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  4. Linali Pty Ltd as trustee for the Chakra Family Trust v Body Corporate for Crown CTS 41282 - [2024] QCAT 446

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Linali Pty Ltd as trustee for the Chakra Family Trust v Body Corporate for Crown CTS 41282[2024] QCAT 446

Linali Pty Ltd as trustee for the Chakra Family Trust v Body Corporate for Crown CTS 41282[2024] QCAT 446

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

CITATION:

Linali Pty Ltd as trustee for the Chakra Family Trust v Body Corporate for Crown CTS 41282 [2024] QCAT 446

PARTIES:

Linali Pty Ltd as trustee for the Chakra Family Trust

(applicant)

v

Body Corporate for Crown CTS 41282

(respondent)

APPLICATION NO/S:

OCL053-22

MATTER TYPE:

Occupational regulation matters

DELIVERED ON:

16 October 2024

HEARING DATE:

5, 6 and 8  August 2024

HEARD AT:

Brisbane

DECISION OF:

Member Lumb

ORDERS:

  1. The Respondent is ordered to pay to the Applicant damages in the amount of $311,958.00, within three (3) months of the date of this Decision.
  2. Any party seeking an order for costs must file with the Tribunal two (2) copies of, and give to the other party one (1) copy of, written submissions, no longer than eight (8) pages, within 14 days of the date of the Decision.
  3. If written submissions as to costs are filed, the party against whom an order for costs is sought must file with the Tribunal two (2) copies of, and give to the other party one (1) copy of, written submissions in response, no longer than eight (8) pages, within 14 days of receipt of the written submissions.
  4. The party that receives written submissions in response may file with the Tribunal two (2) copies of, and give to the other party one (1) copy of, written submissions in reply, no longer than four (4) pages, within 14 days of receipt of the response submissions.
  5. If no written submissions as to costs are filed within 14 days of the date of the Decision, there shall be no order as to costs of the proceeding.
  6. If written submissions as to costs are filed, the application for costs will be determined on the papers, without an oral hearing.

CATCHWORDS:

REAL PROPERTY – STRATA AND RELATED TITLES – MANAGEMENT AND CONTROL – BODY CORPORATE: POWERS, DUTIES, AND LIABILITIES – where applicant and respondent/body corporate were parties to a caretaking agreement and a letting agreement – where body corporate alleged that the applicant failed to comply with its contractual obligations under caretaking agreement – where body corporate alleged that applicant failed to remedy two separate remedial action notices – where the body corporate purported to approve the termination of the caretaking agreements at an extraordinary general meeting – whether requirement that the body corporate act reasonably in passing resolution – whether caretaking agreement validly terminated by applicant or respondent – calculation of damages – whether payments made to one of ‘owners’ should be deducted from revenue to calculate loss of profit – appropriate discount factor to be applied to loss of profit

Body Corporate and Community Management Act 1997 (Qld), s 15, s 16, s 94, s 149B, Schedule 6

Body Corporate and Community Management (Accommodation Module) Regulation 2020 (Qld), s 139, s 140, s 142

Property Occupations Act 2014 (Qld), s 86

Ainsworth v Albrecht (2016) 261 CLR 167

Body Corporate for Bay Village Community Titles Scheme 33127 v Breeze MR Pty Ltd [2023] QCA 91

Body Corporate for the Lakes-Cairns CTS 28090 v Sunshine Group Australia Pty Ltd [2023] QCAT 39

Body Corporate for the Reserve CTS 31561 v Trojan Resorts Pty Ltd [2017] QCATA 53

Cessnock City Council v 123 259 932 Pty Ltd (2024) 98 ALJR 719, [2024] HCA 17

Grieve v Enge [2006] QCA 213

Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623

Price v Friebe & Ors [2024] QSC 157

Reynolds v Body Corporate for Mount View Apartments CTS 2375 [2018] QCAT 283

Robinson v Harman (1848) 1 Exch 850, 154 ER 363

Royal Pines Projects Pty Ltd v Brightman [2024] QCA 147

Sherwood Forest Corporation Pty Ltd v Body Corporate for Centenary Mews [2021] QDC 166

Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272

The Sands Gold Coast Pty Ltd v The Body Corporate for the Sands [2018] QCATA 160

APPEARANCES & REPRESENTATION:

Applicant:

M. J. Downes, instructed by Moore Lawyers

Respondent:

T. F. Ritchie, instructed by Mackays Solicitors

REASONS FOR DECISION

Introduction

  1. [1]
    By an Application to resolve a complex dispute filed on 5 October 2022 (‘the Application’), the Applicant (‘Linali’) claimed relief by way of damages for breach of contract against the Respondent (‘the Body Corporate’).
  2. [2]
    The Body Corporate is the body corporate for the Crown Community Titles Scheme 41282 (‘the Scheme’). An apartment complex known as ‘Crown Apartments’ (‘the Complex’) is located on the Scheme land in Mackay in the State of Queensland. The Complex comprises 43 residential units and one commercial unit.
  3. [3]
    Pursuant to a Deed of Assignment made on 15 October 2018, Linali, as buyer, took an assignment of the seller’s interest under two separate agreements, being a ‘Caretaker Agreement’ dated 9 April 2010 (‘the Caretaking Agreement’) and a ‘Letting Agency Agreement’ dated 28 June 2013 (‘the Letting Agreement’).[1] The stated ‘Assignment Date’ was 24 October 2018. Linali paid $260,000.00 to purchase the rights (or interests) under both agreements.[2]
  4. [4]
    By the Caretaking Agreement,[3] Linali was appointed as the caretaker to manage the common property of the Scheme. Linali was to be paid the agreed remuneration in consideration of Linali performing the ‘Caretaker’s Obligations and Duties’ as outlined in Schedule 1 to the Caretaking Agreement.
  5. [5]
    By the Letting Agreement,[4] the Body Corporate authorised Linali as the letting agent for the Scheme.
  6. [6]
    On 2 November 2021, the Body Corporate purported to terminate the Caretaking Agreement.[5]
  7. [7]
    By correspondence sent by Linali’s solicitors to the Body Corporate’s solicitors on 12 January 2022, Linali asserted that the Body Corporate’s purported termination was unlawful, being both a breach of the Caretaking Agreement and repudiatory, and that Linali elected to terminate the Caretaking Agreement.[6]
  8. [8]
    It is common ground that:
    1. from about 2 November 2021, the Body Corporate did not permit Linali to access the caretaker’s office at the Complex;
    2. this meant that Linali could not legally operate the letting business because s 86(1) of the Property Occupations Act 2014 (Qld) required Linali to have its registered office in the Complex;[7]
    3. Linali formally terminated the Letting Agreement on 17 March 2023.[8]
  9. [9]
    There is also no dispute that the Caretaking Agreement and the Letting Agreement were separate agreements.[9] In my view, the agreements operated independently of each other.
  10. [10]
    In broad terms, the issues for determination are:
    1. whether the Tribunal has jurisdiction to decide the dispute;
    2. if so, whether the Body Corporate or Linali validly terminated the Caretaking Agreement;
    3. if Linali validly terminated the Caretaking Agreement, what is the quantum of damages recoverable by Linali for breach of that contract;
    4. what is the quantum of damages recoverable by Linali in consequence of its termination of the Letting Agreement.

Jurisdiction

  1. [11]
    There is no dispute between the parties that the Tribunal has jurisdiction to decide the Application.
  2. [12]
    I am satisfied that, adopting the conclusions reached by Member Barlow QC (as his Honour then was) in Reynolds v Body Corporate for Mount View Apartments CTS 2375 (‘Reynolds’),[10] the Tribunal has original jurisdiction, pursuant to s 149B(2) of the Body Corporate and Community Management Act 1997 (Qld) (‘the BCCMA’),[11] to hear and resolve a dispute about a claimed ‘contractual matter’ about the engagement of a person as a caretaking service contractor (and, I would add, the authorisation of a person as a letting agent) for a community titles scheme, whenever that engagement (or authorisation) occurred and whether or not it remains ‘extant’.[12]
  3. [13]
    In the present case, there is no dispute that, and I find that, Linali was:
    1. a ‘service contractor’ and a ‘caretaking service contractor’[13] within the meaning of the BCCMA;[14] and
    2. a ‘letting agent’ within the meaning of the BCCMA.[15]
  4. [14]
    I find that the present dispute is one about a claimed contractual matter falling within the scope of, at least, each of subparagraphs (b) and (c) of the definition of ‘contractual matter’ in Schedule 6 to the BCCMA.
  5. [15]
    I am satisfied that the Tribunal has jurisdiction to resolve this dispute.
  6. [16]
    I will next address the issue of which party validly terminated the Caretaking Agreement.

