Drift Palm Cove (Management) Pty Ltd v Body Corporate for Drift Palm Cove [2011] QCAT 605

CITATION: Drift Palm Cove (Management) Pty Ltd v Body Corporate for Drift Palm Cove [2011] QCAT 605 PARTIES: Drift Palm Cove (Management) Pty Ltd (Applicant/Appellant) v Body Corporate for Drift Palm Cove CTS 36253 (Respondent) APPLICATION NUMBER: OCL083-10 MATTER TYPE: Other civil dispute matters HEARING DATE: 3 November 2011 HEARD AT: Brisbane DECISION OF: Paul McGrath, Member DELIVERED ON: 30 November 2011 DELIVERED AT: Brisbane ORDERS MADE: 1. The Reviewable Terms of the Caretaking Agreement between the Applicant and the Respondent be amended to increase the remuneration payable pursuant to the Caretaking Agreement to $209,233.26 (exclusive of GST ) as and from 14 February 2010. 2. That the Applicant be entitled to interest at the rate of 10% per annum on the above amount as and from 14 February 2010 to the date of payment. 3. That there be no order as to costs. CATCHWORDS: Service Contract dispute – Review of functions and powers of Service Contractor – Review of remuneration payable to Service Contractor APPEARANCES and REPRESENTATION (if any): APPLICANT: Drift Palm Cove (Management) Pty Ltd was represented by Mr Kidston of Counsel RESPONDENT: Body Corporate for Drift Palm Cove CTS 36253 was represented by Mr Thomson of Counsel -- 1 of 8 -- 2 REASONS FOR DECISION [1] The application relates to a dispute arising out of a review of terms of service contract under the Body Corporate and Community Management Act 1997 (‘BCCM Act’). [2] The respondent filed a response and/or counter application on 13 September 2010. [3] The applicant was at all relevant times the caretaking service contractor for the Drift Palm Cove Community Title Scheme 36253 (the scheme) pursuant to a written contract entitled ‘Caretaking Agreement’ dated 9 July 2007 (the Caretaking Agreement). [4] The applicant was remunerated pursuant to the Caretaking Agreement at a rate of $129,000 per annum (exclusive of GST) (the remuneration rate). [5] The respondent was, and remains, a Body Corporate created pursuant to, and governed by, the provisions of the BCCM Act and was the Body Corporate for the scheme. [6] The Caretaking Agreement was a service contact within the meaning of s 130(1)(a)(i) of the BCCM Act and had not been previously reviewed pursuant to s 130 of the BCCM Act and to the terms which provide for the remuneration payable to the applicant. [7] The Caretaking Agreement was then reviewed after the commencement of s 130 of the BCCM Act. [8] The scheme was registered on 4 December 2006 and all the lots in the scheme are owned by original owner Indigo (Palm Cove) Pty Ltd. As at the date of the execution of the Caretaking Agreement the original owner controlled the voting of the Body Corporate. [9] The Caretaking Agreement contained the following express terms (the reviewable terms): ‘(4.1) the caretaking fee for the first year of the term is $129,000 (exclusive of GST); (4.2) for each subsequent year, the caretaking fee is the amount in clause 4.1 increased by the same percentage as the percentage increase in the index number since the commencement of the term; (4.3) that change is calculated by reference to the index numbers last published before: (a) the commencement of the term; and (b) the end of the year proceeding the year for which the calculation is to be made; (4.4) the caretaking fee is to be paid by the Body Corporate to the manager in consideration for the performance of the duties by the manager and not for any letting service the caretaker may provide to owners of lots.’ [10] The Caretaking Agreement went on to say, amongst other things, that the caretaker must cause the common property to be managed, maintained and -- 2 of 8 -- 3 repaired so as to ensure that it is kept in good order and repair, and to do all things necessary to protect the interests of the Body Corporate in respect of the common property. In addition the Caretaking Agreement provided for the caretaker to perform and organise fertilising, mowing and maintenance of the lawn, gardens and shrubs forming part of the common property and to carry out all works and do all things incidental and necessarily reasonable and proper in the discharge of its duties. [11] On 21 July 2009 the applicant requested a review of the reviewable terms in so far as those terms provide for the remuneration payable to applicant under the Caretaking Agreement pursuant to s 130(2)(b) of the BCCM Act (the review request). The review request was contained within a letter from Colin McIntosh on behalf of