BRK Resorts Pty Ltd v Popescu [2017] QCATA 106

CITATION: BRK Resorts Pty Ltd v Popescu and Anor [2017] QCATA 106 PARTIES: BRK Resorts Pty Ltd (Appellant) v Octavian Popescu (First Respondent) Body Corporate for the Moroccan-View Tower CTS 16282 (Second Respondent) APPLICATION NUMBER: APL012-17 MATTER TYPE: Appeals HEARING DATE: 24 July 2017 HEARD AT: Brisbane DECISION OF: Member Barlow QC DELIVERED ON: 12 October 2017 DELIVERED AT: Brisbane ORDERS MADE: 1. The appeal be allowed. 2. The order of the adjudicator be set aside. 3. Adjudication application no 0712-2016 be dismissed. CATCHWORDS: REAL PROPERTY – STRATA AND RELATED TITLES – MANAGEMENT AND CONTROL – BODY CORPORATE: POWERS, DUTIES AND LIABILITIES – GENERALLY – whether offer by letting agent to provide valuable benefits to lot owners in letting pool if letting agreement is extended was conferral of a benefit in breach of Act – whether consequence of breach should have been invalidity of resolution to authorise extension of letting agreement Body Corporate and Community Management Act 1997 (Qld), s 113, s 115, s 276(1)(a) -- 1 of 7 -- 2 APPEARANCES: APPELLANT: BRK Resorts Pty Ltd RESPONDENTS: No appearance for the respondents REPRESENTATIVES: APPELLANT: represented by Mr C Tam, Counsel RESPONDENTS: REASONS FOR DECISION The Moroccan-View Tower is a community titles scheme to which the Standard Module rules apply. BRK Resorts Pty Ltd is the authorised letting agent for the scheme, under a letting agreement that commenced in 2011 and was due to expire on 30 April 2017. At an annual general meeting on 23 May 2016 (the AGM), a resolution was passed, the effect of which was to authorise the body corporate to agree to vary the letting agreement to provide an additional option to BRK Resorts to extend the agreement for a further 5 years from 1 May 2017. BRK Resorts had made it clear that it would exercise such an option. The motion was passed by the toss of a coin after there had been equal votes for two alternative motions (one to appoint a different letting agent). The first respondent, Mr Popescu, holds a power of attorney for the owner of a lot in the scheme. On behalf of the owner, he made an adjudication application seeking an order that the resolution was void. The adjudicator made an order to that effect, from which BRK Resorts now appeals. The body corporate was a respondent to the adjudication application and thus is a respondent to this appeal, as well as Mr Popescu. The solicitors for both respondents indicated that neither respondent opposed or consented to the appeal, as they did not wish to incur further costs relating to this dispute. However, they filed written submissions opposing any order that they pay the appellant’s costs of the appeal. The adjudicator’s reason for ordering that the resolution was void was that she considered that the body corporate had sought or accepted the conferral of a benefit for the extension of the letting agreement, in breach of s 113 of the Body Corporate and Community Management Act 1997 (Qld). (She also considered and rejected a number of other submissions made by Mr Popescu in support of the orders he sought.) As a -- 2 of 7 -- 3 consequence of that breach, and apparently pursuant to s 276(1)(a), the adjudicator declared that the resolution was void. The principal issue in this appeal is whether the adjudicator was correct in deciding that the body corporate had sought or received the conferral of a benefit for the extension of the letting agreement. A subsidiary issue may be whether, if the adjudicator was correct in concluding that there had been a breach of s 113, the appropriate order under s 276 was that the resolution was void. Before the AGM, BKR Resorts had written to all the lot owners, putting reasons why it was a more appropriate letting agent than the alternative agent that was being proposed by some lot owners. In those letters, BRK Resorts also said that, if the majority of lot owners voted in favour of its letting agreement being extended, then it would offer to provide a furniture package to the value of approximately $5,000 to the owners of 2 bedroom units in its letting pool and a furniture package to the value of approximately $3,500 to the owners of 1 bedroom units in its letting pool. The adjudicator made the following relevant findings concerning those offers:1 a) (at [36], referring to the letters to lot owners offering the furniture packages), “The Body Corporate clearly sought this financial arrangement, as an inducement to invite lot owners to vote in favour