SUPREME COURT OF QUEENSLAND

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1 SUPREME COURT OF QUEENSLAND CITATION: PARTIES: Henderson & Anor v The Body Corporate for Merrimac Heights [2011] QSC 336 PETER GARTH HENDERSON AND KEIREN DEBORAH HENDERSON AS TRUSTEES FOR THE HENDERSON FAMILY TRUST AND ROBYN DAVIES AS TRUSTEE FOR THE PEARL FAMILY TRUST (plaintiffs) v THE BODY CORPORATE FOR MERRIMAC HEIGHTS CTS (defendant) FILE NOS: BS 1792 of 2010 and BS of 2009 DIVISION: PROCEEDING: ORIGINATING COURT: Trial Division Claims Supreme Court of Queensland DELIVERED ON: 11 November 2011 DELIVERED AT: HEARING DATE: JUDGE: ORDER: Brisbane September 2010, May, 1, 3 June and 21 October 2011 McMurdo J 1. It is declared that the document described as the Landscape Maintenance Agreement, originally made in writing and dated 26 October 2005, is valid and enforceable as a contract between the plaintiffs and the defendant for a term expiring on 14 April It is declared that the document described as a Caretaking Agreement, originally made in writing and dated 24 October 2001, is valid and enforceable as a contract between the plaintiffs and the defendant for a term expiring on 14 April Judgment for the plaintiffs against the defendant in the sum of $59,200. CATCHWORDS: CONTRACTS GENERAL CONTRACTUAL PRINCIPLES DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH OTHER MATTERS where the defendant is the body corporate of a housing complex subject to a community titles scheme where the defendant entered into a caretaking agreement and a landscape maintenance agreement with other parties where the agreements were assigned to the plaintiffs and their duration

2 2 extended until 14 April 2022 whether the plaintiffs breached or repudiated the agreements whether each agreement is enforceable against the defendant whether the plaintiffs should be awarded damages for breach of contract for their lost profits from the performance of the landscape maintenance agreement CONTRACTS GENERAL CONTRACTUAL PRINCIPLES DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH DISCHARGE BY AGREEMENT GENERALLY whether the landscape maintenance agreement was terminated by the agreement of the parties REAL PROPERTY STRATA AND RELATED TITLES MANAGEMENT AND CONTROL BODY CORPORATE: POWERS, DUTIES AND LIABILITIES GENERALLY whether the landscape maintenance agreement was made beyond the defendant s powers as a body corporate whether it is beyond the power of a body corporate to supply, or engage another person to supply, services for the benefit of owners and occupiers of lots without having secured the recoverability of the costs of the provision of that service by having made an agreement with the relevant lot owners PROCEDURE COURTS AND JUDGES GENERALLY COURTS ATTEMPT TO OUST JURISDICTION OF COURT where the parties made an adjudication application to QCAT in relation to the dispute the subject of proceedings BS 14479/09 which was dismissed by the Commissioner where the dispute the subject of proceedings BS 1792/10 was transferred by the President of QCAT to the Supreme Court where the dispute the subject of proceedings BS 1792/10 was a complex dispute within the meaning of Schedule 6 of the Body Corporate and Community Management Act 1997 (Qld) where s 229(2) of the Act provided that the only remedy for a complex dispute is its resolution by an order of a specialist adjudicator under Chapter 6 or an order of QCAT exercising the Tribunal s original jurisdiction under the QCAT Act (or an order on appeal from the adjudicator or the Tribunal) whether the Supreme Court has jurisdiction in relation to proceedings BS 1792/10 Body Corporate and Community Management Act 1997 (Qld), s 149B, s 158, s 229 Body Corporate and Community Management (Accommodation Module) Regulation (Qld) 1997, s 118 Body Corporate and Community Management (Accommodation Module) Regulation (Qld) 2008, s 163, s 167, s 168, s 169 Building Units and Group Titles Act 1980 (Qld), s 37, s 38 Queensland Civil and Administrative Tribunal Act 2009

3 3 (Qld), s 52 Fencott v Muller (1983) 152 CLR 570, applied Fitzgerald v Masters (1956) 95 CLR 420, cited Humphries v Proprietors of Surfers Palms North Group Titles Plan 1955 (1994) 179 CLR 597, distinguished James v Body Corporate Aarons Community Titles Scheme [2002] QSC 386, considered James v Body Corporate for Aarons Community Titles Scheme [2004] 1 Qd R 386, considered Marminta Pty Ltd v French [2003] QCA 541, cited Re Wakim; ex parte McNally (1999) 198 CLR 511, applied Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261, cited Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279, cited COUNSEL: September 2010: CJ Carrigan with PK O Higgins for the plaintiffs D Hogan-Doran with PA Ahern for the defendant SOLICITORS: May and 1 and 3 June 2011: JA Griffin QC with CJ Carrigan for the plaintiffs D Hogan-Doran with PA Ahern for the defendant 21 October 2011: JA Griffin QC with CJ Carrigan for the plaintiffs PA Ahern for the defendant Short Punch & Greatorix for the plaintiffs Teys Lawyers for the defendant [1] At Merrimac on the Gold Coast there is a housing complex consisting of 150 dwellings situated on about six hectares of land. 1 It is the subject of a community titles scheme and the defendant is the body corporate. [2] The defendant entered into two agreements, originally made with other parties, but which were assigned to the plaintiffs in Each agreement was in writing and was varied so that it would expire in One agreement, described as a Caretaking Agreement, was for the provision of services described as caretaking, repair, maintenance, administration, control, use and enjoyment of the improvements and other property within the complex. 2 It also permitted the managers to conduct a letting agency from within the complex. The other agreement, described as a Landscape Maintenance Agreement ( LMA ), was for the provision of gardening services. 3 Each was assignable. [3] Immediately prior to the assignments to the plaintiffs, the Caretaking Agreement was to have expired in October 2011 and the LMA was to have expired in October T 6-41 and Exhibit 1, Vol 1, p 42. Exhibit 1, Vol 1, p 44. Ibid, pp

