on the following dates:
12 to 15 July 2010;
27 to 29 July 2010;
27 August 2010;
30 and 31 August 2010;
2 and 3 September 2010;
3 to 5 November 2010; and
23 to 26 November 2010.
[54] The observations were made from outside the building, according to an Allegations of Fact document tendered by the body corporate. Ms Bugden and Ms Johnston put their observations into spreadsheets. Johjen points out that the spreadsheets incorporate observations made by at least one other person, but I am satisfied that this input was minimal. The input was appropriately acknowledged in the spreadsheets.
[55] Only the observations on 3 to 5 November are directly relevant to the question of whether the third notice was complied with. These observations came at and immediately after the end of the 14 day compliance period. This is the appropriate time to measure compliance with the notice. If non-compliance within the 14 day period was relied upon, Johjen could properly object that it had not been allowed the full 14 days to improve its systems. The more difficult question is how long after the 14 day period the notice has effect, before a failure (or an ongoing failure) to supervise would require a fresh notice. In my view, by 23 November 2010 any failure to supervise would have properly been the subject of a new notice rather than evidence of failure to comply with the 20 October 2010 notice. So the 23 to 26 November observations are not relevant in deciding the question of compliance. (I should add, though, that the same conclusion on compliance would result if the 23 to 26 November 2010 observations were also taken into account).
[56] On 3 to 5 November 2010, the two cleaning staff (Robyn and Kieren) and the two maintenance staff (Corey and Sava) were observed. According to the spreadsheets, Robyn signed time sheets for four hour shifts on each of these days but was not working for between 52 and 103 minutes on each day. Further, Kieren signed time sheets for four or four and a half hour shifts, but was not working for between 62 and 72 minutes on each day. The spreadsheets treat all time spent in the staff room, even for as short as two minutes, as a break from work, even though the observers could not see what the staff were doing in that room. It is possible that some of the time spent in the staff room was spent working: for example reading a manual or fixing something. Having said that, though, some periods in the staff room were lengthy: one up to 70 minutes at a time by Robyn (although the 70 minute entry in question appears to include time spent by Robyn going between the laundry and the foyer), and some of around 45 minutes.
[57] The staff, though, may have been entitled to take breaks, for example under an award condition. The spreadsheets do not say whether any breaks were recorded on the time sheets, but I will assume they were not because the practice on other occasions was for breaks not to be recorded.
[58] The spreadsheets treat as non-work time 15 minutes spent by Robyn going to the laundry with a linen bag, then to the contract cleaning room to talk with a contract cleaner, while carrying around a piece of paper. It is not clear to me that this was a break, or participation in a non-work activity.
[59] The basis for some of the tallied minutes is unclear. For example Kieren is said to have had a break of 61 minutes on 3 November ending at 8.03 a.m. when she left the staff room, but there is nothing recorded at 7.02 a.m. Rather, there are observations about Kieren moving between the staff room and the laundry at various times from 7.13 a.m.
[60] Another limitation is that the observer did not know what time Robyn finished work on 4 November because the observer left the building before Robyn did. It is possible that Robyn made up time then, even if she just recorded her standard hours on the time sheet.
[61] There are some references to both cleaners dealing with laundry items, though it is not clear that the time involved was considerable. At least some of this probably involved staff doing their own laundry, because I accept Ms Bugden's evidence that she saw one employee routinely carry laundry to and from her car (though this comment was not made specifically in relation to early November). According to Mr Burnell, staff did not spend excessive time attending to their personal laundry, but were on occasion allowed to use the washing machines that were owned by Johjen, for example if the staff member's home machine was being repaired.
[62] That the staff may have engaged in some private washing was not incompatible with an appropriate level of supervision by Johjen. It was reasonable for Johjen to allow the staff a small reward such as this. The evidence does not establish, on the balance of probabilities, that the cleaners spent considerable time doing their own laundry during this period; that any time they spent during their shifts was not in permitted breaks; or that any other time they spent was not made up.
