The Sands Gold Coast Pty Ltd v Body Corporate for the Sands [2016] QCAT 365 | Case summary

The body corporate may give effect to the resolution to terminate the Ground Maintenance Contract dated 20 April 2012 (relying on three breach notices within six months) which was passed at the Extraordinary General Meeting on 24 June 2014.

The Sands Gold Coast Pty Ltd v Body Corporate for the Sands [2016] QCAT 365 | Case summary | Zoe

[25]

[1] This decision concerns the Sands Apartments complex in Surfers Paradise. This is a 10 storey property standing between Orchid Avenue and the Esplanade, which has 99 units. At the time of the events with which this decision is concerned it was 48 years old.

[2] The Applicant, The Sands Gold Coast Pty Ltd, contracted with The Body Corporate for The Sands, (amongst other things) "to the best ability manage the Common Property and ensure that it is kept in first class order and repair". The body corporate says that the Applicant failed to fulfil this and its other obligations and that it is entitled to terminate the Applicant's contract.

[3] In order to be able to terminate the contract the body corporate needed to serve one or more remedial action notices ("RANs") on the Applicant.

[4] The body corporate served two RANs alleging breaches by the Applicant of its gardening, cleaning and repair obligations. It also served two other RANs claiming breaches in other areas of the Applicants work. And it served four directions seeking information and documents from the Applicant. When these were not answered in the time allowed, the body corporate served four more RANs because of this.

[5] The Applicant claims that it was not in breach of contract in any significant way sufficient to enable the RANs validly to be served at all. In order to prove breaches in respect of gardening cleaning and repair, the body corporate relies on the results of spot checks carried out by an expert who identified issues at the time of the inspection. From these results I am asked to find that the Applicant was in breach.

[6] The Applicant takes many technical points about the RANs going to their validity. It is said that they were internally inconsistent about the time to remedy, did not comply with statutory requirements in that respect, and in any case did not give sufficient time to remedy. The notices are also said to have been inaccurate and unclear, affecting their validity.

[7] Having served the RANs, the body corporate resolved to terminate the Applicant's contract. It took two separate routes to try to do so: a statutory route and a contractual route. The Applicant says that neither of these routes were effective in law.

[8] The Applicant says that the body corporate's attempts to terminate the contract and the way this was done was unreasonable and unfair. It says the body corporate must act reasonably and fairly by statute and also this should be implied into the contract.

[9] In order to resolve these issues between the parties, I shall set out the background facts in more detail, then set out the precise issues to be decided before attempting to deal with them.

[26]

[10] The body corporate was created pursuant to, and governed by, the provisions of the Body Corporate and Community Management Act 1997 (Qld) under a community titles scheme for the complex.

[11] Ms Rockett, director of the Applicant, owned 12 or 13 units in the complex under various forms of ownership. For many years, the Applicant had performed caretaking and management duties for the complex under two separate contracts.

[12] At its AGM on 29 March 2012 the body corporate resolved that the Applicant's contracts be renewed for a further 10 years.

[13] At the time with which I am concerned, there were three contracts current between the Applicant and the body corporate:-

(a) Ground Maintenance Contract under a Deed of Engagement dated 20 April 2012 (the GMC). This replaced an earlier contract dated 10 June 2003. It governed the Applicant's obligations with respect to gardening, cleaning and repair of the common property of the complex, and other duties, and continued for a period of 10 years commencing on 1 January 2012.

(b) Management Agreement under a Deed of Engagement of the dated 20 April 2012. This replaced an earlier contract dated 11 November 2000. This appointed the Applicant as manager of the scheme for the complex and continued for a period of 10 years commencing on 1 January 2012. The Applicant's obligations under this contract were to carry out various tasks as listed. In the context of this matter, it is significant that one of these tasks was to supervise the performance of "cleaning, maintenance and gardening". In other words, the Applicant was obliged to supervise its own work done under the GMC.

(c) Letting agreement under a Deed of Authorisation dated 20 April 2012.

[14] The dispute before me only concerns the GMC. Although the body corporate did express unhappiness about the way the Applicant was performing the Management Agreement, in the resolutions that I am asked to consider, it sought only to terminate the GMC.

[15] The formal processes which the body corporate followed to terminate the GMC and which are relevant to this matter started in September 2013 when the body corporate requested David Leary of Leary & Partners, an expert in these matters, to inspect the common property of the complex and to prepare a report about the Applicant's failures to comply with its obligations.

[16] This report identified 101 ground maintenance items which, according to Mr Leary, needed attention. On 1 November 2013 the body corporate sent Mr Leary's report to the Applicant asking it to attend to the issues within 28 days.

[17] Mr Leary then carried out a second inspection and found 74 items not attended to. On 30 January 2014 the body corporate gave the Applicant a remedial action notice (RAN) requiring these issues to be remedied within 21 days. The parties have called this the "Leary Report Notice". In these reasons I am going to call this "the first Leary report RAN".

[18] Following a further inspection by Mr Leary, on 24 March 2014 the body corporate gave the Applicant another RAN concerning ground maintenance. The parties have called this "the Leary Report 26 February 2014 Notice". In these reasons I am going to call it "the second Leary report RAN".

[19] Also on 24 March 2014, the body corporate gave the Application a RAN complaining about rubbish being placed in the skip bin. This is called the Skip Bin RAN.

[20] Also on 24 March 2014, the body corporate gave the Applicant four directions seeking information and documents as they were entitled to do under the GMC. They asked for the information and documents to be provided within 7 days. These directions covered the following matters:-

(a) Gardening.

(b) Cleaning.

(c) Pumps and motors.

(d) Fire fighting equipment.

[21] When the Applicant failed to provide the information and documents requested in the directions, on 16 May 2014 the body corporate gave the Applicant four RANs alleging breaches of the GMC because of this failure.

[22] On 23 May 2014 the body corporate gave the Applicant a RAN based on a notice of non-compliance issued by the Queensland Fire and Rescue Service. This is called the QFRS RAN.

[23] The RANs were responded to by the Applicant in detail through solicitors. The Applicant accepted some items, but challenged others on the grounds that it was not obliged to do the work or it was not a defect or that the work had been done. The Applicant's solicitors vigorously challenged the validity of those RANs which were based on the directions.

[24] On 28 March 2014 the body corporate held an Annual General Meeting. The meeting resolved to terminate the GMC due to the alleged failure of the Applicant to comply with the first Leary report RAN. This resolution was not passed by secret ballot. This is relevant if the termination is regarded as being carried out under section 131 of the Standard Module because under that process, such resolutions should be passed by secret ballot.

[25] On 24 June 2014 the body corporate held an Extraordinary General Meeting. At that meeting, the body corporate resolved to terminate the GMC pursuant to clause 8.1(c) of the GMC (relying on the fact of three RANs in a period of six months).

[26] At that same meeting, in addition to, or as an alternative to the ground for termination under clause 8.1(c) of the GMC, the body corporate resolved to terminate the GMC under clause 8.1(d) (gross negligence or incompetence in the performance of its duties).

[27] The matter was brought to QCAT by the Applicant when it commenced proceedings on 26 March 2014 relying on section 149B of the Body Corporate and Community Management Act 1997. This gives the Tribunal jurisdiction to determine a dispute about a contractual matter about the engagement of a person as a body corporate manager or caretaking service contractor for a community titles scheme. The application (amongst other things) sought a declaration that the first Leary report RAN was invalid.

[28] In that application the Applicant sought an interim order restraining the body corporate from giving effect to the motion (if passed at the AGM to be held two days later) to terminate the GMC in reliance on the first Leary report RAN. That order was granted on an interim basis on 27 March 2014. On 4 April 2014, by consent this order was continued until the determination of the proceedings.

[29] On 20 June 2014 the Applicant filed an amended application before the Tribunal seeking a declaration that the other seven RANs were invalid and seeking an injunction to restrain any action based on them.

[30] On 24 June 2014 there was a further order made by consent. This was an injunction restraining the body corporate from taking steps with respect to the seven other RANs and restraining the body corporate from giving effect to a motion (if passed at the EGM to be held that day) to terminate the GMC.

[31] The history of the proceedings show therefore that the Applicant started proceedings in order to obtain the injunctions and to seek declarations about the validity of the RANs - this is relevant to the question of burden of proof considered below.

[32] At one stage during the proceedings, the Applicant applied to strike out part of the body corporate's response. The strike out was on the same grounds as I have considered in these reasons under "Is termination route 2 available to the body corporate?" The application to strike out failed because it was considered to be inappropriate to seek a strike out on matters which ought to be dealt with at final hearing.[1]

[30]

[38] The issues under termination route 1 are whether the RANs complied with the provisions of section 131 of the Standard Module and if so, whether the Applicant remedied within the time to remedy allowed by the RANs. The RANs are challenged as being internally inconsistent about the time to remedy and not giving enough time to remedy. With respect to the first Leary report RAN there is an issue whether, in the light of any technical defects and the need for a secret ballot, the body corporate was entitled to resolve to terminate the GMC as it attempted to do on 28 March 2014. With respect to the other RANs there is an issue whether, in the light of any technical defects in those RANs, the body corporate would be entitled to resolve to terminate the GMC using termination route 1.