4 As was ultimately conceded by the defendant, the agreed duration of each agreement was extended coincidentally with the assignment to the plaintiffs. Each agreement became one which was to exist until 14 April The agreements were valuable, the plaintiffs paying their predecessors a price of $1,280,000 for the assignments of the agreements as extended. 5 [4] The issues here are whether each agreement is enforceable against the defendant. It says that it has terminated, or is entitled to terminate, the Caretaking Agreement for alleged breaches or a repudiation of that contract. To a large extent, its complaints about the plaintiffs performance as caretakers are related to its complaints about the LMA. The defendant claims to have also terminated the LMA for alleged breaches or repudiation by the plaintiffs. Alternatively, it argues that the LMA was terminated by the agreement of the parties, with effect from October And it contends, in any event, that the LMA was made beyond its powers as a body corporate under the relevant legislation so that it has never been of any effect. [5] The plaintiffs claim that each agreement is enforceable and they seek declarations to that effect. They continue to act under the Caretaking Agreement with the benefit of an injunction, granted with the defendant s consent, by the Queensland Civil and Administrative Tribunal ( QCAT ), which restrains the defendant from terminating or attempting to terminate the Caretaking Agreement pending the outcome of proceedings commenced in that jurisdiction. Those proceedings were transferred to this Court by an order of the President of QCAT and became BS 1792 of However, as I will discuss, this Court s jurisdiction to determine the dispute the subject of those transferred proceedings is not clear. [6] As for the LMA, the plaintiffs were replaced by other gardeners from October They intend to resume their duties under the LMA if they are successful here. They claim damages for breach of contract for their lost profits from the performance of the LMA since October 2009 until they are able to resume its performance. Their claims in respect of the LMA are the subject of BS of 2009, for which this Court does have jurisdiction. The LMA case [7] The LMA, dated 26 October 2005, was originally made by the defendant with Berry Management Pty Ltd. 6 The services to be supplied included the mowing of [a]ll grass areas including front and back yards of units, common ground, back paddock and road frontage. 7 At least in that way, the LMA required work to be done not only upon common property but also upon individual lots. The agreed consideration was $35,000 per year subject to increases according to movements in the index, an expression which was not defined but which was apparently intended to refer to the Consumer Price Index Ibid, pp Ibid, p 215. Ibid, pp Ibid, p 122. There is no issue here as to the meaning of this provision.

5 5 [8] In January 2007 the plaintiffs contracted with Berry Management Pty Ltd to purchase its rights according to the LMA and the Caretaking Agreement. 9 The contract of sale was conditional upon the defendant agreeing to extend the Caretaking Agreement for at least 15 years. 10 [9] On 28 February 2007 there was an extraordinary general meeting of the defendant at which it was resolved to agree to the variation in the duration of both contracts to April 2022 and, in effect, to the assignment of the contracts as varied to the plaintiffs. 11 On the same day the plaintiffs and the defendant executed a deed, by which the duration of the two agreements was extended to 14 April [10] A further deed was executed on 27 March 2007, described as a deed of assignment of the Caretaking Agreement and the LMA. 13 The parties to it were the plaintiffs, the defendant and Berry Management Pty Ltd. The evident purpose of this deed was to record the consent of the defendant to the assignments to the plaintiffs and to have them covenant to perform the agreements. Within this deed, the duration of the LMA was recorded as being the (originally agreed) term to expire on 31 October 2008 and the duration of the Caretaking Agreement was recorded as expiring on 16 October 2011 (with an option for a further five years). 14 [11] As is now accepted by the defendant, this deed of assignment wrongly recorded the duration of each of the contracts being assigned. It was not until late in the trial that the defendant made that concession, until then maintaining that the duration of the agreements had not been extended. Those extensions had been the subject of the deed dated 28 February But the defendant had alleged that this deed had not varied the LMA and Caretaking Agreement because Berry Management Pty Ltd was not a party to it. The defendant s ultimate concession that each agreement was extended to 2022 was rightly made. [12] In January 2009 the defendant received legal advice that the LMA may be invalid as having been made by the defendant ultra vires. The defendant s solicitors advised the defendant s committee that: The body corporate may only engage the gardener to perform services which it has a power or duty to carry out. The requirement for the gardener to mow the front and back yards of units would be invalid because the body corporate does not have the power to maintain those areas. The body corporate may engage a gardener to provide services to lot owners (eg mowing the front and back yards of their lots) provided the body corporate has an agreement with each lot owner who Exhibit 1, Vol 1, pp Ibid, p 219. Ibid, pp Ibid, p Ibid, pp Ibid, p 339.

