Coming Home Pty Ltd ATF The Coming Home Trust v Body Corporate for Sunnybank Close [2014] QCAT 110

CITATION: Coming Home Pty Ltd ATF The Coming Home Trust v Body Corporate for Sunnybank Close [2014] QCAT 110 PARTIES: Coming Home Pty Ltd ATF The Coming Home Trust (Applicant) v Body Corporate for Sunnybank Close (Respondent) APPLICATION NUMBER: OCL067-13 MATTER TYPE: Other civil dispute matters HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Member Hughes DELIVERED ON: 21 March 2014 DELIVERED AT: Brisbane ORDERS MADE: Each party bears its own costs of the proceeding. CATCHWORDS: COSTS – whether unnecessary disadvantage – whether invitation to withdraw is offer to settle – where applicant delayed notifying respondent of financier’s interest – where respondent was denied reasonable opportunity to notify financier of intention to terminate prior to commencement of proceedings by applicant – where applicant commenced proceedings despite respondent agreeing to take no further action until financier indicated its position – whether applicant wholly successful in proceedings where interim Orders and Consent Orders made – where insufficient evidence of financial disadvantage Body Corporate and Community Management Act 1997 ss 123 and 126 Queensland Civil and Administrative -- 1 of 10 -- 2 Tribunal Act 2009 ss 100, 102 and 107 Chew v Queensland Building Services Authority [2011] QCAT 48 Hatchy Investments Pty Ltd v Body Corporate for Parkside Investments Toombul [2011] QCAT 413 Johjen Pty Ltd v Body Corporate for Aegean [2013] QCAT 387 Kestrel Coal Pty Ltd & Anor v Construction Forestry Mining and Energy Union & Ors [2000] QSC 150 Maran Corporation v Body Corporate for Four Corners at Willow Brook Park [2013] QCAT 219 Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No. 2) [2010] QCAT 412 Tamawood Ltd v Paans [2005] QCA 111 Westpac Banking Corporation v Commissioner of State Revenue [2004] QSC 019 APPEARANCES and REPRESENTATION (if any): This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (QCAT Act). REASONS FOR DECISION What is this Application about? [1] Coming Home Pty Ltd ATF The Coming Home Trust wants the Body Corporate for Sunnybank Close to pay its legal costs. Sunnybank wants each party to bear its own costs. What is the context for these costs? [2] On 13 September 2013, Coming Home applied to the Tribunal for interim orders to restrain Sunnybank from terminating its Caretaking Agreement and final orders relating to the validity of Sunnybank’s Remedial Action Notice and its right to terminate. [3] The Tribunal ordered Sunnybank to pay Coming Home’s costs of Coming Home’s application for interim orders.1 My current Decision does not affect those orders. [4] The Tribunal subsequently declared by consent that a resolution by Sunnybank to terminate its Caretaking Agreement with Coming Home is invalid for the reason that the Remedial Action Notice has been 1 Decision dated 30 September 2013 at [2]. -- 2 of 10 -- 3 withdrawn.2 The Tribunal then ordered by consent the parties to file submissions on costs.3 What is the Tribunal’s jurisdiction to award costs? [5] Costs in the Tribunal are not awarded as a matter of course. Each party must bear their own costs4, unless the interests of justice require the Tribunal to order a party to pay the costs of another party.5 [6] There is therefore a strong indicator against awarding costs: 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.100.6 [7] In deciding this, I may regard prescribed circumstances7. I will address each seriatim. Whether a party is acting in a way that unnecessarily disadvantages another party Invitation to withdraw [8] Coming Home contends that it provided no fewer than three opportunities to Sunnybank to settle the proceedings: by letters dated 22 August 2013, 2 October 2013 and 18 October 2013. Coming Home argues that Sunnybank unnecessarily disadvantaged Coming Home by not accepting these overtures and compelling Coming Home to incur the costs of these proceedings. [9] A party’s failure to accept an invitation to withdraw does not necessarily equate to that party unnecessarily disadvantaging the other: Whether a court will make an order for indemnity costs when a Calderbank type offer is made is a matter of discretion.8 [10] I have not been provided with any letters dated 2 October 2013 and 18 October 2013. There is therefore insufficient evidence for me to determine whether these presented genuine attempts to settle on terms that were not less favourable to Sunnybank than the ultimate outcome. [11] In their letter to the solicitors for Sunnybank dated 22 August 2013, the solicitors for Coming Home dedicate five of six pages denying any breaches and claiming that the Remedial Action Notice issued on 29 May 2 Decision By Consent dated 21 January 2014 at [1(a)]. 3 Ibid at [1(b)]. 4 Queensland Civil and Administrative Tribunal Act 2009, section 100. 5 Queensland Civil and Administrative Tribunal Act 2009, section 102. 6 Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No. 2) [2010] QCAT 412 at [29]. 7 Queensland Civil and Administrative Tribunal Act 2009, section 102(3). 