[39] As for termination route 2, the Applicant challenges this route entirely. It contends that the route is not available at all. This argument is based on the statutory provisions which, it is said, do not permit the parties to agree a termination process other than that in section 131 of the Standard Module. If the route is available, there is an issue as to whether the RANs satisfied the requirements of the GMC (in so far as that was necessary). Then there is an issue whether, in the light of these technical issues, the body corporate was entitled to resolve to terminate the GMC as it attempted to do on 24 June 2014 or whether it is now entitled to do so using termination route 2.

[40] Finally, there is an issue which applies to both termination routes: whether overall, termination of the GMC was, or would be, reasonable. It is also said that some of the steps the body corporate has taken to get itself in a position to terminate the GMC (if this is the case) were not reasonable. The Applicant says that if the statutory obligation of reasonableness does not cover the events in this case, there is a term of fairness and reasonableness which should be implied into the GMC.

[41] In order to resolve these issues, I need to examine:-

(a) each alleged breach set out in the RANs, and decide for each one whether the Applicant was in fact in breach as alleged and if so, whether the Applicant remedied the breach in the time to remedy in the RAN; and

(b) each RAN and decide whether sufficient time to remedy was given by the RAN and otherwise whether the RAN satisfied the statutory or contractual requirements as the case may be.

[42] Before examining the breaches and RANs in this way, I am going to:-

(a) set out the statutory regime in section 131 of the Standard Module;

(b) set out the provisions of the GMC which apply - in doing so, I can deal with the Applicant's challenge to termination route 2;

(c) consider the extent of the Applicant's obligations under the GMC;

(d) consider how accurate a RAN must be (when setting out the breaches and what is required to remedy the breaches); and

(e) consider whether the time to remedy in the RANs complied with section 131(4)(c) of the Standard Module;

(f) consider whether in any case, the time to remedy in a RAN needs to be reasonable.

[43] On the question of reasonableness, I shall consider the extent of the statutory requirement for the body corporate to act reasonably, and in that context whether a term of fairness and reasonableness should be implied into the GMC.

[44] I also need to consider which side has the burden of proof on the question of reasonableness.

[45] I shall also mention some other evidential issues that have arisen in this case.

[89]

[59] Mr Kidston submitted that there is no power in section 122 for the Standard Module to permit a derogation from section 131 of the Standard Module and section 318 of the Act.

[60] The first thing to examine when considering whether the parties can agree their own termination process for a service contract is whether section 131 of the Standard Module (ignoring for the moment section 129 of the Standard Module) provides an exclusive framework for such terminations. There is nothing in the wording of section 131 saying that it must be used to terminate a service contract. Instead, subsections (1) and (2) say that they "may" be used. Subsection (3) says that if subsection (1) or (2) is used then certain steps must be taken. But it seems to me that if neither subsection (1) or (2) is used, then subsection (3) is not engaged.

[61] But Mr Kidston argues that the intention of the legislature is to provide an exclusive framework providing a process for termination which must apply even if the parties agree otherwise. Whilst I would agree that because of section 318, the termination processes provided for in section 131 of the Standard Module cannot be contracted out of by the parties, this does not mean the parties cannot agree additional methods of termination.

[62] Clause 8.1 does not attempt to contract out of the provisions of the Act, and I think it is difficult to say that clause 8.1 amounts to a waiver of, or a limitation of the exercise of rights, under the Act. Therefore clause 8.1 does not directly infringe section 318.

[63] In any case, in my view section 129 of the Standard Module expressly provides that parties to a service contract can agree additional methods of termination. Section 129(1)(b) permits this to be "by agreement". This would seem to apply where the parties agree to terminate by mutual agreement during the currency of the service contract. Allowing parties to a contract to do this makes perfect sense. Section 129(1)(c) permits the parties to agree termination "under the engagement or authorisation", which must mean under the service contract itself.

[64] But it is said that there is no power to make these provisions in section 129. Section 122 of the Act is the regulation making power. Section 122 allows the regulation module to govern certain aspects of the "engagement" of a service contractor. The word engagement is used in the Act widely, not only referring to the time of the actual appointment but also while it continues during the term. As can be seen from subsection (d) in section 122(1), the regulation module may also govern how the engagement may come to an end.

[65] But it is said that subsection (d) in section 122(1) only permits "particular circumstances" of termination to be prescribed and permitting parties to agree their own methods of termination are not particular circumstances. It seems to me however, that permitting parties to agree an additional process of termination under the engagement [as section 129(1)(c) permits] does prescribe a particular circumstance.

[66] Then it is said that the second clause in subsection (d) - "despite anything in the engagement or authorisation or in any agreement or arrangement" - demonstrates that subsection (d) is intended to be restrictive rather than enabling. But it seems to me that this simply means that the regulation module is capable of overriding any agreement between the parties in this respect. A simple example can be seen in section 129(2). This requires any termination under section 129 to be by ordinary resolution. This would appear to be a mandatory requirement capable of overriding the parties' agreement to the contrary.

[67] It follows that I do not accept the submission that section 129 of the Standard Module, in so far as it permits the parties to agree their own termination process, is beyond the power given by section 122 of the Act.

[68] There is also a policy reason for allowing the parties to agree their own termination arrangements. Quite apart from the obvious sense in permitting parties to end a service contract by mutual agreement, the parties may well wish to provide for various contingencies not covered by the statutory provisions.

[69] What the parties agreed here in clause 8.1(c), as submitted by Mr Faulkner, stops a contractor from continuously falling behind on its duties but then complying with a RAN at the last moment to avoid termination. Such an approach would be extremely inconvenient, time consuming and possibly expensive for the body corporate if it were allowed to continue. In a long contract like this such an approach could potentially continue for years. In an appropriate case, a clause like 8.1(c) stops this happening. The parties are of course free to include such a clause if they wish or exclude it if they wish. It would be one of the things which contribute to their decision whether to enter into the contract at all, or the correct remuneration to set.

[70] For these reasons I do not regard clauses 8.1(b), (c) and (d) as invalid because of the statutory provisions.

[111]

[86] It was submitted by Mr Kidston that the words "to the best ability" in paragraph (a) of clause 2(e) modified the obligations somewhat, and meant that if the Applicant did not have the skills to something, then it would not need to do it. But this ignores paragraph (g) of clause 2(e) and clauses 3.1 and 3.4 of the earlier deed which were adopted in the GMC. It also introduces an element of uncertainty, because it would be very difficult to ascertain the limit of the Applicant's skills bearing in mind it was a body corporate. And in the unlikely event that it was right to apply the test to the Applicant's director, the same problem arises because Ms Rockett's skills were not objectively identified. In my view, the meaning of the words "to the best ability", in the light of the remainder of the GMC and those parts of the earlier contract adopted in the GMC, and therefore the objective intention of the parties to the GMC, is that the Applicant is obliged to do its best.

[87] The obligation is therefore that the Applicant must do its best to keep the common property in first class order and repair and if necessary to engage others to achieve that. If others were engaged, then the body corporate would have to pay the cost of materials, but not the cost of labour which would have to be paid for by the Applicant.

[88] The fact that the Applicant would be expected to engage others if necessary is, I think, consistent with the Management Agreement under which the Applicant was required to supervise the work done under the GMC. The existence of this second agreement which was also compensated by an annual sum, is strange, and meant that the Applicant had responsibility to supervise its own work. The supervisory role meant that the Applicant wearing its hat under the Management Agreement would have to ensure that the Applicant wearing its GMC hat engaged other contractors at the right time.

[89] It was also submitted by Mr Kidston that the body corporate was estopped from requiring the Applicant to engage contractors to do work that it could not do itself. This estoppel, it was submitted, arose because the RANs did not require this. Mr Faulkner in reply, submitted that this fact merely went to reasonableness. The possibility of an estoppel arising was a new point which arose in submissions. It was not in the list of issues, and since evidence would be needed to support the point, it would need to be on that list if it were to be relied on. I do not think it is right for me to consider it.

[113]

[90] The Applicant challenged the validity of the RANs in many ways. It was said that they alleged duties which did not exist, contained allegations of breaches which had not happened, were internally inconsistent about the time to remedy, gave insufficient time to remedy, and were unclear as to the remedial action required. It was said therefore that they were invalid as RANs under section 131 of the Standard Module and could not be relied on as clause 8.1(b) RANs either.

[91] In these reasons, apart from the inconsistency about time to remedy point, I have decided that these challenges are factually successful to a greater or lesser degree with respect to some of the RANs.

[92] For each RAN therefore, it is necessary for me to consider in the light of any deficiencies in the RAN whether it was effective as a RAN under section 131 of the Standard Module, or under clause 8.1(b) of the contract. It comes down to the question how accurate must a RAN in this context be? I need to explain how I have approached the answer to this question.

[93] Some, but not total, guidance is available from the authorities. Effectively both section 131 and clause 8.1(b) required the RAN to set out the breach, require a remedy, and to give a time for the remedy to happen. Authorities which consider other statutes and types of contracts which require the same things are therefore analogous.

