Body Corporate for Liberty v Stewart Silver King & Burns (Gold Coast) Pty Ltd [2013] QCAT 205

CITATION: Body Corporate for Liberty CTS 27241 v Stewart Silver King & Burns (Gold Coast) Pty Ltd [2013] QCAT 205 PARTIES: Body Corporate for Liberty CTS 27241 (Applicant) v Stewart Silver King & Burns (Gold Coast) Pty Ltd (Respondent) APPLICATION NUMBER: OCL051-11 MATTER TYPE: Other civil dispute matter HEARING DATE: 24 September 2012 & 4 October 2012 HEARD AT: Brisbane DECISION OF: John Bertelsen, Adjudicator DELIVERED ON: 25 March 2013 DELIVERED AT: Brisbane ORDERS MADE: The respondent pay to the applicant the sum of $458.29 CATCHWORDS: Body corporate management rights agreement – manager’s duties – manager’s relationship with body corporate committee – manner of charging for services rendered – manager’s code of conduct – legitimacy of charges made previously Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household and Body Care (Australia) Pty Ltd (2000) 201 CLR 520, cited APPEARANCES and REPRESENTATION (if any): APPLICANT: Body Corporate for Liberty CTS 27241 represented by Mr Dollman, Chairman RESPONDENT: Stewart Silver King & Burns (Gold Coast) Pty Ltd represented by Mr Coulson of counsel instructed by WP Millican, solicitor -- 1 of 12 -- 2 REASONS FOR DECISION [1] By application filed 25 March 2011 the Body Corporate for Liberty (the body corporate) sought payment of sums of money from Stewart Silver King & Burns (Gold Coast) Pty Ltd (SSKB) for breach of the body corporate management rights agreement (agreement), conversion or as a debt as follows: Claim 1 $11,454.00 for repayment of unauthorised and unapproved deductions from the body corporate bank account for unauthorised additional service charges (later amended to $22,430.58) for the period 1 September 2007 to 31 August 2008. Claim 2 $1,231.00 for services charged after the expiry of the agreement on 2 December 2009. Claim 3 $1,089.00 for an unauthorised deduction on 27 November 2009 being a building closure fee charged by Stewart Silver King & Burns (Gold Coast) Pty Ltd (SSKB). Claim 4 $17,235.00 for excess bank charges and credit card levies not levied for the 2007, 2008 and 2009 years. (i.e. the use of available credit card facilities ought to have been at the cost of the user not the body corporate). [2] The respondent SSKB as former manager responded asserting all charges were valid, all payments were made in terms of the agreement and that on a quantum meruit basis it was entitled to the fees charged. Background and evidence [3] Liberty is a complex of some 192 units. SSKB had been the body corporate manager for the body corporate of Liberty for some 10 years. Up until December 2006 arrangements were informal. In December 2006 or perhaps early 2007 an administration agreement was entered into. It was not contentious that the agreement applied to the recited period 3 December 2006 to 2 December 2009. It provided for agreed services and additional services as set out in the reference schedule to the agreement. Agreed services were a flat $150.00 per lot per annum. Additional services were identified by a multiplicity of descriptions at per hour rates or on application. Disbursements were set at a flat rate per lot and were additionally itemised in part E of the schedule to the agreement. [4] Standard condition 6.3 provided that the “body corporate must pay any account rendered by the manager for fees or disbursements under this agreement within 14 days of receipt of the account.” [5] Mr David Keppie former body corporate committee member and current treasurer and Richard Carlton former body corporate chairman and current committee member both gave evidence for the body corporate. -- 2 of 12 -- 3 [6] Judy Carter, former general manager of SSKB and Kathryn Todd community manager of SSKB both gave evidence for SSKB. [7] Affidavits of David Keppie, Richard Carlton, Willi Donohue and Sam Broudo were filed by the body corporate and relied upon. [8] Affidavits of Judy Carter (statement as well), Kathryn Todd (statement as well), Peter Cassells (statement as well), Paul Wood (statement as well) and statement of John Bullock were filed by SSKB and relied upon. Evidence of David Keppie [9] Mr Keppie was a body corporate committee member during the course of 2007 resigning in February 2008. In November 2008 he was elected treasurer taking over from John Bullock who had held that office from 28 November 2007 to 27 November 2008. [10] Claim 1: he stated that in early 2009 he became concerned at the quantum of fees charged by SSKB. In particular he questioned the quarterly owner committee liaison fee introduced some time prior and which appeared not to be within the terms of the agreement. He had the fee dropped in June 2009. [11] He indicated that the charge and payment procedure was the same as was in place with the previous treasurer (Mr