Basil Bay Residents Association Inc v EDD Family Superannuation Pty Ltd [2012] QCAT 660

CITATION: Basil Bay Residents Association Inc v EDD Family Superannuation Pty Ltd [2012] QCAT 660 PARTIES: Basil Bay Residents Association Inc (Applicant) v EDD Family Superannuation Pty Ltd (Respondent) APPLICATION NUMBER: MCDO51798-11 MATTER TYPE: Other minor civil disputes matters HEARING DATE: 4 April 2012 HEARD AT: Brisbane DECISION OF: Jeremy Gordon, Adjudicator DELIVERED ON: 17 October 2012 DELIVERED AT: Brisbane ORDERS MADE: EDD Family Superannuation Pty Ltd is ordered to pay to Basil Bay Residents Association Inc the sum of $2,070.76 including interest and allowable fees. CATCHWORDS: RESIDENTS ASSOCIATION – CLAIM FOR MEMBERSHIP FEES – claim as third party – whether can bring contractual claim – whether section 55 Property Law Act 1974 applies – various other defences Property Law Act 1974, ss 53(2), 55 Land Title Act 1994, s 62(1) Australian Consumer Law, s 47 Trade Practices Act 1974 (Cth), s 47 Universal Declaration of Human Rights Associations Incorporation Act 1981, ss 26, 71, 72 Uniform Civil Procedure Rules 1999 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 165 CLR 107 P & A Swift Investments (a firm) v Combined English Stores Group plc [1989] AC 632 -- 1 of 19 -- 2 Measures v McFadyen (1910) 11 CLR 723 Queensland Premier Mines Pty Ltd v French [2007] HCA 53 Plante & Anor v James [2011] QCA 109 considered Jodaway Pty Ltd v Langton [2003] QSC 079 followed APPEARANCES and REPRESENTATION (if any): APPLICANT: Bruce Copland (President), Rick White (Vice- President) and Sandra White RESPONDENT: Edward Dawson-Damar (Director) REASONS FOR DECISION [1] This is a test case brought by a residents association on Keswick Island for non-payment of membership fees. Keswick Island is described as the “last island for residential development in the Whitsundays”. It lies off Mackay in Queensland. [2] The sum claimed is $1,650 and interest and costs. This is for fees and levies of $750 for the membership period 1 July 2009 to 30 June 2010, and $900 for the membership period 1 July 2010 to 30 June 2011. The claim is brought by Basil Bay Residents Association Inc against a sub-lessee of one of the lots, EDD Family Superannuation Pty Ltd. [3] There is no direct contractual relationship between the Association and EDD. So the Association has to rely on being a third party entitled to the benefit of promises made by EDD in its sub-lease and when it took the sub- lease by transfer. Hence, deciding this case involves a consideration of the law of privity of contract and estate and third party rights. A number of other issues have also been raised by EDD in defence to the claim. The land holding [4] The nature of EDD’s ownership and the obligations arising from it are important for the privity issue. [5] The development land on the Island is held on a lease from the Crown on a 100 year term commencing on 16 February 1996. The original lease was granted to Keswick Island Pty Ltd. On 26 March 2008 Keswick Island Pty Ltd transferred its interest under the Crown lease to Keswick Development Pty Ltd. In these reasons I shall call the entity which held the lease (Keswick Island Pty Ltd then Keswick Development Pty Ltd) the “head- lessee”. [6] The development land was divided into about 130 lots and these were sold by the head-lessee on long sub-leases to various purchasers before any -- 2 of 19 -- 3 building on the lot had taken place. The idea was that the sub-lessees would carry out the building work. Currently most of the lots remain empty – only about 23 or so have been built on. [7] EDD became a sub-lessee when on 9 October 2008 it purchased Lots 1 to 5 on CP888692 from the then owners of the sub-lease, Stephen Back and Jennifer Kay Back. This purchased was completed by a transfer of the sub-lease to EDD. [8] Stephen Back and Jennifer Kay Back had become leasehold owners of the lot in a similar way through purchase from others. They were successors in title to Rosalind Hines who was the original sub-lessee of the lots in question. Her sub-lease took effect on 29 September 2000 having been executed on 26 September 2000. It was for a term of over 95 years and the term of the sub-lease ending on 14 February 2096, that is just one day before the expiry of the term of the head lease. Application to transfer to the Supreme Court [9] EDD also submits that the matter should not be heard by QCAT and should be heard by the Supreme Court instead. The reason is connected with the allegation that the levies and fees included a substantial amount destined to repay or be used for the legal costs of officers of the Association in existing Supreme Court proceedings. Therefore it is said that the Supreme Court should decide on the issue whether the levies and fees are recoverable from EDD as part of the issues in the existing Supreme Court proceedings. [10] This is effectively an application to transfer the claim to the Supreme Court. A judicial member of QCAT can order such a transfer under section 52 of the Queensland Civil and Administrative Tribunal Act 2009. This may be done [under s 52(1)] if it was considered that the proceeding or part of it would be more appropriately dealt with by the Supreme Court. It might also happen [under s 52(2)] if QCAT did not have jurisdiction to hear all matters in the proceeding. Since the consideration of whether or not to initiate a transfer (by referring this matter to a judicial member) is informed by questions of jurisdiction and also findings of fact, I intend to re-visit this question at the end of my decision. Two separate promises First promise – in the sub-lease executed on 26 September 2000 [11] The sub-lease granted to Rosalind Hines was subject to the covenants and conditions contained in standard terms document no. 703555478. Document 703555478 had previously been registered with Queensland Land Registry as a standard terms document under section 318 of the Land Act 1994. It contained sublease covenants, and so was binding on Rosalind Hines by reason of the grant of the sub-lease to her. -- 3 of 19 -- 4 [12] Clause 6 was in these terms: 6 Membership of