[94] The authorities are unanimous that the recipient of the RAN must be left with reasonable certainty about what it is necessary to do, although it will be for the recipient to decide how this can be achieved in a manner consistent with the contractual duties.[4]

[95] The authorities are unanimous that a notice which accurately says that an amount of money is owed under a certain head, but exaggerates the amount owing, is not automatically invalid because of the inaccuracy. This has arisen for example in notices given by mortgagees prior to exercising a power of sale where interest has been incorrectly calculated, but it has also been applied to body corporate levies.[5]

[96] The notice may be so inaccurate however, that the statutory requirements are not complied with. An example is Clarke v Japan Machines (Australia) Pty Ltd [1984] 1 QdR 404 where the Full Court found the notice in that case to be bad because it failed to give the recipient any clear lead on the nature of the obligation which had to be fulfilled nor any clear appreciation of what was owing.

[97] Thomas J giving judgment of the court said (at page 413):-

[115]

[98] In Deputy Commissioner of Taxation v Gruber [1998] NSWSC 64; (1998) 43 NSWLR 271 a case cited to me, the NSW Court of Appeal was considering notices to pay a tax penalty served under section 222AOC of the Income Tax Assessment Act 1936 (Cth). The main notice contained errors, including miscalculation of the sums demanded, and a failure to specify the date on which the tax fell due. Its validity was challenged. The Court found that whilst a notice does not have to be absolutely correct, it must fulfil its statutory purpose, which (in this instance) was to set out accurately the amount of the penalty that is to be paid. Errors in the amount were liable to mislead, and in this case left the recipient guessing as to the figures. If the incorrect information in the notice was removed then the sense, nature and substance of the document which remained was affected. These errors affected the notice to an extent which invalidated it.

[99] A similar situation arose in Elsafty Enterprises Pty Ltd v Mermaids Café & Bar Pty Ltd [2007] QSC 394 where the recipient of the notice was misled by the figures in the notice because it was not in a positon to verify them.

[100] The above cases discuss errors in the figures. Here we have allegations of breaches which did not happen.

[101] In this respect, it has been held in New South Wales that a notice which incorrectly identifies a default which is alleged to have occurred even if another default is correctly identified, will automatically be invalid because the statute requires the notice to identify the default.[6] This has also been said in Victoria.[7]

[102] The view in Queensland however, appears to be that a notice which refers to a default which did not in fact happen is not automatically invalid for that reason (provided of course there was some default which was properly identified).[8]

[103] This approach is more consistent with the English authorities, that provided there is a breach identified in the notice and the recipient of the notice is given the chance to remedy that breach, then it does not matter that the notice contains other material which erroneously alleges other breaches; if it does, it simply means that the party giving the notice cannot ultimately rely on that other material. It does not invalidate the notice - the notice complies with the statutory requirements.[9]

[104] The Queensland approach also permits some flexibility when considering notices and is helpful when considering a case such as this. It is possible to envisage a notice for example, which alleges 10 failures of varying importance. Some more trivial failures are found at the hearing not to have happened, or to be outside the contractor's responsibility. The Queensland approach allows such a notice to be regarded in the same way as a notice which has exaggerated the extent of a single breach (it would not automatically be invalid).

[105] The authorities make it clear that close regard should be had to the statutory requirements and their aim in the context of the specific jurisdiction being considered when deciding whether a notice is sufficient.

[106] Here section 131 would, when valid notices are served, have a number of effects. Firstly the section would provide a mechanism whereby a body corporate could terminate a contract for breaches other than repudiatory ones. The common law position which requires a repudiatory or fundamental breach by one party before the other party can terminate is therefore adjusted. How serious a breach needs to be before a section 131 notice can be served is not specified. In theory therefore, a section 131 notice could be served for a trivial breach and if the contractor failed to remedy, the body corporate could terminate under the statutory mechanism. In practice however, such action would not be reasonable and therefore would be outside section 131 for that reason. But other non-repudiatory breaches, of sufficient importance to the body corporate or the lot owners, could be pursued under the mechanism provided by section 131 - the sanction being termination if the contractor failed to remedy the breach.

[107] This tends to emphasise therefore, the importance of such notices giving the contractor a clear indication of what is needed to remedy.

[108] This is also emphasised by the context in which the section operates. Service contracts can often be fairly long term like the one I am considering here: 10 years. The contractor will often have committed itself therefore to providing services over that time and made appropriate plans and investments to achieve that. Since the contract would be, over such period of time, a valuable one, the contractor may have regarded it as a long term investment and may have purchased the contract or at least negotiated remuneration under it to suit the contract period. Termination therefore could be more detrimental to the contractor than it would be if the contract term were shorter.

[109] Another thing the mechanism achieves, or appears to attempt to achieve, is to avoid disputes as far as possible. The requirement of the body corporate to specify the breach concerned means that if there is a dispute about whether there is a duty to do the thing or whether that duty was breached, the dispute can be aired on receipt of the notice. Where the parties remain in disagreement about such things however, then the contractor is placed in a dilemma. Does the contractor remedy the alleged breach anyway despite disagreeing that it is part of the contractor's duties or that the default exists? Or does at that point (as happened here) the contractor resort to litigation to resolve the issue.

[110] All the above matters demonstrate the importance of section 131 notices providing sufficient particulars so that the contractor can identify the duty alleged, and the breach of that duty which is alleged. The notice ought to be specific enough for the contractor to be able to decide whether to challenge the contents of the notice either informally or formally or possibly both. And since the mechanism requires the contractor to carry out the duties which are alleged not to have been carried out within the time given, this also means that the notice must be sufficient for the contractor to be clear what needs to be done to remedy the matter.

[111] In so far as the notices are relied on as a step to contractual termination under clauses 8.1(b) and (c), I take a similar approach when considering the duty and the breach. But it seems to me that since clause 8.1(b) requires a notice to state clearly "what has to be done by the Ground Maintenance Person to remedy the default", this may go further than the requirements of section 131. In some types of alleged breach a valid notice under clause 8.1(b) may need to be more specific about the remedial action required than a notice under section 131.

[130]

[125] This makes it more difficult to get the time to remedy in the RAN correct. Section 131(4)(c) appears to require that the RAN states that remedy is required "within the period stated in the notice". So it may well be necessary to use the expression "within so many days" in the RAN. But the second construction means that the RAN would have to state that the contractor must remedy "within 15 days". This is because, assuming that the 15 day time to remedy starts immediately on the stroke of midnight at the end of the day the notice is given (which is correct as I discuss below), 14 clear days do not pass until day 15 starts, and that is upon the stroke of midnight at the end of day 14. Requiring a remedy "within 14 days" does not give 14 clear days to remedy as was stated by Member Favell in Peterson Management Services Pty Ltd v Body Corporate for the Rocks Resort [2015] QCAT 255.

[126] This could result in confusion and lead to errors, because it appears contrary to the natural reading of section 131(4)(c) which is that 14 days to remedy is sufficient whilst less than 14 days is not sufficient.

[127] Bodies corporate may attempt to satisfy the statutory provision by following the words of section 131(4)(c) exactly, and requiring the breach to be remedied "within a period not less than 14 days after you receive this notice". However, this would be void for uncertainty because no time to remedy is in fact specified at all.

[128] Bodies corporate may attempt to satisfy the statutory provision by specifying in a RAN, for example, that "you have 14 days after today to remedy". This could be challenged because it seems to require that the remedy is achieved by the stroke of midnight at the end of day 14, in which case it suffers from the same problem as a notice requiring the breach to be remedied within 14 days.

[129] These problems do not arise if the first construction is used. This because an extra day is not added, either by the common law rule, or by section 38(1)(a), because on that construction section 131(4)(c) does not specify a period of not less than 14 days.

[130] This would mean therefore, that a RAN which required a remedy "within 14 days" after the notice is given would suffice because it follows the statutory wording exactly. A RAN which gave "14 days to remedy after today" would also suffice because it means the same thing.

[131] The first construction also seems to be more in accordance with the function of subsection (4) of section 131. Subsection (4) sets out the formal requirements of the remedial action notice. It establishes the contractor's right to a period of time in which to remedy in that way, rather than directly. The second construction changes this, by setting a time to remedy. It therefore establishes the contractor's rights to that time directly.

[132] For these reasons therefore, I think the first construction is more likely to have been the objective intention of the legislature. In my view therefore section 131(4)(c) specifies the number of days which must be stated in the notice as the time to remedy.

[133] I therefore turn to question (b), whether the RANs provided this minimum time to remedy and described the time to remedy in compliance with section 131 of the Standard Module.

[134] It is useful to set out the wording used in the RANs. The following different expressions were used, often within the same RAN:-

(a) You must remedy "within 14 days of the date of this notice".

(b) You must remedy "within 14 days after today".

(c) You have "14 days after today" to remedy the breaches.

[135] It is common ground that the notices were given on the date shown in the notice, so there is no difficulty with (a) arising from any delay in that respect.

[136] In each of these expressions it is clear that the 14 day period starts at the stroke of midnight at the end of the day when the notice is given. In other words, if the notice is given on the 1st of the month, the 14 day period starts at the beginning of the 2nd of the month.

[137] It seems possible if I have understood counsel's submissions correctly, that there is some doubt about this. So I need to explain why I take this view. It can be tested by considering a notice which says "you must remedy within one day of the date of this notice" or even "you must remedy within one day of being served with a copy of this notice". Such a notice would not mean "you must remedy today", nor would it mean you must remedy within 24 hours of the date of this notice". Instead, since the notice could be given at the beginning of the day or at the end of the day just before midnight, the one full day must start immediately after midnight on the day of the date of the notice. In other words, the day the notice is given is ignored. The 14 days actually given by the notice must start at the same time.