[63] As far as the two maintenance staff are concerned, there is no suggestion that Sava took excessive breaks on any of the three days. The observers were unsure whether Corey took excessive breaks on 3 or 5 November, partly because he was not in their field of vision for some of the time. The spreadsheet for Corey for 4 November indicates the time not working amounted to '40 mins ????'. This appears to have mostly been made up of periods spent in the maintenance room, and he was observed carrying a 'cuppa' out of the maintenance room on two of these occasions.
[64] What was happening in the maintenance room was not visible. Quite fairly, the spreadsheet comments that Corey should probably be given the benefit of the doubt as to time not working, as he may have been explaining areas of the job to Sava.
[65] A maintenance worker spending time in a maintenance room is not necessarily slacking off. The worker might be repairing an item, assembling tools, or doing other tasks, perhaps while also sipping a cup of tea or coffee. I do not consider that the evidence establishes, on the balance of probabilities, that Corey spent excessive time in the maintenance room during this period.
[66] There are, on the other hand, grounds for suspicion so far as the cleaners are concerned. They may have spent excessive time taking breaks. However, as indicated above, there are a number of unknowns in the evidence. At least some of the time spent in the staff room may well have been work-related. The cleaners may have been entitled to breaks. Perhaps the breaks should have been recorded in the time sheets, which called for all starting and stopping times, including meal breaks, to be recorded. But it is possible that staff interpreted this, not unreasonably, as not extending to tea breaks. If excessive breaks were taken, it is possible that time was made up, but with the staff simply noting their standard hours in the time sheets.
[67] Johjen submits that I should infer from the body corporate's failure to call the employees to give evidence that any evidence from them would not assist the body corporate's case. Johjen emphasises that the staff were employed by the body corporate. However, the cleaning staff are no longer employed. Even if the employees had been called to give evidence (by either party), it would have been difficult if not impossible for them to recall, long after the event, why they spent particular periods in the staff room, why they went to the laundry on certain occasions, and so on. I do not draw the inference for which Johjen contends.
[68] The Burnells say that time was not wasted in the staff room. Ms Burnell says that Johjen performed spot checks to ensure that staff were working, and that in response to the remedial action notices it increased the frequency of its spot checks. This did not reveal any problems. She says that Johjen knew where the staff were, though not for every second of the day.
[69] The body corporate criticises the evidence of Johjen as broad-brush, in contrast with the very detailed surveillance evidence. However, unless Johjen had been confronted with the specific observations very soon after they were made, it had little alternative but to reply in general terms.
[70] Overall, I consider that while the observations made in early November do suggest that the two cleaners may have been taking excessive breaks, the evidence does not establish, on the balance of probabilities, that this was happening. Nor has it been established that the cleaners were washing their laundry on body corporate time, or that either maintenance worker was taking excessive breaks. Johjen's duty was to supervise the staff. It had not warranted that the staff would spend every available minute of their shifts on particular tasks. I am satisfied, on balance, that Johjen met its duty to supervise the staff between 3 and 5 November 2010.
[71] I find that Johjen complied with the third notice.
[72] The fourth notice is dated 20 December 2010. It said that Johjen had become aware of the balustrading problem on or about 8 September 2010, but since then it had failed to provide a written report to the body corporate about the condition of the balustrades in the building. On 17 September 2010 Mr Burnell had emailed Ms Johnston to say that a written report would take a couple of weeks. At a committee meeting on or about 8 October 2010, the committee conveyed to Johjen the importance and seriousness of the situation, and directed Johjen to provide a written report. Further, the notice alleged, Johjen had failed to comply with the second notice by failing to provide a written report.
[73] These various failures, the notice said, involved failures to carry out a number of duties under the management agreement, and contraventions of the code of conduct. The notice said that Johjen must carry out its duties and remedy the contraventions within 14 days.
[74] The effect of the fourth notice, then, was to require Johjen to provide a written report on the condition of all balcony balustrades in the building within 14 days.
[75] Although the balustrades were on the balconies of apartments, it is undisputed that they formed part of Aegean common property. They therefore fell within the scope of responsibilities imposed on Johjen under the management agreement, such as the requirements to 'at all times ascertain and be aware of the general condition of the common property' and to 'report promptly on all things on common property requiring repair'.
