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  • Unreported Judgment

Ranch Frey Pty Ltd v Body Corporate for Quarterdeck

 

[2016] QCAT 252

CITATION:

Ranch Frey Pty Ltd v Body Corporate for Quarterdeck [2016] QCAT 252

PARTIES:

Ranch Frey Pty Ltd ATF Ranch & Frey Family Trust

(Applicant)

v

Body Corporate for Quarterdeck CTS 1136

(Respondent)

APPLICATION NUMBER:

OCL034-16

MATTER TYPE:

Other civil dispute matters

HEARING DATE:

7 July 2016

HEARD AT:

Brisbane

DECISION OF:

Senior Member Brown

DELIVERED ON:

15 July 2016

DELIVERED AT:

Brisbane

ORDERS MADE:

Orders

  1. Upon the undertaking of Ranch Frey Pty Ltd ATF Ranch & Frey Family Trust (Ranch Frey), Ran Cheng and Freya Lui as to damages, the Body Corporate for Quarterdeck CTS 11361 (“the Body Corporate”) whether by its servants, agents, employees or otherwise is restrained from:
    1. terminating or attempting to terminate the Deed of Engagement and Authorisation dated 30 April 2007 (as varied and assigned) (“Agreement”) between the Body Corporate and Ranch Frey:
      1. in reliance on the resolution by the Body Corporate to terminate the Agreement arising from the extraordinary general meeting held on 24 June 2016;
      2. in reliance on the remedial action notice dated 11 March 2016, the subject of these proceedings; or
    2. giving any notice pursuant to section 126 of the Body Corporate and Community Management Act 1997;

until the earlier of:

  1. The final determination of the proceeding;
  2. Order of the Tribunal;
  3. Agreement in writing between the parties.

Directions:

  1. Body Corporate for Quarterdeck CTS 11361 is added as a respondent.
  2. Kalego Accounting & Strata Professionals Pty Ltd is removed as a respondent.
  3. Ranch Frey Pty Ltd ATF Ranch & Frey Family Trust has leave to rely upon a copy of the affidavit of Peter George sworn 7 July 2016 upon the undertaking of the solicitors for the applicant to file the original affidavit in the tribunal.

CATCHWORDS:

REAL PROPERTY – STRATA AND RELATED TITLES – MANAGEMENT AND CONTROL – BODY CORPORATE: POWERS, DUTIES AND LIABILITIES – GENERALLY – Body Corporate and Community Management Act 1997 – Body Corporate and Community Management (Accommodation Module) Regulation 2008 – where caretaking agreement and letting authorisation – where remedial action notice issued – where caretaker disputes validity of remedial action notice

EQUITY – EQUITABLE REMEDIES –  INJUNCTIONS – INTERLOCUTORY INJUNCTIONS – RELEVANT CONSIDERATIONS – BALANCE OF CONVENIENCE GENERALLY – Queensland Civil and Administrative Act 2009 – tribunal power to grant interim injunction – whether serious issue to be tried – whether balance of convenience favours grant of injunction – whether damages an adequate remedy

Queensland Civil and Administrative Tribunal Act 2009 (Qld), s 59

Body Corporate and Community Management Act 1997 (Qld), ss 94, 100, 149B

Body Corporate and Community Management (Accommodation Module) Regulation 2008, s 129

Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57

Highvic Pty Ltd & Ors v Quarterback Group Pty Ltd & Anor [2012] QSC 8

Bestjet Travel Pty Ltd v The Australian Federation of Travel Agents Ltd [2016] QSC 81

Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments [2010] QCAT 334

APPEARANCES:

APPLICANT:

Ms S McNeil of Counsel instructed by Short, Punch & Greatorix Lawyers

RESPONDENT:

Mr B Strangman of Counsel instructed by Adamson Bernays Kyle and Jones Lawyers

REASONS FOR DECISION

What is this application about?

  1. [1]
    Ranch Frey Pty Ltd as trustee for Ranch & Frey Family Trust (‘Ranch Frey’) is the caretaking and letting agent for the Body Corporate for Quarterdeck CTS 11361 (‘the body corporate’). The parties have fallen into dispute concerning the performance by Ranch Frey of its caretaking duties. Following an extraordinary general meeting, the body corporate resolved to terminate the caretaking and letting agreement with Ranch Frey. Ranch Frey has filed an application to resolve a complex body corporate dispute and also seeks an interim order restraining the body corporate from acting on the resolution to terminate. The application for an interim injunction falls for determination.