[138] This is in accordance with the usual common law rules,[11] and also appears to accord with the provisions of section 38(1) of the Acts Interpretation Act.

[139] On this basis, in my opinion all the above expressions mean the same, and require the contractor to remedy within 14 days after the RAN is given, which on the construction of section 131(4)(c) which I prefer, is compliant with that section. Accordingly, there is no internal inconsistency in the RANs with respect to time to remedy.

[140] I appreciate that my view does not accord with the view taken by Member Favell in Peterson Management Services Pty Ltd v Body Corporate for the Rocks Resort [2015] QCAT 255. In that case the learned member was considering a remedial action notice given under section 129(4) of the Accommodation Module [which is in the same terms as section 131(4) of the Standard Module]. The RAN required remedy "within 14 days of being served with a copy of this notice". He found that the RAN did not comply with the statutory requirements.

[141] In his written submissions, Mr Faulkner on behalf of the body corporate conceded that a RAN which merely required a remedy "within fourteen (14) days of the date of this notice" would not comply with section 131(4)(c) having regard to the Rocks. However, Mr Faulkner went on to argue that in fact all the RANs did comply with section 131(4)(c) because there were other words giving time to remedy which did comply with the statutory requirements. I do not regard this concession as an admission of fact as to the RANs' compliance with section 131(4)(c) which would make it difficult for me to find otherwise.

[142] Therefore I find that the RANs gave the minimum time and described the time to remedy in compliance with section 131 of the Standard Module.

[141]

[156] On the question whether the body corporate acted reasonably in its decision to try to terminate the GMC, and also whether the body corporate used reasonable means to that end, the position is different. On these issues, it is clear that the evidential burden of proof is upon the party asserting that the decisions and actions of the body corporate are unreasonable to show that this is so. It is not for the body corporate to show that its decisions and actions were reasonable. Usually the party asserting unreasonableness will be the applicant. If so, then the evidential burden of proof to show unreasonableness will coincide with the legal burden which is on every applicant, that the elements of the applicant's case are established. Sometimes however, the party asserting unreasonableness will be a respondent. This could be for example if the body corporate is bringing some action against a lot owner or service contractor. If the defence to such a claim is that the body corporate acted unreasonably then the evidential burden to show this will be on the respondent.

[157] Although Albrecht v Ainsworth & Ors [2015] QCA 220 was cited on the question of reasonableness, that was a case which concerned a particular statutory test - the "no opposition which was unreasonable" test in item 10 of schedule 5 which applies in the case of motion which can only be passed without dissent.

[158] Clarke v Turner Park Shopping Village Body Corporate [2016] QCATA 105 and McLeod v Body Corporate for Stradbroke Tower and Villas [2015] QCATA 146 were both straightforward section 94 reasonableness cases which confirm the position.

[159] Mr Kidston however, submits that this is not the end of the matter. He argues that where the knowledge of the party asserting unreasonableness is limited, then the amount of evidence required to show unreasonableness will not be high. There comes a point when the court or tribunal will look to the other side (the body corporate) for evidence of the reasonableness of its actions if an inference is not to be drawn that the decision was unreasonable.

[160] There is a difficulty with this proposition when considering reasonableness. As was pointed out in Clarke v Turner Park Shopping Village Body Corporate [2016] QCATA 105 the question of reasonableness is not a yes or no matter - there may be more than one way to act reasonably (there will probably be a band of reasonable responses to events). This makes it more difficult to infer unreasonableness, because such an inference would only be available if it is the only realistic conclusion from the evidence that has been adduced.

[161] The other difficulty in inferring unreasonableness in this case is that the Applicant does in fact have knowledge of the motives of those in control of the body corporate (as disclosed by Ms Rockett's own filed evidence) and probably is aware of the procedures followed by the body corporate which resulted in the decisions and resolutions reached (this is because Ms Rockett attended committee meetings and also held several units in the complex, and was aware of the motions put to the general meetings). She gave evidence that there was ill-will against her and that there an orchestrated campaign to terminate the GMC. She exhibited a number of documents showing past formal disagreements and litigation between the two sides. Any gaps in her knowledge could have been filled by an application to the Tribunal for production of documents or information.[12]

[162] In this case, it is clear that such an order may well have provided a much better insight into the body corporate's motives and processes[13].

[163] I need also to point out that the issue of procedural unreasonableness was never identified as a discrete issue. At the beginning of the case there was a discussion about the issues. A more general view of reasonableness was identified but not one which went to the body corporate's process of decision making. It is in this light that Mr Kidston's submissions at the end of the case that the process had been unfair and therefore unreasonable have to be considered.

[164] In the circumstances, I cannot infer unreasonableness as I am invited to do by Mr Kidston on behalf of the Applicant. I must reach a conclusion about reasonableness on the evidence that has been adduced.

[143]

[165] I have found that one of the most important contractual obligations of the Applicant was to do its best to keep the common property in first class order and repair and if necessary to engage others to achieve that.

[166] In order to comply with this obligation with respect to maintenance and repair, the Applicant would need to:-

(a) establish a proper regime of inspection and reporting of maintenance and repair issues (including allowing others to report issues and have them properly categorised); and

(b) do its best to deal with those identified issues.

[167] As for gardening and cleaning, there was no daily and weekly schedule for such work in the GMC, and the experts in this case told me that this was unusual. There had been a schedule in the 2003 contract but the 2012 contract expressly removed it. Although lawyers were involved in drafting the GMC, I doubt whether they approved its final terms. Ms Rockett told me that she did not intend the schedule to be removed. The fact is that it was. So in order to comply with its obligation with respect to gardening and cleaning it seems to me that the Applicant would need to:-

(a) establish a gardening and cleaning regime sufficient to keep the common property clean and in first class order having regard to the age and condition of the property, its proximity to the sea and exposure to the weather, its proximity to the local activities, and the changing weather through the seasons; and

(b) to provide sufficient flexibility in the gardening and cleaning regime to keep the common property clean and in first class order; and

(c) do its best to perform the regime.

[168] Apart from Mr Kidston's submission about the meaning of the words "to the best ability", neither side has suggested that the Applicant's legal obligations should be regarded as tempered in any way. It is not suggested for example that it should be implied into the contract that the obligations are limited by words such as "in so far as reasonably practicable" or "to the extent which is reasonable".

[169] To a limited extent, the contractual obligations are not absolute however. This is because they require the Applicant to "do its best". So for example, if after the cleaner has finished for the day and after dark, someone drops some litter on the ground, although at that point in time the common property would not be in first class order, the Applicant would have done its best to keep it so. This is of course if there was a cleaning regime sufficient to fulfil the obligation.

[170] And it would not be every failure to perform the obligation which would entitle the body corporate to terminate the GMC. The body corporate has to act reasonably and it would be unreasonable to expect the common property to be in first class order at all times even if failure to achieve that was actually a breach of the obligation to do so.

[171] Having regard to the legal obligations in this case, the best way to show that the Applicant was in breach of the legal obligations would have been to show that (a) it had failed to establish sufficient maintenance, repair, gardening and cleaning regimes which would enable it to carry out its obligations, or (b) if it had established sufficient regimes it had failed to perform them.

[172] However, the factual evidence and expert opinion only touched on point (a) in passing. The way in which the body corporate attempted to show that the Applicant was in breach of contract was to rely on the result of spot checks when the common property was, on the body corporate's case, found to be out of order or unclean. Relying only on this circumstantial evidence, I was then asked to say that the Applicant was in breach.

[173] As Mr Kidston rightly submitted, breach of the GMC is not proved by such circumstantial evidence. However, it seems to me that it is open to me to infer from sufficiently strong circumstantial evidence that there was a breach in any particular issue. And I think it is right for me to rely on what evidence there was about maintenance repair and cleaning regimes to decide whether there was a breach.

[174] The evidence from the body corporate itself, as opposed to its expert, on this issue was very poor. That evidence suffered from almost useless statements of evidence from the Chair of the body corporate, Mr Evans.

[175] The problem with the statements of evidence was that they were not in fact the evidence of Mr Evans. Mr Evans explained that they came about from his own draft as a starting point, followed by input from the solicitors. But it was abundantly clear under cross examination that he had very little idea what was in the final statements despite attesting to their truth, and that there were large parts of them which were not his words but instead had been added by others. His recollection of events was insufficient for me to have any confidence that any factual matters in the statements had been proved by their acceptance in evidence. In so far as the statements contained argument (and there were numerous instances of this in the statements about which Mr Kidston rightly objected) this was not Mr Evans' arguing the matter at all: it was somebody else.

[176] In these days of statements of evidence prepared in advance, courts and tribunals have had to get used to identifying those parts of the statements which actually can be relied on as the evidence of the witness. In almost every case this emerges in cross-examination. The difficulty here, however, was that Mr Evans was so defensive in cross-examination, and so often prevaricated or looked for the motive of the questioner that he never gave any straightforward evidence in cross-examination which could be relied on. The first time he explained in a nutshell the facts as he saw them was in re-examination. Overall, his evidence was wholly unreliable.