of Alternative B and extend their letting agreement”; b) (at [38]), “Sections 113-115 of the Act provides the term, ‘a benefit’, which clearly from the evidence, the furniture package would be a “benefit” to some, although not all, lot owners at the scheme, is still the conferral of a benefit to the body corporate relating to a letting agent authorisation. That is a benefit offered to lot owners only upon BRK having its authorisation extended”; c) (at [39]), “Clearly the Body Corporate will certainly benefit from the passing of Motion 12 Alternative B in that the extension to the Letting Agreement with BRK will directly confer a benefit to some lot owners of either a $3500 or $5000 furniture package”; d) (at [41]), “The correspondence … includes an inducement such that if the lot owner votes to extend the Letting Agreement with them, those lot owners with their property in the letting pool will receive the conferral of a benefit, being a furniture package”; e) (at [43]), “the furniture package … was an improper inducement as many lot owners would have been influenced in such a way that left them unable to freely exercise either vote”; 1 Spelling and grammatical errors are in the original decision. -- 3 of 7 -- 4 f) (at [44]), “it is clear those letters … did offer an inducement for lot owners to vote in favour of Alternative B and for the letting agreement with BRK to be extended”; g) (at [47]), “I am satisfied that BRK has breached the provisions of section 113 and 115 of the Act and has offered consideration, by the conferring of a benefit to the body corporate, upon the extension of their letting agreement2”; h) (at [51), “It is clear that while BRK are at liberty to persuade or influence lot owners vote in favour of its position it advocates by whatever means necessary within the legislative framework governing body corporate matters, but in this case in breach of sections 113 and 115 of the Act. A body corporate cannot seek or accept the payment of an amount, or the conferral of a benefit for the extension of a letting agreement. I find that the offer of a “furniture package” is, the conferral of a benefit”; i) (at [52]), “Having found that BRK offered an inducement to those lot owners who if voted yes would receive a substantial benefit, in a lucrative furniture package for their lot, that for these reasons, Alternative B for Motion 12 was at all times void.” Section 113 of the Act relevantly provides that a body corporate must not seek or accept the payment of an amount, or the conferral of a benefit, for the authorisation of a person as a letting agent for the scheme, including a renewal of an authorisation. Counsel for BRK Resorts made comprehensive written and oral submissions to the tribunal. Most relevantly, he made three points: a) there was no evidence, nor was any submission made to the adjudicator, that the body corporate sought the offers of furniture packages from BRK Resorts; therefore, the finding at [36] of the reasons was baseless; b) no benefit was conferred (nor offered to be conferred) on the body corporate in any event, as any benefit as a result of an extension to the letting agreement would be conferred on the owners of lots in the letting pool, and not on the body corporate; and c) the conferral of a benefit on persons other than the body corporate is not in breach of s113. In a number of paragraphs of the adjudicator’s reasons, she expresses the view that the conferral of a benefit on lot owners within the scheme amounts to the conferral of a benefit on the body corporate. In that respect, she was clearly wrong. The body corporate is an entirely 2 The Act, s 113(1)(c)(ii). -- 4 of 7 -- 5 separate entity from each of the lots owners. The receipt of a benefit to a lot owner is not, of itself, directly or indirectly, a benefit to the body corporate. However, it could be that the adjudicator was intending to reason that: a) the body corporate sought a benefit for its lot owners; b) section 113 prohibits a body corporate seeking a benefit, for itself or any other person; c) having sought a benefit for its lot owners on the condition that the letting agreement be extended, the body corporate breached the section. The first answer to this reasoning (if, indeed, it is what the adjudicator meant, which is not at all clear) is that there was no evidence at all that the inducement was offered to lot owners by BRK Resorts at the request of the body corporate, nor that the body corporate took any steps to seek the conferral of the benefits on the lot owners. In