Termination of the Caretaking Agreement

  1. [17]
    The regulation module under the BCCMA applying to the Scheme is the Accommodation Module.[16]
  2. [18]
    The substantive provisions of the Body Corporate and Community Management (Accommodation Module) Regulation 2020 (Qld) (‘the AM Regulation’) commenced on 1 March 2021.
  3. [19]
    Part 5 of Chapter 6 of the AM Regulation contains, relevantly, the following provisions:[17]

139 Purpose of part [SM, s 149]

This part provides for—

  1. the grounds on which the body corporate may terminate a person’s engagement as a body corporate manager or service contractor, or authorisation as a letting agent; and
  1. the steps the body corporate must follow to terminate the engagement or authorisation.

140 Termination under the Act, by agreement etc. [SM, s 150]

  1. The body corporate may terminate a person’s engagement as a body corporate manager or service contractor, or authorisation as a letting agent—
  1. under the Act; or
  1. by agreement; or
  1. under the engagement or authorisation.
  1. The body corporate may act under subsection (1) only if the termination is approved by ordinary resolution of the body corporate.

…

142 Termination for failure to comply with remedial action notice [SM, s 152]

  1. The body corporate may terminate a person’s engagement as a body corporate manager or service contractor if the person, including, if the person is a corporation, a director of the corporation—
  1. engages in misconduct, or is grossly negligent, in carrying out functions required under the engagement; or
  1. fails to carry out duties under the engagement; or
  1. contravenes—
  1. for the body corporate manager—the code of conduct for body corporate managers and caretaking service contractors; or
  1. for a service contractor who is a caretaking service contractor—the code of conduct for body corporate managers and caretaking service contractors, or the code of conduct for letting agents; or
  1. fails to comply with section 144(2), 145(2) or 146(2); or
  1. for a body corporate manager—
  1. commits an offence under section 158(2); or
  1. if the body corporate manager is acting under a chapter 3, part 5 engagement—fails to give a report under section 68.
  1. Also, the body corporate may terminate a person’s authorisation as a letting agent if the person, including, if the person is a corporation, a director of the corporation—
  1. engages in misconduct, or is grossly negligent, in carrying out obligations, if any, under the authorisation; or
  1. fails to carry out duties under the authorisation; or
  1. contravenes the code of conduct for letting agents or, for a caretaking service contractor, the code of conduct for body corporate managers and caretaking service contractors; or
  1. for a caretaking service contractor—fails to comply with section 144(2), 145(2) or 146(2).
  1. The body corporate may act under subsection (1) or (2) only if—
  1. the body corporate has given the person a remedial action notice under subsection (4); and
  1. the person fails to comply with the remedial action notice within the period stated in the notice; and
  1. the termination is approved by ordinary resolution of the body corporate; and
  1. for the termination of a person’s engagement as a service contractor if the person is a caretaking service contractor, or the termination of a person’s authorisation as a letting agent—the motion to approve the termination is decided by secret ballot.
  1. For subsection (3), a remedial action notice is a written notice stating each of the following—
  1. that the body corporate believes the person has acted—
  1. for a body corporate manager or a service contractor—in a way mentioned in subsection (1)(a) to (e); or
  1. for a letting agent—in a way mentioned in subsection (2)(a) to (d);
  1. details of the action sufficient to identify—
  1. the misconduct or gross negligence the body corporate believes has happened; or
  1. the duties the body corporate believes have not been carried out; or
  1. the provision of the code of conduct, or this regulation, the body corporate believes has been contravened;
  1. that the person must, within the period stated in the notice but not less than 14 days after the notice is given to the person—
  1. remedy the misconduct or gross negligence; or
  1. carry out the duties; or
  1. remedy the contravention;
  1. that if the person does not comply with the notice in the period stated, the body corporate may terminate the engagement or authorisation.
  1. Despite subsection (3)(a), if the person is a body corporate manager acting under a chapter 3, part 5 engagement, the owners of at least one-half of the lots included in the community titles scheme may, on behalf of the body corporate, give the person a remedial action notice.
  1. [20]
    In my view, despite the terms of an engagement or authorisation, where a purported ground of termination falls within the scope of s 142 of the AM Regulation, the requirements of that regulation must be followed in order to validly terminate the engagement or authorisation.[18]
  2. [21]
    The Body Corporate’s case is that it validly terminated the Caretaking Agreement on the basis that Linali failed to comply with one or both of the following remedial action notices (within the period stated in the respective notices):
    1. a notice dated 24 May 2021 (‘the May Notice’);[19]
    2. a notice dated 14 September 2021 (‘the September Notice’).[20]
  3. [22]
    Linali challenges the validity of each of the Notices and, additionally, that the Body Corporate’s conduct in respect of the termination of the Caretaking Agreement was unreasonable, in contravention of s 94 of the BCCMA.

The May Notice

  1. [23]
    Linali contends that the May Notice was invalid for three reasons:
    1. first, the Notice did not state (as required by s 142(4)(b)(ii) of the Regulation) details of the action sufficient to identify the duties that the Body Corporate believed had not been carried out;[21]
    2. second, the Notice did not permit Linali to understand with reasonable certainty what it had to do to comply with the Notice;[22]
    3. third, the Notice did not state (as required by s 142(4)(d) of the Regulation) that ‘if [Linali] does not comply with the notice in the period stated, the [Body Corporate] may terminate the Caretaking Agreement’.[23]
  2. [24]
    I will deal with the third issue first.

Compliance with s 142(4)(d) of the AM Regulation?

  1. [25]
    Section 142(3)(a) requires that a body corporate give to the other party a remedial action notice under s 142(4). Subsection 142(4) identifies what a remedial action notice is. It is a written notice ‘stating’ each of the matters in subsections (4)(a) to (d).
  2. [26]
    The question that arises is whether the terms of the May Notice complied with s 142(4)(d).
  3. [27]
    Linali’s submission, which adopts the language of the provision, appears to contend that the precise words of subsection (d) are required to be stated in the Notice.[24]
  4. [28]
    The Body Corporate submits that the statement that ‘the Body Corporate reserves its rights in all respects’ does not invalidate the Notice because one of the rights which was reserved was a right to terminate the engagement.[25]
  5. [29]
    In my view, the May Notice did not comply with s 142(4)(d).
  6. [30]
    I am of the view that it is unnecessary for a body corporate to adopt the precise wording in that subsection. First, the language of s 142 does not expressly state that the precise words must be adopted. To the extent that the provision refers to ‘the person’ and to ‘the engagement or authorisation’, it appears plain that the legislature contemplated that there would be some modification of the language of the provision to identify the particular ‘person’ and the particular ‘engagement’ or ‘authorisation’. Second, the evident intent of the provision is to put the other party on notice that a failure to remedy the breach may result in the relevant agreement being brought to an end. If the language adopted makes this clear, I consider that this satisfies subsection (d) even if the precise language of the provision is not adopted. However, I consider that a reservation of rights in all respects does not satisfy this requirement. Even if it were accepted that one of those rights may include termination, that was not stated in the Notice. In my view, the prescriptive requirement of s 142(4)(d) is only satisfied if the recipient is put on express notice that a failure to comply with the notice may result in the engagement or authorisation being terminated or brought to an end.
  7. [31]
    I consider that this conclusion is fortified by the approach adopted by the High Court in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (‘Laurinda’).[26] This case concerned the making of time of the essence to justify an entitlement to ‘rescind’ a lease agreement at common law. In Laurinda, paraphrasing the headnote to the case, by a written agreement for lease of part of a shopping centre, the lessor agreed to procure the registration of a formal lease (or to deliver a registrable lease to the lessee). The lessee executed the lease and did all things necessary for the registration of the lease. After the opening of the shopping centre, the lessee twice requested a copy of the lease. After the second request, the lessor advised that it would be provided ‘as soon as we are able to’. Approximately five months later, the lessee gave the lessor 14 days in which to complete registration, in default of which it said that it reserved its rights in relation to the lessor’s default. The precise words of the correspondence from the lessee’s solicitors were ‘our clients naturally reserve their rights in respect of your client’s default’. The lessor did not comply, and the lessee purported to ‘rescind’ the agreement.
  8. [32]
    In Laurinda, the Court concluded that the lessor had repudiated the agreement thereby entitling the lessee to terminate the agreement. Relevantly for present purposes, four of the five Judges also considered whether the written notice was an effective notice to complete, thereby entitling the lessee to ‘rescind’ the agreement in the event of non-compliance.[27] Three of the four Judges found that the notice was not effective to make time of the essence of the contract having regard to the language of a reservation of rights only.[28] If the notice in Laurinda was held to be ineffective, that reasoning must apply with greater force in the present case where there is a statutory requirement as to the content of the Notice. For completeness, I note that, in Laurinda, the correspondence was between the respective solicitors for the parties whereas in the present case, the May Notice was given by the Body Corporate’s solicitors to Linali.
  9. [33]
    I find that the May Notice did not comply with s 142 of the Regulation and, consequently, the Body Corporate was not entitled to rely upon that Notice as a basis for terminating the Caretaking Agreement.
  10. [34]
    I also refer to my observations in relation to the question of reasonableness and s 94 of the BCCMA (see paragraphs [55]-[59] below).
  11. [35]
    Having regard to the above matters, I consider that it is unnecessary to decide the first and second grounds raised by Linali.