Association 6.1 You must become and remain a member of the Association during the Term. 6.2 You must (a) comply with all Rules of the Association, and (b) pay all Fees charged by the Association, while you are a member of the Association. [13] In the standard terms document, “Association” was defined as Basil Bay Residents Association Inc the Applicants in this case. And “Fees” is defined as meaning: any amount determined by the Association as a fee, including, without limitation, any levy charged by the Association to its members generally or any class of members. Second promise – in the contract of 1 October 2008 to buy the lot [14] EDD’s contract to buy the lot was dated 1 October 2008. In this contract EDD agreed to purchase the lot (by transfer of the sub-lease) and Stephen Back and Jennifer Back agreed to sell it to EDD. The contract contains this clause: 3.2 You agree to be bound by and comply with the terms and conditions of the Sub-Lease as if you were the original sub-lessee named therein. [15] Here EDD promises the seller to comply with the sub-lease granted to Rosalind Hines. This included a promise to comply with Clause 6 set out above. Clause 15.2 of the contract states that the seller could enforce the contract by a suit for specific performance. [16] Unusually, there was no deed entered into between EDD and the head- lessee in which EDD covenanted to perform the sub-lease. This would be normal conveyancing practice, and executed in return for the necessary landlord’s consent to the transfer. The reason why this was not done may be because the sub-lease provided that only the Minister needed to consent to the transfer of the sub-lease: there was no requirement for consent from the head lessee. The Association claims as a third party, a right to enforce the promises [17] The rule of privity of contract is that if A promises B that A will benefit C, C is unable to enforce the promise. Only B is able to enforce the promise. In this case, the Association is in the position of C. The head-lessee, in the position of B does not wish to enforce it. [18] In order to succeed in this claim, the Association would need to come within one of the exceptions to the rule of privity of contract. None of the non-statutory exceptions to the rule of privity of contract apply to this case. It cannot be said for example, that the parties to the original sub-lease -- 4 of 19 -- 5 intended a trust to arise in the Association’s favour. Nor does it appear that the case comes within any exception to the rule described in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 165 CLR 107. And equity refuses to intervene in the case of a positive covenant (which this is) rather than a negative one. Further on this issue, there is no reason to imply a contractual obligation in the circumstances of this particular case. [19] Turning to statute, the Association seeks to rely on section 55 of the Property Law Act 1974. Because of the need to consider whether this section applies, I set it out in full: 55 Contracts for the benefit of third parties (1) A promisor who, for a valuable consideration moving from the promisee, promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise. (2) Prior to acceptance the promisor and promisee may, without the consent of the beneficiary, vary or discharge the terms of the promise and any duty arising from it. (3) Upon acceptance— (a) the beneficiary shall be entitled in the beneficiary’s own name to such remedies and relief as may be just and convenient for the enforcement of the duty of the promisor, and relief by way of specific performance, injunction or otherwise shall not be refused solely on the ground that, as against the promisor, the beneficiary may be a volunteer; and (b) the beneficiary shall be bound by the promise and subject to a duty enforceable against the beneficiary in the beneficiary’s own name to do or refrain from doing such act or acts (if any) as may by the terms of the promise be required of the beneficiary; and (c) the promisor shall be entitled to such remedies and relief as may be just and convenient for the enforcement of the duty of the beneficiary; and (d) the terms of the promise and the duty of the promisor or the beneficiary may be varied or discharged with the consent of the promisor and the beneficiary. (4) Subject to subsection (1), any matter which would in proceedings not brought in reliance on this section render a promise void, voidable or unenforceable, whether wholly or in part, or which in proceedings (not brought in reliance on this section) to enforce a promissory duty arising from a promise is available by way of defence shall, in like manner and to the like extent, render void, voidable or unenforceable or be available by way of defence in proceedings for the enforcement of a duty to which this section gives effect. (5) In so far as a duty to which this section gives effect may be capable of creating and creates an interest in land, such interest shall, subject to section 12, be capable of being created and of subsisting in land under any Act but subject to that Act. (6) In this section— acceptance means an assent by words or conduct communicated by or on behalf of the beneficiary to the promisor, or to some person authorised on the promisor’s behalf, in the manner (if any), and within -- 5 of 19 -- 6 the time, specified in the promise or, if no time is specified, within a reasonable time of the promise coming to the notice of the beneficiary. beneficiary means a person other than the promisor or promisee, and includes a person who, at the time of acceptance is identified and in existence, although that person may not have been identified or in existence at the time when the promise was given. promise means a promise— (a) which is or appears to be intended to be legally binding; and (b) which creates or appears to be intended to create a duty enforceable by a beneficiary; and includes a promise whether made by deed, or in writing, or, subject to this Act, orally, or partly in writing and partly orally. promisee means a person to whom a promise is made or given. promisor means a person by whom a promise is