8 Westpac Banking Corporation v Commissioner of State Revenue [2004] QSC 019 at [30]. -- 3 of 10 -- 4 2013 was void and of no effect due to its failure to provide proper particulars and then conclude: … In those circumstances, we invite the Body Corporate to withdraw the Notice. In the event that it is not withdrawn, our client may be forced to commence proceedings seeking declaratory relief to the effect that the remedial action notice is void. Naturally, if our client was forced to take that approach, it would needlessly incur costs which it would seek to recover from the Body Corporate. Further, the committee has placed a motion on the agenda of the 10 September 2013 annual general meeting… to terminate our client’s service contract due to the purported failure to remedy the alleged breaches. For the same reasons that the Notice should be withdrawn, so should the termination motion. Accordingly, we invite the Body Corporate to withdraw the termination motion.9 [12] An invitation to withdraw does not necessarily equate to an offer to settle ‘where the party making the offer seeks a costs advantage if the offer is not accepted outside the regime of offers of settlement in the rules of court’10 – the terms of the invitation are salient: (The applicant) places considerable weight upon the fact that… its solicitors wrote to (the respondent’s) solicitors informing them that the application was misconceived and suggesting that it withdraw the application. (The applicant’s) submission, in essence, is that the letter comprised an offer to settle which, having been refused, and (the respondent) nevertheless having lost the application, should result in (the respondent) being ordered to pay (the applicant’s) costs of the application. The letter from (the applicant’s) solicitors relied upon some matters which were raised by (the applicant) in its submissions on the hearing of the application. However, the bulk of its submissions were directed to other issues… There was no reference to those issues in the letter. Those issues were the determinative ones in my decision. Therefore, I consider the letter to have little weight in my consideration of the question before me.11 [13] The letter itself fails to particularise how the Notice is void other than repeated bare allegations that the Notice fails to particularise the alleged breaches. The Tribunal did not make any findings that the Notice was void12, for the reasons in the letter or otherwise. The submissions in the letter are therefore not vindicated by any findings of the Tribunal. The letter is more akin to a defence to a statement of claim, than an offer to settle.13 9 Letter Mahoney Lawyers to McDonald Balanda & Associates dated 22 August 2013. 10 Westpac Banking Corporation v Commissioner of State Revenue [2004] QSC 019 at [30]. 11 Hatchy Investments Pty Ltd v Body Corporate for Parkside Investments Toombul [2011] QCAT 413 at [6] and [7]. 12 Unlike Johjen Pty Ltd v Body Corporate for Aegean [2013] QCAT 387. 13 Unlike Chew v Queensland Building Services Authority [2011] QCAT 48, where the Authority made a formal Offer to Settle – see [24]. -- 4 of 10 -- 5 [14] I am therefore not satisfied the letter dated 22 August 2013 constitutes an offer to settle and that Sunnybank’s failure to accept the invitation therein unnecessarily disadvantaged Coming Home. Conduct of the parties [15] At the time of Coming Home’s proposal for Sunnybank to withdraw, there were issues surrounding the involvement of Coming Home’s financier. This is pivotal because a body corporate must give notice to the financier before it can terminate a financed contract14 and cannot terminate if the financier has appointed a receiver15. [16] On 29 July 2013, the solicitors for Coming Home enquired of Sunnybank’s body corporate manager whether it had issued the required notice to the financier. The body corporate manager stated it had not. [17] Given their enquiry of 29 July 2013, it would appear that the solicitors for Coming Home were alive to the restrictions on Sunnybank’s ability to terminate the Caretaking Agreement. [18] Despite this, it was not until 9 September 2013 that Coming Home delivered to Sunnybank its own Notice of Financier16 - a prerequisite to Sunnybank delivering its notice to the financier. This is some ten months after the finance facility was provided, nine months after the Caretaking Agreement was assigned to Sunnybank, four months after the delivery of the Remedial Action Notice, over one month after the solicitors for Coming Home enquired whether the body corporate manager had issued its notice to the financier and the day before Sunnybank’s vote to terminate. Thus, Sunnybank was blind to the financier’s interest through no fault of its own. [19] By not issuing the Notice of Financier until the eve of Sunnybank’s vote to terminate the Caretaking Agreement, Sunnybank was denied a reasonable opportunity to ascertain the financier’s position prior to the vote to terminate. The effect of Coming Home’s delay was to prevent the Caretaking Agreement from being terminated – regardless of the grounds for Sunnybank’s Remedial Action Notice. This means that Coming Home benefitted from its own failure to notify Sunnybank of the financier’s interest. [20] On 10 September 2013, Sunnybank voted to terminate the Caretaking Agreement with Coming Home. The solicitors for Coming Home then wrote to the solicitors for Sunnybank foreshadowing the commencement of proceedings and seeking an undertaking by Sunnybank to refrain from 14 Body Corporate and Community Management Act 1997, section 126(1). 15 Body Corporate and Community Management Act 1997, section 126(2). 