Queensland Judgments
Authorised Reports & Unreported Judgments
  • sclq logo
  1. Caselaw
  2. QCAT
  3. 2015
  4. XMR Holdings Pty Ltd v Body Corporate for Xanadu CTS 26361 - [2015] QCAT 437

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment

XMR Holdings Pty Ltd v Body Corporate for Xanadu CTS 26361[2015] QCAT 437

XMR Holdings Pty Ltd v Body Corporate for Xanadu CTS 26361[2015] QCAT 437

CITATION:

XMR Holdings Pty Ltd v Body Corporate for Xanadu CTS 26361 & Ors [2015] QCAT 437

PARTIES:

XMR Holdings Pty Ltd

(Applicant)

v

Body Corporate for Xanadu CTS 26361

Body Corporate for Xanadu East CTS 26380

Body Corporate for Xanadu North CTS 26993

(Respondents)

APPLICATION NUMBER:

OCL057-014

MATTER TYPE:

Other civil dispute matters

HEARING DATE:

3 August 2015

HEARD AT:

Brisbane

DECISION OF:

Member Barlow QC

DELIVERED ON:

19 October 2015

DELIVERED AT:

Brisbane

ORDERS MADE:

  1. The parties, by their solicitors or counsel, consult with each other as to the appropriate orders having regard to these reasons, by 31 October 2015.
  2. If the parties agree on the proposed orders, the applicant file a copy signed on behalf of all parties, by 7 November 2015.
  3. If the parties do not agree on the proposed order, then:
    1. the parties file and serve draft minutes of proposed orders and submissions of no more than 4 pages in support of them, by 7 November 2015;
    2. each party may file submissions of no more than 3 pages in response to the other party’s submissions, by 14 November 2015.

CATCHWORDS:

Body Corporate and Community Management – Review of remuneration under caretaking service contract – Whether provision for determination by independent person in default of agreement contrary to Chapter 6 of Body Corporate and Community Management Act 1997 – Body Corporate and Community Management Act 1997, ss 291, 318

Contract – whether misnomer of appointor of independent person – whether appointee properly appointed – whether independent person’s report valid

APPEARANCES:

 

APPLICANT:

D A Savage QC & B Kidston, counsel, represented the Applicant

RESPONDENTS:

C J Carrigan, counsel, represented the Respondents

REASONS FOR DECISION

  1. [1]
    This decision concerns a number of discrete but interrelated and complex issues.  For convenience of the reader, I set out below a table of the headings under which I shall consider them and the pages at which those headings appear.

Introduction2

In clause 2, can the reference to CTIQ Inc be read as a reference to New SCAQ?5

The entity named in the contract5

Change of entity6

Did New SCAQ’s President appoint Mr Little?7

Is clause 2 partly or wholly invalid due to s 229 & s 318?8

Were Mr Little’s determinations reviews to market?14

If Mr Little’s review is invalid, can and should the Tribunal undertake a review to market (the Question)?17

Conclusions18

Introduction

  1. [2]
    The applicant (XMR) is the current caretaking services contractor and letting agent for three community titles schemes that are commonly referred to as “Xanadu Main Beach Resort”.
  2. [3]
    The respondents are the bodies corporate for the schemes.  Where necessary, I shall refer to the schemes and their respective bodies corporate as the principal scheme or body corporate, the East scheme or body corporate and the North scheme or body corporate.
  3. [4]
    The appointment and conduct of XMR as caretaker and letting agent is the subject of a contract with each body corporate.  The contracts were made between the bodies corporate and another person in 2005.  Each contract is for a total of 25 years, expiring in 2030.  XMR took assignments of them with effect from 22 June 2012.  At the same time, amendments were made to the contracts and one of those amendments is the subject of this application.
  4. [5]
    The contracts are materially identical, apart from the fact that the date from which XMR’s remuneration is annually reviewed is 11 February for the principal and East schemes and 19 August for the North scheme.  For the purposes of this decision I shall generally ignore that difference, but it may be taken that where I refer to 11 February, I mean 19 August so far as the North scheme and contract are concerned.
  5. [6]
    This application concerns the proper amount of remuneration payable by the bodies corporate to XMR since 11 February 2013.  That was the first year, since XMR took over the contracts, for the potential adjustment of its remuneration other than in accordance with the consumer price index.
  6. [7]
    Of crucial relevance to the matters with which I am now concerned, is clause 2 of Schedule A of the contracts.  That clause relevantly provides:

“The remuneration of the Manager shall be reviewed annually during the term of this Agreement … for each of the next ensuing 12 month period.  For the years commencing 11 February 2008, 2009 and every other year where there is not a review to market in accordance with the following provisions of this clause, the remuneration for such annual period shall be [in accordance with changes in the consumer price index] … PROVIDED FURTHER THAT … if any dispute shall arise between the parties with respect to the amount of additional remuneration or with respect to the construction or effect of this Clause the determination of the additional remuneration or other matter in dispute shall be made by  the President for the time being of the Community Titles Institute of Queensland Incorporated or by his or her nominee whose decision will be final and binding on the parties and whose costs will be shared equally.  At the commencement of the 12 month period commencing 11 February, 2010, 2013, 2016, 2019, 2022, 2025 and 2028, the remuneration of the Manger will, in the absence of agreement between the parties as to the new remuneration, be reviewed to market in the manner set out above (ie by an independent person appointed by the President for the time being of the Community Titles Institute of Queensland Incorporated or by his or her nominee and the same conditions relating to the determination thereof as set out above in this Clause will apply.” 