made or given. (7) Nothing in this section affects any right or remedy which exists or is available apart from this section. (8) This section applies only to promises made after the commencement of this Act. [20] In order for section 55 to apply, it is necessary to identify a valid contract between promisor and promisee for the benefit of the third party beneficiary. It is also necessary that the beneficiary accepts the benefit in the manner set out in subsection (6). Section 55 and the first promise [21] On the assumption for the moment that the conditions set out in section 55 were satisfied, then it can be seen that the section would apply to the original sub-lease executed on 26 September 2000 as follows: The beneficiary = the Association The promisor = the original sub-lessee, Rosalind Hines The promisee = the head lessee [22] On this basis, on the face of it, the Association would be able to enforce Clause 6 against Rosalind Hines. But Rosalind Hines sold the sub-lease to others, and those others also sold, until eventually EDD purchased the sub-lease by transfer on 9 October 2008. [23] In the light of this chain of sales, can it be said that EDD are bound by the Association’s section 55 rights in respect of the first promise, so that the Association can sue EDD in this claim? [24] Important here is that the Association’s statutory rights do not run with, or relate to, the land. This is because they do not affect the nature, quality, mode of user or value of the sub-lessor’s interest1. Instead at the time of making, they were purely personal rights as between Rosalind Hines and the head lessee. 1 A test applied by the House of Lords in P & A Swift Investments (a firm) v Combined English Stores Group plc [1989] AC 632 at 642. -- 6 of 19 -- 7 [25] This has two consequences. Firstly section 53(2) of the Property Law Act 1974 (which provides that successors in title are bound by covenants relating to the land) does not apply so as to bind EDD. [26] Secondly, section 62(1) of the Land Title Act 1994 does not apply so as to bind EDD either. Section 62(1) provides that, on registration of the transfer at the Land Registry all the liabilities of the transferor in relation to the lot vest in the transferee. However, it has been held authoritatively that the only liabilities covered by section 62 are those which run with the land and the section does not extend to personal obligations2. [27] It is convenient at this point also to look at clause 3.2 of the sub-lease which was relied on by the Association at the hearing of this matter. It reads as follows: 3.2 If you transfer or sub-let, you must ensure that the proposed assignee or sub-sub-lessee enters into a deed with us in a form satisfactory to us, which may contain without limitation (a) ... and (b) a clause similar to Clause 6. [28] It was suggested by the Association that the requirement of clause 3.2 means that all purchasers of sub-lease are obliged in law to comply with Clause 6. I do not agree. Clause 3.2 obliges the sub-lessee to ensure that the purchaser executes a deed in favour of the head-lessee. But if this is not done, it cannot be said that the law would treat the parties’ legal rights and obligations as if it had been done. The practical difficulty with clause 3.2 is that the sub-lease did not require head lessee’s consent to a transfer of the sub-lease. Without that, clause 3.2 was unenforceable in practical terms. Had the consent of the head lessee been required before a valid transfer could take effect, then the head lessee could have insisted that clause 3.2 was complied with and would reasonably have withheld such consent until this had been done. [29] I agree with the submissions of EDD therefore, that section 55 (whether by itself or in combination with any other rule of law or statutory provision) does not operate upon the first promise of Rosalind Hines so as to transfer to EDD the obligations contained in the original sub-lease. Section 55 and the second promise [30] I do however, take a different view about the second promise. Looking at this second promise, in the contract made on 1 October 2008 to transfer of the sub-lease these were the parties under section 55: The beneficiary = the Association 2 See the reasoning of Mullins J in Jodaway Pty Ltd v Langton [2003] QSC 079 at paragraphs [18] to [20], based on the High Court decision in Measures v McFadyen (1910) 11 CLR 723 considering ss 65 and 66 of the Real Property Act 1861 in similar terms; see also the High Court decision of Queensland Premier Mines Pty Ltd v French [2007] HCA 53. -- 7 of 19 -- 8 The promisor = EDD The promisee = the transferors to EDD - Stephen Back and Jennifer Back [31] On this basis section 55 applies, provided the conditions of the section are met. The conditions in section 55 which must be met are: (a) There must be valuable consideration moving from Stephen Back and Jennifer Back to EDD. (b) EDD must promise to do an act for the benefit of the Association in return for this valuable consideration. (c) The Association must accept by words or conduct communicated by it or on its behalf to EDD (in this case) within a reasonable time of becoming aware of the promise. (d) The parties must intend that the promise is legally binding and enforceable. [32] Condition (a) is met. This is the agreement by Stephen Back and Jennifer Back to transfer the sub-lease. [33] As for condition (b), EDD submit that it is not met because Clause 6 was to benefit the head-lessee and not the Association. I can see that Clause 6 might have been intended to benefit both. It clearly does benefit the Association, which is what the condition requires. The benefit is that the sub-lessee must become a member of the Association. This is of much greater benefit to the Association than simply having one sub-lessee as a member. Since each sub-lease for the relevant precinct is in the same terms, the Association is assured of 100% membership amongst the owners of that precinct. By this means, the Association is stronger and much more effective in representing all the owners. Clause 6 and the second promise are therefore clearly a benefit to the