[151]

[190] I am taking these two items together because they are very similar and some of the photographs showing these two drains were unfortunately transposed. Each of these surface drains run across a driveway - there is one drain at the entrance to the complex and one at the exit. Each drain is covered by grills which can be lifted for cleaning. In each case however, the last grill on one side of the drain could not be lifted. For one of the drains the reason was that the grill was rusted in place, and for the other drain it was because a gate motor housing had been bolted on top of the grill.

[191] It is the case that the Applicant had an obligation to keep these drains clear. This obligation is in paragraph (f) of clause 2(e) of the GMC.

[192] It is the case that at the time the first Leary report RAN was issued to the Applicant, the Applicant had failed to comply with this obligation. Although each of these drains were not completely blocked they were partially blocked with silt and compacted leaf material where the drain was covered by a grill which could not be lifted. In my view, the Applicant's obligation under the contract extended to arranging specialist assistance either to lift these awkward grills to enable the drain to be cleaned at that point, or if this were not possible, to clean the drain with the grill in situ using specialist equipment. From the evidence, the Applicant did not do its best to clear these two drains in these areas either by itself or by engaging others, but instead had permitted silt and compacted leaves to build up causing the drains partially to block.

[193] As for whether the breach was remedied in the manner required by the RAN, the Applicant did do some more work to try to clear these drains after it received the RAN but this was not completely successful and silt and compacted leaves remained in the ends of these drains. This required specialist help. So this item comes under the second remedy limb.

[194] In its solicitor's letter of 21 February 2014 the Applicant informed the body corporate that it was seeking quotes for this item, so by saying this it was identifying it as a matter beyond its skills. However, no quote was obtained within the 21 days as required by the second remedy limb.

[195] Therefore this breach was not remedied as required by the RAN.

[153]

[196] The garden areas in the common property at the complex included various raised garden beds and ground level beds in the car park area. Some of the ground level beds in the car park area were covered with stones, but the raised beds were soil and mulch.

[197] The first Leary report RAN said that the soil in the raised garden beds needed turning over and mulching.

[198] At the time of the RAN there is no doubt that it had been some years since mulch had been applied to these raised garden beds. They had previously been mulched, but over the years this mulch had been allowed to rot away and had not been renewed.

[199] The Applicant's case is that there was no duty to ensure that any mulching was done where it was required, but I disagree. The experts agreed that renewal of the mulching to the raised beds would be beneficial at least to improve them aesthetically. The garden areas were part of the common property which the Applicant had to look after, and this would include mulching as required, particularly bearing in mind the length of the GMC.

[200] The Applicant therefore was not keeping the garden beds in first class order. It follows that the Applicant was in breach of the legal obligations to carry out this work at the time of the first Leary report RAN.

[201] As for turning over the soil, I am assisted here by Mr Leary's photographs of these beds[14], and Mr Little's photographs,[15] and of course by the evidence given at the hearing. In this respect the experts disagree. Mr Little could see little point in this turning over the soil whereas Mr Leary thought there would be a benefit. In my view, this was required to keep the garden in first class order and repair. It is true that not all areas of the beds would require turning over - where for example there were plants which would be damaged by this action - but it is obvious, I think, that the RAN did not require that to happen.

[202] As for whether these breaches were remedied in the manner required by the RAN, in its solicitor's letter of 21 February 2014 the Applicant informed the body corporate that it was seeking quotes for the work. By saying this, it was not saying the work on the garden beds was beyond its skills, but instead it was claiming that it was not a contractual duty.

[203] This is clearly incorrect, and the Applicant should instead have remedied this item and charged the body corporate the materials.

[204] Therefore this breach was not remedied as required by the RAN.

[155]

[205] On Mr Leary's inspections he found some areas of the ground and in the garden beds where there were cigarette butts and other rubbish. He photographed these areas and these photographs appear in his reports.

[206] When Mr Little inspected, he also found some cigarette butts but fewer than Mr Leary had found. Mr Little said that on his inspection the common property was "primarily clean".

[207] An assessment of the evidence about cigarette butts and other rubbish is made more difficult by the following facts:-

(a) The cleaner who make a daily round of the gardens would finish at 11am or 12 noon and it is unclear whether Mr Leary inspected any particular area before or after the cleaner had finished cleaning that area.

(b) At the time of the two visits conducted by Mr Leary, workmen were present on the site to paint the soffits and railings to the balconies they may have been responsible for some of the cigarette butts and rubbish.

(c) It was a recognised problem that debris could be blown in by the wind, particularly as the complex was close to Orchard Avenue, a busy area at night where there would be many smokers.

(d) Tenants or their visitors would flick or sweep off their cigarette butts from balconies onto the ground or garden beds below.

(e) Sometimes tenants and visitors would empty ashtrays from their cars onto the garden beds or onto the ground.

(f) It was possible that tenants and visitors would empty ashtrays from their home onto the garden beds.

(g) Sometimes access to the garden beds was made more difficult for cleaning by the presence of parked vehicles.

[208] The Applicant's evidence was that the common property was cleaned every day.

[209] On his first and second inspections, Mr Leary observed that the cigarette butts in the garden beds were old. He was of the view that this indicated a failure of the cleaning regime. I accept Mr Leary's evidence that the cigarette butts appeared to be old. This makes it unlikely that the cigarette butts which he saw came from the contractors working on site. It is possible, as was put to Mr Leary in cross examination, that the cigarette butts that he saw had come from ashtrays or were sweepings from balconies. Judging from the way the butts are spread out in the photographs it does seem unlikely that they had been emptied from ashtrays between the cleaning rounds.[16] It also seems unlikely that so many butts could have been blown in between cleaning rounds. There are only two other possibilities: that they had been allowed to develop over time, or they were sweepings from balconies. If the latter however, then this itself demonstrates a failure of the cleaning system because it means the balconies were not being swept properly and the sweepings were not being cleared up either.

[210] Of the difficulties faced by this complex described above, (c) to (f) were known problems and predictable. During the painting and repair work (b) was known, or should have been known to the Applicant, to be a problem.

[211] The contractual duty was that the Applicant had to keep the common property clean and tidy in accordance with the duties set out in paragraph (a) of clause 2(e) of the GMC and that required it to do its best to keep the common property in first class order.

[212] A cleaning contractor who agrees to do its best to keep a property in first class order needs to adjust the cleaning regime to ensure that this happens. This means also that if the property is going to fall below the standard required because contractors are on site, or because of nearby activity or because the tenants and visitors are not being careful, the cleaning needs to be stepped up to ensure as far as possible the property remains in first class order. Failure to do this is not doing one's best.

[213] Mr Kidston submitted that if the property is found to be dirty at any particular time this does not prove that there has been a breach of contract. The contractor may have done its best to keep the property clean but despite this, it is dirty when inspected.

[214] It is impossible to say on the evidence whether Mr Leary inspected the garden beds just after the cleaner had finished the round or 24 hours afterwards. But to my mind, even if 24 hours afterwards the extent of rubbish found in the common property when Mr Leary inspected on 10 October 2013 and also on his second visit on 27 November 2013 proves that the Applicant was not doing its best to clean the property. Even if it was clean soon after the cleaning round, the nature of the property was that it would soon get dirty again. Some better regime was required to fulfil the contractual obligations. Ms Rockett on behalf of the Applicant explained that she herself would pick up cigarette butts from the driveways and walkways when she went out to lunch and at night time. It is clear from this evidence that further rubbish was appearing over the day.

[215] On my finding on the balance of probability the evidence is sufficient to show that the Applicant was not doing its best to keep the gardens in first class order and the Applicant was in breach of its obligations for these items.

[216] The Applicant's case however, is that the garden beds were cleaned up during the time given to remedy and I think this did happen. It can be seen from Mr Leary's photographs on his third visit,[17] which was after the time given to remedy, there was only one cigarette butt in the garden beds to be found. This demonstrates that the cleaning regime was improved over the previous regime. Accordingly I find that the breach was remedied.

[168]

[241] These are the window frames of the units which face the balconies. There are three difficulties facing the Applicant here. These windows are original and made of aluminium, and they have deteriorated over the years from the weather and sea air and were pitted in many areas. Secondly the seals in the windows had perished which means that they could not be hosed and were therefore more difficult to clean. Also because of the close proximity of the building to fir trees, and its closeness to the esplanade with winds from the sea, a lot of dust would come onto the balconies and settle on the window frames.

[242] Mr Leary found one of the frames to be "amass with dust and grime".[24] It was a serious build up of dirt that Mr Leary thought had built up over a quite a long period of time certainly longer than a month.

[243] This seems to have resulted from the Applicant's regime for cleaning these frames which was that the window frames were washed down every four to six months. The approach taken by Ms Rockett in her evidence was that since the window frames were in such bad condition anyway it would not make much difference if they were cleaned more regularly. However it seems to me this argument is a two edged sword. If the window frames were in poor condition then this is all the more reason to keep them clean. This would be the way to keep them looking their best even if that was not very good. I say that bearing in mind the particularly duty in this contract which was to do the best to keep the common property in first class order.

[244] It is clear that for there to be such a build up of dirt the Applicant's cleaning regime was insufficient to fulfil its obligations. Accordingly I find that the Applicant was in breach of contract here and failed to keep the common property in first class order with respect to this item as it should have done.