  1. [8]
    This decision is on some preliminary issues, to be determined before the trial of the principal dispute and concerning, in particular, the construction of that clause and its validity in the light of the relevant provisions of the Body Corporate and Community Management Act 1997.  By order of Acting Senior Member Hanly, those issues are:
    1. the question of whether the Tribunal can and should determine the remuneration payable in respect of each of the caretaker agreements for the 12 month period commencing on each of the 2013 Review Dates, in the event that the determinations of Mr Little, or any of them, are found to be invalid; and
    2. the matters the subject of Divisions 5A, 5B and 5C of the Second Further Amended Statement of Claim, excluding the amendments but including the question referred to above.
  2. [9]
    In my opinion, it is appropriate to consider the matters the subject of the nominated divisions of the statement of claim before considering the separate question.  Those divisions are materially identical to each other, each concerning one of the three bodies corporate. 
  3. [10]
    In summary, XMR contends in its statement of claim that:
    1. as at February 2013 and January 2014, the functions of the entity referred to in clause 2 as the Community Titles Institute of Queensland Incorporated had been taken over or succeeded to by Strata Community Australia Limited ACN 163 881 927 (New SCAQ);
    2. as at February 2013 and by January 2014 the parties had not agreed on XMR’s remuneration from 11 February 2013;
    3. in January 2014, pursuant to clause 2 XMR requested the President of New SCAQ to appoint an independent person to review its remuneration to market;
    4. the President of New SCAQ appointed Mr Daniel Little as that person;
    5. Mr Little reviewed XMR’s remuneration to market and determined that remuneration to be a certain figure under each contract;
    6. if Mr Little’s determination is invalid, the Tribunal can and should determine XMR’s remuneration by a review to market.
  4. [11]
    The bodies corporate contend in their response to the statement of claim that:
    1. there has never been an entity called the Community Titles Institute of Queensland Incorporated and therefore clause 2 can have no effect in purporting to provide for the President of that body to appoint an independent person to review XMR’s remuneration;
    2. alternatively, the entity referred to in clause 2 ceased to exist and New SACQ did not take over or succeed to its functions;
    3. alternatively, the President of New SCAQ did not in fact appoint Mr Little;
    4. in so far as clause 2 provides for the appointment of a person to determine XMR’s remuneration in the absence of agreement, it purports to provide a dispute resolution mechanism and is therefore contrary to sections 229 and 319 of the Act and is void, either to that extent or wholly;
    5. in any event, Mr Little’s review was not a review to market and is not binding on the parties;
    6. if Mr Little’s determination is invalid, whether the Tribunal can determine XMR’s remuneration depends on the basis of invalidity, but in any event, either there is no basis for the Tribunal to undertake such a determination, or it ought not do so as a matter of discretion.

In clause 2, can the reference to CTIQ Inc be read as a reference to New SCAQ?

The entity named in the contract

  1. [12]
    The parties agree that there was never, at any relevant time, an entity called Community Titles Institute of Queensland Incorporated.
  2. [13]
    On 22 June 2012, when the deeds of variation were made, inserting the reference to that named entity, the only entity with a similar name – and which had functions relevant to the conduct of body corporate management – was Strata Community Australia (Queensland) Ltd (ACN 010 517 923). That company had formerly (until 21 June 2011) been known as Community Titles Institute of Queensland Ltd.  It was a public company limited by guarantee.  I shall refer to it as “Old SCAQ”.
  3. [14]
    Therefore, as at the date of the variation, there was an incorporated entity that had, until about a year earlier, had the name Community Titles Institute of Queensland, but it was a public company limited by guarantee rather than (as the word “Incorporated” implied) an incorporated association.  Its functions included the promotion of high standards of expertise in strata title management, education of strata title managers, regulation and supervision of strata title managers and similar functions concerning the management of community titles schemes.
  4. [15]
    It seems clear to me that the reference in the contracts to Community Titles Institute of Queensland Incorporated was simply a misdescription of the name of the entity to which the parties were referring in the contract.  In construing the contract, it is permissible for me to take into account the objective circumstances in which it was made, including the facts set out above.  A court or tribunal construing a contract may correct an obvious misnomer of a party or other entity referred to in the contract, having regard to evidence of the surrounding circumstances.[1]  Similarly, in a contract words may be supplied or corrected by a court or tribunal in order to avoid an absurdity[2] (such as, in this case, the absurdity of parties purporting to give power to the President of an entity that did not exist).
  5. [16]
    In the circumstances, I construe the reference to “Community Titles Institute of Queensland Incorporated” as being to Strata Community Australia (Queensland) Ltd (ACN 010 517 923) (that is, Old SCAQ).