Association. [34] Condition (c) I consider when dealing with another issue in the case immediately below, that is whether EDD became a member of the Association. [35] As for condition (d), EDD submits that there was no such intention pointing to a lack of evidence in that regard. However, in my view the intention can easily be seen from the formality of the documents and from the nature of the transaction. The promise in Clause 6 was in a sub-lease executed as a deed. Eight years later, EDD signed a formal contract agreeing to comply with that deed. The terms of the sub-lease would have been known to EDD at the time of doing so. There is nothing here to suggest that there was anything but an intention at that time of the contract to be bound by Clause 6 and that the Association could enforce it if it had a legal right to do so. -- 8 of 19 -- 9 Did EDD become a member of the Association? [36] The question here is whether EDD became a member of the Association on or after 9 October 2008 which is when EDD became sub-lessee by transfer. [37] The facts and findings relating to this question are important for two reasons. Firstly if EDD was never a member of the Association then it cannot be responsible for the membership fees of the Association (EDD denies that it ever became a member). And secondly, the facts and findings help to answer whether the Association accepted the promise made by EDD in the contract to take a transfer of the sub-lease for the purposes of section 55 of the Property Law Act 1974 (EDD deny that this happened). [38] There are two classes of membership in the rules of the Association: company members, and sub-lessee members. The class of membership with which I am concerned is that as sub-lessee. No particular formality is required by the rules for such membership. The only qualification required to be such a member is that the member is a sub-lessee of a lot. Clause 8.2 of the rules provides that the Association cannot reject a sub-lessee as a member. Clause 8.3 provides that a sub-lessee member remains a member until the member ceases to be a sub-lessee. Clause 8.4 provides that a sub-lessee member may not resign as a member. [39] These provisions are all consistent with the evidence given by the officers of the Association and their submissions that they regard new sub-lessees as automatically members of the Association upon a transfer of a sub- lease, without the new sub-lessee having to apply for such membership. [40] However clause 1.1 of the rules state that a member is a person entered in the Register of Members. It seems to me therefore that this must happen before a sub-lessee can properly be regarded as a member. [41] Clause 10 of the rules requires the keeping of a Register of Members and states that it must contain the names and contact addresses of all members, and the dates when they became members. Clause 10.3 requires that the Register of Members must be open for inspection at all reasonable times by any member who applies to the Secretary. [42] In accordance with these rules, the Association has a “Roll List” maintained by an agent and which contains a list of all members. There is also a separate record kept for the owners of each lot called a “Roll of Lots and Entitlements”. These two documents constitute the Register of Members. The relevant Roll of Lots and Entitlements for EDD’s lot is in the papers. It gives the date when the Association became aware of the change ownership of the lot as 21 July 2009. In the Roll List however, the date of transfer is given as 13 November 2008 which is when the transfer was registered at the Land Registry. -- 9 of 19 -- 10 [43] At the time of EDD’s purchase of the sub-lease, the membership fees for EDD’s lot had been paid by the previous owners for the whole year to 30 June 2009. This is why the claim for membership fees starts on 1 July 2009. The evidence given at the hearing was that an amount was paid by EDD on settlement, and the Association claims that this was in respect of these membership fees. EDD accepts that it made a payment but says that it was not intended as payment of these fees, but instead was regarded as an “administration cost”. [44] I have not seen EDD’s completion statement, but I find from the evidence which I have heard that EDD’s payment was an apportionment on settlement of the membership fees for the year in which the transfer was made which had already been paid by the previous owners. Such an apportionment of membership fees was contemplated by the contract which referred to “outgoings” as including membership fees payable to the specified residents association3. [45] It follows from the analysis of the rules, from the internal documentation of the Association, and from the apportionment of membership fees at the time of purchase, that EDD did become a member of the Association. As for the date when EDD became a member of the Association, this was on 13 November 2008 which is the date inserted on the Roll List in accordance with clause 10 of the rules. Was there “acceptance” under section 55? [46] I return to this issue now since it relies on the facts found on the question of membership immediately above. It is important to the operation of section 55 to understand what needs to be accepted by the beneficiary. It seems to me the acceptance must be: (a) of the benefit of the promise made by the promisor to do or to refrain from doing an act or acts [the words used in section 55(1)]; and (b) of any obligation of the beneficiary itself if there is any such obligation, as contemplated by s 53(3)(b). [47] It is significant that the promisor is not bound until the acceptance, and prior to the acceptance the promisor and promisee may vary the terms of the promise [by s55(2)]. For the beneficiary to accept the benefit of the promise then of course the beneficiary needs to be aware of the nature of the promise. I do not see this as requiring that the beneficiary needs to receive a copy of a written promise (in this case, a copy of the contract of 1 October 2008). To my mind, it is sufficient that the beneficiary appreciates that by reason of events which have occurred the promisor is 