The September Notice

  1. [36]
    I did not understand Linali to contest that the September Notice satisfied the requirements of subsections 142(1)(a), (c) and (d) of the AM Regulation. For completeness, I find that each of those subsections was satisfied on the basis that the September Notice stated, relevantly:
    1. ‘The Body Corporate believes that you have failed to carry out your duties under the Caretaking Agreement.’
    2. ‘Pursuant to clause 12.1.2.2, the Body Corporate hereby gives you fifteen (15) days to carry out the duties which you have neglected to perform as outlined above and to remedy your breaches of the Caretaking Agreement and Workplace Health and Safety Obligations.’
    3. ‘We trust that you will take this notice seriously and will remedy your breaches as set out herein within the timeframe required, failing which the Body Corporate reserves its rights in all respects, including that the Body Corporate may terminate the engagement.’ (underlining added)
  2. [37]
    Linali submits that the Body Corporate has failed to discharge its onus of proof to demonstrate that the breaches alleged in the September Notice existed at all or, if they did exist, that they were not remedied by 29 September 2021.[29]
  3. [38]
    Linali also relies upon three matters in support of its contention that the termination resolution was an unreasonable act of the Body Corporate (in contravention of s 94(2) of the BCCMA), and, consequently, invalid. I will now address this issue.

Unreasonableness

  1. [39]
    Linali relied upon three matters in support of its contention in respect of unreasonableness.[30]
  2. [40]
    First, the termination resolution was passed before the Body Corporate gave the September notice and, consequently, it was unreasonable to vote to terminate before the issue of a (valid) remedial action notice.[31]
  3. [41]
    Second, the termination was unreasonable because the Body Corporate was motivated by a perceived financial benefit, which was not a lawful reason for termination of the Caretaking Agreement.[32]
  4. [42]
    Third, by the terms of the termination resolution, the Body Corporate had delegated its power to the Committee of the Body Corporate which delegation was impermissible.[33]

Section 94 of the BCCMA

  1. [43]
    Section 94 provides:
  1. (1)
    The body corporate for a community titles scheme must—
  1. administer the common property and body corporate assets for the benefit of the owners of the lots included in the scheme; and
  1. enforce the community management statement (including enforcing any by-laws for the scheme in the way provided under this Act); and
  1. carry out the other functions given to the body corporate under this Act and the community management statement.
  1. (2)
    The body corporate must act reasonably in anything it does under subsection (1) including making, or not making, a decision for the subsection.

Examples for subsection (2) of a body corporate making a decision—

  • passing a motion by resolution at a general meeting or a committee meeting
  • not passing a motion after a vote at a general meeting or a committee meeting
  • owners of lots included in a specified two-lot scheme entering into a lot owner agreement for the scheme (see section 111E(2))
  • owners of lots included in a specified two-lot scheme failing to enter into a lot owner agreement following a request made by one of the owners (see section 111H(3))

(emphasis added)

Application of s 94 to the present circumstances

  1. [44]
    The Body Corporate submits that:
    1. the decision of lot owners at the meeting which considers a resolution to terminate is not subject to the requirement of reasonableness;[34]
    2. body corporate decisions to initiate the termination, to issue notices, and to place the resolution before the lot owners are subject to the requirement of reasonableness;[35]
    3. properly understood, Linali’s allegation is that the Body Corporate acted unreasonably in giving the 14 September Notice and in giving the notice of termination on 2 November 2021.[36]
  2. [45]
    If, as I understand the submissions, it is contended that the passing of the resolution of the Body Corporate to terminate the Caretaking Agreement is not subject to the requirement of reasonableness, I reject that argument.
  3. [46]
    The Body Corporate relies upon the following authorities.
  4. [47]
    First, the following passage in the decision of the Appeal Tribunal in Body Corporate for the Reserve CTS 31561 v Trojan Resorts Pty Ltd (‘Trojan’):[37]

Even the termination provisions, without the assistance of s 94, impose an obligation on Reserve to act reasonably. Even if Reserve decides to terminate for breach of contract, it must do so only after approval by ordinary resolution. The decision of the lot owners at the meeting which considers the resolution is not subject to the requirement of reasonableness but the body corporate decision to initiate the termination, to issue notices, and to place the resolution before the lot owners is, in our view, subject to s 94.

(underlining added)

  1. [48]
    However, when read in the context of the earlier statements of the Appeal Tribunal, I consider that the reference to the ‘decision of the lot owners’ is intended to convey that s 94 does not impose a requirement of reasonableness on the individual lot owners when they cast their votes for, or against, a motion. I consider that this is made clear in the following earlier passages:[38]
  1. [17]
    The High Court in Ainsworth v Albrecht also considered whether parties were required to act reasonably in voting on a motion that required a resolution without dissent. It, too, held that s 94(2) did not apply. It held that, while s 94(2) applies to the decision-making body to reach a reasonable decision taking into account competing concerns, a lot owner is not a decision-making body and, therefore, not subject to the requirements of s 94.
  1. [18]
    The decisions in Ainsworth and McColl are consistent and instructive. Section 94(2) cannot impose a requirement of reasonableness on the individual lot owners when they cast their votes for, or against, a motion. It does, however, operate in relation to a decision by the body corporate as a decision-maker fulfilling its functions.

(citations omitted, underlining added)

  1. [49]
    Second, the Body Corporate relies upon the decision of Sherwood Forest Corporation Pty Ltd v Body Corporate for Centenary Mews,[39] and, in particular, Barlow QC DCJ’s reference to paragraph [37] of Trojan.
  2. [50]
    However, after that reference, his Honour then said:[40]
  1. [195]
    At first blush, this view seems to be supported by the plurality in Ainsworth v Albrecht, where their Honours distinguished a case that was concerned with the duty of a decision-making body to reach a reasonable decision taking into account competing considerations. A lot owner voting his or her opposition to a motion is not a decision-maker of this kind.
  1. [196]
    However, that was said in the context of a case in which the real question was whether the lot owners’ opposition to a motion put to the general meeting and requiring a resolution without dissent was unreasonable. As the High Court held, that is a different question and one to which the obligation of the body corporate to act reasonably is not relevant.

(citation omitted)

  1. [51]
    His Honour subsequently stated (in unequivocal terms):[41]

Here, the decision of the body corporate constituted by the result of the vote on the motion must be objectively reasonable, taking into account all relevant factors including factors which were extant but which the parties may not have identified or appreciated at the time.

(emphasis added)

  1. [52]
    I consider that this conclusion is clearly supported by the first of the examples contained in s 94(2) of the BCCMA.