6 6 requires the service. The agreement is made pursuant to s 167 of the Accommodation Module. If it is not possible to separate the remuneration for services to lot owners and services to the body corporate, then the landscape maintenance agreement may be invalid in its entirety. 15 [13] As I have said, there are other issues about the performance of this agreement which are relevant to the defendant s alternative grounds for denying that the LMA is now enforceable. But it is convenient at this point to consider the validity of the contract. The LMA was it valid? [14] The plaintiffs say that the LMA was validly made pursuant to s 158 of the Body Corporate and Community Management Act 1997 (Qld) ( the Act ) and what is now s 167 of the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Qld) ( the 2008 Accommodation Module ). [15] At all relevant times, s 158 has provided as follows: 158 Supply of services by body corporate The body corporate for a community titles scheme may supply, or engage another person to supply, services for the benefit of owners and occupiers of lots in the way, and to the extent, authorised under the regulation module applying to the scheme. As at October 2005, the regulation module applying to the scheme was the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Qld), of which s 118 was in these terms: 118 Supply of services by body corporate Act, s 158 [SM, s 119] (1) The body corporate may supply, or engage another person to supply, utility services and other services for the benefit of owners and occupiers of lots, if the services consist of 1 or more of the following (a) maintenance services, which may include cleaning, repair, painting, pest prevention or extermination or mowing; (b) communication services, which may include the installation and supply of telephone, intercom, computer data or television; 15 Exhibit 1, Vol 2, p 435.

7 7 (c) domestic services, which may include electricity, gas, water, garbage removal, airconditioning or heating. Example The body corporate might engage a corporation to supply PABX services for the benefit of the owners and occupiers of lots. (2) The body corporate may, by agreement with a person for whom services are supplied, charge for the services (including for the installation of, and the maintenance and other operating costs associated with, utility infrastructure for the services), but only to the extent necessary for reimbursing the body corporate for supplying the services. (3) In acting under subsections (1) and (2), the body corporate must, to the greatest practicable extent, ensure the total cost to the body corporate (other than body corporate administrative costs) for supplying a service, including the cost of a commercial service, and the cost of purchasing, operating, maintaining and replacing any equipment, is recovered from the users of the service. As and from 30 August 2008, this regulation was remade, in relevantly identical terms, as s 167 of the 2008 Accommodation Module. [16] As to s 158 of the Act, the defendant s argument accepts that the services provided under the LMA are services of a kind which may be provided pursuant to s 167 of the 2008 Accommodation Module. As to the regulation, the defendant says that it must be interpreted in the light of other provisions of the same regulation module, particularly what are now s 168 and s 169 of the 2008 Accommodation Module. Section 168 requires an occupier of a lot to keep those parts of the lot which are readily observable from another lot in a clean and tidy condition and to maintain the lot in good condition save for a part of the lot which the body corporate is required to maintain. Section 169 applies if the owner or occupier of a lot does not do work which it is obliged to do under, for example, s 168. In that event the body corporate may do the work and recover the reasonable cost of it from the owner. The defendant s argument also refers to s 163 of the Act, by which a person authorised by the body corporate may enter a lot in order to, amongst other things, carry out work which the body corporate is authorised or required to carry out. [17] In the context of those provisions, the defendant submits that it is beyond the power of the body corporate to supply, or in this case engage another person to supply, the services of lawn mowing to areas within lots without having secured the recoverability of the costs of the provision of that service by having made an agreement with the relevant lot owners. This is said to result from the evident intent of ss which is to employ a user pays principle. There was no agreement between the defendant and any lot owner, who required the service of lawn mowing and gardening upon his or her lot, for that work to be done.

8 8 [18] Section 167(2) is in permissive terms. It is not in terms which qualify the power under s 167(1). In other words, it does not require the body corporate to have an existing agreement with the user of the service as a condition of the exercise of the power to supply that service or to engage another person to supply it. Yet that is the defendant s argument as to the effect of s 167 as a whole. The defendant argues that a body corporate cannot supply services without ensuring (as far as practicable) that the costs are recovered from the users of the service, and it cannot ensure that the costs are recovered from a user of the service without an agreement with that user. Accordingly, a body corporate cannot supply services without some sort of agreement in place. 16 [19] The defendant s argument suggests that the legislative intention was to limit the powers of a body corporate, in a similar way to that found to exist under a previous statute in Humphries v Proprietors of Surfers Palms North Group Titles Plan The provision there considered by the High Court was s 37 of the Building Units and Group Titles Act 1980 (Qld). It empowered a body corporate to manage and maintain the common property for the benefit of proprietors. Section 37(2)(a) empowered a body corporate to enter into an agreement, upon such terms and conditions (including terms for the payment of consideration) as may be agreed upon by the parties thereto, with a proprietor or occupier of a lot for the provision of amenities or services by it to the lot or to the proprietor or occupier thereof. By s 38(3), a body corporate was prohibited from disbursing its funds other than for the purpose of carrying out its powers and duties under the Act. The body corporate there entered into a management agreement, under which one of the manager s duties was to conduct a letting agency for such of the lot owners who required the service. It was held that the body corporate had no power to enter into the contract to procure the provision of that letting service and that as the letting service provision was not severable from the remainder of the agreement, the contract was wholly void. As Brennan and Toohey JJ said, the agreement which a body corporate was expressly authorised to make was one with a proprietor or occupier of a lot, rather than one between the body corporate and a person who was to provide lot owners or occupiers with a service. 18 Their Honours said: The body corporate did not enter into an agreement with the proprietor or occupier of any lot to provide the services of a letting agency for the benefit of that proprietor or occupier. Had it done so, it would have had authority to perform that agreement by employing an agent or servant (such as the appellants) to provide the services contracted for. However, if an agreement had been made with particular proprietors or occupiers, it would not have been a proper exercise of the body corporate s powers to require the funds raised by contribution from all proprietors to bear the cost of provision of the service for particular proprietors or occupiers. In any event, cl. 2(r) of the management agreement was not made in implementation of any agreement made under s. 37(2)(a) between the body corporate and an individual lot proprietor or occupier. None of the other powers conferred by s. 37(2) authorizes the Defendant s written submissions, p 43, para 36. (1994) 179 CLR 597. Ibid at 602.