Change of entity

  1. [17]
    However, by the time that XMR sought to have an independent expert appointed to undertake a market review (11 February 2014), by the time it sought a replacement in light of the first nominee declining his appointment (14 July 2014) and by the time Mr Little was purportedly appointed (18 July 2014):
    1. Old SCAQ had ceased to undertake relevant activities, had changed its name to SCA-RTO Pty Ltd and had altered its status to that of a proprietary company limited by shares;
    2. the activities and functions formerly conducted by that company had been taken over, in effect, by a separate public company limited by guarantee known as Strata Community Australia (Qld) Ltd (ACN 163 881 927) (to which I shall refer as “New SCAQ”).
  2. [18]
    The circumstances in which this occurred were deposed to by witnesses for XMR: Alan Buckle, Maxwell Walker and Gary Cobbledick.  It is unnecessary, for the purposes of these reasons, to describe that evidence in any detail.  It suffices to say, in summary, that it is clear that New SCAQ was intended to, and did in effect, take over the relevant functions of Old SCAQ.
  3. [19]
    New SCAQ has a President and it was this person who purported to appoint Mr Little to undertake the market review of XMR’s remuneration.
  4. [20]
    The original contracts did not provide for the circumstance that the named entity ceased to perform relevant functions and was replaced by another entity.  However, the deeds of variation by which the new clause 2 of Schedule A was introduced into the contracts, provided (in clause 2.1(p)):

“References to Institutes, associations, bodies and authorities, whether statutory or otherwise, will, if it ceases to exist, or is reconstituted, renamed or replaced or Its [sic] powers or functions are transferred to refer to the institute, association, body or authority established or constituted in its place or which substantially succeeds to its powers or functions.”

  1. [21]
    Although grammatically incorrect and perhaps missing the words “be taken to” before “refer to”, the intent of this clause is clear.  It is intended to have the same effect as common clauses in contracts and sections in statutes that intend that a change of entity or index with certain functions shall not render void or inoperative a clause or section that refers to the original entity or index.
  2. [22]
    It is surprising that this clause was not, by the deeds of variation, added to the original contracts.  However, the deeds of variation inserted the new clause into the contracts and, in my view, the new clause must be construed in accordance with the mechanism set out in clause 2.1(p) of the deeds.  If so construed under the deeds, it must be identically construed in the contracts.
  3. [23]
    I consider the evidence to show clearly that New SCAQ has effectively replaced Old SCAQ.  It has been established in place, and succeeded to powers and functions, of Old SCAQ.  Therefore, under clause 2, the appropriate person to appoint an independent person to undertake a market review of XMR’s remuneration under the contracts was the President for the time being of New SCAQ.

Did New SCAQ’s President appoint Mr Little?

  1. [24]
    The bodies corporate submit that the correspondence from New SCAQ demonstrates that Mr Little was not appointed by the President of that body, as required by clause 2, but by its board.  Therefore, they submit, Mr Little was not validly appointed.
  2. [25]
    The relevant letter from the President of New SCAQ[3] said:

“As the President of [New SCAQ] I have again taken your correspondence to the [New SCAQ] Board of Directors, in light of Leary & Partners decision to decline my appointment.  The Board has discussed your request for me to nominate Mr Danny Little as an appropriate specialist to make a determination of the remuneration for your client.  Based on the outcome of our decision, the Board has found Mr Danny Little of Management Rights Advice and Service Consultants the appropriate specialist in our view to make such a determination.

I would like to nominate Mr Little to resolve the dispute on my behalf.”

  1. [26]
    XMR’s counsel submitted that, “It is plain from the express words of Mr Barnard’s letter that while the board of directors considered the appropriateness of Mr Little’s appointment, it was Mr Barnard, as President, that [sic] nominated Mr Little.” 
  2. [27]
    I agree with that submission.  Therefore, the appointment of Mr Little was made by the President of New SCAQ and, subject to the following issue, was valid.

Is clause 2 partly or wholly invalid due to s 229 & s 318?

  1. [28]
    The bodies corporate contend that clause 2 of Schedule A is invalid, either wholly or insofar as it provides for the appointment of an independent expert to determine XMR’s remuneration on a market review, because:
    1. the clause comprises a method of resolving a dispute between the parties as to XMR’s remuneration;
    2. in doing so it is contrary to s 229 of the Act, which relevantly provides that the only method of resolving a dispute between a body corporate and its manager or letting agent about or arising from their contract is by a dispute resolution process described in s 229;[4]
    3. the clause is also an attempt to contract out of s 229 or to waive or limit the parties’ rights under that section, which is expressly prevented by s 318.
  2. [29]
    XMR contends that the clause is not a method of resolving disputes, but rather is a method of determining its remuneration if the parties do not agree on it, and therefore neither s 229 nor s 318 applies to it.  It also contends that there was no dispute that enlivened the clause and led to the appointment of Mr Little, but merely an absence of agreement as to the amount of the remuneration.
  3. [30]
    XMR first asked the President of New SCAQ to appoint an independent person to undertake a market review under clause 2, by letter dated 11 February 2014.[5]
  4. [31]
    Before that letter was written, the parties and their solicitors had engaged in a series of correspondence.  The most relevant correspondence concerning the principal body corporate was the following.[6]  All of this correspondence concerned the East and North bodies corporate as well as the principal body corporate, or was mirrored by other correspondence on behalf of or concerning the East and North bodies corporate.
    1. By emails of 25 February 2013, each body corporate informed Xanadu that its remuneration would increase by CPI from the relevant review date.[7]
    2. By letter dated 22 November 2013, XMR referred to clause 2 of schedule A and asked the bodies corporate to negotiate with a view to reaching agreement on the remuneration payable from the review date.[8]
    3. By letter dated 3 December 2013, the bodies corporates’ solicitors responded, expressing disappointment at the requests for increased remuneration and stating –