3 Although the contract refers to the residents association as being “Azure Bay” this is an error: both sides agree the Association was the relevant association for the precinct on the Island in which the lot was situated. -- 10 of 19 -- 11 bound by the contract to benefit it and the beneficiary understands the nature of that benefit. [48] On 27 July 2009 the officers of the Association was aware of the terms of Clause 6 of the sub-lease and were aware that it was in every sub-lease. They were also aware of clause 3.2 set out in paragraph 28 above. They believed that the combination of these clauses and the obligations taken on by a purchaser of a sub-lease would result in the purchaser being obliged to comply with Clause 6, but it was not aware at that time precisely the legal mechanism by which this happened (the combination of section 55 and the second promise). However in my view, the knowledge they had at the time was sufficient for the Association to be able validly to accept the benefit of the promise. [49] Some greater knowledge would probably be required in the case of a beneficiary which had its own obligations under the promise – in such a case the beneficiary objectively would need to understand the nature of its obligations and accept those obligations before it would be bound. [50] The Association sent a “tax invoice” to EDD on 27 July 2009 showing membership fees paid in full to 30 June 2009. This was the first direct contact between the Association and EDD. It clearly shows that the Association regarded EDD as a member and liable for membership fees although I agree with EDD that none were in fact claimed in that statement. To my mind this was clearly an “acceptance” under section 55(6) because it indicated to EDD that the Association was treating EDD as a member and expected to receive the membership fees, in other words accepting the benefit resulting from EDD’s promise to comply with Clause 6 of the sub- lease. [51] EDD submits that acceptance under section 55 must be in “specific and unequivocal terms”, but this is not stated in the section as a requirement. To my mind the nature of such acceptance is that which a court or tribunal would require in any contract. There is no reason why it should be any more emphatic. It should be sufficient objectively to indicate to the promisor by words or conduct that the beneficiary has accepted the benefit and any obligations under the promise. [52] There is also the requirement in section 55(6) that such acceptance should be made within a reasonable time of the promise coming to the notice of the beneficiary (in the absence of any other time requirements). EDD submits that the Association must have been aware of its purchase soon after it took place in October 2008 and it was not until 19 October 2009 that there was a claim for membership fees. Therefore it is said that the Association was in unreasonable delay in communicating any acceptance. [53] However, I have already found that the Association first became aware of EDD’s purchase on 21 July 2009. Acceptance on 27 July 2009 is clearly within a reasonable time after that date. -- 11 of 19 -- 12 [54] Even if I am wrong about this and the Association became aware of EDD’s purchase earlier than 21 July 2009, I still think acceptance on 27 July 2009 is within a reasonable time. The Association says that the delay in sending levy notices is explained by the fact that the Association’s fees had been paid up to 30 June 2009 so it had no need to contact EDD any earlier. The difficulty the Association faced was that unless notified by the new owner it would not be aware of any change of ownership. This was made more difficult because only a few of the lots were built upon. The Association could regularly search the Land Register but that would incur fees. Generally it was reasonable to wait until something indicates that ownership may have changed. [55] The analysis above is important for the ongoing relationship between the parties to this claim. This claim covers two years’ membership fees (from 1 July 2009 to 30 June 2011). Soon after the claim was issued, on 1 November 2011 EDD surrendered its sub-lease and was granted another sub-lease by the head-lessee in terms which sought to exclude any benefit to the Association. However, this cannot affect the rights of the Association under section 55 to enforce the second promise. It is clear from section 55(2) that it is only prior to acceptance by the Association that such rights can be altered. Once there has been valid acceptance within section 55, the Association can enforce that second promise and replacement of the sub-lease is ineffective to change that second promise. It would be different if the Association agreed to the change: that would be a variation under section 55(3)(d). The original Clause 6 therefore lives on despite the change in the sub-lease. The defence of exclusive dealing (third line forcing) [56] EDD also defend the claim on the basis that the wording of Clause 6 in the sub-lease offends against the rule against third line forcing in section 47 of the Australian Consumer Law and therefore should not be enforced by QCAT. [57] The argument here is that Clause 6 of the sub-lease made it a condition of the grant that the lessee would become and remain a member of the Association, would comply with the rules of the Association and would pay all fees charged by the Association. Thus it is said that the lessee was forced to accept the services of the Association. [58] The version of the Trade Practices Act 1974 (Cth) which applied at the time the original sub-lease was executed was the consolidated version prepared to 4 July 2000. The version which applied at the time the contract containing the second promise was the consolidated version prepared to 14 July 2008. These are in almost identical terms to the respective provisions in the Competition and Consumer Act 2010 (Cth) which replaced the provisions of the 1974 Act. [59] Section 47 of the Trade Practices Act 1974 is as follows: -- 12 of 19 -- 13 47 Exclusive dealing (1) Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing. ... (8) A corporation