9 9 making of an agreement for the conduct of the letting agency for the benefit of those proprietors of individual lots who might require such a service. 19 [20] Section 167 of the 2008 Accommodation Module differs from the provision considered in Humphries. In Humphries, the power of a body corporate to engage a person to provide services existed only by an implication, as incidental to the express power to agree with persons to whom the services were to be provided. That provision was comparable to the present s 167(2). But s 167(1) expressly authorises a body corporate to engage the service provider and, as I have said, is in terms of a distinct authority from that conferred by s 167(2). This case is not governed by Humphries. [21] The defendant s argument, if accepted, would cause considerable difficulty in practice. The validity of an agreement between a body corporate and the service provider would depend, in many cases, upon facts and circumstances of which the latter could be unaware. In particular, it would depend upon whether the body corporate had made an agreement, with each and every relevant owner, upon terms by which the costs of servicing a certain lot would be assured of recovery from its owner. [22] The body corporate s duty under s 167(3) is expressed in relative terms: it is to ensure to the greatest practicable extent that the user pays. In many instances, there would be a need for estimation and approximation in assessing the costs of providing the service to users. That would provide a potential for controversy as to whether the amount being charged was as much as the total cost of supplying the service. In turn, this makes it less likely that the validity of the engagement of the service provider should depend upon the merits within that controversy. [23] The defendant s argument is that the power to engage another person to supply the services is conditional upon the existence, at that point in time, of an agreement with the relevant lot owners. Yet there could be a significant difference in time between the engagement of the service provider and the provision of the relevant services. For example, there may be an engagement for a person to provide services only once, but not immediately. Upon the defendant s argument it would not matter that, after the engagement of the service provider, the body corporate made an agreement with the lot owner but before the service was supplied and the cost was incurred by the body corporate: the defendant says that the agreement with the lot owner must be in place before the agreement with the service provider is made. [24] The engagement of the service provider would often be upon terms that the service would be supplied continuously or regularly over a period of time (as here). During that period, the identity of the users of the service might change. For example, lots might be sold. The consequences of the defendant s interpretation of s 167 in those circumstances are far from clear. On one view, the engagement of the contractor would remain valid, if at the time of its engagement, agreements had been in place 19 Ibid at

10 10 with the then lot owners. On another view, the continuing engagement to service all lots would be unlawful unless and until the body corporate agreed with each new owner under s 167(2), an impracticable situation in many cases. This potential for invalidity of the contractor s engagement is but one example of the difficulties for a contractor in having the existence of its business subject to circumstances beyond his control or knowledge. [25] The duty imposed by s 167(3) is not so much to make the cost recoverable, but to ensure (to the greatest practicable extent) that the total cost is recovered from users. It is a duty which requires more of the body corporate than the making of an agreement with the relevant owners. It would involve the ongoing task of getting in the money from them. Much of what a body corporate is bound to do pursuant to s 167(3) would necessarily occur after the supply of the services. This makes it yet more difficult to qualify the exercise of the power under s 167(1) by a precondition of the performance of the duty under s 167(3). [26] To accept the plaintiffs argument is not to deprive s 167(3) of any effect. The duty of the body corporate under s 167(3) would still exist, although the engagement of a person under s 167(1) has occurred in a circumstance of non-compliance with that duty. It could be said that the likelihood of full compliance with the duty could be enhanced by accepting the interpretation of s 167 for which the defendant contends. But against that, there could be many circumstances in which the interests of lot owners could be disadvantaged by placing this impediment upon the body corporate. As I have endeavoured to stress, there is the commercial impracticality of making the engagement of the service provider susceptible to challenge by factual contests about of whether the body corporate had gone far enough to ensure that its costs were recovered. And most importantly, the defendant s argument is at odds with the terms of s 167, under which s 167(2) permits, rather than requires, an agreement with the users of the service where the body corporate acts under s 167(1). [27] Accordingly, I am unpersuaded that the LMA was made beyond the authority given to the body corporate under what was then s 118 of the repealed module (now s 167 of the 2008 Accommodation Module). The history [28] Before going to the other arguments about the LMA, I will set out the relevant history, much of which is relevant also to the Caretaking Agreement. [29] The advice from the defendant s lawyers, as to the potential validity of the LMA, was tabled at a meeting of the committee of the defendant on 6 February Two of the plaintiffs, Mr and Mrs Henderson, were present. It was in that context (the possibility that the LMA was ineffective) that the plaintiffs were then exploring an alternative arrangement. However, the plaintiffs were not motivated only by the legal question of the validity of the agreement. They were interested in an 20 Exhibit 1, Vol 2, pp