the absence of any evidence, there was no basis for the finding and therefore the adjudicator erred in law in making that finding. Secondly, there was no submission to that effect before the adjudicator, so BRK Resorts was not accorded natural justice, in that it had no opportunity to make submissions to the contrary. The finding seems to be an issue of the adjudicator’s making. Thirdly, it is not clear to me that section 113 prohibits a body corporate seeking the conferral of a benefit on a third party in exchange for the extension of a letting agreement. The words of the section do appear, on their face, to prevent the body corporate seeking the conferral of a benefit, regardless of on whom the benefit is conferred, while also prohibiting it accepting a benefit. I can only envisage a body corporate “accepting” a benefit if the benefit is conferred on it, but if could “seek” a benefit to another person. However, counsel for BRK Resorts took me to the history leading to the enactment of s 113. In particular, the reasons for its introduction (with s 115) was succinctly described by the highly respected expert on body corporate matters, Mr Gary Bugden OAM, in his commentary on the section published by CCH: These provisions were introduced by the BCCM At as a consequence of the increasing incidence of bodies corporate refusing to grant or renew management or letting agreements, or refusing to consent to their assignment, unless they were paid a consideration. Sometimes the consideration was a cash amount (eg $50,000) while at other times the consideration took an ‘in kind’ form (eg an obligation to resurface the tennis court or refurbish the foyer). In some cases the practice amounted to -- 5 of 7 -- 6 holding the building manager to ransom when their agreements needed to be renewed. The government introducing the prohibitions took the view that it was not in the public interest to allow bodies corporate to continue to demand such payments or benefits.3 If this summary is correct, as one would expect, then the section appears to have been intended to be directed at prohibiting a body corporate from seeking or accepting payments to, or the conferral of benefits on, the body corporate itself. On this construction, it was not intended to prohibit a body corporate seeking payment to, or the conferral of a benefit on, a third person. This construction is arguably supported by s 115, which provides that an authorisation of a letting agent must not include, whether directly or indirectly, a requirement for the payment of an amount to, or the conferral of a benefit on, the body corporate. Thus s 115 appears to reflect the same policy as s 113. However, while the practices referred to by Mr Bugden may be been the progenitor of the section, as the section is worded it seems to me that it can be read as extending to a body corporate seeking payments to, or the conferral of benefits on, a third person, as well as seeking or accepting payments of benefits to itself. This possible construction of the section was not put to the adjudicator, nor was it put to me, nor by me to counsel for BRK Resorts. However, it is unnecessary for me to determine whether it is correct because, in this case, as I have said, there was no evidence that the body corporate sought the conferral of the benefits of furniture packages on lot owners. Therefore there was no basis for a finding to that effect. In my view, therefore, the adjudicator erred in finding that the body corporate breached s 113. In any event, even if there had been a contravention of s113, it does not follow that the resolution should necessarily be declared invalid. One might consider that, for that to be a just and equitable order to resolve the dispute, the applicant should have proved that the offers of furniture packages induced at least one lot owner to vote in favour of the resolution. There was no evidence to that effect: rather, the adjudicator was invited to draw an inference to that effect. I therefore conclude that the adjudicator’s decision was wrong and should be set aside. BRK Resorts submitted that, if I reached such a conclusion, I should order that the respondents pay its costs of the appeal. However, no clear reasons were given why this case should not follow the usual course 3 G F Bugden, Queensland Community Schemes Law and Practice, CCH looseleaf, at [38-250]. -- 6 of 7 -- 7 provided for by s 100 of the tribunal’s governing Act, in which each party bears its own costs. I do not see any reason to depart from that course. -- 7 of 7 --