Dream Suburbs Pty Ltd as trustee for the Sok and Amy Family Trust v The Body Corporate for Persse Palace & Anor (No 2) [2023] QCAT 239

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Dream Suburbs Pty Ltd ACN 609 015 938 as trustee for the Sok and Amy Family Trust v The Body Corporate for Persse Palace CTS 48289 & Anor (No 2) [2023] QCAT 239 PARTIES: DREAM SUBURBS PTY LTD ACN 609 015 938 AS TRUSTEE FOR THE SOK AND AMY FAMILY TRUST (applicant) v THE BODY CORPORATE FOR PERSSE PALACE CTS 48289 (first respondent) TIM GLOBAL PTY LTD ACN 168 580 505 AS TRUSTEE FOR THE SUNRISE FAMILY TRUST (second respondent) APPLICATION NO/S: OCL046-18 MATTER TYPE: Other civil dispute matters DELIVERED ON: 28 June 2023 HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Member Cranwell ORDERS: 1. The Body Corporate for Persse Palace CTS 48289 must pay the following costs of and incidental to the proceeding, including the costs of the strike out application, on the standard basis fixed in the amounts of: (a) $112,645.01 to Dream Suburbs Pty Ltd ACN 609 015 938 as trustee for the Sok and Amy Family Trust; and (b) $20,569.88 to Tim Global Pty Ltd ACN 168 580 505 as trustee for the Sunrise Family Trust. 2. The amounts set out in order 1 must be paid within 28 days of the date of these orders. 3. The application for miscellaneous matters filed by the Body Corporate for Persse Palace CTS 48289 on 23 June 2023 is dismissed. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – GENERAL -- 1 of 11 -- 2 RULE: COSTS FOLLOW EVENT – GENERAL PRINCIPLES AND EXERCISE OF DISCRETION – where body corporate in substance unsuccessful in proceedings – whether costs order should be made against body corporate – whether costs should be fixed Body Corporate and Community Management Act 1997 (Qld), s 112, s 128, s 130, s 149B Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 6, s 7, s 9, s15, s 16, s 100, s 102, s 107 Ascot v Nursing and Midwifery Board of Australia [2010] QCAT 364 Body Corporate for Persse Palace CTS 48289 v Dream Suburbs Pty Ltd ACN 609 015 938 ATF Sok and Amy Family Trust & Anor (unreported, A/Senior Member Fitzpatrick, 15 May 2023) Cowen v Queensland Building and Construction Commission [2021] QCATA 103 Cruceru v Medical Board of Australia [2016] QCAT 111 Dream Suburbs Pty Ltd ACN 609 015 938 as trustee for the Sok and Amy Family Trust v The Body Corporate for Persse Palace CTS 48289 & Anor [2023] QCAT 4 Ralacome Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412 Reynolds v Body Corporate for Mount View Apartments (No 2) [2019] QCAT 118 APPEARANCES & REPRESENTATION: This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld). REASONS FOR DECISION Introduction [1] The parties, in each seeking costs orders, have differing views as to who was successful and who was unsuccessful in Dream Suburbs Pty Ltd ACN 609 015 938 as trustee for the Sok and Amy Family Trust v The Body Corporate for Persse Palace CTS 48289 & Anor [2023] QCAT 4. It is useful for me to clarify this issue at the outset, before turning to a detailed consideration of costs. [2] I had before me five agreements purportedly governing the relationship between Dream Suburbs Pty Ltd (‘Dream Suburbs’), Tim Global Pty Ltd (‘Tim Global’) and the Body Corporate for Persse Place (‘the Body Corporate’): (a) a Management Agreement between the Body Corporate and Tim Global dated 23 February 2016; -- 2 of 11 -- 3 (b) a Letting Agreement between the Body Corporate and Tim Global dated 23 February 2016 (collectively with the agreement in sub-paragraph (a) referred to as ‘the Tim Global Agreements’); (c) a Management Agreement between the Body Corporate and Dream Suburbs dated 23 February 2016 (‘the Dream Suburbs Agreement’); (d) a Letting Agreement between the Body Corporate and Dream Suburbs dated 23 February 2016; and (e) a Deed of Consent to Assignment of Management Right and Letting Right dated 29 June 2016 (‘the Deed of Consent’). [3] The position of Dream Suburbs and Tim Global in the proceedings was that the Tim Global Agreements were valid, and that the Deed of Consent operated to assign the rights under the Tim Global Agreements from Tim Global to Dream Suburbs with the consent of the Body Corporate. The effect of this position was Dream Suburbs assumed the roles of manager and letting agent from the date of the Deed of Consent, upon the terms set out in the Tim Global Agreements. Relevantly, the agreements were for a term of 10 years with an option for a further 15 years. [4] Consistent with this position, Dream Suburbs sought the following relief in its amended application filed on 9 August 2018: (a) a declaration that the Management Agreement and the Letting Agreement with Tim Global Pty Ltd on 23 February 2023 (‘Tim Global’) were not invalid (‘the Tim Global Agreements’); and (b) specific performance of the Tim Global Agreements or alternatively damages for breach of contract [5] The damages sought by Dream Suburbs comprised unpaid management fees of $19,413.76 relating to the period 23 March 2018 to 10 September 2018, plus interest. [6] The position of the Body Corporate in the proceedings was that the