The timing of the termination resolution

  1. [53]
    I have found that the May Notice was invalid. The termination resolution was passed before the September Notice was issued. In my view, this temporal issue raises not only the question of reasonableness but also the question of whether the resolution was valid regardless of that question.
  2. [54]
    In my view, s 142(3) of the AM Regulation contemplates a sequential series of steps in order for a body corporate to terminate a relevant agreement. First, the body corporate has given the other party a remedial action notice under s 142(4); second, the other party has failed to comply with the remedial action notice within the period stated in the notice; and third, the termination is approved by ordinary resolution of the body corporate (decided by secret ballot). I consider that the reference to ‘the termination’ in s 142(3)(c) necessarily contemplates that a right of termination has arisen consequent upon a failure to comply with a valid remedial action notice. In my view, in the absence of satisfaction of each of subsections 142(3)(a) and (b), there can be no valid approval to terminate the relevant agreement under s 142(3)(c) (and (d)). I find that the termination resolution was not a valid resolution because it was passed in the absence of the giving of a valid remedial action notice.
  3. [55]
    Had I not reached the conclusion in [54] above, I would have found that the termination resolution was unreasonable. The motion which was passed contemplated a potential future termination of the Caretaking Agreement ‘if required’ (and ‘if a satisfactory resolution cannot be reached’). In my view, the motion was passed, in effect, in the abstract. There was no extant valid remedial action notice identifying the particular alleged defaults at the time, much less a failure to comply with such a notice. I consider that a body corporate can only act reasonably to terminate a relevant engagement or authorisation if the motion is based on existing circumstances then justifying the basis for the termination. That is plainly not the case here.
  4. [56]
    Given the particular language of the motion, I consider that it is also open to argument as to whether the resolution amounted to approval of a termination of the Caretaking Agreement at all. In light of my conclusions above, I consider it unnecessary to decide the point. However, the language adopted in the motion the subject of the termination resolution leads to the third argument raised by Linali.
  5. [57]
    Having regard to such language and the evidence of Mr Kerridge,[42] I accept Linali’s submission that the ultimate decision to terminate the Caretaking Agreement was that of the committee of the Body Corporate.[43]
  6. [58]
    A body corporate cannot delegate its powers.[44] Nevertheless, a decision of the committee of a body corporate is a decision of the body corporate.[45] However, this does not apply to a decision that, under the relevant regulation module, is a decision on a restricted issue for the committee.[46] Under the AM Regulation, a decision is a decision on a restricted issue for the committee if it is a decision, relevantly, that may only be made by ordinary resolution of the body corporate.[47] Consequently, in my view, the decision of the committee of the Body Corporate to terminate the Caretaking Agreement was invalid because it was a decision on a restricted issue. The Body Corporate could not delegate that decision to the committee.
  7. [59]
    For the above reasons, I find that:
    1. the May Notice did not comply with s 142 of the Regulation and, consequently, the Body Corporate was not entitled to rely upon that Notice as a basis for terminating the Caretaking Agreement; and
    2. the termination resolution was not a valid resolution.
  8. [60]
    The above findings make it unnecessary to decide the second argument raised by the Applicant. However, I will address it briefly. Whilst I am prepared to infer from the supporting material for the motion prepared by Mr Pietzner, that he was primarily motivated by the perceived financial benefit of terminating the Caretaking Agreement, I am of the view that:
    1. in order to make good this argument, Linali needed to establish, on the balance of probabilities, at the least, that of the lot owners who voted in favour of the motion, a sufficient number of those lot owners were predominantly motivated by a perceived financial benefit, and that the number of such lot owners was sufficient to tilt the balance from a defeat of the motion to the passing of the resolution; and
    2. the evidence does not establish the matters referred to in subparagraph (a).
  9. [61]
    My findings also make it unnecessary to address the issue of the alleged breaches identified in the September Notice and, if proved, whether remedied. However, I will also address this issue briefly.
  10. [62]
    Numerous breaches were alleged in the September Notice. However, at the conclusion of the hearing, the Body Corporate only pressed six of those alleged breaches.
  11. [63]
    I am satisfied that Linali was in breach of, and did not remedy the breach of:
    1. Schedule 1, clause 2.3 of the Caretaking Agreement, by not aerating the garden beds monthly with a garden fork or similar. Mr Chambers accepted that he did not do this. This is further addressed below;
    2. Schedule 1, clause 2.3 of the Caretaking Agreement, by not cleaning the fire sprinkler pipework in the car park monthly. I reject the oral evidence of Mr Chambers that he cleaned the pipework (either daily or weekly: it was not clear from his evidence which).[48] Linali’s response to this breach as alleged in the September Notice was as follows: ‘This is not a breach. Monthly cleaning of the carpark fire sprinkler pipework is both an unnecessary and unreasonable directive.’ If the pipework had, in fact, been cleaned on a daily/weekly basis, the obvious and only logical response would be state that this was the case. The written statement made by Linali (plainly on the instructions of Mr Chambers) is entirely at odds with the subsequent oral evidence of Mr Chambers. I prefer the evidence contained in the contemporaneous document provided in response to the September Notice;
    3. Clause 9.3 of the Caretaking Agreement, by not communicating with the Body Corporate by its nominated representative. The alleged breach was ‘Not communicating via the nominated representative of the Body Corporate in your dealings with it as required under clause 9.’ Clause 9.3 provided, relevantly, that ‘The Caretaker will confer … with the representative of the Committee …’ Although clause 9.3 refers to conferring with the representative, I consider that adopting a commercial and businesslike interpretation of that clause in the context of the agreement as a whole, the term ‘confer’ means communicating with the representative in relation to matters arising under the Caretaking Agreement and other matters concerning the management of the common property. When regard is had to Linali’s response of 28 September 2021 in relation to this alleged breach (see page 198 of 259 of the annexures to Mr Chambers’ first affidavit), it is plain that Mr Chambers understood that Mr Kerridge was the relevant representative of the Committee, and that Linali had made a conscious choice to communicate only with the strata manager rather than with Mr Kerridge.
  12. [64]
    As to the balance of the alleged breaches that were pressed:
    1. with respect to the alleged breach of Schedule 1, clause 1.3, by changing the locks of the caretakers’ office door: The obligation is ‘Use the Caretaker’s best endeavours to see that the Common Property is kept in good order and repair.’ In my view, the changing of the locks on the office door was not a breach of that obligation because the change of the locks did not render the door as not being in good order and repair;
    2. with respect to the alleged breach of Schedule 1, clause 1.9, by not carrying out all reasonable directions given by the Body Corporate, specifically by not uncovering the camera in the office: the alleged breach was ‘Covering Body Corporate infrastructure (office camera) which could damage the camera and/or interfere with its operation (We are instructed that you have been asked to refrain from doing so immediately).’ Clause 1.9 states:

Comply with and carry out all reasonable directions from time to time given by the Body Corporate to the Caretaker in and about the administration and Management of the Common Property and the performance by the Body Corporate of its lawful obligations and duties.

As I understood the respective cases of the parties, the covering up of the camera involved placing an A4 piece of paper over the camera with sticky tape. There is no evidence that this ‘could damage the camera and/or interfere with its operation’. Linali also points to the fact that it had an occupation authority in respect of the office. It is submitted that this gave it exclusive occupation of the office. As candidly submitted by the Body Corporate, no evidence was given by the Body Corporate as to the purpose of the CCTV in the office.[49] In in all circumstances, I am not satisfied that the direction to remove the piece of paper was a reasonable direction for the purposes of clause 1.9 of Schedule 1, and, consequently, there was no breach of the Caretaking Agreement in that respect by Linali.

  1. with respect to the alleged breach of Schedule 1, clause 1.2, by not supervising contractors: the alleged breach baldly asserted that there was a failure to discharge the duties being ‘supervising contractors engaging in work on the common property’. There was simply no detail provided as to what supervision of individual contractors required, nor the specific respects in which Mr Chambers failed to comply with that obligation.
  1. [65]
    As noted above, there was no subsequent resolution of the Body Corporate to terminate the Caretaking Agreement on the basis of the September Notice and, for that reason, the purported termination was invalid. However, for completeness, I observe that if there had been a resolution based on the above three unremedied breaches:
    1. I would have concluded that the September Notice would have been invalidated by the inclusion of, by my calculation, 34 other individual alleged breaches (including those under the heading ‘Workplace Health and Safety Obligations’) which did not provide a basis for termination (particularly having regard to the nature of the three unremedied breaches);[50]
    2. it would not have been objectively reasonable to pass the resolution having regard to the nature of the breaches in the context of terminating a long-term Caretaking Agreement.
  2. [66]
    For the reasons set out in above, I find that the Body Corporate was not entitled to terminate the Caretaking Agreement, as it purported to do, on 2 November 2021. I also find that, in purporting to terminate the Caretaking Agreement when it was not entitled to do so, the Body Corporate’s conduct amounted to a renunciation or repudiation of the Caretaking Agreement, entitling Linali to terminate the Caretaking Agreement (which it did on 12 January 2022).