Bullock) i.e. payment by deduction from the body corporate bank account. [12] Claim 2: he confirmed that he considered there was an overpayment for services in that the sum of $2,880.28 charged on 17 November 2009 was for the period 16 November 2009 through to 15 December 2009 and that therefore on a pro rata basis the body corporate was entitled to a refund of 13 days (2 December – 15 December) i.e. $1,231.00. [13] Claim 3: Mr Keppie confirmed that he considered the building closure fee could not be categorised as any item or under any particular heading in the agreement. [14] Claim 4: Mr Keppie confirmed that the user pay credit card system had been put in place in late 2009 some 2 months after it was anticipated that it would be put in place. SSKB on this occasion reimbursed the body corporate for the delay in implementing the system. [15] In cross examination with respect to claim 1 Mr Keppie agreed he had the password to access the SSKB Stratamax System i.e. SSKB’s software that records events being work done and duties performed; that he used it fortnightly and for meetings; that he was able to access the system remotely from home; that the system recorded events in real time and that his access was in real time; that in accessing such software he could look at the general ledger transaction list and a narrative of work done. Mr Keppie confirmed that he could print the general ledger transaction list -- 3 of 12 -- 4 if he needed to follow something up; that such list was given to each of the committee members from time to time. [16] Mr Keppie confirmed that during the period June 07 to June 09 there was no objection to the owner committee liaison fee. During the bulk of that time he had access to the Stratamax system and was able to converse with other committee members. [17] With respect to claim 2 it was put to Mr Keppie that support services were charged in advance and disbursements in arrears. Mr Keppie did not seem to think that was an unreasonable way of doing business. [18] With respect to claim 3, the building closure fee, it was put to Mr Keppie that additional expenses would be incurred at the agreement expiry such as notices to be lodged, closure of bank accounts, statutory notices, changes to credit accounts and notifications to lot owners. Whilst he suggested there was no provision to charge for such things, even though the work was done, that if substantiated he would have paid for it. Mr Keppie accepted that such work had to be done and was done. [19] With respect to claim 4 it was put to Mr Keppie that the so called loss suffered by the body corporate was not a real monetary loss in that credit card merchant fees were simply a cost built into the body corporate budget; that if indeed there was a failure to charge lot owners some $17,000.00 merchant fees then that $17,000.00 could then have been received from the lot holders through levies at the time or subsequently. Mr Keppie did not appear to grasp the argument. [20] In re examination it was suggested that merchant fees i.e. credit card charges for August 2006 – September 2007 year were recorded as nil; that such constituted evidence of the body corporate being assured that these fees would be paid by lot holders. That did not, however, take into account the actual cost of bank charges and merchant fees of $6,658.20 for the September 05 through August 06 years and increased bank charges of $10,377.30 for the September 06 through August 07 year. No explanation was forthcoming as to the increase in bank charges if indeed Mr Keppie was able to give one considering he was not treasurer around that time. Evidence of Richard Carlton [21] Mr Carlton joined and became chairman of the body corporate committee from August 2004 through November 2006. He is currently a committee member. [22] With respect to claim 1, Mr Carlton recalled the budget committee meeting of 30 September 2008 where the financial report to 31 August 2008 was examined and discussed before being presented to the AGM in November 2008. The financial report was presented and accepted at the AGM. -- 4 of 12 -- 5 [23] With respect to claim 4, Mr Carlton recalled the budget committee meeting of 14 September 2006 at which, he said, Ms Harvey of SSKB was instructed for a second time to initiate the user pays credit card merchant fee system. He suggested that at the time Ms Harvey was not on the ball; that she was having difficulty coping with her position. He did not recall any relevant discussion about credit card fees. He did not stand for re election at the AGM on 17 November 2006. [24] In cross examination Ms Carlton confirmed that at the meeting of 14 September 2006 it was decided that credit card charges should be levied against lot holders stating that such required ratification at the AGM to be held on 17 November 2006. He stated the “decision was to take that question