11 11 alternative arrangement which would be more profitable. In those circumstances, the plaintiff Mrs Henderson wrote to the committee on 26 February 2009, suggesting in general terms that there be some change to the arrangements for mowing and gardening services. 21 [30] On 21 March 2009, Mrs Henderson again wrote to the committee in terms which included the following: Following many hours of careful deliberation and lengthy consultation with accounting & legal firms we have now compiled an account on the entire complex to enable an accurate assessment on its maintenance. Merrimac Heights total size acres (59,420m²) Area of Common Property acres (25,001m²) Contributions through levies can only cover Common Property, by law. Any Body Corporate responsibility on private property must be charged to the owner separately. It must be clearly defined in the By-Laws. This is the only legal way to perform such activities. While our [LMA] outlines mowing & whipper snipping all grass areas it has not taken into account the many changes since this contract was implemented: including higher than average rainfall & temperatures. Please also consider that the original development partitioned back yards to hold the clothes line only. There are now fenced/gated yards to 75 units, hindering physical & legal access to 99 units. Our proposal to the Body Corporate = $10 + GST/lot/week on top of existing remuneration. The existing remuneration should be carried as we will continue to perform the basic duties + continuing weed control, which is not currently contracted. We hope this proposal will meet your expectation. 22 [31] The defendant pleads that each of these letters constituted conduct by way of an abandonment of the LMA. This letter of 21 March is also relied upon as a repudiation. But neither letter evinced an intention to abandon the contract or to refuse to perform it. Each suggested that the parties make a different agreement and the second letter made a more specific proposal to that end. [32] On 3 July 2009, the committee considered an opinion from its solicitors that the LMA was not enforceable. The minutes of its meeting also recorded that it had sought advice from a consultant, Mr Turner, to report on the current remuneration Ibid, p 445. Ibid, p 448.

12 12 of the gardening agreement so as to be presented to owners at the upcoming annual general meeting. 23 Mr and Mrs Henderson were present at this meeting of the committee. [33] On 31 July 2009, the plaintiffs made a written request, addressed to the secretary of the defendant, for a motion to be included in the agenda for the AGM. The motion was in these terms: That in the event a resolution is not reached on review of the contract (including remuneration) for Henderson & Pearl Family Trusts [the plaintiffs] the Body Corporate shall increase the current Landscape remuneration to $7.10 cents per lot per week and continue the CPI increases that exist for duties defined ONLY to common property and allowing review annually. 24 In the same document they wrote this under the word memorandum : Under this agreement all contracted duties for private property will cease from October 2009 as no authorisation has been made to enter private lots. Refer BCCM regulations [34] The defendant pleads that this document constituted an abandonment of the LMA or, alternatively, a repudiation of it. I do not accept that it was either of those things. Firstly, it was premised upon a resolution not being reached on review of the contract, which was an apparent reference to the work being done by Mr Turner. It was not an unequivocal statement that the contract would not be performed from that point or from October Rather, it was a proposal for consideration at the annual general meeting and an element of the proposal was that the LMA would cease to operate from October [35] On 14 August 2009, the committee of the defendant met in the presence of Mr and Mrs Henderson. The minutes record that the committee had notified the plaintiffs that the LMA would cease as at the 1st of October It further recorded that the plaintiffs had requested an increase in remuneration and that irrespective if the report comes back from Barry Turner advising the increase is justifiable the committee is unanimous in the decision to have an increase would be unfair to lot owners; therefore the committee will not be submitting a motion from the Body Corporate to continue with the [LMA] but give the lot owners their own means to mow their gardens. 27 [36] On the same day, Ms Hunter, the so-called general manager and strata manager for the defendant, wrote on behalf of the committee to Mr and Mrs Henderson as follows: Ibid, pp Ibid, p 485. Ibid. Ibid, pp Ibid, p 503.

13 13 The committee requested we send you this in relation to the last point raised at today s meeting; 1. The committee has agreed with the point you raised in ceasing the [LMA] as of the 1st of October They will advise in the minutes of meeting that as at the 1st of October lot owners have 3 options; being (a) (b) (c) Liaise directly with [the plaintiffs] to mow their gardens and payment will be sort directly between you. Use an outside contractor of their choice Or mow their property themselves. We will be forwarding a letter of explanation with the minutes explaining that the current [LMA] is not valid and explain how your complex is governed by the Standard Format Plan 28 The committee had misinterpreted the stated position of the plaintiffs. The plaintiffs had not said that, in any event, they would cease work under the LMA in October [37] Not surprisingly, the plaintiffs responded, by an from Mrs Henderson on the same day, rejecting that statement of their position. Mrs Henderson wrote: NO NO NO! Please note the following and pass to committee members as you deem necessary. Our motion DOES NOT suggest ceasing the [LMA]. It states that we request to only cease performing services on private lots at the increased remuneration rate documented. We signed for a 15 year contract & the committee of the day agreed and endorsed with the Body Corp common seal. This has been presented IN THE EVENT that the other considerations toward resolving our contract concerns were not resolved. The committee have agreed to recruit Barry Turner and that should stand until he completes his task. He has not yet finished his work. As we agreed to pay half his cost we would like his service completed in full before any decision is made. 28 Ibid, p 504.