[76] The background is that on 8 September 2010 the civil engineer Mr Blodorn was at the Aegean building to prepare for painting works which included painting the balustrades. He inspected apartments 10B and 18A, which are on the 10th and 18th floors respectively. He noticed 'obvious and serious defects' in the balustrades. According to his affidavit, several balustrades were unstable and/or twisted with loose or broken welds; the gaps between balustrades exceeded the maximum permitted under regulation of 125 millimetres; and the gaps posed a high risk of a child falling through. Mr Blodorn immediately raised his concerns with Mr Burnell and the committee.
[77] The committee then asked Johjen to conduct a full inspection of all balustrades in order to identify the extent of the problem so that repairs could be undertaken. An email exchange between Ms Johnston and Mr Burnell on 17 September 2010 indicates that on 13 September 2010 Ms Johnston requested a written report. Mr Burnell advised on 17 September 2010 the report would take a couple of weeks 'as it is very time consuming to inspect all the balconies'. Mr Burnell said that inspections had commenced.
[78] The body corporate submits that the notice is valid because it was detailed and provided sufficient particulars of the failures for which it was issued. I agree that the notice was clear and detailed enough. But a 14 day deadline was very tight, having regard to the size of the job, and bearing in mind that Johjen was still expected to perform its routine duties.
[79] There are 126 apartments in the building. Even if there had been immediate access to every balcony, the job would have taken considerable time. But Johjen did not have immediate access to all balconies. It was the letting agent for a little under half of the apartments, and so had keys to those apartments. It also had keys for emergency access to a further 30 or 40 apartments. But that does not mean it had immediate access to all of those apartments: many would presumably have been occupied and arrangements would have to have been made with, or perhaps notices given to, the occupants. In respect of the remaining units, contact would have to have been made with the owners; keys obtained; and access arranged.
[80] That is not to say that Johjen could not have, or had not, made a start on the project prior to 20 December 2010. Nor do I overlook Johjen's own indication on 17 September 2010 that the project would take a couple of weeks, but I regard that as unduly optimistic. Notwithstanding these matters, imposing a 14 day deadline on 20 December 2010 was clearly unreasonable. It may well have been reasonable if the body corporate had excused Johjen from its other duties, or some of them, under the management agreement, but that did not occur.
[81] The demand imposed by the fourth notice was unreasonable, and so the notice is invalid.
[82] The fifth notice is also dated 20 December 2010. It said that since the third notice, and an accompanying Notice to Perform Duties, cleaning staff had continued to regularly spend excessive periods of their shifts in the staff room instead of performing their duties, and that Johjen had failed to properly supervise those staff. This was said to involve failures to carry out duties under the management agreement, and contraventions of the code of conduct. A period of 14 days for compliance was given.
[83] The notice is valid, for essentially the same reasons as the third notice is valid. The fifth notice, appropriately, confined its attention to the cleaning staff, as the perceived problems with the maintenance staff had presumably been overcome. The body corporate remained concerned about the cleaning staff after its surveillance in November 2010.
[84] There is no surveillance evidence after 26 November 2010. Ms Bugden says that in September 2012, 'as a result of Johjen's continuing failure to properly supervise the Body Corporate's employees', the body corporate terminated the employment of its employees except for two maintenance staff. It then engaged a contract cleaning firm.
[85] The Burnells say that proper supervision was provided at all times.
[86] It is noteworthy that the termination of the cleaning staff did not happen until almost two years after the notice was given. In the absence of specific evidence of failures by Johjen to properly supervise at around the time when the 14 day compliance period expired, I am not satisfied that Johjen failed in its duties at that time. I find that Johjen complied with the fifth notice.
[87] In its response and/or counter-application filed in April 2011, the body corporate sought a declaration that Johjen has, by reason of the matters set out in the five notices, been guilty of gross negligence in the performance of its duties under its engagement (which is, effectively, the management agreement as varied). Gross negligence by Johjen in the performance of its duties gives the body corporate the right to terminate the agreement under clause 7(c) of the agreement. Although the written submissions dated 21 June 2013 do not develop the argument for gross negligence, counsel for the body corporate informed me that the body corporate has not withdrawn its application for the declaration.