The Letting Agreement

  1. [67]
    The Body Corporate’s case in relation to the Letting Agreement was that the validity of the termination succeeded or failed depending upon whether the Caretaking Agreement was found to be validly terminated by the Body Corporate.
  2. [68]
    For the above reasons, I have found that the Body Corporate did not validly terminate the Caretaking Agreement. However, for completeness, I observe that even if I had found that the Caretaking Agreement had been validly terminated by the Body Corporate, I would have concluded that the Body Corporate repudiated or, at least, committed a substantial breach of the Letting Agreement, thereby justifying the termination of that agreement by Linali.
  3. [69]
    As observed above, the Caretaking Agreement and the Letting Agreement operate independently of each other.
  4. [70]
    In Grieve v Enge,[51] it was said by de Jersey CJ:[52]
  1. [31]
    The primary Judge held that once Mr Enge became aware that the respondents needed access to the property, for the purposes of an inspection to facilitate the preparation of the valuation required by the bank asked to advance the necessary funds, Mr Enge was obliged to allow that access. That arose from his fundamental, if unwritten, contractual obligation. As put by Lord Blackburn in Mackay v Dick (p. 263):

“I think I may safely say, as a general rule, that where in a written contract it appears that both parties have agreed that something shall be done, which cannot effectually be done unless both concur in doing it, the construction of the contract is that each agrees to do all that is necessary to be done on his part for the carrying out of that thing, though there may be no express words to that effect. What is the part of each must depend on circumstances.”

  1. [32]
    That principle has been repeated countless times since; for example, per Griffith CJ in Butt v McDonald (1896) 7 QLJ 68, 70-1:

“It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.”

  1. [33]
    In Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 607 Mason J said of this duty:

“It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party’s obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself.”

  1. [71]
    In my view, the provision of the use of the office at the Complex was an act which was necessary on the part of the Body Corporate to enable Linali to have the benefit of the Letting Agreement. As was accepted by the Respondent, without access to the office, Linali could not lawfully operate the letting business pursuant to the Letting Agreement. In my view, it follows that access to the office was fundamental to the Letting Agreement. By refusing access to the office, I find that the Body Corporate breached the implied term of cooperation, and that Linali was entitled to treat that as a ground for termination. I further find that Linali validly terminated the Letting Agreement on 17 March 2023.

Quantum

Principles in respect of damages

  1. [72]
    The Tribunal has power to order damages for breach of a service contract (and authorisation of a letting agent).[53]
  2. [73]
    The principle applicable to damages at common law for breach of contract is stated as follows:[54]

The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.

Damages for breach of the Caretaking Agreement

  1. [74]
    Linali relied upon two reports of Mr Lytras.[55]
  2. [75]
    The Body Corporate relied upon a report from each of:
    1. Mr Otto;[56] and
    2. Ms Sun.[57]
  3. [76]
    Mr Lytras and Mr Otto assessed the loss on the basis of a loss of future profit. They gave their evidence concurrently.[58] Both experts presented as impressive witnesses, each making appropriate concessions in the course of cross-examination.
  4. [77]
    Ms Sun assessed the laws on two alternative bases. The first was an assessment of the market value of the management and letting rights as a going concern business as at 2 November 2021. The second was an assessment of the market value of the caretaking rights only as a going concern business as at 2 November 2021. The respective valuations were $230,000.00 and $260,000.00. The stated reason for a lower figure in relation to the combined rights was that, as at 2 November 2021, there were only two units in the letting pool generating an income of $3,005.00 which did not cover the expenses to operate the letting component of the business of $9,464.00. Ms Sun was not required for cross-examination.
  5. [78]
    Following the hearing, the only issues that remained in issue between the parties in relation to the issue of quantum were:
    1. whether, in calculating the profit lost by Linali, the remuneration paid to Mr Chambers (who provided the bulk of the day to day services on behalf of the Linali) should be deducted from Linali’s revenue as a cost incurred in performing the Caretaking Agreement, or whether the remuneration was not truly a cost of performing those services and, consequently, should not be deducted (‘Owners’ remuneration issue’);
    2. the appropriate discount rate to be applied to the loss of future profits under the Caretaking Agreement (‘Discount rate issue’);
    3. the discount rate to be applied to ‘past loss’ (‘Discount on past loss issue’).[59]

Owners’ remuneration issue

Nature of the payments received

  1. [79]
    Annexure 8 to the report of Mr Lytras includes a Profit and Loss Summary of Linali for the financial years ended 30 June 2019, 2020, and 2021. It records an item of expenditure ‘Directors’ Salaries’ for those years of $19,202.00,[60] $30,000.00 and $30,000.00 respectively. For each of those years, the Summary also showed a further item of expenditure ‘Superannuation – Associated Persons’ of $1,772.00, $2,850.00, and $2,850.00 respectively. There was no dispute that these amounts concerned Mr Chambers.
  2. [80]
    In re-examination of Mr Chambers, a printed extract from the ‘financials’ of Linali was tendered and admitted as Exhibit 22. Mr Chambers stated that he believed it showed payments received by him.[61] The total of the identified payments was $55,539.88. No attempt was made to explain the difference between this amount and the amounts set out in the tax returns. In the absence of such an explanation and a lack of source documentation to corroborate Exhibit 22, I prefer the information contained in the financial statements and tax returns (reported to the Australian Taxation Office) which were prepared by Linali’s accountant. Mr Chambers signed off on the tax returns as a director of Linali and he assumed they were correct to the best of his knowledge.[62]
  3. [81]
    In re-examination, Mr Chambers gave the following evidence:[63]

How many employees did Linali have?---Me. Well, yes. I was the – the main – not the only, but the main single regular person who did work.

Assume Linali didn’t pay you as the periods in this report shows, assuming you didn’t get paid for a period of time, how would the duties get done?---I still conducted the duties as per normal on a daily basis, or as required.

  1. [82]
    The payments were recorded as salary or wages.[64] I accept Mr Chambers’ evidence that the payments received were not regular.[65] Mr Chambers said the item ‘salaries’ was suggested by the accountant.[66] However, no evidence was led that the true nature of the payments received was other than that of salary or wages.
  2. [83]
    I find that Mr Chambers received from Linali, as salary or wages, the amounts of $19,202.00, $30,000.00 and $30,000.00 respectively.
  3. [84]
    Further, in cross-examination, Mr Chambers gave evidence that although no decision had been made at the time, ‘… one would reasonably expect that my wages would go up’.[67] I find it more likely than not that this would have occurred having regard not only to that evidence but also to Mr Chambers’ evidence that the Caretaking Agreement and the Letting Agreement provided the major source of his income during that period,[68] and the matters raised in paragraph [98] of the Body Corporate’s closing submissions concerning the low level of wages that were being paid to Mr Chambers.

Should the payments to Mr Chambers be deducted from the revenue calculation?

  1. [85]
    In cross-examination, Mr Otto gave the following evidence:[69]
    1. he agreed that in small family companies, owners often get paid by drawings or profit distributions and that when one calculates the gross profit of those businesses, those drawings or profit distributions are excluded from that calculation;
    2. wages can be paid to employees or to owners; they can be paid to anyone;
    3. a company can make payments  as wages/super or as director’s fees or as a loan;
    4. if the business is run through a trust, payments can be made as trust distributions;
    5. the payments in (c) and (d) above are accounting choices that the owners of the business can make.
  2. [86]
    Linali submits that:[70]
    1. the reality is that owners’ remuneration could have been paid in a number of ways and the choice of disbursement to owners did not cause Linali to incur any additional expenses that needed to be met to make its income;
    2. as to the method of paying owners’ remuneration is a choice of the owner, it is not truly a cost performing the services that should be deducted before the calculation of gross profit;
    3. the Tribunal should accept Mr Lytras’ opinion that wages should not be deducted before calculating gross profit.
  3. [87]
    With respect to subparagraph [86](a) above, in cross-examination Mr Lytras accepted that it was a legal question as to whether it was appropriate to deduct from Linali’s revenue the amount that it paid to the owner as a wage in order to determine its profitability.[71]
  4. [88]
    I find that there was no evidence that Linali:
    1. incurred a legal obligation to continue to make payments to Mr Chambers by way of salary or wages, following the termination of the Caretaking Agreement; or
    2. continued to make payments to Mr Chambers by way of salary or wages, following the termination.
  5. [89]
    In my view, the applicable approach to the treatment of the remuneration paid to Mr Chambers is, in the circumstances of the present case, that adopted in the authorities set out below.
  6. [90]
    Hadoplane Pty Ltd v Edward Rushton Pty Ltd (‘Hadoplane’),[72]  involved an appeal on the question of damages for breach of contract recoverable by a plaintiff which was a small company. It was owned and controlled by a husband and wife (‘the shareholders’), both of whom worked for the company. In the financial years leading up to the breach of contract, the company made a small profit with the chief item of expense being the remuneration of the shareholders. As a result of the defendant’s breach of contract, the company’s gross income dropped sharply, but the shareholders did not receive remuneration they would otherwise have drawn from the company had the breach not occurred. The trial Judge assessed damages on the basis of the income that the company would have received after paying expenses including the remuneration previously paid to the shareholders. By a 2-1 majority, the Queensland Court of Appeal dismissed the appeal on the basis that the trial Judge’s approach was correct.
  7. [91]
    Pincus JA said:[73]

