Breeze MR Pty Ltd v Body Corporate for the Bay Village [2021] QCAT 449

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL CITATION: Breeze MR Pty Ltd v Body Corporate for the Bay Village CTS 33127 [2021] QCAT 449 PARTIES: BREEZE MR PTY LTD (applicant) v BODY CORPORATE FOR THE BAY VILLAGE CTS 33127 (respondent) APPLICATION NO/S: OCL028-21 MATTER TYPE: Other civil dispute matters DELIVERED ON: 11 June 2021 HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Member Howe ORDERS: Upon the usual undertaking as to damages having been given by the applicant, the respondent, by itself, its servants and agents: (i) is restrained pending determination of the within proceedings at trial or until further order from terminating or attempting to terminate or assert that the management agreement dated 17 October 2005 between the applicant and respondent has been terminated in reliance on the resolution of the respondent’s body corporate committee made 20 April 2021; (ii) is restrained from giving any notice pursuant to section 126 of the Body Corporate and Community Management Act 1997 in reliance on the said resolution; (iii) pending determination of these proceedings the respondent permit the applicant to perform its caretaking services under the management agreement without hindrance; and -- 1 of 10 -- 2 (iv) pending determination of these proceedings the respondent pay any money due the applicant pursuant to the terms of the management agreement without set off or deduction. The costs of and incidental to the application for interim orders is reserved. CATCHWORDS: REAL PROPERTY – STRATA AND RELATED TITLES – MANAGEMENT AND CONTROL – BODY CORPORATE: POWERS, DUTIES AND LIABILITIES – GENERALLY – where the applicant was the caretaker of a scheme – where the body corporate committee resolved to terminate the caretaker’s services – where the applicant commenced proceedings to resolve a complex dispute in the Tribunal – where the applicant applied for interim relief – where the Tribunal issued an interim injunction pending determination of an interlocutory injunction – where the parties filed evidence and submissions – where there was a serious question to be determined – where the applicant would potentially suffer irreparable harm – where damages were an inadequate remedy – where the balance of convenience favoured grant of an interlocutory injunction – where the applicant offered the usual undertaking as to damages Body Corporate and Community Management Act 1997 (Qld) s 100, s 122, s 123(1), s 126 Statutory Instruments Act 1992 (Qld) s 7(3), s 21 Body Corporate and Community Management (Commercial Module) Regulation 2020 (Qld) s 17, s 100, s 102 ABC v Lenah Game Meats Pty Ltd [2001] HCA 63; 208 CLR 199 Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57 Day & Anor v Woolworths Group Limited & Ors [2021] QCA 42 The Sands Gold Coast Pty Ltd v The Body Corporate for the Sands [2018] QCATA 160 APPEARANCES & REPRESENTATION: Applicant: Mahoneys, Solicitors Respondent: M White, instructed by Butler McDermott Lawyers This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) -- 2 of 10 -- 3 REASONS FOR DECISION [1] The applicant (“Breeze”) is the caretaking services contractor for the respondent (“Bay Village”) after assignment of the management agreement from the previous caretaking service contractor on 20 August 2018. [2] On 20 April 2021 the applicant was served with a notice to terminate the management agreement. [3] The termination notice claimed Breeze had misappropriated at least $664,000 from Bay Village associated with car parking charges at the complex. Bay Village advised the management agreement was terminated with immediate effect from service of the letter. [4] On 23 April 2021 Breeze filed an application to resolve a complex dispute – Body Corporate and Community Management Act 1997 in the Tribunal. [5] On 14 May 2021 Breeze applied for interim orders pending determination of the complex dispute. [6] Upon Breeze giving the usual undertaking as to damages, on 19 May 2021 an interim injunction was granted restraining Bay Village from terminating or attempting to terminate the management agreement and requiring Bay Village to pay the monthly sum due under the management agreement pending determination of the application for interim orders. [7] The parties have made submissions and the application for interlocutory orders (until finalisation of the complex dispute) now falls for decision. [8] The Tribunal has power to grant an injunction, including an interim injunction, in a proceeding if it is just and convenient to do so.1 The reason for imposing interim restraint pending hearing lies in preventing the destruction of that which the applicant may establish is due it only at final hearing.2 [9] The organising principles for grant of an interlocutory injunction are now well established.3 As explained in Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57, they are that: … in all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that there is a serious question to be tried as to the plaintiff's entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate remedy, and has shown that the balance of convenience favours the granting of an injunction. These are the organising principles, to be applied having regard to the nature and circumstances of the case, under which issues of justice and convenience are addressed. We agree with the explanation of these organising principles in the reasons of Gummow and Hayne JJ, and their reiteration that the doctrine of the Court established in Beecham Group Ltd v Bristol Laboratories Pty Ltd4 should be followed.5 1 Section 59(1) of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (‘the QCAT Act’). 