[245] As for whether the breach was remedied in the manner required by the RAN, in its solicitor's letter of 21 February 2014 the Applicant informed the body corporate that it was seeking quotes for this item, so by saying this it was identifying it as a matter beyond its skills.

[246] In my view, this categorisation was incorrect, and the Applicant should instead have remedied this item itself.

[247] Therefore this breach was not remedied as required by the RAN.

[171]

[253] The RAN suffered from four problems:-

(a) On my findings, two of the pressed breaches were not breaches: item 11.01 (screws missing on covers over breakfast nook) and 11.04 (cigarette butts and rubbish on the balconies).

(b) The second remedy limb (report to committee and provision of quotes) applied if an item was beyond the Applicant's skills. However, it was unclear which items were said to be beyond the Applicant's skills or how this could objectively be determined. Although it appeared from the RAN that it was for the Applicant to decide what was within its skills, the Applicant could not be certain about this, or what would happen if the body corporate disagreed. There was nothing in the accompanying expert's report identifying what the body corporate's expert was saying was within or beyond the Applicant's skills. This was a particular problem with some of the pressed breaches. For example, items 1.03 and 2.02 (rubbish and leaves in surface drains): this could be cleared to an extent without specialist skills, but would require specialist skills to clear completely. There was a similar difficulty with items 6.02 and 6.15 (dirt and mould on tile edges). Under item 6.04, there was confusion over which louvre window was involved: one probably required special skills, one may not have done, although there was disagreement about this at the hearing. There were also two opinions which continued into the hearing about whether item 7.01 (spear pump) required special skills. And there was a further difficulty where dirt had been allowed to build up over the years and was more difficult to remove (item 11.13) or where redecoration was probably the best solution (item 11.02).

(c) The second remedy limb required two quotes when in the particular circumstances of this case, one would have been sufficient, at least for the pressed breaches. This is because the Applicant regularly used a particular contractor to do general maintenance work which it trusted, and upon whom it could rely on to do the work quickly and give reasonable quotes. It is common ground between the experts that the quotes which were obtained from this contractor with respect to the pressed breaches were reasonable. Since this contractor knew the building well, it was possible to get a quote quickly, but it was much more difficult to get a second quote quickly. It would have been better if the RAN had required only one quote to be obtained within the time to remedy. Then a second quote could be obtained afterwards, if required.

(d) The time of year made it difficult to obtain quotes quickly. Since the criteria which was being applied as to what was beyond the Applicant's skills was inherently unclear, it is difficult to calculate exactly how many of the 74 items in the RAN required quotes. However, the Applicant did obtain quotes for 42 of the items.[26] The Applicant was saying that some of these items were beyond its skills and others it was not obliged to do under the GMC, and that was why quotes were required. I take Mr Leary's point that it could be possible to obtain quotes quickly from one contractor for a large number of items if the contractor provided a wide range of services. This is indeed what the Applicant was able to do with the contractor it usually used. But it was much more difficult to get the second quote quickly. In my view, 21 days at the time of year when the RAN was given to obtain two quotes for the number of items for which quotes would potentially be required, was insufficient. The difficulty was that the Applicant would be reliant on third parties to provide the quotes. It was submitted by Mr Faulkner on behalf of the body corporate that 21 days was sufficient because the Applicant had received the first Leary report on about 1 November 2013, but this argument does not work here: two quotes for each item in the second remedy limb were required within 21 days of the notice. This was a new requirement, and not in the first Leary report.

[254] I return to my considerations in "The remedial action notices - how accurate do they need to be?". Whilst I do not think that problem (a) (two pressed breaches not in fact breaches) would automatically be fatal to the RAN, I think that the combination of the problems (a) to (d) was fatal, in that overall I do not think that the RAN gave the Applicant a reasonable opportunity to do what it was obliged to do. It was not sufficiently certain for the Applicant to be sure what it was obliged to do, and it required a remedy which was onerous in the time allowed.

[255] More specifically, the RAN did not conform with section 131(4) of the Standard Module because it did not require the Applicant, with sufficient certainty or within sufficient time, to carry out the duties identified as not have been carried out.

[256] Similar issues arise when regarding the RAN as a contractual notice under clause 8.1 of the GMC. Clause 8.1(b) required that a notice to remedy should specify the default and clearly state "what has to be done by the Ground Maintenance person to remedy the default". In my opinion the RAN was not certain enough to satisfy the requirement in this clause. As discussed under "Must the time to remedy in the notice be reasonable?", it is probably the case that insufficient time to remedy does not invalidate the notice under clause 8.1(b), however if the time is too short it makes the notice unreasonable and therefore contrary to section 94(2). For these two reasons I do not think this RAN can be relied on as a clause 8.1(b) RAN.

[172]

[257] This RAN listed five items in annexure A[27] which were more thoroughly described in Mr Leary's third report dated 26 February 2014:-

Build up of cigarette butts and rubbish near the garden beds.

A section of the dividing block fence requires repair.

Mirrors require cleaning in both right and left hand side toilets.

WC to left toilet - cistern requires fixing to stop WC from continuously flowing.

An extensive quantity of food and rubbish scattered around driveway and garden areas.

[258] Item 14 (build up of cigarette butts). These cigarette butts were probably previously under a vehicle as Ms Rockett believed, and then became visible when the vehicle was moved away. They were most likely butts thrown out from a car ashtray. I do not think their presence at the time of Mr Leary's inspection demonstrates a breach of the obligation for the Applicant to do its best to keep the common property in first class order.

[259] Item 15 (dividing block fence). I am not satisfied that there was an area of common property in disrepair. There was disagreement at the hearing, perhaps also some confusion, about exactly what was meant here - and it was not assisted by the photographs.

[260] Item 18 (mirrors require cleaning). The difficulty with this item is that Mr Leary conducted a spot check of the toilets where these mirrors were situated, but at the time they were being used by contractors who were then working on site. I am not satisfied in these circumstances that the marks on the mirror demonstrate a breach of contract by the Applicant to do its best to keep the common property in first class order.

[261] Item 19 (WC running continuously). Although this was a new fault, it had arisen over time and had not been fixed, and that was the Applicant's responsibility. However, I accept that the Applicant had called in a plumber twice to fix this but it had not been repaired properly. By the time of the RAN it was understood by the Applicant that the plumber needed to be called again. In those circumstances I am not satisfied that with respect to this item the Applicant had failed to do its best to keep the common property in first class order.

[262] Item 8 (food and rubbish). This is supported only by three photographs. One shows a paper bag, one shows what appears to be a scrap of paper and another shows some leaves and scraps of paper apparently in an internal room.[28] I do not think the evidence is sufficient for me to find that the Applicant had failed to do its best to keep the common property in first class order.

[263] On these findings, none of the items in this second Leary notice is a breach. It follows that this RAN cannot be relied on as a valid notice under section 131 of the Standard Module or as a valid clause 8.1(b) notice.

[177]

[273] Two of the directions required information about the Applicant's system and work instructions for gardening and cleaning.[30] These directions stated that the objective was to reduce the possibility of disputes about the performance of duties by enabling (the Applicant) to demonstrate that it understands the extent of its gardening and cleaning duties and that it has checklists and/or systems to ensure that its staff and contractors understand the extent of those duties and to ensure that they are performed.

[274] The gardening and cleaning directions required the Applicant within 7 days to provide a copy of the current checklists and systems or to advise if they didn't exist, to provide the gardener's contracts and instructions and instructions to staff and the documents that the staff and contractors had to complete.

[275] On the same day the body corporate served a direction requiring the Applicant within 7 days to provide information about the pumps and motors.[31] This asked what procedures were in place to check that the pumps and motors were working properly, when and by whom the pumps and motors had been serviced within the last two years, what repairs had been done over that time (it was said that copy invoices would be sufficient to show this), and what repairs were currently required.

[276] On the same day the body corporate served a direction requiring the Applicant within 7 days to provide information about the fire fighting equipment.[32] This asked how often the Applicant inspected the fire fighting equipment, when and by whom the fire fighting equipment had been serviced within the last two years, and what repairs had been done over that time. It also asked when the QFRS had inspected the fire fighting equipment over the last two years, and whether there were currently any repairs required or hazards or dangers with respect to the fire fighting equipment.

[277] The Applicant responded to these directions on 1 April 2014 (which on my reckoning was the day after the last day given to comply with the direction).[33] The Applicant did not provide the information or documentation requested, but instead asked for an extra 7 days to do so on the basis that 7 days was too short. The body corporate did not reply to this request. In the event, the Applicant provided no information or documents at that time in response to the directions.

[278] Because of this, the body corporate issued four more RANs, all dated 16 May 2014, and all alleging that the Applicant had breached the GMC by failing to answer the directions given on 24 March 2014.[34] They gave a time to remedy of 14 days.

[279] In respect of the directions Mr Kidston submits that the 7 days allowed to provide the information and documentation was too short, and therefore that the directions were not reasonable under paragraph (b) of clause 2(e). Ms Rockett supports this in her evidence, pointing out that the directions were served at a busy time in the dispute between the parties. The directions had been served on the Monday, but an AGM which was going to consider a motion to terminate the GMC was to be held on the Friday of that week. The Applicant was busy instructing its solicitors to make an originating application to the Tribunal and to apply for an injunction to restrain the body corporate from giving effect to that motion, if passed. The Applicant was also busy preparing a response to the second Leary report RAN and the Skip Bin RAN which had been served on the Monday as well. This argument is strengthened by my findings in these reasons that the body corporate is not entitled to give effect to the motion passed at the AGM (and therefore the Applicant was right to seek the injunction restraining this), and my findings that the second Leary report RAN and the Skip Bin RANs alleged breaches which had not happened.