A history of the dispute

  1. [2]
    Quarterdeck, located in Surfers Paradise on the Gold Coast, is a multistorey building comprising 54 lots. It was constructed in 1980. A caretaking agreement and letting authorisation was entered into between the body corporate and a previous resident caretaker in July 2002 (the first agreement). An agreement was entered into by the body corporate with a subsequent resident caretaker in 2007 (the deed of engagement). The deed of engagement adopted the terms and conditions of the first agreement with certain variations. The duties of the caretaker (contained in schedule 2 of the first agreement) were not varied.
  2. [3]
    On 30 June 2014 the deed of engagement was assigned to Ranch Frey (the deed of assignment). Pursuant to the deed of assignment, Freya Lui and Ran Cheng, the directors of Ranch Frey, guaranteed the performance of the deed of engagement and the payment of all loss and damage recoverable by the body corporate from Ranch Frey.
  3. [4]
    The purchase price paid by Ranch Frey for the caretaking and letting rights and the residential management lot was $1.39 million of which 70% was financed by the Commonwealth Bank (the financier) and 30% was financed by Ranch Frey.[1] Pursuant to the deed of engagement the term of the caretaking and letting rights expires in July 2032.
  4. [5]
    In early 2015, at the request of the body corporate manager, Goldstein & Associates, Buildcheck Engineering and Building Consultants inspected the building and prepared a report (the Buildcheck report).[2] In the report Buildcjeck noted that the body corporate was concerned about a range of building defects including: entry pergola; basements B1 and B2; indoor pool spalling including enclosure drainage; façade defects; windows; roof deck.[3]
  5. [6]
    The Buildcheck report identified “a range of serious defects” including:
  • Window water entry with severe associated concrete spalling;
  • Severe concrete spalling B2 (Carpark 53) including general concrete spalling in basements 1 and 2;
  • Concrete spalling in indoor pool area;
  • Water entry through top roof deck into upper units;
  • Water entry reception/vergola roof.
  1. [7]
    The report identified that the windows in the building were structurally unstable and leaking. The deterioration of the east and north drop windows was said to have “progressed to the stage of potential structural collapse including health and safety concerns and requires very urgent attention”. Water entry into units from the leaking roof top deck was identified and spalling in the basement car park was said to be “severe and is requiring urgent attention”.
  2. [8]
    Buildcheck noted in the report that the inspection was “only a limited, visual inspection and did not involve each and every Unit in the building and certainly not a special investigation, including removal of lining materials and floor covering materials”. Buildcheck expressed the view that “the problem (ie water ingress) is systemic/typical/generic and more visible expressed spalling/cracking with associated water entry can be expected over time”.
  3. [9]
    In October 2015, the body corporate resolved to impose a special levy on lot owners in respect of the cost of the required building and structural works. The cost of the works was $641,880.00.[4] The authorised works were limited in scope and involved replacing windows and treating concrete cancer for unit numbers ending in “1” only, plus Unit 10.[5] The minutes of the EGM indicate that the cost to undertake the replacement of all windows, treat concrete cancer in all units and paint the building would be in the order of $1.424 million to $1.615 million.[6] It is unclear as to when the building work commenced however it was underway by March 2016.
  4. [10]
    In August 2015, the body corporate manager wrote to Ranch Frey raising a number of issues in relation to the performance of the caretaking duties.[7] Mr Cheng responded the same day addressing the issues and advising that the applicant was performing its contractual duties.[8]
  5. [11]
    In February 2016, Goldstein & Associates wrote to the applicant raising issues in relation to the maintenance of the pool, the cleaning of drains and a leaking shower tray in the manager’s unit.[9] Mr Cheng responded advising that, among other things, the issues complained of regarding the leaking shower tray in fact related to the indoor pool.[10]
  6. [12]
    On 3 February 2016, the body corporate committee met and resolved to instruct the body corporate’s solicitors to prepare and issue a remedial action notice. On 11 March 2016 a remedial action notice was issued to Ranch Frey (the RAN).[11] At an EGM on 24 June 2016, the body corporate resolved to terminate the deed of engagement. On the same day, the solicitors for the body corporate wrote to the solicitors for Ranch Frey giving notice of the intention of the committee of the body corporate to act on the authority to terminate the deed of engagement.[12]

