Heritage Village Ormiston West [2007] QBCCMCmr 246 (30 April 2007)

Last Updated: 22 May 2007

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Caretaking Contractual Matter)

Number: 0274A-2007

Applicant: FIRST RESPONSE MAINTENANCE PTY LTD Respondent: BODY CORPORATE FOR HERITAGE VILLAGE ORMISTON WEST COMMUNITY TITLES SCHEME 19720

INTERIM ORDER
30 April 2007

ORDER under section 279(1) of the Body Corporate and Community Management Act 1997 that the Respondent refrain from taking any further action in reliance on either or both of the Notices of Breach of Caretaking Agreement, each dated 14 March 2007, until such time as this order expires or the application on which this order is made is finally determined, whichever first occurs. FURTHER ORDER that the applicant be granted leave to seek further interim orders on the application should the need arise.

Gary Bugden OAM
Specialist Adjudicator

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Caretaking Contractual Matter)

Number: 0274A-2007

Applicant: FIRST RESPONSE MAINTENANCE PTY LTD

Respondent: BODY CORPORATE FOR HERITAGE VILLAGE ORMISTON WEST COMMUNITY TITLES SCHEME 19720

INTERIM DETERMINATION
30 April 2007

1. This application relates to a dispute between a Caretaking Service Contractor (the applicant), which is also a Letting Agent, within the meaning of the Body Corporate and Community Management Act 1997 ("Act") and a community title body corporate (the respondent). The application was made under section 238(1) of the Act and referred by the Commissioner for specialist adjudication pursuant to section 265(1) of the Act.
2. The application seeks both interim and permanent relief and it has been referred to me at this stage so that I can consider whether an interim order should be made pending the processing of the application and its final referral and determination.
3. The applicant is "the Manager", by assignment, under a Management and Letting Agreement dated 17 May 1993, which was varied by Deed on 2 October 1998 ("Agreement"). The Second Schedule of the Agreement, as amended by clause 3 of the variation Deed, sets out the duties of the Applicant. The applicant also has a similar role in an adjoining community title scheme, Heritage Village Ormiston East.
4. If the Manager fails to perform its duties under the Agreement provision is made in the Agreement for either immediate termination, or termination after failure by the Manager to rectify a notified breach, depending upon the seriousness of the breach.
5. Section 118(1)(b) of the Act provides that a code of conduct set out in Schedule 2 of the Act applies to "a caretaking service contractor in performing obligations under the person’s engagement as a service contractor". That code contains a number of obligations and prohibitions, many of which are very general in nature. If there is a breach of the code and the body corporate is required by an ordinary resolution of a general meeting, decided by secret ballot, to give the letting agent a "code contravention notice", then the body corporate must give that notice.
6. If the letting agent does not comply with that notice, or further contravention of the code occurs in certain circumstances, then the body corporate can give a "transfer notice". A transfer notice effectively requires the letting agent to transfer their "management rights" within a stated period to an unrelated third party. This is effectively a forced sale of the management rights to a new manager who the body corporate has the right to approve, within certain guidelines.
7. In this case the body corporate purportedly passed an ordinary resolution by secret ballot on 18 September 2006 authorizing service of both a code contravention notice and a transfer notice. The body corporate then served a code contravention notice dated 6 October 2006 on the applicant alleging a number of contraventions of the code of conduct. Shortly after that the body corporate served a transfer notice dated 16 November 2006 on the applicant alleging that the earlier notice had not been complied with as well as continuing breaches of the code of conduct.
8. On 28 February 2007 Mahoney Lawyers wrote to the body corporate’s solicitors, Herdlaw Solicitors, disputing the validity of the 2 notices and responding to the alleged breaches of the code of conduct. Certain correspondence then passed between the 2 solicitors about whether or not the breaches of the code occurred and whether the notices were valid.
9. The body corporate then served 2 notices of breach of the Agreement pursuant to the breach procedures in the Agreement; alleging failures on the part of the applicant to perform duties in the agreement, one being a failure to follow a direction to remove watering systems "from all units in Heritage Village West" and the other alleging failure to cut certain hedges. These notices were met by a strong rebuttal from the applicant’s solicitors, as well as an accusation that the body corporate was effectively acting in bad faith.
10. Because of the nature of applications for an interim order, neither the body corporate’s allegations against the applicant, or the applicant’s rebuttal of those allegations, have been tested. It is sufficient to say that, on the papers before me, the applicant has established a prima facie rebuttal of the matters on which the various notices were founded. Of course, that does not mean that, in due course after the application is fully dealt with, the applicant’s rebuttal will prevail. But for the moment the applicant has at least an arguable case.
11. That brings me to the question whether it is appropriate to make an interim order. If an interim order is not made the body corporate may, in reliance on one or both of the breach notices, move to terminate the Agreement and thus deprive the applicant of an asset of considerable value. An interim order would preserve the status quo while the application is determined. However, it would prevent the body corporate moving to terminate the Agreement in circumstances where it might ultimately be held entitled to terminate it. The body corporate would therefore suffer delay if an interim order is made.

12. Section 279(1) of the Act says:

"The adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates."

13. I am satisfied that –

(a)	the applicant has an arguable case;
(b)	because of the nature and circumstances to which this application relates; and
(c)	having regard to the alternate remedy that would otherwise be available to the applicant (i.e. an action for damages) and the adequacy of that remedy; and
(d)	in balancing the rights and interests of the 2 parties,

it is appropriate for an interim order to be made.
14. I therefore propose to make an interim order to prevent the body corporate from taking any action pursuant to the 2 notices of breach it has served on the applicant pending determination of the application. Given the period for compliance with the transfer notice there appears to be no need to include that notice in the order, but I will grant leave for the matter to be brought back to me by the applicant if the need arises for consideration of further interim orders.

Gary Bugden OAM
Specialist Adjudicator