also engages in the practice of exclusive dealing if the corporation grants or renews, or makes it known that it will not exercise a power or right to terminate, a lease of, or a licence in respect of, land or a building or part of a building on the condition that another party to the lease or licence or, if that other party is a body corporate, a body corporate related to that body corporate: (a) ... (b) ... (c) will acquire goods or services of a particular kind or description directly or indirectly from another person not being a body corporate related to the corporation. [60] In a nutshell, with this type of exclusive dealing, the corporation needs to give notice to the Australian Competition and Consumer Commission (“ACCC”) 14 days before the conduct concerned, to allow the ACCC time to decide whether to hold a conference about the notice and whether to permit the conduct, by balancing of the likely detriment and benefit to the public of the proposed conduct. [61] Clearly the prohibition against third line forcing (without notice to ACCC) could be problematical in respect of the first promise. However, I have already decided the first promise is not enforceable by the Association for other reasons. [62] The third line forcing provisions do not apply to the second promise. This is because a transfer of a sub-lease is not within the terms of section 47(8), or indeed any other provision. And Stephen Back and Jennifer Back are not a corporation, nor was the transfer made in trade or commerce. Waiver defence [63] EDD say that the Association has, as a matter of fact, waived the right to bring a claim. It relies on letters and emails dated 21 September 2010, 11 May 2011, 18 May 2011 and 30 March 2012 from the head lessee, and also newsletters produced by the head lessee in which the head lessee stated its opposition to the administrative and legal fees levied by the Association and where it was made clear that the head lessee would not be enforcing Clause 6 against the sub-lessees. [64] The information about the position of the head lessee came to the attention of the sub-lessees in this way. And so it is said that this was an effective waiver of the sub-lessee’s obligations under Clause 6. [65] The main difficulty with this argument is that in order to be an effective defence to this claim, which is brought by the Association, any waiver would have to be an act of the Association, rather than the act of another party (the head lessee). If the head lessee was communicating its view to -- 13 of 19 -- 14 the sub-lessees as agent for the Association then if there was a waiver it would be an effective defence to this claim, however it is quite clear that no agency existed here. Human Rights defence [66] EDD defend this claim on the basis that, as a matter of human rights, it cannot be forced to become or remain a member of the Association against its will. [67] EDD relies on Article 20(2) of the Universal Declaration of Human Rights, which has been copied to me in the papers. This reads as follows: “No one may be compelled to belong to an association”. [68] Although the Universal Declaration of Human Rights relied on by EDD has been accepted by Australia through its membership of the United Nations, it has no force of law in Australia. [69] In Queensland there is no enactment of human rights (nor in New South Wales which is where EDD is based and registered). [70] On 13 August 1980, Australia ratified the International Covenant on Civil and Political Rights (New York, 19 December 1966) (the “ICCPR”). Since then, Australia has been under an obligation in international law under the ICCPR “to take the necessary steps, in accordance with its constitutional processes … to adopt such legislative or other measures as may be necessary to give effect to the rights recognised in the present Covenant”. [71] However the ICCPR does not help EDD. Firstly it does not contain the words found in Article 20(2) of the Universal Declaration of Human Rights relied on by EDD. In the ICCPR there is a right of freedom of association in Article 22, but it only protects freedom of association with others. [72] Secondly, ratification of the Covenant by Australia is not capable of affecting the private rights and obligations between EDD and the Association. Failure to comply with the rules of Keswick Island Association Inc [73] EDD defend the claim on the basis that the Association failed to comply with its own rules requiring compliance with the rules of another association. [74] Clause 37 of the rules of the Association state: “Members must comply with the Rules of KIA as if they were part of these rules.” -- 14 of 19 -- 15 [75] In the rules of the Association, KIA is said to mean Keswick Island Association Inc. This may be an error for Keswick Island Community Association Inc. whose rules I have been provided by EDD. I shall call this association “KICA”. [76] From the rules of KICA it can be seen that it is intended to be an umbrella organisation whose members will largely be the associations of each precinct on the Island, of which the Applicant Association is one. [77] EDD list in its submissions a number of ways in which (it is said) the Association have failed to comply with the rules of KICA. However, for this defence to succeed I would need to be satisfied that any such failure affected the validity or right to enforce the second promise. To my mind there is nothing in the KICA rules or in any such failure which could remotely achieve that. Supreme Court claim and legal costs [78] What is said here is that a large part of the Association’s levy is for a “legal fund” which is, was or will be used to fund a defence to litigation brought against some of its members. It is said that this is unconscionable conduct under Part 2.2 of Schedule 2 of the Competition and Consumer Act 2010 and therefore should not be enforced by QCAT; it is also outside the powers of the Association and therefore unenforceable; and the levy is unreasonable and was decided upon by the Association in breach of the rules of natural justice. [79] It is true that a large part of the levy is for the Association’s legal fund. This