The legislative and legal framework

  1. [13]
    The dispute between the parties is governed by the Body Corporate and Community Management Act 1997 (Qld) (‘BCCM Act’) and Body Corporate and Community Management (Accommodation Module) Regulation 2008 (‘the Module’).
  2. [14]
    If a service contractor fails to carry out duties under an engagement the body corporate may terminate the engagement.[13] The body corporate must first give to the service contractor a remedial action notice.[14] The notice must, among other things, set out details of the action sufficient to identify the duties the body corporate believes have not been carried out, and state that the person must carry out the duties within a specified period but not less than 14 days after the notice is given.[15] If the service contractor fails to comply with the notice within the stated period, and approval is given by ordinary resolution of the body corporate, the body corporate may terminate the engagement.[16]
  3. [15]
    A body corporate must act reasonably in carrying out its functions.[17] The body corporate committee must act reasonably in making a decision.[18]
  4. [16]
    A party may apply to the tribunal about a claimed or anticipated contractual matter about the engagement of a person as caretaking service contractor or the authorisation of a person as a letting agent.[19] The tribunal may grant an interim injunction if it is just and convenient to do so.[20] An appropriate undertaking may be required by the tribunal.[21]
  5. [17]
    The limitation on the power of the tribunal to order an interim injunction only if it is just and equitable to do so is a legislative statement of the general common law principle. It will be just and equitable to grant an interim injunction if the tribunal is satisfied that:
    1. There is a serious issue to be tried; and
    2. The balance of convenience favours the granting of the injunction; and
    3. Damages are otherwise not an adequate remedy.

What do the parties say?

  1. [18]
    Ranch Frey says that there is a serious issue to be tried. It says that the caretaker duties have been carried out in accordance with schedule 2 of the deed of engagement. The affidavit of Ran Cheng sets out the response by the applicant to the matters contained in the RAN.[22] Ranch Frey refers to four (4) specific examples of allegations contained in the RAN refuted by Ranch Frey. These allegations relate to the failure to replace outdoor lights; the failure to maintain the indoor pool to prevent the tiles becoming stained and mouldy; maintaining the outdoor pool area and balustrading; and maintaining the ground floor foyer in a tidy and clean condition.[23]
  2. [19]
    During the course of the hearing of the application, counsel for Ranch Frey, Ms McNeil, took the Tribunal through a series of photographs attached to an affidavit by the body corporate chairperson.[24] Ms McNeil submitted that the photographs illustrated that factual findings would need to be made at a hearing, after the evidence has been heard, in relation to the allegations contained in the RAN.
  3. [20]
    Ranch Frey says that the balance of convenience favours the granting of the interim injunction and says that if the deed of engagement is terminated the applicant will suffer significant financial detriment. Ranch Frey says that it will continue to perform its caretaking duties and that the body corporate will not be disadvantaged by the granting of the interim injunction.
  4. [21]
    Finally, Ranch Frey says that damages will not be an adequate remedy, that the deed of engagement has a further 26 years to run and that the loss that the applicant will suffer if the deed of engagement is terminated is the income it would have derived over the life of the agreement and the loss of the ability to sell the caretaking and management rights.
  5. [22]
    The body corporate says that it is necessary to determine whether the RAN valid and whether it has been complied with.[25]
  6. [23]
    The body corporate refers to the response to the RAN by Ranch Frey[26] and says that the RAN is valid and has not been complied with by the applicant. The body corporate observes that Ranch Frey chose not to respond to the RAN within the specified time. The body corporate says that Ranch Frey must, in order to demonstrate a serious question to be tried, make out a prima facie case that at the expiry of the RAN, the duties had been complied with.
  7. [24]
    The body corporate says that the balance of convenience does not favour the grant of the interim injunction on the basis that Ranch Frey has failed to carry out its duties to maintain the common property and that the body corporate will be prejudiced by being prevented from dealing with a contractor who is refusing to carry out its contractual obligations. The body corporate says that it will thereby be prevented from being able to exercise proper control over its common property.
  8. [25]
    The body corporate says that damages will be an adequate remedy and that in circumstances where a principal terminates a contract without proper reason the contractor would be entitled to damages.