to the AGM”. Mr Carlton confirmed that the agenda for the AGM posted out at the time did not raise the issue of credit card charges nor was the issue raised in general business at the AGM. He confirmed there was no ratification at that AGM but recalled that it was a “hostile meeting”. Evidence of Judy Carter [25] Ms Carter was employed by SSKB as general manager from 15 February 2007 to July 2011 and was community manager as well from 2009 to the time the agreement expired. Ms Carter was fully familiar with the Stratamax reporting system and the terms of the management agreement. [26] Prior to hearing SSKB had provided recovery records reports substantiating additional services and charges. The body corporate isolated what it considered relevant documents, that is, those reports that could not be reconciled with the general ledger transaction list and that as such were disputed. Relevant documents were (1) recovery records reports numbered A1 through A82 (some 28 odd reports), (2) consultancy records reports, 1 page, (3) time and cost reports (some 4 reports) and tax invoice summary, some 6 reports. [27] In relation to claim 1, it is not intended to traverse Ms Carter’s explanation of each and every disputed or queried entry. Suffice to say Ms Carter gave a clear and precise explanation of all entries in the reports quoting the provision of the agreement relied upon to validate the charge and further explaining where necessary what the charge was for. In particular she was able to explain the internal management reports which were effectively totals of charges made and hourly rates applicable to specific items. Ms Carter exhibited a thorough knowledge of the agreement. [28] In cross examination Ms Carter was referred to paragraph 10 of her affidavit sworn 12 April 2012 where she stated, “no charges for credit card merchant fees could be charged by SSKB of the lot owners without a formal and minuted committee resolution.” She went on to say at paragraph 20 that, “it would need at least a committee meeting resolution for it to be imposed but I don’t consider it would be necessary for a resolution in annual general meeting although possibly prudent in the case of Liberty body corporate.” -- 5 of 12 -- 6 [29] When asked Ms Carter stated, there was no record of any committee resolution about the imposition of credit card merchant fees in 2006. When the credit card merchant fees were again raised at the body corporate committee meeting of 4 June 2009 the committee was minuted as considering the bringing forward of a number of motions to be included for submission to the next general meeting “to ensure inclusion into the next general meeting notice”. One such motion was recorded as follows, “next levy payment, credit card charges to be applied to lot owners, (action immediately David, Katie to show you how)”. Ms Carter asserted that the minutes of body corporate committee meeting of 4 June 2009 exhibited to her affidavit was a draft only and that she recalled typing the resolution. [30] Ms Carter stated merchant fees were budgeted in every single budget both before and during her time at SSKB dealing with the body corporate. When asked about the credit card merchant fees being included in bank charges she stated that the committee queried these charges; that the general ledger was produced; that it clearly depicted merchant fees which were accepted by the committee. [31] Ms Carter was very clear that whilst a committee resolution for imposition of credit card merchant fees was carried, minuted and put into effect in 2009 there was no record of any such resolution in 2006. She stated that even if there was a committee resolution in 2006 which was not minuted none of the committee at the time sought to amend minutes circulated subsequent to that meeting. [32] It was suggested by Mr Dollman that in 2006 credit card merchant fees were to be put into effect and apply as well to electricity supplied by Silver Energy, an entity associated with SSKB; that such was on the instruction of SSKB; that SSKB and Silver Energy were related by common directors. The comparison is flawed. Silver Energy as an electricity reseller/retailer deals with and contracts with occupiers of lots who may or may not be lot owners. As such committee input was never required nor would the committee have any stance in relation to an individual’s choice of electricity retailer. [33] With respect to claim 2 Ms Carter agreed that $1,231.00 was refundable in terms of services charged for the period of 2 December to 15 December 2009 but stated that because disbursements were charged for an arrears sum of $772.71 should be offset against that sum. In the context of the change of body corporate manager occurring in December 2009 the refundable portion of $1,231.00 and the offset of $772.71 were overlooked. Mr Coulson conceded that a refund of $1,231.00 