[88] In its written submissions, the body corporate seeks declarations that Johjen failed or neglected to carry out its duties pursuant to its engagement as set out in the five notices, and that such failures or neglect continued for a period of 28 days from the date that each notice was given.
[89] It is not entirely clear why the body corporate seeks a declaration in these terms, when most of the remedial action notices specified a compliance period shorter than 28 days. It may be that declarations relating to a 14 or 28 day period, as appropriate, are sought, as indicated in the response and/or counter-application.
[90] The management agreement, in clause 7(b), gives the body corporate the right to terminate if Johjen fails or neglects to carry out its duties for a period of 14 days, or such longer period as is reasonable in all the circumstances, after a written notice is given to Johjen specifying the failure or neglect and calling upon Johjen to perform the duty. There is a similar right given to either party under clause 8(b).
[91] I will first deal with the proposed declarations relating to failure and neglect.
Proposed declarations relating to failure and neglect
[92] There would be no proper basis for a declaration about Johjen's conduct in response to an invalid notice, or the invalid part of a notice. Accordingly, I will confine my attention to the notices (or the relevant parts) that I have found to be valid. I will assume for present purposes that Johjen failed or neglected to carry out duties before each of these notices were given. Before the proposed declarations could be made, it would also be necessary for the body corporate to establish that the failure or neglect continued for 28 days (or perhaps 14) after the giving of each notice.
[93] The valid parts of the first notice related to absence from the building, and staff doing work for residents. I have found that that Johjen complied with these parts of the notices within the 28 day compliance period. Accordingly, I find that no breaches of duty continued for 28 days after the notice was given.
[94] In respect of the third notice, I have found that there was compliance with the notice within the 14 day compliance period. There is no evidence to indicate that the situation was materially different in the following 14 days. Accordingly, I find that no breaches of duty continued for 28 days after the notice was given. The situation is the same for the fifth notice.
[95] A basis has not been established for the proposed declarations based on failure and neglect.
[96] The body corporate contended in April 2011 that 'by the matters set out in [the five notices] [Johjen] has been guilty of gross negligence in the performance of its duties under the Engagement'.
[97] As I have found that the conduct of Johjen in response to the remedial action notices was appropriate, I will confine my attention to Johjen's conduct prior to each of the notices (whether valid or not). I will consider the conduct under the following headings, which encompass the most potentially wrongful conduct:
causing staff to assist residents or Johjen;
failure to supervise cleaning and maintenance staff;
failure to advise of the rooftop problems;
failure to advise of balustrading problems; and
absence from the building.
[98] I do not propose to take into account any alleged breaches that have occurred more recently, of which there is some mention in the material. The body corporate quite properly did not seek to rely on that later evidence, as it fell outside the scope of the defined dispute.
[99] In discussing the first notice, I have mentioned the four instances observed by committee members. It appears that the body corporate was concerned that these were just the tip of the iceberg. It was concerned that Johjen was, as Ms Johnston put it, 'directing its efforts to its letting business ... at the expense of the building's maintenance'. Ms Johnston says that Ian Brown told another committee member that private rental maintenance was part of the daily maintenance duties allocated to him by Mr Burnell. I do not attach significance to this last piece of evidence, however, because it emerged in Mr Burnell's and Ms Bugden's evidence that Mr Brown was an employee of both the body corporate and Johjen.
[100] Johjen for its part says that it inherited a practice where the manager would provide minor assistance to residents, many of whom were elderly, and it carried this on in the interests of good community relations. It denies favouring owners in its letting pool. It says that Mr Brown attended to Johjen's private banking during only a short period, on his own time, to help out when Ms Burnell was absent because of a family bereavement. Mr Brown gave evidence to similar effect.