Consideration

  1. [26]
    Two issues arise on an application for an interim injunction – whether the applicant is able to make out a serious question to be tried and whether the balance of convenience favours the granting of an injunction. Whether damages are an adequate remedy may be an independent criterion for consideration or a factor that goes to the balance of convenience.[27]
  2. [27]
    As has been observed by this tribunal, it is a serious matter when a body corporate acts to terminate a service agreement.[28]
  3. [28]
    The body corporate points to a number of examples of allegations contained in the RAN that, says the body corporate, clearly demonstrate that the notice was not complied with by Ranch Frey. The body corporate refers to the failure by the applicant to supply a quote for the replacement of a BBQ plate in the common property BBQ area;[29] graffiti on the lift motor room door has not been cleaned;[30] common property rubbish rooms and areas surrounding the rubbish shuts were not kept clean.[31]
  4. [29]
    The body corporate says that Ranch Frey did not respond to the RAN within the stated period.  The minutes of the committee meeting at which it was resolved to issue the RAN refer to “a letter from the Body Corporate’s Lawyers dated the 27th February 2015, and a letter from the Body Corporate Manager to Ranch Frey dated the 12th August 2015 regarding matters requiring the attention of the caretakers in accordance with the deed of engagement.[32] It was noted that the matters had not been rectified. The minutes then record the resolution to issue the RAN. It is unclear whether the letter from the body corporate manager to Ranch Frey is different in content (or in fact) to the email from the manager dated 25 August 2015 which Mr Cheng deposes as having responded to. Whilst Mr Cheng’s failure to respond to the RAN is not explained, there is evidence before the Tribunal suggesting that the applicant had previously addressed issues raised by the body corporate that may have been included in the RAN. These are, again, factual matters that will need to be the subject of findings after the evidence is heard.
  5. [30]
    The applicant says that all of the allegations contained in the RAN are strongly refuted. In his affidavit Mr Cheng deals at some length with the applicant’s responses to the various issues raised regarding the performance of the caretaking duties.[33] Mr Cheng deposes to the fact that the quote for the BBQ plate has been obtained. The quote was obtained after the period nominated in the RAN. The applicant’s response to this issue is, if this is the only allegation on which the body corporate is ultimately successful, the question will be whether the response of the body corporate was reasonable both in relation to issuing the RAN and in resolving to terminate the deed of engagement.
  6. [31]
    A “serious question to be tried” has also been referred to as a “prima facie case of sufficient merit to justify the grant of an interlocutory injunction”.[34] Prima facie does not mean that an applicant must show that it is more probable than not that at the trial the applicant will succeed; it is sufficient that the applicant show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.[35]
  7. [32]
    The evidence before the Tribunal suggests that the building is old and in need of significant building and structural repair. That the lot owners have been levied and the necessary building works commenced is a clear acknowledgement by the body corporate of this state of affairs. The defects and required repairs may be far more extensive than the body corporate has thus far committed to undertake. Evidence for this can be found in the proposed motions relating to the building works which contained quotes in excess of $1.6 million. The evidence also suggests that, at least in a number of respects, issues identified by the body corporate in the RAN as failures on the part of the applicant to undertake its required duties might be related, directly or indirectly, to the building and structural defects identified in the Buildtech report. If this is so, it raises clear questions as to whether the body corporate acted reasonably in issuing the RAN.
  8. [33]
    By way of illustration, the Buildcheck report contains a photograph of what is identified as indoor pool water entry/spalling.[36] This appears to depict what the body corporate says is a mouldy ceiling which Ranch Frey has not maintained.[37] It is not possible on an application such as this to determine whether and to what extent there is mould on the ceiling that has not been cleaned by the applicant or whether what is depicted in the photographs is evidence of a more serious structural issue relating to the swimming pool.