[280] It is right therefore that this was a busy time for the Applicant, but despite this, I do not agree that 7 days to provide the information required by the directions was unreasonably short. Although Ms Rockett says that the information and documents had to be compiled from numerous sources, I cannot accept that this is the case. All the information and documentation requested should have been immediately available to the Applicant. I do not accept that the directions required a time consuming trawl through emails as suggested by Ms Rockett under cross examination.[35] Even if this were the case, it would have been because of inadequate record keeping on these issues.

[281] The extent of the work required to provide the information and documents can be seen from the eventual responses to the RANs based on the directions. The gardening direction and the cleaning direction were answered very simply in a few lines, and by attaching the relevant checklist.[36] The pumps and motors direction required a longer letter, but which was still on one page, and some copy invoices. [37] The fire fighting direction was answered by copying inspection reports, emails and invoices covering some 200 pages odd. [38] Not all these documents were necessary to answer the direction however, and it could have been answered more efficiently.

[282] Dealing with the responses to the second Leary report RAN and the Skip Bin RAN should not have caused problems because they had a time to remedy of 14 days, so the following week was also available to deal with those.

[283] Whilst it would probably have been better to give more than 7 days in the direction in the light of the other things the Applicant was required to do at that time, in the circumstances I do not think it was unreasonable to limit the time to respond to the directions to 7 days. It follows that, subject to the question of reasonableness which I deal with below, the directions were properly given under paragraph (b) of clause 2(e) of the GMC.

[284] Turning now to the RANs given on 16 May 2014 which were based on the Applicant's failure substantially to respond to the directions, I have found elsewhere that the time to remedy in these RANs complied with section 131 of the Standard Module, and the descriptions of the time to remedy were not internally inconsistent.

[285] However, I note that these RANs attached copies of the directions with the wrong date. The directions which were attached were dated 6 March 2014. Otherwise they were in the same terms as those actually received by the Applicant. I do not think this error would have been misleading and therefore would have invalidated the RANs.

[286] On the question whether these RANs were remedied, my findings are that the Applicant remedied them all, by providing the information and documents requested in the directions within the time to remedy in the RANs.

[178]

[287] On 23 May 2014 the body corporate served on the Applicant a RAN concerning the fire fighting equipment.[39] The Queensland Fire and Rescue Service had inspected the complex on 2 May 2014 and as a result of that inspection on 5 May 2014 the Commissioner issued a notice of non-compliance with the fire regulations in that:-

(a) The fire evacuation plan for the building had not been reviewed annually and recorded and did not contain up to date contacts for Evacuation Coordinator or procedures to follow in an emergency situation.

(b) Evacuation signs and diagrams were not displayed in an acceptable format.

(c) There was no water available for the fire hose reels.

[288] The QFRS had required these matters to be attended to by 5 June 2014.

[289] The RAN issued to the Applicant recited a report previously obtained about fire safety whose recommendations (it was said) had not been implemented, and a request by the Chair to be advised when the tank feeding the hose reels was operational, which had not happened.

[290] The RAN listed the clauses in the GMC which brought these issues within the duties of the Applicant. I am satisfied that all the things mentioned here were the Applicant's duties and came within one or other of the clauses recited in the RAN.

[291] The RAN set out the remedial action required of the Applicant in some detail and quite specifically. I am satisfied that it was sufficiently certain to make it clear to the Applicant what needed to be done. This is despite the possibility that an email referred to in the RAN was missing from it as an attachment,[40] and despite the contents of letters written by the Applicant's solicitors on 27 May 2014 and 28 May 2014 complaining that the RAN was unclear.[41] On 10 June 2014 the Applicant's solicitors argued that for technical reasons set out in the response that the RAN was defective.[42]

[292] However, there was little evidence adduced at the hearing about the factual matters supporting this RAN and whether the Applicant was in fact in breach of its duties because of these matters. The Applicant gave a detailed response to the RAN on 10 June 2014. The response suffers from arguing the validity of the RAN legalistically and repeatedly. Of more importance for my purposes are its arguments as to the factual basis for the RAN and whether the QFRS notice of non-compliance was caused by the body corporate's failure to deal with quotes submitted. These arguments also appear in Ms Rockett's evidence.[43] In effect, the Applicant's case is that the body corporate accepted that it was its responsibility, rather than the Applicant's responsibility, to accept the quotes obtained to deal with issues about fire equipment and evacuation plans.

[293] I those circumstances, whereas on the face of it I could have been satisfied from the mere fact of the QFRS notice of non-compliance that the Applicant was in breach of its obligations under the GMC, I do not think this approach is fairly open to me.

[294] It is for the body corporate to prove to me that the Applicant was in breach sufficient to support the QFRS RAN and this it has failed to do.

[295] As for whether 14 days was sufficient to comply with the RAN, it is significant that Ms Rockett had signed the earlier fire safety report and therefore would already be acquainted with most of the issues. I note that in the response to this RAN the Applicant's solicitors did not say that the time was insufficient or that the issues were a surprise. In the circumstances it would appear that the Applicant was well aware of these issues or should have been, and would therefore either have started to take remedial action or should have done. In these circumstances the 14 days in the notice was reasonable.

[296] It follows from my finding that the Applicant was not in breach as alleged in the RAN however, that this RAN cannot be relied on by the body corporate as a section 131 RAN or a clause 8.1(b) RAN.

[297] There is also no clear evidence whether or not this RAN was complied with. However, having decided that the alleged breach supporting this RAN has not been proved, it is unnecessary to make any findings about this.

[179]

[298] I have found that the only RANs upon which the body corporate can rely are the four RAN's based on the unanswered directions. And I have found that these RANs can only be relied on under clause 8.1(c), and not for any other purpose because they were remedied.

[299] It is necessary for me to consider whether it was reasonable for the body corporate to resolve to terminate the GMC at its Extraordinary General Meeting on 24 June 2014 relying on clause 8.1(c) (three RANs in the last four months) or 8.1(d) (gross negligence or incompetence).

[300] Dealing with clause 8.1(d) first, I do not think that the breaches which did occur[44] can be said to amount to gross negligence or incompetence. Whilst I think they were more than trivial breaches, they cannot be placed in that higher bracket. Accordingly it was not reasonable for the body corporate to resolve to terminate the GMC on that basis.

[301] As for whether it was reasonable for the body corporate to resolve to terminate the GMC under clause 8.1(c), it is necessary to consider whether the body corporate's actions in getting itself in a position to utilise clause 8.1(c), by issuing a series of directions and RANs based on those directions, was reasonable. It is said on behalf of the Applicant that it was not, and Ms Rockett says that in fact there was an orchestrated campaign against her and a campaign to terminate the GMC.

[302] I am satisfied that in 2013 Mr Evans and Mr Yeates who were the leading members of the committee of the body corporate, had concerns about the quality of the work done by the Applicant, and that this was one of the reasons Mr Leary was commissioned to produce a report.

[303] Mr Evans also had a number of other reasons to want to terminate the GMC. He had been against the 29 March 2012 motion to renew the Applicant's contracts,[45] he believed that there had been a conflict in the negotiations of the terms of the contracts which the Applicant had taken advantage of at that time, he held a belief that the Applicant had paid "bogus" contractors' invoices,[46] and he also held a belief that the Applicant had deliberately notified the insurers about concrete spalling at the complex which resulting in higher premiums. There had been a number of disagreements and also litigation involving the Applicant which had been referred to the Commissioner, and also previous litigation in the Tribunal.[47]

[304] One of the main problems for both sides which was difficult for them to resolve, and which had been responsible for some of the disputes between them, was the uncertainty about the extent of the Applicant's duties, caused by the poor drafting of the GMC. As Mr Leary put it:-

[181]

[305] Mr Leary was, I think, referring to the absence of schedules in the contract listing the regular work which the Applicant was required to do (they had been removed from it, probably inadvertently). The precise obligations under the GMC were unclear to the parties, for example there was disagreement about whether the Applicant had responsibility for mulching the garden areas. It was also unclear to both parties and to their experts, whether the Applicant had duties under the GMC which went beyond the skills of its director and the skills of the gardener and cleaner employed on site. It was unclear to the parties whether the Applicant needed to obtain quotes for work beyond these skills and obtain the body corporate's approval to do it, or whether it was obliged simply to proceed to do the work anyway. The difficulty was exacerbated by the fact that the Applicant was contractually obliged to monitor its own performance, so there was no third party supervisor to assist.

[306] This uncertainty needs to be taken into account when considering the reasonableness of serving the gardening and cleaning directions dated 24 March 2014 on the Applicant. If the object of these directions was as stated on their face, to reduce the possibility of disputes about the performance of the duties by the Applicant then they were not only reasonable but sensible. There is nothing to suggest that the stated aim was not the true aim, and it is my finding that this was the intention when these directions were served.