[101] The explanations given by Johjen are credible. While there may be room for suspicion about the extent of the practice, there is no concrete evidence that Johjen required the body corporate staff to spend more than minimal time on work for residents. I accept Johjen's explanations.
[102] Johjen's conduct was not inconsistent with a diligent attitude to its duties. The evidence against Johjen on this issue is scant. It does not establish negligence, let alone gross negligence.
Failure to supervise cleaning and maintenance staff
[103] The body corporate believes that Johjen allowed the body corporate employees to take excessive breaks, and attend to personal tasks such as laundry during working hours. I have discussed at length the limitations in the surveillance evidence for early November 2010. The remainder of the surveillance evidence suffers from similar limitations. The conduct of some staff members is open to question, on the basis of the surveillance evidence, but the evidence falls short of establishing that Johjen failed to adequately supervise or carry out any of its related duties. Gross negligence is not established.
[104] Johjen's responsibilities under the management agreement include duties to ascertain the general condition of the common property, to keep the body corporate informed, and to report anything on common property requiring repair.
[105] The body corporate says that it discovered for itself significant deterioration in the rooftop membrane and ventilation ductwork on 13 August 2009. It says that Johjen should have reported the problem, and done so well before August 2009.
[106] Ms Johnston says in her affidavit that members of the committee, including Ms Bugden and herself, went to the rooftop on 13 August 2009 to inspect repairs to a vent damaged in a severe storm in May 2009. Ms Johnston says she had not previously been on to the rooftop. Ms Johnston says she was 'extremely surprised to see the very poor state of the rooftop membrane and extensive rust obvious in the mechanical ventilation ductwork ...'.
[107] Ms Bugden does not mention in her affidavit whether she was surprised.
[108] Walking down the stairs from the rooftop, the group encountered Mr Blodorn, the civil engineer, who was at the building for other matters. He went with the group to the rooftop. Mr Blodorn says he 'immediately observed extensive damage and deterioration' to the membrane, and 'extensive corrosion' to the ductwork. In October 2009 Mr Blodorn prepared a report at the request of the committee. He noted points of water entry in the membrane, poor drainage, and so on. Overall he considered the membrane to be past its use-by date, and recommended that it be replaced with a new membrane featuring the latest technology. He also noted ponding in sections of the ductwork, and recommended the replacement of metal items with steel of a certain marine grade, as well as the addition of spitter pipes and emergency overflows.
[109] The body corporate went on to have the proposed work carried out.
[110] Mr Blodorn says that the rooftop defects and damage would have been obvious to any lay observer for at least two years prior to October 2009. Had they been identified earlier, he says, the body corporate 'may likely have achieved a cost saving of approximately $25,000'.
[111] In cross-examination, Mr Blodorn was unable to explain how he had reached the figure of $25,000. He acknowledged that the ductwork was intact: at no point had it rusted right through. He said the membrane had been on the building since its construction in 1983, and would have reached the end of its useful life within a further three to four years though 'bandaid' solutions would be needed for the intermittent leaking that was likely to occur. He said that a building manager should have been more conscious than the average person of the potential for harm from defects such as pinholing and honeycombing in bare concrete.
[112] Mr Burnell says that he noticed blistering in the membrane in around 2007. He says he reported this to the then chairperson of the body corporate committee, Mr Hateley, and repairs were carried out at a cost of approximately $13,000. He says that repairs to the ductwork have been carried out on two or three occasions during Johjen's period of management. He says one of which was in around 2007/2008, and at that time the committee inspected the damage. (I note that this is likely to have been before Ms Johnston joined the committee in August 2008, and it may have been before Ms Bugden joined the committee sometime in 2007).
[113] Mr Hateley says that during his time on the committee between 2005 and 2008, Johjen brought to the body corporate's attention maintenance issues relating to the membrane and the ductwork on several occasions, and repairs were carried out. During the hearing, references were made to discord between Mr Hateley and the later committee. Mr Hateley acknowledged that he had been upset about how he was treated, but denied that his evidence was tainted by acrimony. Mr Hateley gave his evidence in a straightforward manner, and he provided convincing detail when cross-examined. I accept the evidence of Mr Hateley and Mr Burnell that problems with the membrane and ductwork were brought to the body corporate's attention while Mr Hateley was on the committee. This, I consider, is evidence that Johjen treated seriously its duties to report infrastructure faults.