Tim Global Agreements were void. The effect of this position was that the Body Corporate was not bound by the Tim Global Agreements, and therefore that Dream Suburbs did not occupy the role of manager or letting agent. [7] Consistent with this position, the Body Corporate sought the following relief in its amended counter-application filed on 5 May 2020: (a) a declaration that the Tim Global Agreements were void; (b) alternatively, a declaration that the terms of the Tim Global Agreements were limited to 10 years; and (c) an order for restitution; and (d) compensation for breach of section 112(3) of the Body Corporate and Community Management Act 1997 (Qld) (‘the BCCM Act’) and for breach of fiduciary duty. -- 3 of 11 -- 4 [8] I found that the Tim Global Agreements were void. However, I found that the Dream Suburbs Agreement was valid. The Dream Suburbs Agreement was in identical terms to the Management Agreement between the Body Corporate and Tim Global, save for the identity of the manager. In particular, the agreement was for a term of 10 years with an option for a further 15 years. [9] The effect of this finding was that Dream Suburbs continued to occupy the role of manager, and I consequently ordered the Body Corporate to pay the unpaid fees to Dream Suburbs under the Dream Suburbs Management Agreement. I otherwise dismissed the Body Corporate’s counter-application. I expressed this outcome very clearly at [5] of my decision in the substantive proceedings: The effect of this decision, therefore, is that the Body Corporate continues to be contractually obliged to pay the agreed fees to Dream Suburbs in exchange for performance of the agreed services. [10] On any objective view, Dream Suburbs and Tim Global were in substance successful in the proceedings, and the Body Corporate was in substance unsuccessful. This is not a case where it could be said that the parties enjoyed mixed success in anything other than a purely formal sense. [11] It is also useful at the outset to highlight the disparity in the costs incurred by the parties. The evidence before me is that Dream Suburbs incurred costs of $177,013.70 and Tim Global incurred costs of $32,295.17, being a total of $209,308.87. The Body Corporate incurred costs of $373,018.93. The Body Corporate, rather disingenuously, variously sought orders that: (a) Dream Suburbs and Tim Global pay 57%, or alternatively 50%, of the Body Corporate’s costs; and (b) the Body Corporate pay 43%, or alternatively 50%, of Dream Suburbs and Tim Global’s costs. [12] By virtue of the Body Corporate’s costs being nearly double those of the other parties combined, the orders sought by the Body Corporate would result in it recovering almost twice the costs of Dream Suburbs and Tim Global. [13] In my decision delivered on 9 January 2023, I directed that any party seeking costs file an application within 28 days thereof. In accordance with my direction, Dream Suburbs and Tim Global filed an application for miscellaneous matters on 6 February 2023 seeking costs. [14] The Body Corporate filed an appeal and sought a stay of my decision on 6 February 2023. The application for a stay was dismissed, and the Appeal Tribunal declined to stay the costs application: Body Corporate for Persse Palace CTS 48289 v Dream Suburbs Pty Ltd ACN 609 015 938 ATF Sok and Amy Family Trust & Anor (unreported, A/Senior Member Fitzpatrick, 15 May 2023) at [33]-[34]. [15] On 19 May 2023, I made directions for the filing of evidence and submissions in relation to the costs application filed by Dream Suburbs and Tim Global, which was the only costs application before the Tribunal. The final direction was that the Body -- 4 of 11 -- 5 Corporate’s evidence and submissions in response were due on 23 June 2023. It was not until that date that the Body Corporate filed an application for miscellaneous matters seeking its own costs. [16] While I am critical of the Body Corporate for not flagging its intention to bring a costs application earlier, I have ultimately decided it is unnecessary to provide Dream Suburbs and Tim Global with an opportunity to make submissions on the Body Corporate’s costs application. As the Body Corporate was in substance unsuccessful in the proceedings, its costs application must fail. Relevant principles [17] Section 100 of the Queensland Civil and Administrative Act 2009 (Qld) (‘the QCAT Act’) sets out the starting point in relation to costs: Other than as provided under this Act or an enabling Act, each party to a proceeding must bear the party’s own costs for the proceeding. [18] Section 102 of the QCAT Act permits the Tribunal to depart from this position if the interests of justice require it to make a costs order: (1) The tribunal may make an order requiring a party to a proceeding to pay all or a stated part of the costs of another party to the proceeding if the tribunal considers the interests of justice require it to make the order. … (3) In deciding whether to award costs under subsection (1) or (2) the tribunal may have regard to the following— (a) whether a party to a proceeding is acting in a way that unnecessarily