“In these circumstances, the Bodies Corporate will not agree to an increase in remuneration above the minimum stipulated under Schedule A … (i.e., a CPI increase).”[9]

  1. By letter dated 14 January 2014, in the context of seeking to agree on a mediation before proceeding with the appointment of an independent person under clause 2, XMR’s solicitors relevantly sought agreement from the bodies corporate that:
  1. XMR was entitled to a review of its remuneration under the relevant contractual provisions from certain dates;
  2. “there has been failure to reach agreement for the purpose of each of the relevant provisions;”
  3. the Queensland Law Society President appoint either Mr Little or another named person to determine the remuneration;[10]
  4. the bodies corporate would meet half of the nomination fee and the fees charged by the appointee; and
  5. any appointment not become active pending the earlier of the unsuccessful conclusion of the mediation and 13 February 2014.[11]
  1. By letter dated 22 January 2014, the bodies corporate:
  1. disagreed with the dates but otherwise impliedly agreed with XMR’s first proposition;
  2. agreed with the second proposition;
  3. agreed to the President of “the Community Titles Institute of Queensland Incorporated” appointing Mr Little or the other nominated person (preferring Mr Little);
  4. agreed to meet half the costs incurred by that body and the appointee; and
  5. agreed with the last proposition.[12]
  1. By letter dated 24 January 2014, XMR’s solicitors provided a draft letter to the President of “Strata Community Australia (formerly CTIQ)” seeking nomination of Mr Little as the expert to determine XMR’s remuneration, and asked the bodies corporate to execute it.[13]
  2. The proposed mediation did not proceed, for reasons that are not apparent to me, although XMR proposed on 30 January that it take place by 28 February 2014 and, in the meantime, the parties sign the request for appointment of Mr Little, but the appointee would be instructed not to take any steps pending the outcome of the mediation.[14]
  3. On 10 February 2014, XMR reiterated its proposal of 30 January and said that, unless the bodies corporate agreed to that proposal, XMR would proceed to request the appointment of an expert.[15]
  4. On 11 February 2014, XMR sent a letter to “The President, Strata Community Australia (Formerly CTIQ”)[16] that eventually led to Mr Little’s appointment.[17]
  1. [32]
    In support of its contention that there was no “dispute” to which s 229 can apply, XMR points in particular to the wording of clause 2 (“in the absence of agreement between the parties as to the new remuneration”) and to the bodies corporates’ acknowledgment, by their solicitors’ letter of 22 January 2014, that there had been failure to reach agreement for the purpose of each of the relevant provisions.
  2. [33]
    On the other hand, the bodies corporate point to their solicitors’ letter of 3 December 2013 and contend that a dispute arose concerning a contractual matter between the parties (that is, the appropriate remuneration of XMR under the agreements) from their refusal to agree to an increase above CPI.
  3. [34]
    These opposing contentions must be resolved by considering whether the parties’ failure to agree on the remuneration itself constitutes a dispute between them.
  4. [35]
    Unfortunately, the definitions and other provisions in the Act concerning what is a “dispute” beg the question of what is a “dispute”.  The Act defines disputes, and provides for the methods of resolving them, only by reference to the subject matters of a dispute, not by what amounts to a dispute.  In particular, they do not assist in determining whether the absence of an agreement can or does, without more, constitute a dispute.
  5. [36]
    It is necessary, therefore, to advert to the ordinary English meanings of the term – principally in the manner in which it is used in the Act, namely as a noun.
  6. [37]
    The Macquarie Dictionary online defines “dispute” as meaning -

“–verb (i) 1.  to engage in argument or discussion.

  1.   to argue vehemently; wrangle or quarrel.

–verb (t) 3.  to argue or debate about; discuss.

  1.   to argue against; call in question.
  1.   to quarrel or fight about; contest.
  1.   to strive against; oppose: to dispute an advance.

–noun 7.  argumentation; verbal contention; a debate or controversy; a quarrel.”