[114] Mr Burnell concedes that he did not raise any membrane or ductwork problems with the body corporate after Mr Hateley's period until sometime in 2009 (earlier than August) when committee members went up on the roof to inspect damage to the ductwork after a storm. There is a dispute about whether such an inspection occurred, but it is not necessary to resolve that dispute. It seems to be a matter of differing and sometimes uncertain recollections. In any event, if the inspection occurred, it is apparent that the focus would have been on the storm damage rather than deterioration.
[115] Mr Burnell says the body corporate would have been generally aware in the years leading up to August 2009 that the membrane and ductwork, in their exposed position, would be deteriorating, and that they would need to be replaced at some point. He notes that there was provision for replacement in the earlier sinking fund forecasts. For example the 2006 forecast envisaged replacement of the membrane in 2015. I accept that the body corporate would have had this general knowledge.
[116] Mr Burnell says Johjen did not report the deterioration because the body corporate was already generally aware of it, and of the need to replace deteriorating infrastructure in due course, and there was no water ingress.
[117] The only mentions of water ingress that the parties could find in the committee minutes in the year or so to August 2009 was in July and August 2008. Water ingress into apartment 31C (on the top floor) was noted. A report was sought from Buildcheck (Mr Blodorn's firm). The committee resolved that if the matter was considered a body corporate responsibility, Johjen was to arrange for repairs. At the hearing, Ms Burnell suggested that this ingress would have involved a leak from the roof. Ms Bugden said she suspects it was because of a window problem. It is not critical which witness's recollection is correct. Even if this leak was coming from the roof, it is evident that there were no frequent or sustained leaks from the roof in the couple of years leading up to August 2009 that might have alerted Johjen to a serious problem with the roof.
[118] Having examined the photographs included in Mr Blodorn's report, I accept Mr Burnell's evidence that nothing was apparent in the membrane and ductwork beyond normal wear and tear that one would expect in the 'harsh marine environment' described by Mr Blodorn. There may have been serious faults apparent to the trained eye of Mr Blodorn, or which were discovered upon his more detailed examination. Mr Blodorn is an engineer who has specialised in high rise buildings for 15 years.
[119] I accept that a building manager can reasonably be expected to have a greater awareness of building issues than the average person. However, I do not consider that a reasonably competent building manager would have seen a need to make a report to the body corporate about the deterioration in the absence of some acute problem such as a leak into an apartment or the collapse of a vent. Nor can a building manager reasonably be expected to suggest different materials or protective coatings for ductwork in the way that an engineer might.
[120] I am conscious that Ms Johnston, who has no building-related qualifications, says she was extremely surprised by what she saw on the rooftop. However, I do not believe this would be a typical reaction amongst lay observers. Ms Johnston's recollection may have been influenced by the subsequent reaction of Mr Blodorn. It may be that Ms Johnston was ready to find fault, being part of a committee that, she says, 'from at least early 2009 ... was very concerned that the Aegean building was not being properly maintained'.
[121] I am not satisfied that Johjen breached a reasonable standard of care in carrying out its duties in connection with the rooftop, and so I do not find gross negligence.
[122] As previously mentioned, Mr Blodorn inspected two apartments in September 2010 and found problems with the balustrading. It can be seen from the photographs that on one balcony there was an obviously wide gap (estimated by Mr Blodorn to be 30 to 40 centimetres wide) that rendered it unsafe for a small child. The balusters are curved, and a baluster was twisted so as to leave the large gap. This was the sort of problem that would be obvious even to a lay person and which clearly required reporting by Johjen to the body corporate.
[123] Mr Blodorn says that the defects would have developed gradually over the life of the building and would have been obvious to any lay person that day and for some time previously.
[124] It cannot be assumed, however, that the large gap had been present for an extended time. It may have been created very recently by a young holidaymaker twiddling with the balusters, for example, though of course the twisted baluster must have been loose in the first place.