disadvantages another party to the proceeding, including as mentioned in section 48(1)(a) to (g); (b) the nature and complexity of the dispute the subject of the proceeding; (c) the relative strengths of the claims made by each of the parties to the proceeding; (d) for a proceeding for the review of a reviewable decision— (i) whether the applicant was afforded natural justice by the decision-maker for the decision; and (ii) whether the applicant genuinely attempted to enable and help the decision-maker to make the decision on the merits; (e) the financial circumstances of the parties to the proceeding; (f) anything else the tribunal considers relevant. [19] In Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No 2) [2010] QCAT 412 at [29], Justice Wilson stated: -- 5 of 11 -- 6 Under the QCAT Act the question that will usually arise in each case in which costs are sought is whether the circumstances relevant to the discretion inherent in the phrase ‘the interests of justice’ point so compellingly to a costs award that they overcome the strong contra-indication against costs orders in s 100”. [20] More recently, in Cowen v Queensland Building and Construction Commission [2021] QCATA 103 at [28], Judicial Member McGill SC stated: I consider that to say that an order for costs will not be made unless the factors favouring an order are ‘compelling’ does not accurately state the test for making an order for costs laid down by s 102(1). In my opinion, the Member in this way set the bar too high against the applicants when deciding whether to make an order for costs in this matter. The test is whether the interests of justice ‘require’ an order for costs, but I do not accept that the circumstances favouring an order for costs must be compelling before that test will be met. [21] Nevertheless, Judicial Member McGill SC conceded that the use of the word ‘require’ in s 102 means that the default position should not be ‘too readily’ departed from: ibid at [27]. [22] In Ascot v Nursing and Midwifery Board of Australia [2010] QCAT 364 at [9], Deputy President Kingham noted: The considerations identified in s102(3) are not grounds for awarding costs. They are factors that may be taken into account in determining whether, in a particular case, the interests of justice require the tribunal to make a costs order. [23] Section 107 of QCAT Act contains the following additional provisions in relation to costs: (1) If the tribunal makes a costs order under this Act or an enabling Act, the tribunal must fix the costs if possible. (2) If it is not possible to fix the costs having regard to the nature of the proceeding, the tribunal may make an order requiring that the costs be assessed under the rules. (3) The rules may provide that costs must be assessed by reference to a scale under the rules applying to a court. [24] In Cruceru v Medical Board of Australia [2016] QCAT 111, [49], the Hon J B Thomas stated that: [T]he discretion to fix costs under s 107 is an extremely wide one and is to be exercised robustly. The fixation of a round or approximate sum will often be a preferable option to increasing costs and wasting money and effort in the production of itemised assessments. Should a costs order be made? [25] The parties in their submissions have addressed the factors set out in section 102(3) of the QCAT Act. I will proceed to do the same. Unnecessary disadvantage to another party -- 6 of 11 -- 7 [26] In my opinion, the Body Corporate unnecessarily disadvantaged Dream Suburbs by unilaterally ceasing payment of management fees from 23 March 2018. The proceedings were commenced on 28 June 2018. The Body Corporate only recommenced payment of the management fees from 10 September 2018 when ordered to do so by the Tribunal. [27] During the period of non-payment, which continued after the commencement of the proceedings, the evidence before me is that Dream Suburbs continued to perform its duties under the Dream Suburbs Agreement without the benefit of remuneration. The Body Corporate did not, during the long course of the proceedings, pay the outstanding fees or any part thereof. [28] As I noted at [90]-[91] of my decision in the substantive proceedings: I note in passing that section 130 of the [BCCM] Act provides a process for the review of the duties and remuneration contained in the Management Agreement with Dream Suburbs, such agreement having been entered into during the original owner period. The review criteria in section 134 include: (a) the appropriateness of the reviewable terms for achieving a fair and reasonable balance between the interests of the reviewing parties; … (d) whether the reviewable terms are appropriate for the scheme; (e) the term of the engagement as service contractor and the period of the term remaining. It would have been open to the Body Corporate to seek such a review, rather than ceasing payment of the management fees to Dream Suburbs. [29] I do not otherwise accept that the parties have engaged in conduct which unnecessarily disadvantaged another party. [30] For completeness, I note that the Body Corporate submitted that Dream Suburbs and Tim