14 14 You may need to revisit before minutes are sent to owners. 29 [38] On 27 August 2009, the defendant s solicitors wrote to the plaintiffs as follows: The committee wishes to formally advise that the [LMA] will cease as at 1st October 2009 and your last payment should be submitted at the end of September after the gardens of the lots have been mowed for that month. As stipulated in the minutes of meeting the Committee are contacting (4) four gardening companies to submit quotes for the common property gardens and the committee also invites you to submit your proposal for consideration. This would be required by 14th September 2009 to discuss at the next committee meeting. As your [Caretaking] Agreement does not require gardening equipment all of the gardening equipment will be sold and specific details of each item and expected sale prices will be disclosed to owners in the minutes of the next committee meeting. As at 1st October 2009 the Committee requests that all items be placed in the shed and the keys be given to a Committee Member. The golf buggy will also be sold as it s not an item required to carry out duties under the [Caretaking] Agreement. The Committee is taking these measures to resolve the unenforceable [LMA] in accordance with the Standard Format Plan regulations, which Merrimac Heights is governed under. 30 [39] On 3 September 2009, the plaintiffs ed committee members as follows: Following recent discussions with some committee members & realising there are different opinions I wish to clear the misconception arrived at, from a motion we submitted for the upcoming AGM. 1. The motion will be put forward for owner vote and may or may not be accepted, therefore possibility of no change. 2. This was submitted as an alternative to results reached from Barry Turner s report on our contract/tasks/expectation with the Body Corporate. 31 [40] On 7 September, the plaintiffs ed committee members in these terms: We hereby advise that we intend to honour the [LMA] and expect to be paid as usual Ibid, p 505. Ibid, p 514. Ibid, p 515. Ibid, p 518.

15 15 [41] On 9 September 2009, solicitors for the plaintiffs wrote to the body corporate manager (Teys Strata (Gold Coast) Pty Ltd), contending that the LMA was binding and stating that the plaintiffs would continue to perform it. They wrote that the committee was acting unilaterally to bring a [c]ontract to an end unlawfully. 33 A similar letter was sent by the plaintiffs solicitors to the managers on 11 September [42] On 30 September 2009, the body corporate manager wrote to the plaintiffs advising that the firm called Executive Property Maintenance Services had been selected by the defendant s committee, at its meeting on 25 September, to carry out the gardening of common property. 35 [43] On 1 October 2009, the plaintiffs replied to that letter through their solicitors, who wrote: Our clients agree to participate under protest and without prejudice to our clients assertion that our clients hold a valid and enforceable Gardening Agreement, which we note is more properly described as a Landscape Maintenance Agreement. 36 [44] Until October 2009 the plaintiffs continued to perform the LMA and to charge and (for the most part) to receive payment according to it. Consistently with that lastmentioned letter, the plaintiffs did not attempt to provide the services under the LMA as and from October They continued to send accounts for payment under that agreement. But they have been effectively prevented from performing the LMA since the engagement of the alternative contractor. [45] On 23 October 2009, the plaintiffs solicitors wrote two letters to Teys (Gold Coast) Pty Ltd. 37 They wrote that the conduct of the defendant was an unlawful repudiation of the LMA but that the plaintiffs elected to affirm the contract. They foreshadowed proceedings involving a claim for specific performance of the LMA or, in the alternative, a claim for damages. [46] The plaintiffs made an adjudication application against the defendant pursuant to the Act on 27 October 2009, seeking orders that the LMA be declared valid and enforceable and for its specific performance. Alternatively, they sought damages in the sum of $400, [47] The annual general meeting occurred on 30 October The minutes record that the motion put forward by the plaintiffs was ruled out of order, upon the basis that what was proposed required spending beyond a limit of $37,500, such that it could Ibid, p 521. Ibid, p 523. Ibid, p 544. Ibid, p 545. Ibid, pp Ibid, pp