2 ABC v Lenah Game Meats Pty Ltd [2001] HCA 63 [12] per Gleeson CJ; 208 CLR 199. 3 Day & Anor v Woolworths Group Limited & Ors [2021] QCA 42 [11] per Henry J. 4 (1968) 118 CLR 618. 5 Ibid [19] per Gleeson CJ and Crennan J. -- 3 of 10 -- 4 … By using the phrase “prima facie case”, their Honours did not mean that the plaintiff must show that it is more probable than not that at trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.6 A serious question to be tried [10] Breeze maintains Bay Village has acted unlawfully in purporting to terminate the management agreement, the termination is of no effect and the contract remains on foot. [11] Breeze says Bay Village failed to satisfy three pre-termination requirements set by the Body Corporate and Community Management Act 1997 (Qld) (‘BCCMA’), any of which renders the purported termination invalid: (a) no resolution to terminate was made by the body corporate; (b) no notice of intention to terminate was given to Breeze’s financier; and (c) no Remedial Action Notice (‘RAN’) was given as precursor to termination. No resolution by the body corporate [12] Breeze says by s 122 of the BCCMA: Regulation module (1) The regulation module applying to a community titles scheme may prescribe all or any of the following things about the engagement of a person as a body corporate manager or service contractor, or the authorisation of a person as a letting agent, for the scheme— … (d) particular circumstances under which the engagement or authorisation may or may not be terminated or transferred, despite anything in the engagement or authorisation or in another agreement or arrangement; [13] Here the regulation module is the Commercial Module.7 The Commercial Module provides: 100 Termination under the Act, by agreement etc. (1) The body corporate may terminate a person’s engagement as a body corporate manager or service contractor, or authorisation as a letting agent— (a) under the Act; or (b) by agreement; or (c) under the engagement or authorisation. 6 Ibid [65] per Gummow and Hayne JJ. 7 Body Corporate and Community Management (Commercial Module) Regulation 2020; Breeze initially identified the accommodation module as applicable but in consequence of correction by Bay Village now apparently agree that the commercial module applies. -- 4 of 10 -- 5 (2) The body corporate may act under subsection (1) only if the termination is approved by ordinary resolution of the body corporate. [14] By s 100 of the BCCMA: 100 Power of committee to act for body corporate (1) A decision of the committee is a decision of the body corporate. (2) Subsection (1) does not apply to a decision that, under the regulation module, is a decision on a restricted issue for the committee. [15] By s 17 of the Commercial Module: 17 Restricted issues for committee (1) A decision is a decision on a restricted issue for the committee if it is a decision— … (c) that may only be made by resolution without dissent, special resolution, majority resolution or ordinary resolution of the body corporate; [16] Bay Village responds that its body corporate committee met and agreed to terminate the management agreement. They contend that the decision to terminate is not a restricted issue and the decision of the committee was therefore a decision of the body corporate. [17] The legislation is clear. By s 100 of the Commercial Module a body corporate may terminate a person’s engagement as a service contractor only if the termination is approved by ordinary resolution of the body corporate. [18] By s 17 of that module, a decision that can only be made by ordinary resolution of the body corporate is a restricted issue for the committee. [19] Section 100 of the BCCMA provides that the power of the committee to act for the body corporate does not apply to a restricted issue decision. [20] An ordinary resolution passed by the body corporate is necessary to terminate the management agreement of a caretaking services contractor. A resolution by the body corporate committee is no valid alternative. [21] There is no suggestion in any of the material filed by the parties that the requisite ordinary resolution was passed before the letter of termination. Without the ordinary resolution passed by the body corporate the committee will find itself hard pressed to claim its resolution to terminate had any effect. No notice to financier [22] Additionally, Breeze says there was no notice of proposed termination given its financier and that such notice was a necessary step to take before termination. [23] Chapter 3, Division 4 of the BCCMA concerns the protection of any financier of a relevant contract. By s 123(1) of Division 4, a person is a financier for a contract if that person and the contractor gives written notice, signed by both, to the body corporate. [24] By s 126 of the BCCMA, a body corporate may terminate a financed contract if: -- 5 of 10 -- 6 (a) the body corporate has given the financier for the contract written notice, addressed to the financier at the financier’s address for service, that the body corporate has the right to terminate the contract; and (b) when the notice was given, circumstances existed under which the body corporate had the right to terminate the contract; and (c) at least 21 days have passed since the notice was given. [25] Breeze maintains theirs was a financed contract and no notice was given to the financier before Bay Village purported to terminate the contract. That failure also renders the purported termination by the committee invalid. [26] Bay Village says it was never advised that the contract was a financed