  1. [38]
    The New Shorter Oxford English Dictionary relevantly defines “dispute” as meaning –

(as a noun) “2 An instance of disputing or arguing against something or someone, as an argument, a controversy …

3  The act of disputing or arguing against something or someone; controversy, debate.”

(as an intransitive verb) “1  Contend with opposing arguments or assertions; argue; …”

(as a transitive verb)  “3  Discuss, debate, or argue (a question or point) …

4   Maintain or defend (an assertion, claim, etc) by argument or disputation; contend (that something is so).”

  1. [39]
    Frankly, these definitions do not greatly assist in resolving the question before me of whether a failure to agree on XMR’s remuneration itself constitutes a “dispute”.
  2. [40]
    The bodies corporate rely on a number of cases in support of their contention that the very fact of failing to agree on XMR’s remuneration, or that fact coupled with their express refusal to agree to an increase beyond CPI, constituted a dispute.[18]  But each of those cases depended on its own facts and, with the possible exception of the Batwing decision, in each case it was not in contention that there was an extant dispute between the parties.
  3. [41]
    The closest to the circumstances of this case (because it involved a dispute about the amount of a caretaking service contractor’s remuneration following a reduction in its duties) was the decision of Dalton J in Batwing.  In that matter, following unsuccessful discussions the parties had agreed on the appointment of an arbitrator to resolve the appropriate amount of the contractor’s remuneration.  There appears to have been little or no doubt in the minds of the parties and the Court that there was a dispute.  Indeed, the very mechanism of appointing an arbitrator presupposes a dispute, as arbitration is clearly a method of resolving disputes.
  4. [42]
    However, Dalton J noted and dealt with an argument by the body corporate in the following paragraph:

“[38] The applicant argued that the parties were not in dispute at the time of the reference to the arbitrator.  The dispute between them had settled:  the terms of the settlement being to exclude the security services from the scope of works under the [contract] at a price to be fixed, with an agreed mechanism (arbitration) to fix that price.[19]  In my view, having regard to the facts of this matter, that is not a correct legal interpretation of what has occurred.  The parties were in dispute at all material times.”

  1. [43]
    Three matters should be noted about that passage and the case in which it appears.  First, as her Honour noted, her view had regard to the facts of the matter.  Those facts were that the parties had already debated, and had reached substantial and apparently unresolvable disagreement about, the amount by which the remuneration should be reduced.  Secondly, the agreement to refer the dispute to arbitration was not part of the caretaking services contract but was a separate agreement to resolve that disagreement.  Thirdly, her Honour noted that the parties were in dispute at all material times.
  2. [44]
    A failure to agree can, in some circumstances, result in a dispute about the subject matter.  However, where the parties to a contract have, in that contract, agreed on a method to determine a matter provided by the contract if they do not agree on that matter, then the failure to agree is not itself a dispute, nor does it lead inevitably to a dispute.  Rather, the absence of agreement on the particular matter enlivens the already agreed method of ascertaining the relevant matter.
  3. [45]
    I consider that to be the position that arises from clause 2.  The clause provides for 2 alternative methods to determine what XMR’s remuneration should be on a market review:  either agreement by the parties or determination by an independent expert.  In the absence of agreement, the remuneration “will be reviewed to market … by an independent person” appointed by the method provided.
  4. [46]
    The bodies corporate had proposed a review in accordance with CPI, with which XMR did not agree.  Although the bodies corporate had said in their solicitors’ letter of 3 December 2014 that they would not agree to an increase above CPI, that was “in these circumstances” (ie, those referred to in the letter).  That, and the proposal for mediation, suggested the possibility of further negotiation and agreement, which again suggests the absence of a “dispute”.  But in any event, in the absence of an agreement, the parties had already contemplated and agreed on the appointment of an independent person to determine the remuneration.  Thus, they were not in dispute, but were putting into effect the default mechanism for determination of XMR’s remuneration in the absence of agreement.
  5. [47]
    I am supported in this view by a decision of Mr Dorney QC (as his Honour then was), sitting as an adjudicator, in which he considered a materially similar clause.  He said:[20]

“I accept that the precise dollar amount of remuneration for each year is not specified in the terms of the agreement. However, notwithstanding this approach, it seems clear to me that Schedule A of the agreement makes specific provision for how the remuneration of the Caretaker is to be determined through the life of the agreement. To my mind, it is not relevant that the remuneration provisions (as agreed to by the Body Corporate and original Caretaker) are expressed in a manner that allows an external party to determine the value of remuneration at two points in the life of the agreement.   …

“I do not consider that it is relevant that the Body Corporate did not consent to the increase in remuneration proposed at the extraordinary general meeting of 30 November 2003. In the event that parties are unable to agree on an increase in remuneration, the agreement provides an apparently mandatory process that the amount will be determined by an external party (clause 5 of Schedule A). Again, it seems to me that the Committee was simply implementing the process required by the agreement, and authorised by the Body Corporate when it consented to the terms of that agreement.”

  1. [48]
    Justice Alan Wilson, sitting as President of the appeal tribunal, also considered a similar provision and said of it:[21]

“[12]   The learned Adjudicator came to the view that clause 5 does not offend s 112 and is, in the phrase he used, a ‘valid contractual mechanism’. His reasons are, with respect, terse but because of what follows I agree with his conclusion.

[15]   What occurred here, however, was … simply, the operation of a mechanism determining remuneration to which the parties had originally agreed. That is the conclusion reached by an earlier tribunal sitting in this jurisdiction and applying preceding, but not dissimilar, legislation: Bayview Shores [2004] QBCCMCmr 541 (9 November 2004), a decision of Mr Dorney QC (as His Honour then was) in which he described a process similar to that arising under clause 5 as one which simply implemented ‘...the process required by the agreement, and authorised by the body corporate when it consented to the terms of that agreement’.