16 16 not be considered by the owners in the absence of an alternative quote to be presented and voted on. 39 [48] On 26 November 2009, the secretary of the defendant ed the plaintiffs as follows: We wish to advise that a Managers Report and your attendance will not be required at the meeting this coming Friday. 40 None of the plaintiffs attended that committee meeting held on 27 November The minutes of the meeting record that the first item of business involved the plaintiffs. 41 They record the committee s concern that accounts totalling $3, had been submitted by the plaintiffs, over and above their annual remuneration when it was the committee which believed that this was for work required of the plaintiffs under the Caretaking Agreement. They also record that the committee then telephoned the defendant s solicitor, Mr Teys, who advised them to forward a Caretaking Remedial Action Notice. [49] In consequence, a remedial action notice, purportedly given pursuant to s 129 of the 2008 Accommodation Module was sent to the plaintiffs. 42 It alleged that there had been four types of contravention of the Caretaking Agreement, although in each case the point was related to the LMA. I will return to the terms of the notice when I discuss the case involving the Caretaking Agreement. [50] On the same day, 27 November 2009, the Commissioner for Body Corporate and Community Management dismissed the adjudication application upon the basis that it should be dealt with in a court. 43 [51] On 11 December 2009, the plaintiffs delivered their response to the remedial action notice, disputing each of the matters put forward by the defendant. 44 [52] They commenced proceedings BS of 2009 on 22 December 2009 in this Court against the defendant, claiming specific performance and other relief in relation to the LMA. [53] On 6 January 2010, the plaintiffs made an application to the QCAT against the defendant, seeking both interlocutory and final orders in relation to the Caretaking Agreement. 45 In some places, the application shows the applicant as Mrs Henderson alone. In others, it shows all three plaintiffs. Properly understood, it was an application by the three. They sought declarations that the remedial action notice was void and of no effect and that the Caretaking Agreement remained in full Ibid, pp Ibid, p 638. Ibid, pp Ibid, p Ibid, p 673. Ibid, pp Exhibit 1, Vol 3, pp

17 17 force and effect. They sought interim orders to restrain the body corporate from putting a motion to terminate the Caretaking Agreement to the extraordinary general meeting of lot owners which had been scheduled for 19 January They also sought an order that their application to the QCAT be remitted to this court to be dealt with the proceedings which had been commenced in respect of the LMA. [54] The EGM took place on 19 January The minutes record that by a secret ballot, it was resolved (46 votes to 40, with four abstentions) that the Caretaking Agreement be terminated. 46 They also record that the defendant through its solicitor had agreed to a limited injunction that restrains the implementation of the termination of the caretaking agreement whilst the courts determine if the [determination] is valid. 47 [55] A consent order was made by the QCAT restraining the defendant from terminating or attempting to terminate the Caretaking agreement pending the resolution and determination of these proceedings. By an order made in the QCAT on 8 February 2010, the proceedings there were transferred to the Supreme Court of Queensland to be dealt with in conjunction with proceeding number of 2009 in that Court. 48 The LMA other arguments [56] According to the defendant s pleading, the plaintiffs abandoned the LMA by their letters of 26 February and 21 March 2009 and their proposed motion for the AGM which they sent on 31 July As I have discussed, that conduct did not manifest an intention to abandon the contract. 49 However, in the final submissions for the defendant, additional conduct was relied upon. The defendant s counsel referred to what they said was an unchallenged statement of an employee of body corporate manager, a Ms Hunter, that the plaintiffs communicated to the body corporate that the current agreement is invalid and unenforceable. 50 Ms Hunter was called as a witness in the defendant s case, but she gave no evidence that the plaintiffs had made such a communication. [57] Reliance was also placed upon evidence of the plaintiff Ms Davies that sometime prior to August 2009, she learnt that the defendant had indicated that the LMA would end from 1 October 2009, and that she thought from her then discussions with Mr and Mrs Henderson that they understood that the LMA would no longer be on foot from that date. I accept that it may have been the expectation, common to all of the plaintiffs, that they would not be performing the LMA from 1 October But that is not the way in which they acted towards the defendant. Moreover, it is one thing to say that they expected that the agreement would not be on foot because the defendant would not perform it; it is another to say that they consented to that course in the sense that they agreed to discharge the contract: Ibid, pp Ibid, p 808. Ibid, p 831. See [29]-[34] above. Defendant s written argument, para 12(a).

18 18 Fitzgerald v Masters. 51 An abandonment of a contract is a matter which must appear upon an objective assessment of the conduct of the parties. 52 [58] The defendant also relied upon an from Mrs Henderson of 20 August 2009, apparently addressed to members of the committee of the defendant. The passage relied upon is where Mrs Henderson wrote: Your best chance to present for the AGM is to [a]llow Barry to complete his report that you asked for & take the care & attention when you take it the next step to rectify contract(s). 53 The defendant submits that this was a concession that the contract had to be rectified, in the sense that it could not be performed upon its present terms. However, what Mrs Henderson there wrote need not be interpreted in that way. Undoubtedly, she was suggesting an amendment to the LMA or perhaps an entirely new LMA. But she was not agreeing to discharge the LMA without something being agreed in its place. [59] The defendant s argument even extended to reliance upon conduct in 2008 (which again was unpleaded). This included the plaintiffs attendance at a committee meeting in August 2008, in which the committee resolved to retain solicitors to advise on the validity of the LMA. The plaintiffs thereby knew of the committee s resolution. But the plaintiffs were not themselves members of the committee. Then the defendant argues that Mrs Henderson acknowledged in November 2008 that it was illegal for the plaintiffs to enter into individual lots to perform their work under the LMA. Nevertheless, the plaintiffs continued to perform that work. Importantly, prior to being effectively locked out from October 2009, the defendant did not argue that it became entitled to terminate the LMA because the plaintiffs had failed to perform it. [60] The balance of the matters identified by counsel for the defendants, in their extensive written submissions on this question, need not be discussed paragraph by paragraph. The conduct relied upon falls into categories such as the plaintiffs presence at meetings at which the suggested invalidity of the LMA was discussed, the plaintiffs knowledge of and participation in the process by which Mr Turner was engaged and the plaintiffs awareness of the defendant s intention to engage someone else to do work upon the common property (which the plaintiffs were required to do under the LMA). As to all of this, some matters should be restated. The first is that it is the apparent intention of the plaintiffs, that which objectively appears, which is relevant. Upon an objective view, their intention as demonstrated by their correspondence, strongly and consistently protested the defendant s proposal to put an end to the LMA. Secondly, throughout these events of 2008 and 2009, until October in that year, the plaintiffs continued to perform the LMA 54 and were paid for their services. Thus any abandonment of the contract could have occurred only from October But at that point, clearly the plaintiffs were (1956) 95 CLR 420 at 432. Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279 at [2], [30]-[32] and [57]; Marminta Pty Ltd v French [2003] QCA 541 at [22]. Exhibit 1, Vol 2, p 512. Although, so the defendant alleges, with some instances of non-performance.