Global did not comply with directions relating to the filing of evidence and the production of the trial bundle, resulting in the adjournment of a number of directions hearings. Dream Suburbs and Tim Global in turn submitted that the Body Corporate’s conduct of the hearing unduly lengthened what might otherwise have been a three day hearing. While there is some merit in both submissions, it is not clear to me that either submission is sufficiently out of the ordinary in the conduct of litigation such as to rise to the level of “unnecessary disadvantage”. Nature and complexity of the proceeding [31] The hearing before me lasted for 5 days, and included the cross-examination of lay and expert witnesses by both parties. Both parties were represented by Counsel. Ipso facto, the proceeding was at the higher end of the range of complexity of matters dealt with by the Tribunal. Relative strengths of parties’ claims -- 7 of 11 -- 8 [32] I do not consider that the case as pleaded by Dream Suburbs and Tim Global was a strong one. They primarily relied on the validity of the Tim Global Agreements, which I found were void ab initio. Nevertheless, I ultimately found that the Dream Suburbs Agreement was valid. [33] That said, I do not consider that the Body Corporate’s case was strong either. While I accepted the existence of a fiduciary duty owed by Tim Global to the Body Corporate, which was not novel, I did not accept that this duty was breached. Nor did I accept that Tim Global had breached section 112 of the BCCM Act. Further, I did not accept that the term of the Dream Suburbs Agreement breached the Standard Module, in circumstances where the terms of section 128(2) of the BCCM Act made it plain that the Accommodation Module continued to apply to the agreement. Financial circumstances of the parties to the proceeding [34] The Body Corporate did not provide any evidence of its financial position. That said, I accept that any costs incurred by it would be shared by the 31 lot owners comprising the Body Corporate. [35] Dream Suburbs and Tim Global also did not provide any evidence of their financial position. In particular, while Dream Suburbs referred in its submissions to its “limited means”, no evidence was provided of these means. Any other relevant matters [36] I set out the context of the dispute at [2]-[4] of my decision in the substantive proceedings as follows: The current chairperson of the Body Corporate, Fudong Liu, purchased his lot off the plan. The contract annexed a draft budget, which showed caretaking fees of $31,000 per annum. Clause 24(a) of the contract also contained the following acknowledgment: The Buyer acknowledges that the agreements described in this clause are appropriate for the Scheme and are on terms which are fair and reasonable. Mr Liu conceded under cross-examination that “what you bought is what you got”. At some point after purchasing his lot, Mr Liu (and apparently other lot owners) formed an alternate view that the management and letting agreements were not appropriate, and were not on fair and reasonable terms. This change in position led to actions by the Body Corporate which ultimately triggered the commencement of these proceedings. [37] It seems to me that where a party pursues a position for commercial advantage, they should not be insulated from the commercial disadvantage of having to pay a costs order if they are unsuccessful. [38] Dream Suburbs stated in its submissions that its costs were the equivalent of four or five years of remuneration under the Dream Suburbs Agreement. As noted above, the -- 8 of 11 -- 9 period of the Dream Suburbs Agreement is a maximum of 25 years, which means that without a costs order Dream Suburbs suffer a loss of around 20% of the value of the agreement. In Cowen v Queensland Building and Construction Commission [2021] QCATA 103 at [67], Judicial Member McGill SC observed that “it would be unjust for the appellants’ success to be substantially eroded by having to pay their own costs incurred in achieving their success”. [39] Having regard to all the circumstances of the case, including the matters identified in s 102(3) of the QCAT Act, I am satisfied that the interests of justice both require and point compellingly to a costs award being made in favour of Dream Suburbs and Tim Global. What about the strike out application? [40] On 30 May 2019, Dream Suburbs and Tim Global filed an application seeking to strike out the Body Corporate’s counter-application. The basis of the strike out application related to the Tribunal’s jurisdiction to determine the counter-application. The Body Corporate contended that the Tribunal did have jurisdiction, and in the alternative applied to have the proceedings transferred to the Supreme Court. [41] On 25 November 2019, Member Traves dismissed the strike out application, finding that the Tribunal had jurisdiction pursuant to section 149B of the BCCM Act. She also dismissed the Body Corporate’s application to transfer the proceedings to the Supreme Court. No application for costs was made by the Body Corporate at the time, and no order for costs was made by