Of course, such questions as whether a company owned by two people has come under an obligation to remunerate the two for work they have done for the company without payment have rather an artificial air about them. To avoid problems of that sort, it is tempting to adopt a solution of deconstructing the legal framework in which the [shareholders] conducted their business assessing damages as if they and not the company had made the relevant contract and brought the action. I can see no justification in principle for taking this course. It seems to me unfortunate in the present case that the [shareholders], whose loss has been considerably more than their company’s, have no cause of action. But it is a familiar notion that the use of a company structure can bring with it complications and disadvantages, as well as the hoped-for advantages.

(emphasis added)

  1. [92]
    Thomas JA (as his Honour then was) said:[74]

The fact is that it was the company which made the contract, not [the shareholders]. Different legal consequences follow according to which party makes the contract. I agree with Pincus J.A. that the tendency in Australia is against lifting the corporate veil, especially when the parties who create it rely upon its legal existence for collateral benefits. There are no doubt cases where the sole share-owner controller of a company may be treated as the true principal in a transaction or where the acts of a company can be regarded as the acts of the owner-controller. The present case is however not such a case, and it cannot be suggested that the company was the alter ego of [the shareholders]. If that had been so, a case could have been brought under which [the shareholders] sued as the genuine contracting party.

The case is therefore one where the plaintiff is the company, and it is the company’s loss that falls to be assessed. Had the company continued to pay the same level of salary to [the shareholders], notwithstanding that there was no longer sufficient work for them to perform, its losses would have commensurately increased, and it may have been able to bring such losses into account against the respondent. I prefer not to express a concluded view on that point, as the answer would depend upon a finding whether the company had reasonably mitigated its loss in the circumstances. That is a question of fact (Payzu v. Saunders [1919] 2 K.B. 581, 588, 589) although statements exist as to the way in which such a question may be approached (Banco de Portugal v. Waterlow [1932] A.C. 452, 506; cf. McGregor on Damages, (15th ed., 1988), paras 285 et seq., 311 et seq.). Plainly payments to [the shareholders]were discontinued because the company was short of money and because it would have been thought unwise to generate tax liability on [the shareholders’] behalf by doing so.

Again, if the company at the time of making its contract with the respondent had incurred an obligation to pay [the shareholders]at a specified rate for the whole period of the contract with the respondent, then that would have created a legal obligation on its part, and the cost of discharging that obligation would be a part of the loss that it could prove against the respondent by reason of the respondent’s breach of the contract. However, no doubt for sound commercial reasons, no such obligation was created.

In the absence of some obligation of the kinds just discussed, the appellant company in my view is in much the same situation as any other company. If it mitigates its loss by dismissing staff or failing to employ persons it would otherwise employ, it simply does not suffer the damage. I may say that I am in general agreement with the reasons that Pincus J.A. has written.

(emphasis added)

  1. [93]
    Hadoplane was cited with approval by McPherson JA in Nosic v Zurich Australian Life Insurance Ltd.[75]
  2. [94]
    Having regard to the matters addressed above, I am of the view that:
    1. the amounts paid to Mr Chambers as salary or wages were paid by Linali in order to perform the Caretaking Agreement;
    2. the respective amounts were costs incurred by Linali to perform the Caretaking Agreement and claimed as deductions in its tax returns for the respective income years;
    3. it makes no difference that the payments were made to Mr Chambers (one of Linali’s ‘owners’) rather than an employee with no connection to Linali;
    4. the amounts paid should be deducted from Linali’s revenue in calculating the loss of profit.

Discount rate issue

  1. [95]
    As to the appropriate discount rate to be applied, in their respective reports, Mr Lytras adopted a rate of 4.5% and Mr Otto adopted a rate of 10%.
  2. [96]
    With respect to the rate of 4.5%, Mr Lytras said that the risk to Linali in earning its future revenue under the Caretaking Agreement is equivalent to the risk that a person would have in earning money on a bank term deposit.[76] However, as I understood Mr Lytras’ evidence, he accepted that the rate of 4.5% may be subject to additional ‘contingencies’ or ‘risk factors’ that the Tribunal may identify, which Mr Lytras considered he could not comment upon.[77]
  3. [97]
    In closing submissions, Linali submitted that a discount rate of 6% was appropriate;[78] and the Body Corporate continued to press for a discount rate of 10%.
  4. [98]
    Linali made a number of submissions in support of the discount rate proposed by it (in preference to the rate opined by Mr Otto). These submissions included, materially, the following:
    1. that there was no real commercial risk to Linali, no risk of non-payment, no risk of insolvency, no risk of the Body Corporate ceasing to exist;[79]
    2. no contingency should be given for the ‘dispute risk’ referred to by Mr Otto; such a risk was ‘not real’ and was of ‘minimal significance’;[80]
    3. that in Price v Friebe & Ors (‘Price’),[81] Kelly J adopted (by way of a provisional assessment) a discount rate of 5% for a future loss of income of an obstetrician.
  5. [99]
    In my view, for the following reasons, the appropriate discount rate in the present case is 9%.
  6. [100]
    First, as I understood the position of the parties, the agreed period of loss was from 2 November 2021 to 8 April 2040. That is a period of approximately 18 years 5 months. I consider that this is a significant distinguishing feature from the facts of Price. Whilst I accept that there would be a greater element of risk involving the future income stream of an obstetrician (for example, fewer patients and no ability to replace his services), the period of loss in this case is in excess of three times that of the loss period in Price (which was 5 years and 7 months, from 14 June 2021 until mid-January 2027).[82] Further, it appears that the plaintiff in Price was approximately 59 years of age at trial (and would have been 65 years of age at the end of the loss period).[83] In the present case, Mr Chamber’s age at the end of the loss period would have been 80. I consider that this is a material factor, notwithstanding the fact that, at age 64 at the date of the hearing, Mr Chambers had no present health issues, and there was the potential for his daughter and son-in-law to take over the day to day duties in his place if necessary.
  7. [101]
    Second, in my view, the ‘dispute risk’ is a real risk and of more than minimal significance, particularly given the extent of the loss period. Having regard to the evidence of Mr Kerridge and Mr Chambers, and the correspondence between Mr and Mrs Chambers and the Committee of the Body Corporate,[84] as well as correspondence from Mr and Mrs Chambers to the lot owners,[85] it was evident that the relationship between Mr Chambers and, at least, Mr Kerridge had effectively broken down.
  8. [102]
    Further, I consider that there were three instances of conduct alleged against Linali (by the conduct of Mr Chambers) that indicate that there was more than a fanciful prospect that Linali may have engaged in subsequent conduct that gave rise to the potential for termination of the Caretaking Agreement.
  9. [103]
    In one instance, there was a CCTV system set up within the Complex with a camera in the office utilised by Linali for conducting the letting business. Mr Chambers had been told that various people did not have access to the CCTV system, but he suspected that some people did have access to it. In order to test his theory, and to get a ‘reaction’, Mr Chambers downloaded, from the Internet, a black-and-white outline of a ‘phallic symbol’,[86] replicated it six times on an A4 piece of paper, and displayed it in front of the CCTV camera in the office.[87] Mr Chambers ‘didn’t really know’ who had access to the image that might be prompted to provide a response to it.[88] I find that such a response to a perceived issue of concern was problematic; it was more likely to generate a conflict or dispute that it was to resolve it.
  10. [104]
    The second instance was the refusal to aerate the garden bed. Mr Chambers acknowledged refusing to do so. The basis for the refusal was that, in his view, to aerate the garden bed would likely cause damage to the waterproof membrane at the bottom of the garden bed.[89] Whether this was, in truth, a likelihood does not alter the fact that there was a contractual obligation to do so in circumstances where the Body Corporate had specifically raised this issue with Linali.
  11. [105]
    The third instance was the breach of the requirement to conduct monthly cleaning of the carpark fire sprinkler pipework (addressed above). Not only was the alleged default denied but it was positively asserted that the ‘directive’ was both ‘unnecessary’ and ‘unreasonable’. This was an opinion held by Mr Chambers.[90] However, such cleaning was a contractual requirement of the Caretaking Agreement.
  12. [106]
    In my view, the second and third instances suggest a degree of intransigence on the part of Mr Chambers, namely that he was likely to refuse to perform duties on behalf of Linali under the Caretaking Agreement if he formed the view that a particular contractual obligation was unnecessary or unreasonable.
  13. [107]
    I have also had regard to Mr Chambers’ age at the hearing, and the age he would have been had the Caretaking Agreement continued through to the end date.
  14. [108]
    The adoption of an appropriate discount rate is a matter of judgment and is not susceptible to an arithmetical exercise. Having regard to the factors addressed above, I assess that the risk factors (or contingencies) over and above that of having the money invested in a term deposit (which is very low risk) justify an additional discount in the range of 4% to 5%. I adopt the mid-point figure of 4.5% which results in an overall discount rate of 9%.
  15. [109]
    In arriving at this rate, I have taken into consideration that the likelihood of the risk factors materialising in, say, the first three years following termination would be less than the likelihood of same occurring throughout the balance of the loss period, but the length of the period going forward of approximately 15½ years carries with it a counter-balancing increased risk of occurrence.