[16]  That comment is apt to describe what occurred here: Clause 5 sets up a contractual mechanism which the parties have agreed upon (as part of the original agreement, properly ratified by the lot owners) and which can be implemented without further recourse to the lot owners in a general meeting. 

[17] Mechanisms of this kind are well known in commercial dealings:[22]

...in the present case, the lease itself provides the entire mechanism for determining the rental for the renewed term. There is no further agreement required of the parties. It is true that if they do agree upon that rental, then there is no occasion to resort to the independent mechanism that the lease provides. But, there being no such agreement, all that is required is that the President name a person to fix a figure ...”

  1. [49]
    In neither case was it submitted that such a provision was in breach of sections 229 and 318 of the Act,[23] but in my view that does not affect the proper approach to be taken in the construction of the clause in this case.
  2. [50]
    The mechanism provided in clause 2 was not a mechanism for resolving a dispute between XMR and the bodies corporate, but was a mechanism for determining XMR’s remuneration.  It was not in breach of sections 229 and 318.  It was a valid mechanism and, as I have found that it was complied with, Mr Little’s determinations are not invalid on this ground.

Were Mr Little’s determinations reviews to market?

  1. [51]
    Mr Little produced one report, in which he determined XMR’s remuneration under its contract with each of the bodies corporate.  Thus, in the one report, he made 3 determinations.
  2. [52]
    The bodies corporate contend that, even if the mechanism for the appointment of Mr Little was valid and was properly engaged, he did not undertake the task for which he was appointed:  namely, to undertake a “review to market”.  In their response to the statement of claim,[24] the bodies corporate list a number of bases on which they make this contention.  In short summary (without meaning any disrespect to the long list of allegations in their response), they contend that Mr Little:
    1. did not identify the methodology he had used to determine the remuneration or, where he set out a methodology, it was not the correct one to use;
    2. did not set out details of his reasoning, such as details of the hourly rates he adopted;
    3. did not investigate or take into account certain matters (or at least, it is not apparent on the face of the report that he investigated or took them into account);
    4. made clear mistakes in identifying relevant duties under the different schemes or in determining the times needed to undertake duties.
  3. [53]
    The bodies corporate sought to rely on parts of an affidavit by Mr Leary[25] – a person similarly qualified to Mr Little – to support their contention that Mr Little did not in fact undertake a market review.  Mr Leary expresses views about what should be involved in conducting a market review and expresses opinions on Mr Little’s report, concluding that in his opinion it is not a review to market.  They also sought to rely on an affidavit of Mr Gittins, which deposed to the amounts that had been paid to XMR by each body corporate between 11 February 2013 and May 2015.
  4. [54]
    Mr Savage QC, appearing with Mr Kidston of counsel for XMR, objected to those affidavits as irrelevant to the question that I have to determine.  He submitted that I must necessarily determine the question solely by reference to the report produced by Mr Little and it is irrelevant that another person might have undertaken a market review in a different manner or taking into account different factors.  What Mr Little had to do was to conduct what was referred to in broad terms – a market review – and to express an opinion as to the level of remuneration of XMR under each contract having regard to that review.  I reserved my decision on whether or not to allow these affidavits into evidence.
  5. [55]
    I did not understand the bodies corporate to be contending that Mr Little was appointed as an arbitrator and therefore that he had a duty to act judicially.  Rather, they accepted that he was appointed as an expert.  But in any event it is clear that clause 2 did not provide for the appointment of an arbitrator, but of an expert.  If nothing else this is apparent when one compares it with clause 3.6 of the agreements, which specifically provides for the appointment of an arbitrator to resolve disputes about the contract.[26]  But it is also apparent from the wording of clause 2 itself, which is typical of clauses appointing an expert to determine a matter as an expert, in a manner that “is final and binding on the parties”.
  6. [56]
    That being so, the relevant principles for the review of an expert determination are well known:[27]

“In my opinion the question whether a valuation is binding upon the parties depends in the first instance upon the terms of the contract, express or implied. This was pointed out by Sir David Cairns in the Court of Appeal in Baber v Kenwood Manufacturing Co Ltd (at 181). A valuation obtained by fraud or collusion can usually be disregarded even in an action at law. For in a case of fraud or collusion the correct conclusion to be drawn will almost certainly be that there has been no valuation in accordance with the terms of the contract. As Sir David Cairns pointed out, it is easy to imply a term that a valuation must be made honestly and impartially. It will be difficult, and usually impossible, however, to imply a term that a valuation can be set aside on the ground of the valuer's mistake or because the valuation is unreasonable. The terms of the contract usually provide, as the lease in the present case does, that the decision of the valuer is “final and binding on the parties”. By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision. It is now settled that an action for damages for negligence will lie against a valuer to whom the parties have referred the question of valuation if one of them suffers loss as the result of his negligent valuation: Sutcliffe v Thackrah [1974] AC 727; Arenson v Arenson [1977] AC 405. But as between the parties to the main agreement the valuation can stand even though it was made negligently. While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: Was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract.“