Member Traves. [42] It is trite to observe that the Tribunal does not have an inherent jurisdiction, and derives its jurisdictions from enabling Acts: see sections 6, 7, 9, 15 and 16 of the QCAT Act. [43] Whether or not the strike out application had been filed, it would have been incumbent on the Tribunal to be satisfied that it had jurisdiction under the BCCM Act before proceeding to exercise that jurisdiction. The alternative to ventilating these issues during the strike out application would have been to ventilate them at the final hearing. In my opinion, it was desirable for the jurisdictional issues to have been resolved prior to the final hearing. This avoided the potential of the parties running a multi-day hearing before the Tribunal in circumstances where the outcome may have been to transfer the proceedings to the Supreme Court. [44] In Reynolds v Body Corporate for Mount View Apartments (No 2) [2019] QCAT 118 at [8], Member Barlow QC observed: The ultimate outcome of the proceeding may well be relevant to whether the interests of justice require or justify an order for costs of the preliminary question, even though the costs of the preliminary decision must be dealt with separately from the costs of the principal proceeding. [45] Having regard to the ultimate outcome of the proceedings and the considerations identified in section 102(3) of the QCAT Act previously discussed, as well as the necessity of determining the jurisdictional issues and the desirability of doing so prior to the final hearing, I am of the view that it is appropriate for the costs of the strike -- 9 of 11 -- 10 out application be parties’ costs in the cause. The costs of the strike out application will therefore be subsumed in my overall costs order. Were there any offers to settle? [46] Rule 86 of the Queensland Civil and Administrative Tribunal Rules 2009 (Qld) authorises an award of costs in the following circumstances: (1) This rule applies if— (a) a party to a proceeding, other than a proceeding for a minor civil dispute, makes another party to the proceeding a written offer to settle the dispute the subject of the proceeding; and (b) the other party does not accept the offer within the time the offer is open; and (c) in the opinion of the tribunal, the decision of the tribunal in the proceeding is not more favourable to the other party than the offer. (2) The tribunal may award the party who made the offer all reasonable costs incurred by that party in conducting the proceeding after the offer was made. [47] In this context, “reasonable costs” was construed by Justice Wilson in Lyons v Dreamstarter Pty Ltd [2021] QCAT 71 at [24] to mean indemnity costs. [48] The Body Corporate seeks its indemnity costs under rule 86 from the date of a “without prejudice” offer made on 17 June 2021. Relevantly, that offer would have required the payment by Dream Suburbs and Tim Global to the Body Corporate of the amount of $75,000, and the termination of the Tim Global Agreements and the Deed of Consent. As noted above, this effect of this would have been that Dream Suburbs ceased to occupy the role of manager and letting agent. The Body Corporate submits that this offer reflects its success in having the Tim Global Agreements declared void ab initio. [49] In my view, this submission is untethered to the fact that I found the Dream Suburbs Agreement to be valid, and ordered the Body Corporate to pay an amount of $19,413.76 plus interest to Dream Suburbs. Again, the effect of this is that Dream Suburbs continues to occupy the role of manager. This outcome is in substance the diametric opposite of the offer made by the Body Corporate. I reject the Body Corporate’s submission. [50] Dream Suburbs and Tim Global do not seek costs on an indemnity basis under rule 86. However, I note that Dream Suburbs’ offers involving a reduction in both the term and fees, an agreed termination or an orderly sale of the management rights were pragmatic, and any of them would have left the Body Corporate in a better position than it now finds itself. Should costs be fixed? [51] It is common ground between the parties that costs assessed on the standard basis commonly equates to around 70% of the total costs actually incurred. Neither party -- 10 of 11 -- 11 presses for an assessment of costs, and it seems to me that the parties have already incurred enough costs without incurring the additional costs of an assessment. [52] In these circumstances, I fix the standard costs at 70% of the total costs actually incurred by Dream Suburbs and Tim Global. [53] Finally, I note in passing that had I made a costs order in favour of the Body Corporate, I would have required its costs to be assessed due to the vastly higher costs claimed by it. Order [54] I order that the Body Corporate pay Dream Suburbs and Tim Global’s costs of and incidental to the proceeding, including the costs of the strike out application, on the standard basis fixed in the amounts of: (a) $112,645.01 for Dream Suburbs; and (b) $20,569.88 for Tim Global. [55] These amounts are to be paid within 28 days of the date of these orders. -- 11 of 11 --