the applicant to the respondent dated 21 July 2009. [12] The review request was accompanied by a report (the BMCS report) from Building Caretaking Consultancy and Services (BMCS). The BMCS report constituted, and constitutes, a ‘review advice’ within the meaning of s 132(1)(a) of the BCCM Act. [13] In the period from 21 July 2009 through until 14 February 2010 the applicant and the respondent conducted the review. [14] At the Annual General Meeting of the lot holders of the scheme held on 14 February 2010 (the AGM) the following motion (the remuneration motion) was considered ‘that the Body Corporate review the remuneration payable to Drift Palm Cove (Management) Pty Ltd under the Caretaking Agreement dated 9 July 2007 between the Body Corporate and Drift Palm Cove (Management) Pty Ltd and increase that remuneration for the year of the term commencing 9 July 2009 from $135,600 per annum (excl GST) to $275,865.60 per annum (excl GST) and that the common seal of the Body Corporate be affixed to an appropriate deed to record such review and increase in remuneration by the secretary and any member of the committee or any two members of the committee, or the secretary acting alone.’ The remuneration motion was not passed. [15] The refusal by the Body Corporate to pass the remuneration motion constituted a final decision about the outcome of the review for the purposes of s 132(3) of the BCCM Act. [16] The applicant seeks the following orders: 1. That pursuant to s 149(B)(2) of the BCCM Act, upon its proper construction the Caretaking Agreement obliges the applicant to perform the duties at the frequencies and for the amount of time set out in the BMCS report. 2. The reviewable terms are not currently fair and/or reasonable in so far as a. they do not achieve a fair and reasonable balance between the interests of the reviewing parties; and, or alternatively; -- 3 of 8 -- 4 b. the consequences of complying with the reviewable terms are unfairly harsh to the applicant and unfairly beneficial to the respondent; and, alternatively c. the reviewable terms are inappropriate for the scheme having regard to the term of the engagement as service contractor and the period of the term remaining. 3. The reviewable terms be amended such as to increase the remuneration payable pursuant to the Caretaking Agreement to $275,865.60 (excl GST) per annum with retrospective effect from 9 July 2009. 4. Interest at 10% per annum pursuant to s 47 of the Supreme Court Act 1995. 5. The respondent pay the applicant’s costs of and incidental to the proceedings on an indemnity, or in the alternative, standard. 6. Such further or other order as the Tribunal may deem appropriate in the circumstances. [17] In its response and/or counter application the respondent disputed that the Caretaking Agreement has not been previously reviewed pursuant to s 130 of the BCCM Act or otherwise as to the terms which provide for the remuneration payable to the applicant. [18] The respondent disputes that the BMCS report constituted and constitutes a review advice within the meaning of s 132(1)(a) of the BCCM Act on the basis of: a) The Caretaking Agreement had already been reviewed under Div 7, Pt 2 of the BCCM Act. b) The applicant did not make a request to the Body Corporate under s 130(2) of the BCCM Act. [19] The respondent disputes that the applicant and respondent are ‘reviewing parties’ within the meaning of s 130(2) of the BCCM Act and that the applicant and respondent were obliged to carry out a review of the reviewable terms as soon as reasonably practical after 21 July 2009. The respondent disputes that during the period 21 July 2009 through and until 14 February 2010 the applicant and the respondent conducted the review. [20] The respondent disputes the refusal by the Body Corporate to pass the remuneration motion constituted the final decision about the outcome of the review for the purposes of s 132(3) of the BCCM Act; and, the respondent disputes the jurisdiction of Div 7 of Pt 2 of the BCCM has been invoked on the basis that: a) The Caretaking Agreement had already been reviewed under Div 7, Pt 2 BCCM Act; b) The applicant did not make any request to the Body Corporate under s 130(2) of the BCCM Act. -- 4 of 8 -- 5 [21] The respondent disputes the reviewable terms are not currently fair and reasonable in that they did impose conditions that are unreasonably difficult to comply with or which are unnecessarily unreasonable for the protection of the legitimate interests of the respondent and consequence of the applicant complying with the reviewable terms is