[125] Mr Burnell says he had not noticed any loose balusters before Mr Blodorn's visit.
[126] There is no report before the tribunal about the state of the balustrading throughout the building, when it was all inspected. According to Mr Burnell, about six, or possibly up to 20, loose balusters were found, and there were no dislodged balusters apart from the one discovered by Mr Blodorn. This evidence is not contradicted and I accept it. Clearly, the problem was not as widespread as was feared on the basis of the initial sample. In a building as large as the Aegean, the signs of a problem were few and far between. Except perhaps for low apartments, even gross defects would not have been observable except from inside the apartment. Small defects would probably not have been observable without a hands-on examination.
[127] Johjen says there were no reports of defects from apartment owners or occupants. There is no evidence to the contrary.
[128] Johjen did not have in place a system of regularly checking all balconies. Such a system would have picked up the problems at an earlier stage. However, there was no reason for Johjen to think that such a system was necessary. There were very few signs of a potential problem. Significantly, there were no reports of defects from occupants, as one would expect if there was a widespread problem. The extent of deterioration, as revealed ultimately in the full inspection, was not on a large scale.
[129] I am not satisfied that Johjen was grossly negligent, or even simply negligent, in failing to have a checking system in place or in not spotting problems. Accordingly, I find that Johjen was not guilty of gross negligence in carrying out its duties in relation to the balustrading.
[130] The body corporate says that there was no representative of Johjen on the premises between 29 November and 9 December 2009, and so Johjen could not have carried out various duties such as supervising staff. The body corporate says it did not authorise any person, including Ian Brown, to act as manager.
[131] Ms Burnell says that she was present during the above period, but she was absent for approximately a week from about 31 October 2009 when her stepfather died and she went to Adelaide to assist her mother. She says that Mr Burnell was away on holidays at the time, and that during her absence she employed Mr Brown as acting site manager.
[132] I see no reason to reject Ms Burnell's explanation for the absence. On the available evidence, I find that there was no representative of Johjen at the building for a period of approximately a week at some time in late 2009, but this situation arose suddenly because of a family crisis, and Johjen appointed Mr Brown to ensure that its duties were carried out. This is not indicative of negligence.
[133] A basis has not been established for a declaration of gross negligence.
[134] The starting point is that each party bears its own costs for a proceeding in QCAT.[4] There is a power to award costs if the interests of justice require it.[5] In deciding whether to award costs, the tribunal may have regard to any matter it considers relevant, including whether a party is acting in a way that unnecessarily disadvantages another party (such as by not complying with a direction), the nature and complexity of the dispute, and the relative strengths of the parties' claims.[6] In Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No. 2),[7] the President of QCAT observed that the question that will usually arise is 'whether the circumstances ... point so compellingly to a costs award that they overcome the strong contra-indication against costs orders in s 100'.
[135] Johjen has not sought an order for costs. The body corporate sought an order for costs in its written submission dated 21 June 2013, but did not explain why such an order would be warranted under section 102. Presumably the application for costs was premised upon success by the body corporate in the proceeding, which has not eventuated. The body corporate may also have had in mind the late submission of material by Johjen. That will be addressed separately below. So far as costs generally are concerned, it is not apparent why the interests of justice would warrant an order in favour of the body corporate, and I decline to make such an order.
[136] On 18 June 2013, which was three days before the hearing, a directions hearing was conducted by Senior Member Stilgoe. The directions hearing was held to decide a number of matters, including whether Johjen would be permitted to file late statements.
[137] The statements in question were by Mr Hateley, Mr Brown and Mr Burnell, which had been given to the body corporate's solicitors on or about 7 June 2013, and an additional statement by Ms Burnell, which had been given to the body corporate's solicitors on or about 14 June 2013. The body corporate had filed its affidavits on 16 April 2013, in response to earlier affidavits by Ms Burnell. Senior Member Stilgoe gave Johjen leave to file the four statements. She also directed that Johjen pay the body corporate's additional costs of perusing the body corporate's material in answer to the additional statements. Such costs were to be assessed by the presiding member.