[307] As for the pumps and motors direction and the fire fighting equipment direction, as was submitted by Mr Faulkner, it was then some two years into this GMC and it was therefore an appropriate time to ensure that these matters were being attended to properly. The importance of the fire fighting equipment direction is demonstrated by the QFRS non-compliance notice which was subsequently issued.

[308] However, Ms Rockett says that the directions were served "with ill will". Whilst her evidence does suggest that the body corporate had received detailed information from time to time about what repairs were required in these areas, this needs to be considered in the light of uncertainty between the parties as to whether the Applicant was itself obliged to organise these repairs. My overall view is that the body corporate was justified in seeking the information which it sought in the directions about pumps and motors and fire fighting equipment.

[309] Mr Kidston submitted that it was unreasonable of the body corporate to serve separate RANs based on four separate directions, and it was suggested that this was contrived by the body corporate to permit it to invoke clause 8.1(c). This needs to be considered in the light of the Applicant's case, as now submitted by Mr Kidston, that a RAN alleging numerous breaches must give sufficient time to remedy all the breaches to avoid being invalid as a whole. This tends to make the service of a separate RAN for each breach reasonable, because it reduces the chance of a RAN being invalid.

[310] Of course it would be unreasonable artificially to divide an issue into parts so that more than one direction, and more than one RAN could be served with respect to that issue. In effect, each issue should be capable of being sued upon separately (each should be capable of being a separate cause of action). I think each of the RANs were sufficiently separate for the purposes of clause 8.1(c).

[311] It is right also when considering whether it was reasonable of the body corporate to invoke clause 8.1(c) to take into account that the terms of the GMC were freely negotiated in a commercial environment, and that the Applicant had solicitors at that time (although as I have said earlier, I think it is unlikely that the solicitors would have approved the final terms of the GMC). It was submitted to me by Mr Faulkner on behalf of the body corporate that the need to act reasonably does not require the body corporate to abandon its own contractual rights on which it would wish to rely in order to achieve its reasonable purpose. I tend to agree with this submission.

[312] Ms Rockett says that it was a deliberate decision not to provide the information and documents because it was an onerous task. It appears that the Applicant decided only to respond if RANs were given based on the unanswered directions. This was a deliberate refusal by the Applicant to co-operate with the body corporate to seek information which it was entitled to have and which was reasonable for it to pursue. In doing so the Applicant was in breach of paragraph (b) of clause 2(e).

[313] It was reasonable therefore for the body corporate to issue the directions and the RANs which were based upon them. It follows that the body corporate can rely on these RANs under clause 8.1(c).

[314] As for the reasonableness of the body corporate's internal processes which resulted in the resolutions of 28 March 2014 and 24 June 2014 to terminate the GMC, the Applicant raises some concerns. In the light of my findings, I shall concentrate on the resolution of 24 June 2014 although the same questions arise for both resolutions.

[315] These concerns circulate around the process being largely committee led, with many committee meetings being on paper only, and decisions based on limited and misleading information. And it is said that the general meetings suffer from the same problem, with the lot owners largely voting by proxy on motions presented by the committee and without full and accurate information.

[316] The concern here expressed by the Applicant, which I share, is that there was scope here for overbearing influence to be exercised by those in control of the body corporate over those other members of the committee, and the lot owners, to vote in a certain way.

[317] However, there is hardly any evidence at all one way or the other, to show whether or not this sort of thing happened and so it cannot be said to be anything more than conjecture. As said earlier under "Burden of proof: reasonableness", this is not a case where in the absence of such evidence it is appropriate to infer unreasonableness.

[318] The agenda for the EGM of 24 June 2014 referred to the eight RANs given to the Applicant. Of those, the first - the first Leary report RAN, I have found was largely justified because of the Applicant's breach. This RAN mainly failed on drafting and time issues, which I do not think the body corporate could have foreseen at the time of the resolution. Of the other seven RANs referred to in the agenda on my findings three cannot be relied on. Of these, the factual basis of the Skip Bin RAN was correct although the legal liability was not, and the QFRS notice has simply failed before me because of evidential inadequacies. There is one notice, the second Leary report RAN, which ought not to have been given.

[319] The agenda needs to be read as a whole, and clearly states under "Termination" that the ground relied on is gross negligence or incompetence [relying on clause 8.1(d)] or alternatively that three breach notices had been issued in the last four months [relying on clause 8.1(c)].

[320] The basis for the alternative motion which I am considering here (three breach notices in the last four months), was factually correct.

[321] The meeting was attended by seven people. Six of these it seems had voting rights: Ms Rockett also attended but had no voting rights. Numerous lot owners attended by proxy and submitted voting papers. There is no information about how this was achieved. The vote to terminate the GMC was passed by 38 votes to 25 with 1 abstention.

[322] Those who voted at the general meeting would be entitled to expect that the committee in making the recommendation would properly have considered factors relevant to the decision. Mr Evans said that this had happened, but did not go into detail. In the absence of any evidence to the contrary I am entitled to assume that the committee did consider things properly and reasonably.

[323] In the circumstances, my overall view is that it was reasonable for the EGM on 24 June 2014 to pass the motion to terminate the GMC.

[182]

[324] Subject to the requirement to act reasonably and provided the provisions in these clauses are satisfied, the body corporate may rely on clauses 8.1(b), (c) and (d) of the GMC (termination route 2) as a means to terminate the GMC.

[325] The Applicant's obligation was to do its best to keep the common property in first class order and repair and if necessary to engage others to achieve that. It had other specific duties, including a duty to keep the common property and other property of the body corporate clean and tidy and to ensure all drainage was clear and functioning. It was also obliged to report repair, hazard and danger issues to the committee, and to protect the interests of the common property of the body corporate and the lot owners.

[326] By describing the breach and the remedial action required with sufficient certainty, a remedial action notice (a RAN) must give a contractor a reasonable opportunity to do what it is obliged to do. Under section 131 of the Standard Module a RAN which requires a remedy within 14 days after the notice was given is valid, provided this is a reasonable time to remedy.

[327] The descriptions of the time to remedy in the RANs were not inconsistent.

[328] The body corporate is obliged by the statutory provisions to act reasonably in making decisions and in exercising its functions and this includes its decisions about the contents of directions and RANs and its decisions about termination of service contracts.

[329] The evidential burden of proof is upon the body corporate to show that the Applicant was in breach of the GMC and that the statutory or contractual provisions were complied with, but the Applicant has the evidential burden of proof to show that the body corporate has acted unreasonably.

[330] The body corporate cannot rely on the following RANs under section 131 of the Standard Module or clauses 8.1(b) or (c):-

(a) The first Leary report RAN because it did not give the Applicant a reasonable opportunity to do what it was obliged to do. It was not sufficiently certain for the Applicant to be sure what it was obliged to do, and it required a remedy which was excessive in the time allowed.

(b) The second Leary report RAN because none of the five alleged breaches were in fact breaches.

(c) The Skip Bin RAN because it was not based on a breach by the Applicant.

(d) The QFRS RAN because the evidence showing that there was a breach by the Applicant is insufficient.

[331] The resolution passed by the body corporate at its AGM on 28 March 2014 to terminate the GMC based on the first Leary report RAN was not valid because that RAN could not be relied on. In any case the resolution was not valid if it is regarded as action under section 131 of the Standard Module, because it was not by secret ballot.

[332] The only RANs which the body corporate can rely on are:-

(a) The RAN based on the unanswered gardening direction.

(b) The RAN based on the unanswered cleaning direction.

(c) The RAN based on the unanswered pumps and motors direction.

(d) The RAN based on the unanswered fire fighting equipment direction.

[333] All these RANs were remedied, so they can only be relied on by the body corporate for the purposes of clause 8.1(c).

[334] It was not reasonable for the body corporate at its EGM on 24 June 2014 to resolve to terminate the GMC pursuant to clause 8.1(d) (gross negligence or incompetence).

[335] It was reasonable for the body corporate at its EGM on 24 June 2014 to resolve to terminate the GMC pursuant to clause 8.1(c) (three RANs within six months) relying on the RANs based on the unanswered directions. I am not asked to decide whether the GMC has already ended pursuant to this resolution or whether a further step is required.

[336] As for whether the body corporate could now resolve to terminate the GMC pursuant to clause 8.1(c) relying on these RANs (which is one of the issues in counsels' lists of issues) in the light of my findings it may not be necessary for me to consider this. However for the sake of completeness, in my view this option is probably open to it. This is because there is no time limit to invoke clause 8.1(c) in the GMC. If the body corporate delayed in invoking that clause, it is possible it would face waiver or estoppel issues, but here the delay has been caused by this litigation and by nothing else.

[337] Since I have found that the resolution of the EGM on 24 June 2014 to terminate the GMC was valid on one of its grounds, the Tribunal's injunction of 24 June 2014 which restrained the giving effect to this termination motion needs to be lifted.

[338] That injunction also restrained any steps from being taken with respect to the seven RANs other than the first Leary report RAN. In lifting this order, I am not saying that all these seven RANs were valid. As stated above, I have only found that four of the RANs could be relied upon, and then only for the purposes of clause 8.1(c) because they were all remedied.

The Sands Gold Coast Pty Ltd v Body Corporate for the Sands

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (215 paragraphs)

The Sands Gold Coast Pty Ltd v Body Corporate for the Sands (No 2) [2016] QCAT 365 (22 September 2016)

Parties

Cases Cited (5)