19 19 strongly insisting upon the enforcement of the contract. In my conclusion, there was no abandonment of the LMA. [61] Nor was there any repudiation by the plaintiffs, entitling the defendant to terminate the LMA. The repudiation alleged by the defendant appears to be what was described, in the joint judgment in Koompahtoo Local Aboriginal Land Council v Sanpine 55 as a renunciation. The defendant must prove that there was conduct by the plaintiffs which evinced an unwillingness or an inability to render substantial performance of the contract, or in other words which evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with their obligations. 56 [62] In the defendant s final argument, the conduct which was relied upon as a renunciation was the lodgement of the proposed motion for the AGM. 57 It was submitted that this was accepted by the defendant on 14 August 2009 or alternatively on 27 August But this conduct of the plaintiffs was not repudiatory. It proposed a different contractual regime and to that end, it sought the support of members at the AGM. But it is another thing to say that the plaintiffs evinced an intention not to be bound by the LMA or to act inconsistently with its terms if no alternative arrangement could be agreed. The same applies to other conduct which was pleaded as repudiatory on the part of the plaintiffs, being the letters of 26 February and 21 March In the same way as the plaintiffs had not evinced an intention to abandon the contract, their conduct was not repudiatory. [63] I have now discussed each of the matters pleaded by the defendant in response to the plaintiffs claim for relief in respect of the LMA. In particular, I have discussed the matters pleaded in response to paragraph 16(b) of the Consolidated Statement of Claim, which alleges that the plaintiffs have duly performed their duties pursuant to the LMA, and pursuant to the schedule to that agreement. However, within the conduct upon which the defendant relies as grounds for terminating the Caretaking Agreement, the defendant has alleged certain breaches of the LMA. In paragraph 39 of its Defence, it pleads facts upon which it made the four allegations within the remedial action notice to which I referred at [49]. 59 [64] In particular, it pleads breaches of the LMA as part of the plaintiffs conduct which it describes within that notice as Allegation 1 and Allegation 4. Allegation 1 was not pursued at the trial. Within Allegation 4 is a contention that the plaintiffs were unable to obtain access to some lots in order to perform the work required by the LMA. The defendant s case as there stated was not that they were in breach of the LMA by not performing the work upon those lots. Rather, it is that they were in breach of the Caretaking Agreement, in that they charged for work which could not (2007) 233 CLR 115 at 135. Ibid per Gleeson CJ, Gummow, Heydon and Crennan JJ citing Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 634. Exhibit 1, Vol 2, p 485. The defence pleads the letter of 26 February 2009 as one of 2 February 2009 but no letter of that date is in evidence and this is an apparent reference to the letter of 26 February Amended Defence filed 24 September 2010.

20 20 be and was not performed, and without telling the defendant of that matter. This case is also pleaded in paragraphs 21(c) and 23 of the defendant s Counterclaim. [65] Then in the defendant s final submissions it was argued that the plaintiffs breached the LMA by not performing some work on individual lots to which they enjoyed access. It was said that the plaintiff s carried out mowing and edging tasks, but not other work which the LMA required to be performed on individual lots. The subject was explored in the cross-examination of Mrs Henderson, 60 Ms Davies 61 and a Mr Kalina. 62 It is clear that upon the individual lots the plaintiffs performed only mowing and edging and confined the performance of the other tasks to the common property. Notably the defendant did not make this complaint during the many months of manoeuvrings by each side which led to the unilateral suspension of the LMA in October Indeed the evidence does not reveal any complaint by the defendant, up to that point in time, that the plaintiffs were in breach of the LMA in any respect. This explains why no remedial action notice was given in relation to that contract. But what must now be considered is whether the LMA, objectively viewed, required further work to be performed upon individual lots. [66] It is necessary to set out in full the schedule of work required by the LMA: MOWING All grass areas including front and back yards of units, common ground, back paddock and road frontage every days in Summer days in Winter EDGING Whippersnip all grass edges PALM FRONDS Cocas Palms on road edges Palms down centre of main road Palms around tennis courts and pools Golden Palms as required every days in Summer days in Winter every 3-4 months every 3-4 months every 3-4 months FERTILIZING & TOP DRESSING As required PRUNING & MULCHING Pruning trees and shrubs in common areas and boons as required Mulching and spreading of mulch on gardens SUPPLEMENTARY SERVICES Plant replacement of supplementary planting from time to time as required Fill depression in lawns and top dressing as required T T T 6-48.

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