Rate to be applied to past loss

Letting Agreement

  1. [110]
    Mr Lytras and Mr Otto were agreed that the appropriate discount rate for the loss arising from the termination of the Letting Agreement was 20%.
  2. [111]
    The Body Corporate contends that the respective discount figures should be applied to the whole of the loss from 2 November 2021 onwards.
  3. [112]
    Linali contends that the discount figure to be applied to past lost should be at the rate of:
    1. 1.5% (‘risk only’) in respect of the caretaking loss (on the basis of its primary position on the discount rate of 6%);
    2. 4.5% (‘risk only’) for the letting loss.
  4. [113]
    With respect to the letting loss, as noted above, the experts were in agreement as to the appropriate rate namely 20%.[91] The experts proceeded on the basis of identifying loss 30 June 2024 and further loss thereafter. In this context, the experts did not suggest that a different discount rate should be applied to the loss to 30 June 2024. In the circumstances, I adopt the agreed rate of 20%. For completeness, I consider that the risk factor was significant and existed on and from the date that Linali was excluded from the office. The total number of units in the letting pool had reduced from 13 when Linali took over the letting business, to two at the date of termination of the Letting Agreement.[92] In those circumstances, I would assess there being a greater likelihood of a subsequent reduction in the size of the letting pool than an increase in the number of units in the letting pool.

Caretaking Agreement

  1. [114]
    Again, I did not understand the experts to adopt a different discount rate for the respective assessed loss from 2 November 2021 to 30 June 2024.
  2. [115]
    I consider that the rate of 9% should apply to the whole period on from 2 November 2021 on the basis that, first, the dispute risk existed from that date and, second, the discount rate factors in the matters addressed at paragraph [109] above.

Summary of damages

Calculation of Caretaking Agreement loss

  1. [116]
    The parties provided agreed calculations adopting respective interest rates of 5%, 6%, 7%, 8% and 9% (Mr Otto’s report provides calculations a discount rate of 10%).
  2. [117]
    As addressed above, I consider that an assessment of the loss arising from the termination of the Caretaking Agreement should (a) deduct the ‘owners’ remuneration’ from the assessment of loss of profit; (b) adopt a discount rate of 9%; and (c) apply that rate across the whole of the loss on from 2 November 2021.
  3. [118]
    Adopting these parameters, I consider that the table provided by the parties headed ‘CARETAKING LOSS (after Owners’ Remuneration) 9.0% Discount Rate’ is the applicable table. I assess the caretaking loss in the amount of $286,075.00.

Calculation of Letting Agreement loss

  1. [119]
    In assessing this head of loss, I consider that it is appropriate to apply a 20% discount and apply that rate across the whole of the loss on from 2 November 2021.
  2. [120]
    In the Agreed Statement of Position of Parties:
    1. the Body Corporate contends that ‘Letting Loss’ was $10,755.00 based on the report of Mr Otto;
    2. Linali contended that the loss was $36,850.00 based on the ‘Experts Comparison Table’. That figure adopted a discount rate of only 4.5% for past loss.
  3. [121]
    On my reading of the Experts Comparison Table, the assessed loss (if the 20% discount is applied to the whole of the loss) is $25,883.00. As I understand the material provided by the parties, the difference between that amount and the figure contended for by the Body Corporate, is that Mr Otto’s assumptions included:
    1. a notional average weekly rent per unit of $582.50 whereas Mr Lytras adopted a figure of $630.00;
    2. an ancillary letting income as a percentage of letting commission of 29.1% whereas Mr Lytras adopted a figure of 37.25%.
  4. [122]
    As I understood Mr Otto’s evidence, he was prepared to accept each of the figures adopted by Mr Lytras.[93]
  5. [123]
    I assess the letting loss in the amount of $25,883.00.

Total loss

  1. [124]
    I assess Linali’s damages for breach of contract (in relation to both the Caretaking Agreement and the Letting Agreement) in the total amount of $311,958.00.

Orders

  1. [125]
    For the reasons set out above, the Respondent is ordered to pay to the Applicant damages in the amount of $311,958.00. Given the amount of damages awarded, I consider it appropriate to allow the Respondent within three (3) months from the date of this Decision to make payment.
  2. [126]
    With respect to costs, I make the following orders:
    1. any party seeking an order for costs must file with the Tribunal two (2) copies of, and give to the other party one (1) copy of, written submissions, no longer than eight (8) pages, within 14 days of the date of the Decision.
    2. if written submissions as to costs are filed, the party against whom an order for costs is sought must file with the Tribunal two (2) copies of, and give to the other party one (1) copy of, written submissions in response, no longer than eight (8) pages, within 14 days of receipt of the written submissions.
    3. the party that receives written submissions in response may file with the Tribunal two (2) copies of, and give to the other party one (1) copy of, written submissions in reply, no longer than four (4) pages, within 14 days of receipt of the response submissions.
    4. if no written submissions as to costs are filed within 14 days of the date of the Decision, there shall be no order as to costs of the proceeding.
    5. if written submissions as to costs are filed, the application for costs will be determined on the papers, without an oral hearing.

Footnotes

[1]Exhibit 8, 118-128.

[2]Exhibit 8, [17].

[3]Exhibit 8, 30-55.

[4]Exhibit 8, 56-77.

[5]Exhibit 8, 219.

[6]Exhibit 8, 223-224.

[7]Closing Submissions of the Body Corporate, [7].

[8]Closing Submissions of the Body Corporate, [7].

[9]This was accepted by Mr Richie of Counsel for the Body Corporate: Transcript 08.08.24 T1-10 lines 20-24.

[10][2018] QCAT 283. See also Body Corporate for the Lakes-Cairns CTS 28090 v Sunshine Group Australia Pty Ltd [2023] QCAT 39, [94]-[95].

[11]Coupled with ss 6, 9 and 10 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld).

[12]Reynolds, [17]-[31], esp. [30].

[13]For completeness, I note that the definition of ‘contractual matter’ in Schedule 6 refers to ‘service contractor’ and not ‘caretaking service contractor’.

[14]BCCMA, definitions of ‘service contractor’ and ‘caretaking service contractor’ in Schedule 6, and s 15.

[15]BCCMA, definition of ‘letting agent’ in Schedule 6, and s 16.

[16]See exhibit 8, p 12.

[17]These provisions have not been amended since commencement.

[18]See the observations of the Appeal Tribunal in relation to similar provisions contained in the Standard Module in The Sands Gold Coast Pty Ltd v The Body Corporate for the Sands [2018] QCATA 160, [48]. See also Body Corporate for Bay Village Community Titles Scheme 33127 v Breeze MR Pty Ltd [2023] QCA 91, [18]-[20] (Bond JA, Wilson J agreeing).

[19]Exhibit 8, pp 151-154.

[20]Exhibit 8, pp 192-196.

[21]Linali's closing submissions, [50]-[52].

[22]Linali's closing submissions, [53]-[54].

[23]Linali's closing submissions, [55].

[24]Linali's closing submissions, [53]-[54].

[25]Closing Submissions of the Body Corporate, [57]-[58].