  1. [57]
    Having regard to these tasks, I agree with Mr Savage’s submission about the admissibility of Mr Leary’s affidavit.  I consider that the affidavit is irrelevant because my task is to look at Mr Little’s report and to decide whether it shows that he has or has not undertaken a market review of XMR’s remuneration under each contract.  Mr Leary’s opinion about the adequacy of Mr Little’s report is irrelevant.
  2. [58]
    I also do not consider Mr Gittins’ affidavit to be relevant to my current tasks.  It may become relevant if there is any contention about the amounts (if any) owed by the bodies corporate to XMR, but it is irrelevant to the preliminary issues with which I am now concerned.
  3. [59]
    In Mr Little’s report, he has:
    1. identified the basis of his appointment (by request of the President of New SCAQ);
    2. set out in dot points the methodology he used;
    3. summarised XMR’s duties and stated specifically that the review is based on the duties specified in the agreements;
    4. summarised hourly rates that his market research has identified for caretakers of similar size schemes under similar agreements and for external contractors to undertake the duties, noting that there is substantial variation in the management rights industry;
    5. set out a yearly lump sum figure for his assessment of the remuneration payable to XMR under each agreement.
  4. [60]
    The bodies corporate complain that Mr Little does not state in his report that he had determined the remuneration as from the relevant review dates.  Mr Little was instructed to undertake a determination as to the remuneration payable to XMR in respect of each scheme, with effect from 11 February 2013 (19 August 2013 in the case of the North scheme) and to do so as a ‘review to market’.[28]  Nothing in the report indicates to me that he did not do what was requested of him.  On the contrary, having regard to those instructions, on the face of his report he undertook a market review, formed opinions as to the appropriate remuneration, and honestly expressed those opinions.  Clearly his review was as at the relevant dates.  While he may have made some errors in doing so (about which I express no view), nevertheless his opinion, having been honestly formed, is final and binding on the parties.
  5. [61]
    In my opinion, therefore, each of Mr Little’s determinations was a review to market in accordance with clause 2 of Schedule A of each respective contract.

If Mr Little’s review is invalid, can and should the Tribunal undertake a review to market (the Question)?

  1. [62]
    As I have found that the procedure in clause 2 is valid, that Mr Little was validly appointed and that his review complied with the contract and is valid and final and binding on the parties, there is no need to answer this question.  Nor can I realistically do so, as the reason for the invalidity is likely to affect the answer to the question.  In the circumstances, I cannot even indicate my views in obiter dicta, as they would be merely speculative.

Conclusions

  1. [63]
    For these reasons, it seems to me that the appropriate orders may be:
    1. to declare that clause 2 of Schedule A to each agreement, insofar as it provides for the appointment of an independent person to determine XMR’s remuneration in the years 2010, 2013, 2016, 2019, 2022, 2025 and 2028, does not contravene either s 229 or s 318 of the Act and is not invalid;
    2. to declare that the determination by Mr Little of XMR’s remuneration from the relevant dates in 2013 is not invalid by reason of any of the grounds raised in the responses of the bodies corporate to divisions 5A, 5B and 5C of the applicant’s statement of claim;
    3. perhaps, to order that the remuneration determined by Mr Little be paid by the respective bodies corporate to XMR with effect from the respective relevant dates (and having regard to subsequent CPI increases).
  2. [64]
    The last of these possible orders, and perhaps some other issues, may require a trial.  On the other hand, my decision on the issues with which I have been concerned may lead to trial being unnecessary.  I am not sure.  Therefore I consider it appropriate to hear from the parties about the orders that should be made, including any orders as to costs.  At this stage, therefore, I shall simply make directions for the filing of draft orders and submissions about those drafts.
  3. [65]
    I therefore direct that:
  1. the parties, by their solicitors or counsel, consult with each other as to the appropriate orders having regard to these reasons, by 31 October 2015;
  2. if the parties agree on the proposed orders, the applicant file a copy signed on behalf of all parties, by 7 November 2015;
  3. if the parties do not agree on the proposed order, then:
  1. the parties file and serve draft minutes of proposed orders and submissions of no more than 4 pages in support of them, by 7 November 2015;
  2. each party may file submissions of no more than 3 pages in response to the other party’s submissions, by 14 November 2015.

Footnotes

[1]Maddestra v Penfolds Wines Pty Ltd (1993) 44 FCR 303 at 306.

[2]Fitzgerald v Masters (1956) 95 CLR 420 at 426-7.

[3]Affidavit of Simon Barnard filed 28 July 2015 (exhibit 4), SB-1; letter dated 17 July 2014.

[4]They contend that it is a “complex dispute” to which s 229(2) applies, because it is a dispute about a contractual matter concerning the engagement of XMR as caretaking services contractor and letting agent for the scheme:  s 149B, dictionary definition of “complex dispute”, s 227(1)(d) & (f) and s 228(1)(d).  Alternatively, they contend, it is a dispute that is not a complex dispute and falls under s 229(3).

[5]Exhibit 1, pp 105-111.

[6]This correspondence appeared in the agreed bundle of documents (exhibit 1), but it is clear from its terms that I have not been provided with all the correspondence between the parties.  Presumably the parties considered that the missing items were irrelevant.

[7]Exhibit 1, pp 79-80, 81-82, 83-84.

[8]Exhibit 1, pp 85-87.