  9. [34]
    The body corporate relies upon a number of photographs said to depict, among other things, stained and mouldy tiles.[38] I agree with the submission by Ranch Frey that on an interim injunction application it is not possible to make findings as to whether the tiles are stained and mouldy as a result of lack of maintenance or simply the result of a 30 year old building in need of renewal.
  10. [35]
    More generally, in her affidavit, Mrs Chambers deposes to having taken photographs of the scheme after the RAN was issued upon which the body corporate relies as evidence of non compliance by the applicant with its caretaking duties. One of the issues for determination in the principal application will be the question of whether the schedule of caretaker duties adequately identifies the nature and scope, including frequency, of duties to be performed. Whilst the photographs may purport to indicate a particular failure by the caretaker to perform a specific duty, it may be that the required frequency of the duty inevitably results in some interim, temporary, accumulation of refuse, herbage and the like. Any lack of clarity in the schedule of duties may be relevant to findings as to the reasonableness of the actions of the body corporate and the validity of the RAN.
  11. [36]
    Mr Cheng deposes to the fact that the large numbers of tradespeople accessing the building during the renovation works resulted in the common property and lift areas becoming dirty very quickly.[39] I assume from this, although it is not expressly stated thus, that keeping the common areas clean at all times was problematic. Evidence will be need to be led on these issues at the hearing and findings made.
  12. [37]
    If ultimately there are allegations in the RAN that are established on the facts after a hearing, then depending on just what those allegations are there may be a serious question to be determined as to the reasonableness of the actions of the body corporate in issuing and acting upon the RAN.
  13. [38]
    I am satisfied that Ranch Frey has established that there is a serious question to be tried.
  14. [39]
    Turning to the balance of convenience considerations, presently Ranch Frey is performing the caretaking duties and says it will continue to perform those duties if the interim injunction is granted.[40] If the interim injunction is not granted, it is common ground that a number of consequences will immediately flow. Firstly, the body corporate will act to terminate the deed of engagement. Secondly the body corporate will notify Ranch Frey’s financier of the termination of the agreement. The financier will exercise its rights over the assets of the applicant, including the right to appoint an administrator, and to call in the secured debt.[41] The consequences for Ranch Frey will, in these circumstances, be very significant as the applicant submits.
  15. [40]
    Against these considerations must be weighed the detriment to the body corporate in granting the interim injunction. The body corporate will be required to maintain the services of a caretaker which the body corporate says is not performing its duties. The body corporate expresses concern that it may be exposed to liability for loss suffered by lot owners from damage to property or in respect of personal injury.[42] The concerns expressed by the body corporate, while no doubt genuine, are not of such gravity that they outweigh the factors in favour of granting the interim injunction. I am satisfied that the balance of convenience favours the granting of the interim injunction.
  16. [41]
    As to whether damages would be an adequate remedy, the body corporate conceded at the hearing that the quantification of damages would be difficult but not impossible. In my view, damages would not be an adequate remedy. There is no sworn evidence before the Tribunal as to Ranch Frey’s future intentions regarding the caretaking and letting rights. They may intend to sell those rights at some time in the future. Evidence would be required of the value of the rights at some future point in time. Evidence would also be required of the loss of income suffered by the applicant up until any intended sale of the caretaking and letting rights. All of this is uncertain. There is also the issue of whether the body corporate would be in a position to satisfy a damages award. Counsel for the body corporate submitted that the body corporate would levy the lot owners to meet a damages award. This pre-supposes, among other things, that lot owners will pay a levy promptly and in full. Again, all of this is uncertain. All of these factors lead me to the view that damages would not be an adequate remedy.