16 As required by the Body Corporate and Community Management Act 1997, section 123(1). -- 5 of 10 -- 6 further action on the termination motion until those proceedings had been resolved.17 [21] On 11 September 2013, the solicitors for Sunnybank relevantly replied: In relation to your client’s request for an undertaking to be made, we respectfully consider that such request is outside the Committee’s powers and would be considered as a restricted issue. As the matter has been decided at general meeting, and the motion to terminate was carried, the Committee are (sic) unable to take action contrary to the Body Corporate’s decision. … (However) no further action will be taken by our client until such time as the financier has indicated its position.18 [22] On (Friday) 13 September 2013, Coming Home filed its application and its solicitors then wrote to the solicitors for Sunnybank enclosing an unsealed copy of the application and proposed Consent Orders in identical terms to the undertaking: … Please let us have your position regarding the proposed consent order by close of business Monday. If the body corporate does not accede to the consent order, we hold instructions to list the interim order application…19 [23] On 20 September 2013, the solicitors for Sunnybank wrote to the solicitors for Coming Home relevantly stating that Sunnybank cannot validly agree to the Consent Orders and that it is seeking the financier’s intentions as a matter of priority: … As advised to you on 11 September 2013, and whilst we do not admit the notice is valid, our client has provided your client’s financier with the prescribed 21 days notice pursuant to the BCCM Act to exercise its interest. Notwithstanding our client correspondence of 11 September 2013 notifying you of this, your client has proceeded with filing a QCAT application. In light of the application filed, our client has sought notification of the financier’s intentions as a matter of priority. Without knowledge of the financier’s intentions there is little our client can do in responding to your client’s application and consent orders. Not only is our client confined by the decision of the Body Corporate but also confined by your client’s financier. By agreeing to the consent orders proposed, the Committee would be acting contrary to the decision of the Body Corporate and further, blatantly disregarding any purported interests of (the financier). Until such time as the financier notifies our client of its intentions, no steps in termination can be lawful (sic) made.20 [24] Although Sunnybank did not provide the undertakings or consent to the proposed orders, it is clear from the correspondence that once Sunnybank became aware of the financier’s interest, Sunnybank agreed to take no 17 Letter Mahoney Lawyers to McDonald Balanda & Associates dated 10 September 2013. 18 Letter McDonald Balanda & Associates to Mahoney Lawyers dated 11 September 2013. 19 Letter Mahoney Lawyers to McDonald Balanda & Associates dated 13 September 2013. 20 Letter McDonald Balanda & Associates to Mahoney Lawyers dated 20 September 2013. -- 6 of 10 -- 7 further action to terminate the Caretaking Agreement. There was therefore no need for Coming Home to commence proceedings when it did. [25] Because Sunnybank was not notified of the financier’s interest until the eve of the vote to terminate, it was not unreasonable for it to proceed with the vote on the basis that the Notice may not be valid. Having been belatedly notified of the financier’s interest, Sunnybank then acted reasonably by informing Coming Home that it would take no further action until it ascertained the financier’s position. [26] I therefore consider that Coming Home commenced proceedings with unnecessary haste: four days after notifying Sunnybank of the financier’s interest, three days after the vote to terminate and two days after being informed by Sunnybank that no further action will be taken until the financier had indicated its position. [27] I also consider that Coming Home’s belated notification to Sunnybank of the financier’s interest unnecessarily disadvantaged Sunnybank by preventing Sunnybank from taking steps to notify the financier prior to the vote to terminate. [28] Coming Home knew for months that it had not notified Sunnybank of its financier’s interest and did nothing about it until the eve of the vote to terminate, yet within days of that vote commenced proceedings. [29] This is not conduct warranting a costs order in its favour. Nature and complexity of dispute [30] Sunnybank concedes that retaining legal representation may be a factor considered by the Tribunal in determining costs, but within the Tribunal context of the strong indicator against costs.21 [31] There is a distinction between the mere fact of having legal representation and reasonably obtaining representation because of the nature of the proceedings.22 [32] The Tribunal granted leave to both parties to be legally represented.23 At stake in these proceedings was a Caretaking Agreement forming part of the management rights to the complex. The rights were purchased with finance for $868,000.00. The termination of the agreement jeopardised Coming Home’s substantial investment. [33] I am therefore satisfied that it was reasonable for Coming Home to engage legal representation. 21 Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments (No. 2) [2010] QCAT 412 at [29]. 22 Tamawood Ltd v Paans [2005] QCA 111. 