[26](1989) 166 CLR 623.

[27]Gaudron J did not decide this question: see 665.

[28]Deane and Dawson JJ, 654-655 and Brennan J (as his Honour then was), 646-647; contra Mason J (as his Honour then was), 638.

[29]Linali's closing submissions, [72]-[75].

[30]Linali's closing submissions, [80]-[93].

[31]Linali's closing submissions, [80]-[84].

[32]Linali's closing submissions, [85]-[87].

[33]Linali's closing submissions, [88]-[92].

[34]Closing Submissions of the Body Corporate, [24], [60].

[35]Closing Submissions of the Body Corporate, [60].

[36]Closing Submissions of the Body Corporate, [61].

[37][2017] QCATA 53, [37].

[38]At [17]-[18].

[39][2021] QDC 166, [194].

[40]At [195]-[196]. See also Ainsworth v Albrecht (2016) 261 CLR 167, [71] (Nettle J).

[41]At [202], see also [200]-[201].

[42]As identified in Linali's closing submissions, [90]-[91].

[43]Applicant's closing submissions, [89].

[44]BCCMA, s 97.

[45]BCCMA, s 101(1).

[46]BCCMA, s 101(2).

[47]AM Regulation, s 44(1)(d).

[48]T1-26 line 32 – T1-28 line 30, esp. T1-27 lines 38-42, T1-28 lines 20-32.

[49]Closing submissions of the Body Corporate, [38].

[50]Contrast Sherwood Forest Corporation Pty Ltd v Body Corporate for Centenary Mews [2021] QDC 166, [157]-[165], where the Court concluded that the notice was valid in circumstances where four of the nine alleged breaches had occurred.

[51][2006] QCA 213. These observations were cited with approval by the Queensland Court of Appeal in Royal Pines Projects Pty Ltd v Brightman [2024] QCA 147, [14].

[52]At [31]-[33] (Helman J agreeing).

[53]See Reynolds [33]-[47].

[54]Robinson v Harman (1848) 1 Exch 850, 855, 154 ER 363, 365, cited in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, [13]. See also Cessnock City Council v 123 259 932 Pty Ltd (2024) 98 ALJR 719, [2024] HCA 17, [117].

[55]Exhibits 16 and 17.

[56]Exhibit 19.

[57]Exhibit 18.

[58]Mr Lytras was also cross-examined separately on the day prior to the concurrent evidence.

[59]The dispute about this aspect of quantum did not emerge (or, at least, did not fully emerge) until supplementary material was provided by the parties following the hearing.

[60]The first year of the Caretaking Agreement was not a full financial year.

[61]T1-48 lines 16-22.

[62]T1-43 line 44 - T1-44 line 7.

[63]T1-49 lines 18-23.

[64]T1-44 lines 9-14.

[65]T1-41 line 30 - T1-42 line 19.

[66]T1-41 lines 30-33.

[67]T1-46 lines 6-13.

[68]T1-40 lines 19-20.

[69]T2-31 lines 1-45.

[70]Linali’s closing submissions, [107]-[109].

[71]T1-61 lines 16-18. See also T2-30 lines 1-10.

[72][1996] 1 Qd R 156.

[73]At 162.

[74]At 164.

[75][1997] 1 Qd R 67, 75.

[76]T2-16 lines 41-44.

[77]T2-13 line 41 – T14 line 17; T2-16 line 46.

[78]Linali’s closing submissions, [96], [115].

[79]Linali’s closing submissions, [99].

[80]Linali’s closing submissions, [101]-[102].

[81][2024] QSC 157.

[82]See [250].

[83]See [193].

[84]See, for example, Exhibit 8, pp 131-132.

[85]See, for example, Exhibit 8, pp 134-137.

[86]Specifically, as I understood Mr Chambers’ evidence, an outline of a penis and testicles.

[87]T1-34 line 3 – T1-35 line 11.

[88]T1-35 line 41 – T1-36 line 3.

[89]T1-28 line 38 – T1-30 line 6.

[90]T1-28 lines 10-18.

[91]In this respect, I note Linali’s closing submissions, [120].

[92]T1-36 lines 27-31; T1-37 line 33 – T1-39 line 25.

[93]T2-36 line 37 – T2-37 line 2; T2-40 lines 3-20.

Close

Editorial Notes

  • Published Case Name:

    Linali Pty Ltd as trustee for the Chakra Family Trust v Body Corporate for Crown CTS 41282

  • Shortened Case Name:

    Linali Pty Ltd as trustee for the Chakra Family Trust v Body Corporate for Crown CTS 41282

  • MNC:

    [2024] QCAT 446

  • Court:

    QCAT

  • Judge(s):

    Member Lumb

  • Date:

    16 Oct 2024

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
Ainsworth & Ors v Albrecht & Anor (2016) 261 CLR 167
2 citations
Jump To
Cite 1 - (2016) 261 CLR 167
Cite 2 - (2016) 261 CLR 167
Banco Pe Portugal v Waterlow and Sons Ltd (1932) AC 452
1 citation
Jump To
Cite 1 - (1932) AC 452
Body Corporate for Bay Village Community Titles Scheme 33127 v Breeze MR Pty Ltd(2023) 15 QR 185; [2023] QCA 91
2 citations
Jump To
Cite 1 - [2023] QCA 91
Cite 2 - [2023] QCA 91
Body Corporate for the Lakes-Cairns CTS 28090 v Sunshine Group Australia Pty Ltd [2023] QCAT 39
2 citations
Jump To
Cite 1 - [2023] QCAT 39
Cite 2 - [2023] QCAT 39
Body Corporate for the Reserve v Trojan Resorts Pty Ltd [2017] QCATA 53
2 citations
Jump To
Cite 1 - [2017] QCATA 53
Cite 2 - [2017] QCATA 53
Butt v McDonald (1896) 7 QLJ 68
1 citation
Jump To
Cite 1 - (1896) 7 QLJ 68
Cessnock City Council v 123 259 932 Pty Ltd (2024) 98 ALJR 719
2 citations
Jump To
Cite 1 - (2024) 98 ALJR 719
Cite 2 - (2024) 98 ALJR 719
Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17
2 citations
Jump To
Cite 1 - [2024] HCA 17
Cite 2 - [2024] HCA 17
Grieve v Enge [2006] QCA 213
2 citations
Jump To
Cite 1 - [2006] QCA 213
Cite 2 - [2006] QCA 213
Hadoplane Pty Ltd v Edward Rushton Pty Ltd[1996] 1 Qd R 156; [1995] QCA 446
1 citation
Jump To
Cite 1 - [1996] 1 Qd R 156
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 C.L R. 623
2 citations
Jump To
Cite 1 - (1989) 166 C.L R. 623
Cite 2 - (1989) 166 C.L R. 623
Nosic v Zurich Australian Life Insurance Ltd [1997] 1 Qd R 67
1 citation
Jump To
Cite 1 - [1997] 1 Qd R 67
Payzu Limited v Saunders (1919) 2 KB 581
1 citation
Jump To
Cite 1 - (1919) 2 KB 581
Price v Friebe [2024] QSC 157
2 citations
Jump To
Cite 1 - [2024] QSC 157
Cite 2 - [2024] QSC 157
Reynolds v Body Corporate for Mount View Apartments [2018] QCAT 283
2 citations
Jump To
Cite 1 - [2018] QCAT 283
Cite 2 - [2018] QCAT 283
Robinson v Harman (1848) 1 Ex Ch 850
2 citations
Jump To
Cite 1 - (1848) 1 Ex Ch 850
Cite 2 - (1848) 1 Ex Ch 850
Royal Pines Projects Pty Ltd v Brightman [2024] QCA 147
2 citations
Jump To
Cite 1 - [2024] QCA 147
Cite 2 - [2024] QCA 147
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
1 citation
Jump To
Cite 1 - (1979) 144 CLR 596
Sherwood Forest Corporation Pty Ltd v Body Corporate for Centenary Mews [2021] QDC 166
3 citations
Jump To
Cite 1 - [2021] QDC 166
Cite 2 - [2021] QDC 166
Cite 3 - [2021] QDC 166
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272
2 citations
Jump To
Cite 1 - (2009) 236 CLR 272
Cite 2 - (2009) 236 CLR 272
The Sands Gold Coast Pty Ltd v The Body Corporate for the Sands [2018] QCATA 160
2 citations
Jump To
Cite 1 - [2018] QCATA 160
Cite 2 - [2018] QCATA 160

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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