contract. [27] Breeze has produced a copy of a letter from Westpac Bank dated 31 May 2018 addressed to Bay Village Body Corporate whereby the Bank gave notice that the management agreement between Breeze and Bay Village was a financed contract under the BCCMA. The letter is signed by both Mr Manderson, a director of Breeze, and by a representative of the Bank. In addition there is noted on the letter signed acknowledgement of receipt of the notice of financed contract by a representative of Bay Village. [28] Bay Village’s dispute that it was given notice was only on the basis it was unable to locate the notice in its records. On balance, Breeze has established to my satisfaction that the notice was given. The efficacy of the notice is not affected by Bay Village not being able to find it in their records. [29] The management agreement was a financed contract and the failure to comply with the notice to financier requirements set by the BCCMA would also appear to render the termination ineffective. No RAN [30] The third ground of claimed invalidity is the absence of any RAN preceding the termination. [31] By s 102 of the Commercial Module, a body corporate may terminate a person’s engagement as a service contractor if, amongst other things, the person engages in misconduct or contravenes the code of conduct for a caretaking service contractor. [32] Bay Village submits the RAN mechanism does not abrogate Bay Village’s express contractual right to terminate, particularly where gross misconduct is claimed against the contractor and where the misconduct cannot be remedied through the RAN mechanism. The gravity of the misconduct, says Bay Village, warrants immediate termination. [33] Section 102 of the Commercial Module deals with termination of a management contract because of misconduct in the service contractor carrying out its functions or duties under the engagement. Section 102 allows body corporate to terminate the caretaking services contract, but that entitlement is subject to the body corporate giving the person a RAN, the person failing to comply with the RAN within the stated period and the termination being approved by ordinary resolution of the body corporate decided by secret ballot. [34] The misconduct referred to in s 102 is not defined and left broad brush. There is no separate category of gross misconduct mentioned in the provision. -- 6 of 10 -- 7 The Appeal Tribunal in The Sands Gold Coast Pty Ltd v The Body Corporate for the Sands [2018] QCATA 160 dealt with a similar provision under the Standard Module and said this: … notwithstanding the terms of an engagement or authorisation, where a purported ground of termination falls within the scope of s 131 (or s 130) of the Standard Module the requirements of that regulation must be followed in order to validly terminate the engagement or authorisation.8 [35] The parties cannot contract out of the provisions of the BCCMA,9 and that prohibition extends to contracting out of the module. The Commercial Module is a statutory instrument made by regulation10 and, as such, is only valid to the extent it does not exceed or conflict with the authorising law.11 [36] Accordingly despite any categorisation of the alleged misconduct by Breeze as gross, the misconduct apparently falls within the scope of the provisions of s 102. Termination under s 102 required notice by way of RAN be given and only on failure to comply with the RAN could the management agreement be terminated. To be effective, termination under s 102 required ordinary resolution of the body corporate and secret ballot. [37] On this basis as well, the termination by resolution of the committee without compliance with the requirements of s 102 appears to be invalid regardless that the misconduct is described as gross misconduct. [38] Has Breeze established that there is a serious question to be tried in the sense that there is sufficient likelihood of success to justify the preservation of the status quo pending trial?12 [39] In my opinion it has done that. Damages will not be an adequate remedy [40] Is Breeze likely to suffer irreparable injury for which damages will not be an adequate remedy unless an injunction is granted? [41] Breeze claims there is very real potential for Westpac to appoint a receiver in the absence of an injunction. [42] Breeze says it owes $788,287 to Westpac Bank on the loan taken to fund purchase of the management agreement. It pays approximately $5,000 each month in interest and other charges. [43] Breeze also holds the management rights over another scheme (‘Maison Noosa’). That purchase was also financed by a loan from Westpac in an amount of $3,499,587. The monthly interest and other charges payable on that loan is $10,000. [44] Breeze pays weekly wages of $7,630. [45] As at 14 May 2021, Breeze had approximately $12,500 in its bank account. 8 The Sands Gold Coast Pty Ltd v The Body Corporate for the Sands [2018] QCATA 160, [48]. 9 s 318 BCCMA. 10 s 7(3) Statutory Instruments Act 1992 (Qld). 11 Ibid s 21. 