is shown by the following table: Invoice Membership period Total amount Amount for legal fund 19 October 2009 1 July 2009 to 30 June 2010 $750 $450 21 October 2010 1 July 2010 to 30 June 2011 $900 $500 [80] The reference to litigation brought against members of the Association is to two actions in the Supreme Court of Queensland brought by the head lessee. One is action number BS5859/10 brought against Richard White and Sandra White who hold a sub-lease of one of the lots; the other action is number BS5603/10 brought against Bruce Copland and Frances Copland who hold a sub-lease of another lot. [81] In each of these claims the head lessee says that the defendants were in breach of their sub-lease by their failure to complete construction of a building on the lot within 5 years of the commencement of the term of the sub-lease as required by the sub-lease. The head lessee claims termination and seeks possession of the lot because of this breach. -- 15 of 19 -- 16 [82] Mr Copland and Mr White are President and Vice-president of the Association respectively. Mr White is a former President of the Association. [83] The Association’s use of the legal fund with respect to the Supreme Court actions appear from the AGM minutes of 22 August 2009 and 18 September 2010. By 22 August 2009 there had been pre-action correspondence and possibly also mediation. By 18 September 2010 the actions had been commenced and consideration was being given to defending the claims. [84] The committee of the Association had decided to use the Association’s funds in dealing with and defending the claims and this was endorsed by the 2009 AGM, which approved a continuation of this policy in the forthcoming year. The 2010 AGM also approved this approach and agreed to enlarge the legal fund budget from $45,500 to $65,000, which represented $500 per lot. [85] The reason minuted for this decision was that such action would “ultimately affect all owners” and that “the common interests of a majority of members are at stake”. [86] EDD say that the Association is acting outside its powers by funding the defence to the Supreme Court claims. The objects of the Association appear in clause 3 of the rules. In the action, the head lessee’s aim appears to be to achieve better progress in the development of the precinct. There is nothing in the objects of the Association that permit the Association to resist this. I agree therefore, that resisting the head lessee’s claims is beyond the powers of the Association. [87] Despite this, in the case of an association incorporated under the Associations Incorporation Act 1981, as the Association is, actions outside the power of an Association are validated by the operation of section 26 which reads: 26 Ultra vires transactions (1) No act of an incorporated association (including the entering into of an agreement by the incorporated association) and no conveyance or transfer of property, whether real or personal, to or by an incorporated association shall be invalid by reason only of the fact that the incorporated association was without capacity or power (whether by provision of this Act or by its rules or otherwise) to do such act or to execute or take such conveyance or transfer. (2) Any such lack of capacity or power may be asserted or relied upon only in— (a) proceedings against the incorporated association by any member of the incorporated association to restrain the doing of any act or acts or the conveyance or transfer of any property to or by the incorporated association; or -- 16 of 19 -- 17 (b) any proceedings by the incorporated association or by any member of the incorporated association against the present or former officers of the incorporated association. [88] There are no proceedings which have been brought under section 26(2), so it follows that the Association can sue for the payment of a levy even if part of that levy was for purposes outside its powers. [89] I now turn to the question whether it is unconscionable conduct to raise this levy because part of it is being used or will be used to pay for legal costs in the Supreme Court actions. [90] Part 2.2 of Schedule 2 of the Competition and Consumer Act 2010 only applies to those engaging in unconscionable conduct in “trade or commerce”. This means that the dealings have a trading or commercial character. In my opinion in cannot be said that the Association has acted or is acting in trade or commerce. It is not trading. Services which it provides to its members are in relation to their lot ownership and their residence or prospective residence in the precinct. These services do not have a trading or commercial character. [91] In any case in my opinion the activities of the Association cannot be regarded as unconscionable. Apart from the allegation that the Association acted beyond its powers (which is validated by section 26 above) there is no challenge to the validity of this AGM or to the decision taken. And there is nothing wrong with the Association supporting its officers in what is effectively a test case. If the claim against the officers is successful, then the head lessee would be able to bring similar cases against other sub- lessees who had not yet built on the land. If the claim is not successful it will be difficult to do so. Hence responding to the claims in an appropriate manner is in the interest of the majority of members. There is no suggestion that the claims have not been responded to in an appropriate manner. The head lessee’s action necessarily had to be against one or more of the sub-lessees personally and could not be against the Association. It would appear that no application has been made to convert the proceedings into representative ones, but even without that it cannot be said that the decision of the Association to fund the resistance to these claims was objectionable. [92] I turn now to the contention that the Association cannot sue for its membership fees and the legal levy because the costs are excessive and unreasonable and the decisions to impose these fees and levies have been reached contrary to the rules of natural justice. Section 71(3) of the Associations Incorporation