less $772.71 was due. [34] With respect to claim 3 Ms Carter stated that this fee referred to such things as transferring term deposits, informing lot owners of the change in body corporate manager, liaising with the bank and newly appointed bank and transferring records; that such was all necessary and payable in -- 6 of 12 -- 7 terms of the agreement. When asked Ms Carter referred to condition 2.2 of the agreement which states: The manager is engaged by the body corporate (as an independent contractor and not as an employee of the body corporate) to supply administrative services (comprising the agreed services and the additional services where applicable) to the body corporate. [35] Ms Carter also relied on condition 6.3 of the agreement which states: The body corporate must pay any account rendered by the manager for fees or disbursements under this agreement within 14 days of receipt of the account. [36] Ms Carter reiterated that the treasurer had access to the Strata Max system full time; that statements were provided on a monthly basis as TR Max Reports; that charges recorded were deducted with the full knowledge and approval of the treasurer from time to time particularly Mr Bullock. Evidence of Kathryn Todd [37] Ms Todd was the community manager for Liberty during 2008-2009. She dealt primarily with Mr Bullock the then treasurer. She stated the TR Max reports produced by SSKB recorded what work was done and when; that these reports were shown to Mr Bullock who attended regularly and he approved the payments for services. She stated that Mr Bullock was aware of everything that was being done; that there were numerous issues facing the body corporate with which he had to deal at the time; that he was trying to be transparent for the committee. [38] Ms Todd gave evidence about events that historically faced the body corporate e.g. whether SSKB’s involvement in a legal dispute with a lot owner should have been paid for by the body corporate insurer; defamation action involving lot owners; the owner liaison fee introduced and subsequently discontinued. [39] Ms Todd expressed the view that credit card merchant fees in order to have been levied by SSKB would require a resolution of the body corporate in annual general meeting. Statement of John Michael Bullock [40] A statement by Mr Bullock dated 22 February 2012 formed part of the respondent’s evidence. He was not called as a witness but it appears he is retired and living at Liberty. Crucially he states: As treasurer it was standard practice for me to approve all invoices that related to additional secretarial fees provided by SSKB. I do not have an independent recollection of each transaction but I believe that I was aware of all of the charges for additional secretarial fees and that all were appropriate, approved and in accordance with the work required by the -- 7 of 12 -- 8 committee. I would not have approved them if they had not been appropriate and in accordance with the work required by the committee. At each committee meeting all financial statements were considered at length and in detail and were approved unanimously by the committee for the relevant period. On several occasions I warned committee and owners of the additional secretarial fees being incurred due to the enormous amount of action being taken by some individuals. [41] Mr Bullock goes on to state as follows: I confirm that a treasurers report was attached to minutes mailed to each committee member for the budget meeting for the annual general meeting 2008. I also printed out and bound in a folder all other paperwork including the treasurers report and personally gave it to each of the committee members. Evidence in general [42] What became apparent during the course of the evidence, particularly the evidence of the witnesses who appeared at hearing and from statements made by Mr Dollman was that there was ongoing friction at Liberty and that such was consuming a great deal of SSKB’s time and energy in comparison to other bodies corporate that it managed. It was a turbulent period for the body corporate. There was an ongoing defamation action, an evaluation of management rights, a dispute that eventuated in a body corporate Adjudicator hearing, SSKB’s involvement in a particular insurance claim. Whilst all these issues are history they occurred at a time of elevated friction and disharmony between the body corporate and some lot owners. Body corporate general meetings were often hostile. Assertions were made by Mr Dollman that SSKB breached the manager’s code of conduct. There was nothing in the evidence to substantiate unprofessional conduct. The body corporate material suggested that KPMG as auditor fell short of its statutory obligations. The allegation was not pursued. Conclusions Claim 1 [43] The thrust of the body corporate’s argument here was that the payments