Orders and directions

  1. [42]
    Being satisfied that it is just and convenient to do so, I order as follows:
  1. Upon the undertaking of Ranch Frey Pty Ltd ATF for Ranch & Frey Family Trust (Ranch Frey), Ran Cheng and Freya Lui as to damages, the Body Corporate for Quarterdeck CTS 11361 (“Body Corporate”) whether by its servants, agents, employees or otherwise is restrained from:
    1. terminating or attempting to terminate the Deed of Engagement and Authorisation dated 30 April 2007 (as varied and assigned) (“Agreement”) between the Body Corporate and Ranch Frey:
      1. in reliance on the resolution by the Body Corporate to terminate the Agreement arising from the extraordinary general meeting held on 24 June 2016;
      2. in reliance on the remedial action notice dated 11 March 2016, the subject of these proceedings; or
    2. giving any notice pursuant to section 126 of the Body Corporate and Community Management Act 1997;

until the earlier of:

  1. the final determination of the proceeding;
  2. order of the Tribunal;
  3. agreement in writing between the parties.

I also make the following directions:

  1. Body Corporate for Quarterdeck CTS 11361 is added as a respondent.
  2. Kalego Accounting & Strata Professionals Pty Ltd is removed as a respondent.
  3. Ranch Frey Pty Ltd ATF Ranch & Frey Family Trust has leave to rely upon a copy of the affidavit of Peter George sworn 7 July 2016 upon the undertaking of the solicitors for the applicant to file the original affidavit in the tribunal.

Footnotes

[1] Affidavit of Ran Cheng sworn 4 July 2016.

[2] Buildcheck report – 27.03.15.

[3] Ibid.

[4] Minutes of Extraordinary General meeting dated 28.10.15.

[5] Ibid, motion 2.

[6] Ibid, motion 2.

[7] Email Goldstein & Associates to Applicant – 25.08.15.

[8] Email Danny Chen to Goldstein & Associates – 25.08.15.

[9] Letter Goldstein & Associates to Applicant – 11.02.16.

[10] Email Danny Chen to Goldstein & Associates – 15.02.16.

[11] Remedial Action Notice dated 11.03.16.

[12] Letter Adamson Bernays Kyle and Jones to Short Punch & Greatorix – 24.06.16.

[13] Module, s 129(1)(b).

[14] Module, s 129(4).

[15] Module, s 129(4)(b) and (c).

[16] Module, s 129(1).

[17] BCCM Act, s 94(1).

[18] Ibid at s 100(5).

[19] BCCM Act, s 149B.

[20] Queensland Civil and Administrative Act 2009 (Qld) (‘QCAT Act’), s 59(1).

[21] Ibid, s 59(6)(a).

[22] Affidavit of Ran Cheng dated 04.07.16 at [52] to [60].

[23] Applicant’s submissions at [22] to [25].

[24] Affidavit of Janelle Chambers dated 06.07.16.

[25] Respondent’s submissions at [30].

[26] Application filed 16.06.16, Annexure “A”.

[27] Highvic Pty Ltd & Ors v Quarterback Group Pty Ltd & Anor [2012] QSC 8.

[28] Ralacom Pty Ltd v Body Corporate for Paradise Island Apartments [2010] QCAT 334

[29] RAN at 1(a) and Affidavit of Janelle Chambers at [9] – [10].

[30] Ibid at 3(s) and see Affidavit of Janelle Chambers at [15(s)] and photographs DSCN 2015 and 2333 attached thereto.

[31] Ibid at 3(t) and see Affidavit of Janelle Chambers at [15(t)] and photographs DSCN 2112 and 2113 attached thereto.

[32] Affidavit of Janelle Chambers, Exhibit bundle “JC1” at page 20

[33] Affidavit of Ran Cheng at [38], [40], [48], [52] to [60]

[34] Bestjet Travel Pty Ltd v The Australian Federation of Travel Agents Ltd [2016] QSC 81.

[35] Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 per Gummow and Hayne JJ at 27.

[36] Buildcheck report – photo 19.

[37] Affidavit of Janelle Chambers at [14(b)] and DSCN2063.

[38] Ibid, DSCN2048, 2059, 2061.

[39] Affidavit of Ran Cheng at [60(b)].

[40] Applicant’s submissions at [39].

[41] Ibid at [35].

[42] Affidavit of Janelle Chambers at [17] and [18].

Close

Editorial Notes

  • Published Case Name:

    Ranch Frey Pty Ltd v Body Corporate for Quarterdeck

  • Shortened Case Name:

    Ranch Frey Pty Ltd v Body Corporate for Quarterdeck

  • MNC:

    [2016] QCAT 252

  • Court:

    QCAT

  • Judge(s):

    Senior Member Brown

  • Date:

    15 Jul 2016

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.
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