neither unfairly harsh not beneficial to either the applicant or the respondent. [22] The respondent states the reviewable terms are appropriate for the scheme and seeks that the current remuneration of $135,600 per annum plus GST is fair and/or reasonable. [23] The respondent seeks to have the applicant’s application dismissed; that the applicant pay the respondent’s costs of and incidental to the proceedings; and such further or other orders as the Tribunal may deem appropriate in the circumstances. [24] The Tribunal ordered that there be an expert conclave that took place on 28 September 2010 before Member Mr Favell. Following that conclave the Tribunal noted that the experts agree as follows: 1. The Caretaking Agreement dated 9 July 2007 which is a generic document which lacks specificity as to the duties of the caretaker; 2. A schedule of caretaker’s duties and responsibilities and frequency of service should be prepared and agreed upon by the parties; 3. The maintenance and cleaning of the pool as shown in the BMCS report is approximately 1/3 of the time and cost of the overall caretaker’s expenses; 4. A maintenance schedule should be agreed upon between the parties; 5. A cleaning schedule should be agreed upon between the parties; 6. The issues are: a. The number and nature of the caretaker’s duties; b. The frequency of attending to the caretaker’s duties and the time to so attend to those duties; c. The appropriate rate to be applied per hour for attending to the caretaker’s duties. 7. The experts cannot agree on the issues on para 6 herein because the expert for the Body Corporate does not have sufficient evidence to agree on those issues; 8. The experts agree that the parties and their experts will attend a mediation settlement conference on site with a view to examining: a. The duties of the caretaker; b. The extent of each duty of the caretaker; c. A possible maintenance schedule; d. A possible cleaning schedule; e. Time allowance for each task. -- 5 of 8 -- 6 [25] On 29 April 2011 Senior Member O’Callaghan directed that the parties and their experts Mr Leary and Mr Turner attend a meeting on site with a view to examining the hours allowed for the carrying out of each caretaking duty by 20 May 2011. [26] On 16 May 2011 BMCS and Leary and Partners Pty Ltd met with the parties at Drift Palm Cove in order to complete the reconciliation of the duty schedule and to examine the hours allowed for the carrying out of each duty as ordered in the QCAT order of 18 February 2011. A report was subsequently prepared by Leary and Partners Pty Ltd in relation to the work to be carried out by the caretaker. The experts Mr Leary and Mr Turner agreed to jointly submit an agreed duty schedule and to each individually submit a new caretaker valuation based on their own amended hourly allowances for the duties. [27] It was agreed between the experts that the rate of remuneration was to be an hourly rate of $28.83 (excl GST). Mr Leary, in his report, considered that the schedule of work required to carry out the caretaking duties as per the agreed duty schedule of 19 August 2011 was some 5,998.067 hours per annum which, at the agreed hourly rate of $28.83, equated to a total remuneration per year excluding GST of $172,924.27. [28] Mr Turner in his report considered that the amount of time required for the caretaker to carry out the agreed duties totalled 7,777.5 hours per year, which equated to an annual remuneration of $224,225.33 excluding GST using the agreed hourly rate of $28.83. [29] The main difference between the experts in relation to the time suggested, for the caretaker to carry out the agreed duties related to a number of issues around the care and maintenance of the swimming pool, which is quite a large pool; the care and maintenance of lift wells and lifts; the air conditioning vents; lighting; and, the overseeing of contractors and tradesmen who visit the premises on a daily basis. Mr Leary in his evidence indicated that some of the times suggested by Mr Turner were excessive and Mr Turner, for his part, conceded on some occasions that the times may be reduced but not to the extent claimed by Mr Leary. [30] Both experts are highly professional and both have experience in managing Body Corporate premises. Mr Leary had previously managed a Body Corporate commercial premises at Toowong; and, Mr Turner had previously managed a number of properties including a resort style complex similar to the subject property. [31] Mr Kidston of Counsel in his submissions stated that, in his opinion, section 130(1) of the BCCM Act