made to SSKB were unauthorised and/or unapproved. It was never the issue that the work was not done. If it was the evidence of Ms Carter puts paid to any perception that the work was not done. Her evidence was articulated with exceptional clarity. She described the duties carried out and the manner in which they were carried out. One could not help being impressed with her as an experienced and able body corporate manager. [44] Mr Bullock was treasurer from November 2007 to November 2008. This claim is for the period 1 September 2007 to 31 August 2008. Therefore Mr Bullock was the treasurer, the person with whom SSKB primarily dealt with on a day to day basis. Mr Bullock provided a statement that makes it -- 8 of 12 -- 9 crystal clear that as far as he was concerned additional secretarial fees were appropriate, approved and in accordance with the work required by the committee. That accords with Mr Todd’s evidence that all deductions for payment of services were approved by the treasurer. Mr Dollman consistently and persistently laboured the point of authority to make those deductions. He contended the body corporate had 14 days pursuant to condition 6.3 of the agreement to pay accounts or invoices produced by SSKB to the body corporate. [45] Condition 6.3 of the agreement does not mean and could not sensibly mean that an individual account be rendered for each and every service or disbursement no matter how small and then for a period of up to 14 days to pass before payment was required to be made. That condition does not make it obligatory to issue an account but rather sets a time within which any account rendered is to be paid. [46] Even if the agreement was construed as requiring an account in each and every instance it is well settled that an agreement may be varied by conduct of the parties. As stated in Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household and Body Care (Australia) Pty Ltd (2000) 201 CLR 520 when a contract is varied, in effect, 2 contracts are then in existence; either the second contract brings the first to an end or leaves it standing, subject to alteration. It could well be said that the conduct of Mr Bullock particularly appropo Ms Todd brought about a workable albeit perhaps less formal mode of notification of the rendering of services and payment for such services. Mr Carlton stated SSKB were paid automatically and monthly. Ms Donohue stated that “to her knowledge SSKB did not issue invoices, they simply deducted their fees and charges from our bank account periodically”. The Tribunal is satisfied that the payment by deduction relationship that developed was a convenient mode of operation acceptable to both parties. [47] In the context of the ongoing issues that were facing the body corporate it is not surprising that charges for the period in question were more than might otherwise have been the case. Mr Bullock refers in his statement to warning the committee and owners of additional fees being incurred due to actions by some individuals. [48] Finally, there was no evidence of any complaint by the body corporate at the time the charges were made. Mr Dollman seemed to assert that some charges were made with respect to matters that were either mishandled or could have been handled better. Perhaps they could have been at the time but that does not necessarily give rise to a right of action by the body corporate to attempt to claw back or be reimbursed for such charges. There was no evidence that the conduct of SSKB at the time was negligent, or that SSKB failed to act professionally and in the best interests of the body corporate at all times. Indeed the affidavit of Ms Todd refers to the enormous volume of work performed for the body corporate on an ongoing basis in this period while Ms Carter referred to work over and above the call of duty which was never charged for or which was charged out at a reduced rate. -- 9 of 12 -- 10 [49] In this claim, as indeed in the following 3 claims, the onus of proof sits squarely with the body corporate to prove on balance that the charges were unauthorised and unapproved such as to constitute a breach of the agreement; that payments made in respect of those charges warrant reimbursement. The body corporate has not produced any evidence or any sufficient evidence as to why some years after the timeframe in question it was considered the charges were unauthorised and unapproved. [50] Claim 1 is dismissed. Claim 2 [51] SSKB did not dispute that reimbursement of $1,231.00 for the post expiry period of 13 days was refundable to the body corporate. That was in respect of services rendered. Because disbursements were charged in arrears SSKB contended that such disbursements amounted to the sum of $772.71. That effectively left $458.29 as the net sum payable to the body corporate. That sum was conceded as payable by SSKB to the body