23 Decision dated 30 September 2013 at [6]. -- 7 of 10 -- 8 Relative strengths of the claims [34] Coming Home submits that the Tribunal can infer from the withdrawal of the Remedial Action Notice that Sunnybank formed the view that it was ‘doomed to lose the proceedings’. [35] Certainly, consent orders have ultimately been made to the effect that the Notice is withdrawn. [36] However, there is no evidence that the Tribunal’s ultimate orders were based on any of Coming Home’s submissions. The Consent Orders do not declare the Notice to be void and the Tribunal did not make any findings that the Notice was void24 or indeed, on any of the merits of the application. [37] The Tribunal did make interim orders restraining the termination of the Caretaking Agreement25 and this can be an indication of the relative strengths of the claims.26 However, the very nature of interim injunctive relief is not conclusive of the merits of the substantive application: The decision whether or not to restrain the commission of future acts will depend upon an amalgam of factors which have to be considered and weighed. These include as well as the likelihood of the conduct occurring, the damage the plaintiff will suffer if it does occur and the hardship or inconvenience the defendant will suffer if the injunction is granted. A lesser likelihood of the conduct’s occurrence will justify the grant of an injunction where the plaintiff will suffer great loss if the conduct does occur and the defendant will not be put out by the injunction.27 [38] Terminating the Caretaking Agreement would have caused Coming Home substantial loss, namely its business. Similarly, restraining termination would have had little impact on Sunnybank. These factors favoured the granting of the interim orders, regardless of the strengths of the parties’ claims. [39] Although the ultimate Consent Orders bind the parties to the same extent as Orders from a hearing, they are as they suggest - by agreement, not by merit: The direction of the Tribunal… that the application is withdrawn by consent was not… strictly a determination by the Tribunal of the substantive matters in dispute. I find that there is no operative decision of the Tribunal for the Tribunal to compare with the offer. It would have been open to the QBSA to press for a decision that the application be dismissed rather than consent to the application being withdrawn. This would have 24 Unlike Johjen Pty Ltd v Body Corporate for Aegean [2013] QCAT 387. 25 Decision dated 30 September 2013 at [1]. 26 Maran Corporation v Body Corporate for Four Corners at Willow Brook Park [2013] QCAT 219 at [26]. 27 Kestrel Coal Pty Ltd & Anor v Construction Forestry Mining and Energy Union & Ors [2000] QSC 150 at [28]. -- 8 of 10 -- 9 strengthened its claim that there was an operative decision with which to compare its offer.28 [40] Although the Consent Orders declare the resolution to terminate invalid, this is because of the withdrawal of the Remedial Action Notice – itself by consent. The Consent Orders do not declare the Notice to be void. It would have been open for Coming Home to pursue a decision that the Notice was void, by Consent or otherwise. It did not. [41] I therefore do not accept Coming Home’s submission that it was wholly successful in the proceedings. The financial circumstances of the parties [42] Coming Home submits that it is a small business who borrowed over $1M to purchase the caretaking and letting business and unit compared with the resources of the body corporate’s 56 lot owners: The interests of justice must require that a financially dominant party who instigates a dispute that is subsequently found to have no merit must pay the costs of the weaker party who has been forced to vindicate its position (and save its business in this matter) in the expensive realms of litigation.29 [43] However, apart from the loan facility, Coming Home has failed to provide any evidence of its assets, liabilities, income and expenses as compared with Sunnybank. A loan of $1M alone does not suggest financial disadvantage. [44] There is no evidence to support that Sunnybank is a “financially dominant party”. [45] There is also no finding of the issues in dispute having “no merit”. That the Notice is withdrawn does not necessarily mean that there was not a reasonable basis for it. Without evidence of why Sunnybank agreed to withdraw the Remedial Action Notice, the merits of the Notice are conjecture. Anything else the Tribunal considers relevant Weighing of the circumstances [46] It was reasonable for Coming Home to engage legal representation given the potential impact of Sunnybank’s actions on its business. [47] However, Coming Home delayed in notifying Sunnybank of its financier’s interest even after being alerted to Sunnybank’s intentions. Had Coming Home notified Sunnybank of the financier’s interest within a reasonable period, Sunnybank would have been in a position to notify the financier of its intentions much earlier. 28 Queensland Building Services Authority v Johnston [2011] QCATA 265 at [56], [57] and [58]. 29 Applicant’s Submissions On Costs at [44]. -- 9 of 10 -- 10 [48] Instead, Coming Home allowed Sunnybank to embark on a flawed termination process to which these proceedings relate. Coming Home then prematurely instigated the proceedings despite Sunnybank notifying it that it would refrain from action to terminate pending clarification of the financier’s position. [49] Coming Home has not demonstrated that the interests of justice compellingly indicate an award of costs in its favour. Orders [50] The order is that each party bears its own costs of the proceeding.30 30 Pursuant to the Queensland Civil and Administrative Tribunal Act 2009, section 100. -- 10 of 10 --