Act 1981 binds the Association to the rules of natural justice. I note also that under section 71(1) of the Act the rules constitute the terms of a contract between members. This means that QCAT would have jurisdiction in a minor debt claim to determine whether the debt was properly due in accordance with the rules. -- 17 of 19 -- 18 [93] In its original submissions, EDD did not point to any particular breach of the Association’s rules (other than the ultra vires point above), nor to any breach of procedure. Its submissions at that time amounted merely to a disagreement with the decision made. Such a disagreement could not affect its liability to pay the fees and the levy. [94] In its reply to the Association’s submissions, EDD raised a new point. This claimed that the voting at the Association’s meeting of 18 September 2010 (which endorsed the fees and levy for 1 July 2010 to 30 June 2011) was in breach of the rules. The point is that the head-lessee sought to exercise 120 proxy votes at the meeting and this was wrongly disallowed. It is said that the head-lessee was entitled to these 120 votes because in its new Masterplan for the development of the Island there were 120 lots for which sub-leases had not been granted (it would appear that these were new lots not on the original Masterplan). And by Rule 36 the head-lessee was entitled to one vote per lot for which no sub-lease had been granted. [95] There are two difficulties with this new point. The first is that the disallowed votes were those of the head-lessee, rather than of EDD. So it would appear not to be a point which EDD can take. [96] The second difficulty is that the point was made for the first time very late in these proceedings, after a hearing when evidence was given and only in reply to the Association’s written submissions which were directed at that hearing. It is clear that in order to deal with the point properly, I would require further evidence and the submission of further documentation from both sides. The Association have not given any evidence or made any submissions on the point. Since the evidence and documentation on this matter is incomplete I cannot deal with it. [97] EDD has made no request that the hearing is reopened or the decision delayed to enable full evidence and submissions to be heard on the point. Whilst as mentioned above, QCAT is concerned with any breach of the rules from a contractual standpoint, the Supreme Court has jurisdiction under section 72 of the Associations Incorporation Act 1981 to deal with questions of the rights and obligations between members including such questions of voting rights. I have not been informed that any application has been made to the Supreme Court on this matter. In the circumstances I am not minded of my own motion to require such evidence and submissions to be given. Transfer to the Supreme Court [98] I return to the question whether I should pass this claim to a judicial member for consideration under section 52 of the Queensland Civil and Administrative Tribunal Act 2009 for transfer to the Supreme Court. The idea would be for it to be heard together with the existing Supreme Court claims. -- 18 of 19 -- 19 [99] EDD’s reason for asking for this is that the Supreme Court is the proper forum to decide whether the members of the Association should face levies into a legal fund to pay for the Supreme Court costs. I do not agree. When the Supreme Court proceedings are finalised and costs are considered, if the sub-lessee parties are not ordered to pay the head lessee’s costs then QCAT’s finding as to whether the levy is payable by EDD does not matter to the Supreme Court, nor to the parties before that Court. If instead, the sub-lessee parties are ordered to pay the head lessee’s costs then again the ultimate source of that money is not of interest to the Supreme Court or to the head lessee. [100] The only relevance therefore of QCAT’s findings to the Supreme Court or to the head lessee is that if the Association has contributed to the costs of the sub-lessee parties, the Association itself might be exposed to an adverse costs order as a non-party under rule 681 of the Uniform Civil Procedure Rules 1999 within the principles recently re-considered in Plante & Anor v James [2011] QCA 109. This is something that the Supreme Court can handle without being embarrassed by this decision. Therefore I do not consider that the Supreme Court is a more appropriate forum to hear this matter under 52(1) of the QCAT Act. [101] I have not identified any matter in the defence to this claim over which QCAT had no jurisdiction. Therefore I do not consider a transfer should be initiated under section 52(2) on those grounds. Conclusion on the claim [102] I have found that EDD became a member of the Association and its membership is recorded in the Association’s documentation as commencing on 13 November 2008. I have found that Association is unable to enforce against EDD the promise made by the original sub- lessee, but that the Association is able to enforce against EDD its third party rights under section 55 of the Property Law Act 1974 arising from EDD’s promise to the seller in the contract of sale of the sub-lease to EDD dated 1 October 2008 (the second promise). [103] I have rejected all the defences to the claim on the second promise. I therefore allow the claim in the sum of $1,650. There is a claim for interest in the sum of $318.25 calculated from 20 November 2009 to the date of the application. There is no reason for the interest to stop at the date of the application which was 16 May 2012, however the interest can only properly start so early in respect of the claim for the first year’s fee; the interest claim for the fees due for the second year should start later. The rate claimed at 10% is also probably rather high for today’s level of interest rates, and for these reasons I am limiting the recoverable interest to $250. [104] To these figures should be added the filing fee of $95, the bailiff’s service fee of $39.50, the search fee of $25.03 and the Citec transaction fee of $11.23. The total to be paid is therefore $2,070.76. -- 19 of 19 --