corporate. However in respect of this particular claim there has been no accounting to the body corporate whatsoever. All the body corporate was ever aware of was that a months services and disbursement fee had been deducted. It was never informed of the offset of $772.71. It was not disputed that disbursements would have been incurred to the agreement expiry date of 2 December 2009. The sum of $772.71 as the pro rata disbursement component for the period 16 November through to December 2009 was not disputed. [52] Claim 2 is allowed at $458.29. Claim 3 [53] It is clear from the evidence particularly that of Ms Carter that at about the time of the expiry of the agreement notices were required to be lodged, closure of bank accounts was required to be effected, notices to lot owners were required to be sent out. Mr Dollman argued that such services could not be categorised as additional services to be paid for by the body corporate pursuant to the agreement; that the additional work involved at this time was an eventuality that SSKB should have included in setting their fee structure in the first instance. [54] SSKB was engaged to supply administrative services. In order to carry out those administrative services properly it was necessary for SSKB to attend to transition arrangements in such a manner so as to not place the body corporate at risk. The Tribunal is satisfied particularly on the evidence of Ms Carter that such duties at the time were necessary, carried out efficiently, on time and at reasonable cost in accordance with the rates applicable to additional services recited in the agreement. [55] Claim 3 is dismissed. -- 10 of 12 -- 11 Claim 4 [56] The body corporate contended that as far back as the budget committee meeting of 14 September 2006 SSKB was instructed to initiate the user pays credit card merchant fee system. Mr Carlton in his affidavit sworn 22 March 2012 swears that the body corporate committee on 14 September 2006 instructed Ms Harvey of SSKB to initiate the user pay credit card fee system. Willi Donohue, a committee member of the body corporate in September 2006 swears in an affidavit of 26 March 2012 that he recalls Richard Carlton instructing Ms Harvey “to activate the committee’s resolution to on charge the credit card fees for both electricity charges and body corp levies which at the time were about 1.5%.” He swears that he has no idea why the matter was not minuted by SSKB. However, he is silent as to whether he ever read or queried the minutes. [57] SSKB asserted that there was absolutely no record, despite exhaustive search, of any body corporate committee resolution providing for the introduction for credit card merchant fees in 2006. Ms Carter and Ms Todd were consistent in their evidence that at the very least a body corporate committee resolution was required to initiate the user pays credit card merchant fee system. [58] Ms Carter stated it was always the case that minutes of committee meetings were circulated and if necessary amended and confirmed at the next committee meeting; that minutes of the 14 September 2006 meeting were circulated; that there was no mention of any resolution re credit card fees; that no committee member sought to correct or amend the minutes as circulated. [59] If the merchant fees resolution was not minuted as is alleged it should have been it was a glaring omission and could not and should not have been missed when the minutes were presented for confirmation at the subsequent committee meeting. An SSKB representative recorded the minutes. It was the committee member’s signatures that confirmed the minutes. For a period of over 3 years bank charges inclusive of credit card merchant fees were not challenged. [60] Additionally credit card merchant fees continued to form part of budgets after 2006 albeit in due course being included under the heading of bank charges. Mr Dollman suggested that may have been misleading but the subsequent increases in bank charges and the omission of a separate entry for merchant fees would have made it obvious to even a lay person that credit card fees had simply not disappeared. In any event Ms Carter confirmed explaining bank charges and particularly the inclusion of credit card merchant fees within the bank charges heading to the body corporate committee subsequently. [61] The evidence to support the contention that credit card merchant fees ought to have been introduced in 2006 is based on at best the memory of 2 committee members 6 years later. When compared to the evidence of Ms Carter in particular and the subsequent train of events that makes it -- 11 of 12 -- 12 clear that credit card merchant fees were always included in budgets that evidence falls far short of that required, on balance, to convince the Tribunal that any such resolution was passed in 2006. [62] Claim 4 is dismissed. -- 12 of 12 --