[138] At the conclusion of the hearing on 21 June 2013 the parties indicated that they were hopeful that agreement could be reached on the amount of costs arising under Senior Member Stilgoe's direction. I directed that if agreement was not reached, the parties were to lodge written submissions with the question to then be determined on the papers. Subsequently, the body corporate filed a submission seeking $2,465 in costs. Johjen responded with a submission that the body corporate had not justified any amount of costs.
[139] The body corporate says that it needed to re-peruse its records for a substantial period in order to evaluate and respond to the additional evidence. It says that a lack of detail in the statements made its job time-consuming: it was not able to check its records just for specific dates. It says that it incurred the cost of an associate solicitor, at $340 per hour for 7.25 hours, who had to communicate with body corporate personnel to obtain records, peruse voluminous records, and obtain instructions.
[140] Johjen submits as follows, in summary. The communication and perusal costs were ones that would necessarily have been incurred in any event, even if the statements had been supplied earlier. There may have been some duplication of effort, but insufficient detail has been provided by the body corporate to allow a determination of costs by reference to the District Court schedule of costs, or a determination as to whether skill and knowledge at the level of an associate was required. The work involved in obtaining body corporate records could have been undertaken by an employee. Senior Member Stilgoe required Mr Hateley to appear in person, and this meant that Johjen had to pay for Mr Hateley to fly up from Melbourne the night before the hearing and then fly back after the hearing.
[141] In my view, the fact that Johjen incurred travel and presumably accommodation costs for Mr Hateley is not relevant to the costs in question, at least in the absence of any suggestion that this would leave Johjen unable to pay the body corporate's costs (which might be relevant under section 102(3)(e)). Further, while the District Court schedule has been used by the tribunal on many occasions, there is no legislative requirement to use it. The tribunal can act on a reasonable figure supplied by the party seeking costs, as it did for example in Kehl v Board of Professional Engineers of Queensland.[8]
[142] There is force in the body corporate's submission that the statements lodged by Johjen lacked detail in some important respects. This may have been because the current solicitors were engaged late in the piece, but that does not detract from the inconvenience and cost to the body corporate.
[143] The lack of detail is highlighted by the fact that Johjen had to seek leave to introduce further evidence-in-chief at the hearing. Mr Brown's statement, for example, contained only two sentences. Further examples can be seen in the statements of Mr Hateley and Mr Burnell. Mr Hateley had been on the committee for over ten years. His statement said that 'the committee was aware of the balustrades deterioration, having had them powder coated ...', without any more details on that topic. Mr Burnell in his statement said that he had advised the body corporate about maintenance issues in relation to the roof membrane and ductwork 'on several occasions' prior to March 2009. Some particulars were given, but not many: Mr Burnell discussed one occasion involving the membrane 'in around 2007' and two or three occasions since 2003 involving the ductwork, although detail was given of only one of those occasions and the timeframe was given only as 'around 2007/2008'.
[144] It is unsurprising that the body corporate's lawyers felt compelled to review the body corporate's records in light of such broad evidence. They had little detail to go on. It would have been a time-consuming task.
[145] The late provision of the additional statements must have led to considerable duplication of effort. Had the statements been provided in a timely way, the body corporate could have checked its records once in response to all statements. Instead, it had to deal with Johjen's material in two batches.
[146] Given that the later statements were obtained and provided only when the hearing was looming, it was reasonable for the body corporate's solicitors to use the services of an associate. The task was urgent and complex, and required a sound understanding of the case. I accept as reasonable the figures given by the body corporate for the time and expense involved.
[147] I quantify the costs referred to in Senior Member Stilgoe's direction at $2,465. I will allow a month for payment.
[148] On the basis of the findings I have made, the appropriate orders are those sought by Johjen on the substantive matters, and a costs order for $2,465 in favour of the body corporate.
[7] [2010] QCAT 412 at [29].
[8] [2010] QCATA 77 at [15].
Johjen Pty Ltd
Body Corporate for Aegean [2013] QCAT 387