12 Australian Broadcasting Corporation v O’Neill op.cit per Gummow & Hayne JJ. -- 7 of 10 -- 8 [46] It owns Lot 31 in Bay Village and Lots 3 and 7 at Maison Noosa. [47] Westpac wrote to Breeze on 28 May 2021 to advise, in the circumstances of the purported termination of the management agreement by Bay Village, that if the injunctive relief sought is not obtained Westpac reserved its right to appoint a receiver under its security. [48] Mr Manderson, Breeze’s sole director and secretary, says if a receiver is appointed Breeze will be in default of its loan to Westpac. The entire loan will become due and payable on demand. Breeze does not have sufficient cash to pay out the loan and Westpac will be entitled to exercise its power of sale. [49] Breeze further submits that if a receiver is appointed it will put Breeze in default generally with respect to its financing arrangements with Westpac and Westpac will be able to demand immediate payment of around $3,400,000. Breeze will not be able to comply with such demand. Westpac will be entitled to exercise its mortgagee powers of sale over Breeze’s three units in the two schemes.13 [50] Bay Village does not challenge the assertion that the appointment of a receiver will potentially involve loss of two management rights businesses and the possible sale of three real properties. [51] In the circumstances, if an injunction does not issue but the applicant succeeds at trial, damages would appear to offer inadequate remedy. [52] Further, it is questionable whether Bay Village is financially capable of paying appropriate damages should Breeze succeed and the suggested domino effect of receivership and forced unit sales occurs in the absence of injunction. According to the treasurer for Bay Village, who filed a statement of evidence, if not for the increase in administration fees in or about August 2020, he believes Bay Village would have been bankrupt. Balance of convenience [53] The gross misconduct alleged by Bay Village against Breeze concerns car parking fees. Bay Village operates a two level car park and claims Mr Manderson, Breeze’s director, has sold access to the car park to third parties for Breeze’s own personal gain. [54] The treasurer for Bay Village estimates Bay Village has suffered a financial loss of at least $664,000 over the course of the management agreement with Breeze. Much of the loss claimed is associated with lack of explanation in respect of unidentified exit tickets. [55] Mr Manderson for Breeze denies any wrong doing. He says the boom gates often fail and to allow cars out from the carpark he has had to issue extra exit tickets to trigger the raising of the boom gates. [56] Additionally the ticket machine was located in his office he says and a number of people besides him had access to it. [57] Mr Manderson for Breeze says Breeze will continue to provide the services required under the Management Agreement if he is allowed to do that. 13 Applicant’s Outline of Argument, [25]. -- 8 of 10 -- 9 [58] If an interlocutory injunction is not granted Breeze may suffer irreparable damage. Damages may not prove an adequate remedy even if it succeeds in the action. If an injunction is granted there will be inconvenience caused Bay Village, but not irreparable harm. [59] The balance of convenience lies in continuing the status quo, with Breeze continuing to perform work as caretaking service contractor and Bay Village allowing that to happen. Determination [60] I find that Breeze has established that there is a serious question to be tried. On the material presented, there is a probability that at the trial of the action Breeze will be entitled to the relief claimed. [61] The suggested misappropriation of moneys is based on broad brush claims and denied by Breeze. That needs be properly tested at a trial of the action. It is not appropriate to make any determination about the accusations or denials here. [62] If an interlocutory injunction does not issue to restrain Bay Village from resiling from the caretaking agreement yet Breeze succeeds in the action, damages will offer Breeze an inadequate remedy. There are potentially devastating flow on effects with respect to Breeze’s financial arrangements with Westpac and Breeze’s management agreement of the unrelated scheme, Maison Noosa. [63] The balance of convenience favours the current management arrangements staying in place pending the determination of the action. Bay Village may be inconvenienced and claim injurious lack of trust in the caretaker but it will not suffer irreparable harm. The potential injury to Breeze far outweighs the possible injury and inconvenience to Bay Village. [64] Breeze has offered the usual undertaking as to damages and from the financial material filed that undertaking has value. Terms of the order [65] Bay Village submits the terms of the interim order made on 19 May 2021 are too wide. Any interlocutory injunction should extend to no more than restraining Bay Village from relying on its termination of the management agreement on the basis of the resolution of the body corporate committee of 20 April 2021. I think that is right. An interlocutory injunction should do no more than hold the status quo pending final judgment of the disputed issue the subject of claim. Here that is the validity of the purported termination by the committee resolution of 20 April 2020. [66] It is clear there will be disruption to the parties, but Breeze must be allowed to supply the requisite caretaking services under the management agreement and Bay Village allow Breeze to do that. [67] The appropriate order is that until the trial of the action and subject to further order, Bay Village should be restrained from terminating or attempting to terminate or assert that the management agreement has been terminated based on the resolution of the committee made 20 April 2021. [68] Bay Village should also be restrained from giving any notice pursuant to section 126 of the BCCMA in reliance on the said resolution. -- 9 of 10 -- 10 [69] Bay Village must allow Breeze to perform its caretaking services under the management agreement without hindrance and pay money due Breeze pursuant to the management agreement as required without set off or deduction otherwise than pursuant to the terms of the management agreement. -- 10 of 10 --