[9]Exhibit 1, pp 88-89.

[10]The reference to the President of the QLS was in error – that was a procedure under clause 2 of Schedule A before its amendment by the deeds of variation.  That error was corrected in the bodies corporate’s response.

[11]Exhibit 1, pp 90-91.

[12]Exhibit 1, pp 92-93.

[13]Exhibit 1, pp 94-101.

[14]Exhibit 1, pp 102-103.

[15]Exhibit 1, p 104.

[16]Exhibit 1, pp 105-111.

[17]In fact, the President first appointed a David Leary, but Mr Leary declined to accept that appointment as he apparently considered that he had a conflict of interest.

[18]James v Body Corporate for the Aarons Community Titles Scheme 11476 [2002] QSC 386;  on appeal [2004] 1 QdR 386;  Henderson v Body Corporate for Merrimac Heights [2011] QSC 336; Body Corporate for Liberty CTS 27421 v Batwing Resorts Pty Ltd [2012] QSC 340 (“Batwing”).

[19]cf Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600, 606.  (This footnote appears in her Honour’s decision.)

[20]Bayview Shores [2004] QBCCMCmr 541, at 5, 6.

[21]Dummett v Gallery Vie Management Pty Ltd [2010] QCATA 128.

[22]See, eg, Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604-5 (per Gibbs CJ, Murphy and Wilson JJ). (Footnote in the original.)

[23]In Dummett, the applicant did submit that the clause breached a section of the applicable regulations, but that raised a different issue.

[24]Paragraph 25(d)(ii), which concerned the review under XMR’s contract with the principal body corporate.  It was adopted, in paragraphs 33(d)(iii) and 39(d)(ii), in respect of the contracts with the East and North bodies corporate respectively.

[25]Their counsel expressly did not rely on paragraphs 15-32, 45 and 68-74.

[26]That provision no doubt does offend s 229.

[27]Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314 at 335 (McHugh JA); affirmed A Hudson Pty Ltd v Legal & General Life of Australia Ltd (1986) 66 ALR 70.

[28]Letter from XMR’s solicitors to Mr Little, 18 July 2014:  exhibit 1 pp 183-191, particularly at 190.

Close

Editorial Notes

  • Published Case Name:

    XMR Holdings Pty Ltd v Body Corporate for Xanadu CTS 26361, Body Corporate for Xanadu East CTS 26380 and Body Corporate for Xanadu North CTS 26993

  • Shortened Case Name:

    XMR Holdings Pty Ltd v Body Corporate for Xanadu CTS 26361

  • MNC:

    [2015] QCAT 437

  • Court:

    QCAT

  • Judge(s):

    Member Barlow

  • Date:

    19 Oct 2015

Appeal Status

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

Cases Cited

Case NameFull CitationFrequency
A Hudson Pty Ltd v Legal and General Life of Australia Ltd (1986) 66 ALR 70
1 citation
Jump To
Cite 1 - (1986) 66 ALR 70
Arenson v Casson Blackman Rutley & Co (1977) AC 405
1 citation
Jump To
Cite 1 - (1977) AC 405
Bayview Shores [2004] QBCCMCmr 541
2 citations
Jump To
Cite 1 - [2004] QBCCMCmr 541
Cite 2 - [2004] QBCCMCmr 541
Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600
2 citations
Jump To
Cite 1 - (1982) 149 CLR 600
Cite 2 - (1982) 149 CLR 600
Dummett v Gallery Vie Management Pty Ltd [2010] QCATA 128
1 citation
Jump To
Cite 1 - [2010] QCATA 128
Fitzgerald & Anor v Masters (1956) 95 CLR 420
1 citation
Jump To
Cite 1 - (1956) 95 CLR 420
Henderson v The Body Corporate for Merrimac Heights [2011] QSC 336
1 citation
Jump To
Cite 1 - [2011] QSC 336
James v Body Corporate Aarons Community Title Scheme 11476 [2002] QSC 386
1 citation
Jump To
Cite 1 - [2002] QSC 386
James v The Body Corporate Aarons Community Title Scheme 11476[2004] 1 Qd R 386; [2003] QCA 329
1 citation
Jump To
Cite 1 - [2004] 1 Qd R 386
Legal & General Life of Australia Ltd v A Hudson Pty Ltd (1985) 1 NSWLR 314
1 citation
Jump To
Cite 1 - (1985) 1 NSWLR 314
Maddestra v Penfolds Wines Pty Ltd (1993) 44 FCR 303
1 citation
Jump To
Cite 1 - (1993) 44 FCR 303
Sutcliffe v Thackrah (1974) AC 727
1 citation
Jump To
Cite 1 - (1974) AC 727
The Body Corporate for Liberty CTS 27241 v Batwing Resorts Pty Ltd [2012] QSC 340
1 citation
Jump To
Cite 1 - [2012] QSC 340

Cases Citing

Case NameFull CitationFrequency
XMR Holdings Pty Ltd v Body Corporate for Xanadu [2016] QCAT 271 citation
1

Require Technical Assistance?

Message sent!

Thanks for reaching out! Someone from our team will get back to you soon.

Message not sent!

Something went wrong. Please try again.