applies, there had been a review requested in or about July 2009 and the review had been conducted by virtue of the failure of the Body Corporate to approve the remuneration motion. In relation to the experts’ reports Mr Kidston submitted that it was necessary to consider a reasonable amount of time for the duties and the frequency of the duties of the caretaker. It was a necessity to decide what duties were and what obligations were the responsibility of the caretaker under the agreement. It was submitted that the parties reached an agreement as to what the duties -- 6 of 8 -- 7 are, and it is then a matter of determining whether the times required to complete the duties are reasonable having regard to the respective reports. [32] It was submitted that the Tribunal can make decisions regarding remuneration as well as duties that the provisions of s 130 of the BCCM Act dealing with the review of terms of service contracts have been made out to enable the jurisdiction to be enlivened. [33] In relation to the difference between the experts, Mr Kidston submitted that both experts based their views on their previous experience; Mr Turner having spent more time on site and consulted with the Body Corporate Manager in more detail and having made more detailed enquiries, was more concessional with respect to a range of figures that may be relevant to the remuneration. It was submitted that the amount currently being paid by way of remuneration is far too low and that the terms of the agreement must be appropriately considered. The remuneration, reflecting the duties of the caretaker, should then be fixed. [34] Mr Thomson of Counsel on behalf of the respondent submitted that the issues of duties and remuneration go hand in hand. Any change in remuneration must be matched to equivalent duties. [35] With respect to the experts, Mr Thomson considered that both are professional people and both bring formal experience to the table. He considered Mr Turner’s approach was more personal, rather than formal, than was Mr Leary who is a quantity surveyor. Mr Turner referred to high standards of exacting requirements whereas Mr Leary considered he was aiming for the average in determining what an appropriate amount of time required for each work process needed. [36] It was submitted it was open to the Tribunal to find the middle ground between the two set of figures; between the average of Mr Leary and the high exacting standards of Mr Turner. [37] The Tribunal is satisfied that a review has been carried out and that there has been a dispute arising out of the review which necessitates an investigation of the matter and a determination as to whether or not appropriate remuneration has been, or continues to be, paid by the respondent to the applicant. [38] In relation to the expert witnesses and their reports, the Tribunal considers that Mr Turner has had more hands on experience in this particular type of matter and had spent more time investigating the work needed to be done by the caretaker on a daily basis. The Tribunal, in this case, accepted and preferred the evidence of Mr Turner to that of Mr Leary. [39] Mr Turner did concede there were some possible amendments to the times set out by him in relation to the functions required to be undertaken by the applicant. -- 7 of 8 -- 8 [40] The Tribunal is of the view that approximately 10 hours per week should be deducted from the amount of time claimed by Mr Turner to be expended by the caretaker on a weekly basis. [41] On this calculation therefore, the amount of hours to be provided per week would reduce to 139.567; a yearly total of 7,257.484 hours. [42] Using the agreed hourly rate of $28.83 (excl GST) this would equate to an annual remuneration of $209,233.26. The Tribunal finds this is a fair and reasonable remuneration rate which should be backdated to the date of the AGM of 14 February 2010. [43] The applicant sought interest, as well as costs. It was submitted by the solicitors for the respondent that there must be an existing right to the money and the party must have been held out of the money to enable interest to be ordered. In the circumstances I consider that the applicant should be entitled to interest at the rate of 10% on the increased amount of remuneration as and from 14 February 2010 to the date of payment. [44] Both parties sought that costs follow the event. In the circumstances of this particular case I consider that both parties had fair and reasonable grounds for bringing their applications. In the circumstances I do not propose to make any order for costs. -- 8 of 8 --