Heritage Village Ormiston West [2007] QBCCMCmr 662 (27 November 2007)

Last Updated: 4 January 2008

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Caretaking Service Contractor Dispute)

Number: 0274-2007

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

O R D E R S

27 November 2007

ORDERS that: (a) the Code Contravention Notice dated 6 October 2006 served by the Respondent on the Applicant is not a valid and effective notice for the purpose of section 139 of the Body Corporate and Community Management Act 1997 ("Act") because it did not establish any contravention of the relevant Code of Conduct; (b) the Transfer Notice dated on or about 16 November 2006 served by the Respondent on the Applicant is not a valid and effective notice for the purposes of section 140 of the Act because it was not – i. preceded by a valid and effective notice under section 139 of the Act; and ii. authorised by majority resolution as required by section 140(b)(i) of the Act; (c) the Notice of Breach of Caretaking Agreement dated 14 March 2007, relating to removal of watering systems, served by the Respondent on the Applicant pursuant to the Management and Letting Agreement dated 17 May 1993, as varied by Deed dated 2 October 1998, ("Agreement") is not a valid and effective notice for the purposes of clause 12 of the Agreement because it fails to establish any breach of the Agreement; (d) the Notice of Breach of Caretaking Agreement dated 14 March 2007, relating to trimming of hedges, served by the Respondent on the Applicant pursuant to the Agreement is not a valid and effective notice for the purposes of clause 12 of the Agreement because it fails to establish any breach of the Agreement; (e) the Respondent is not legally able, on the basis of the notices referred to in these Orders, to terminate, or convert to a monthly term, the Agreement or to require the Applicant to transfer the Agreement under Chapter 3 Part 2 Division 8 of the Act; and (f) the Respondent is ordered to pay the costs of the adjudication within 30 days of receipt of an invoice for those costs.

G F Bugden OAM
Specialist Adjudicator
Office of the Commissioner for Body Corporate and

Community Management

SPECIALIST ADJUDICATION
(Caretaking Service Contractor Dispute)

Number: 0274-2007

Applicant: FIRST RESPONSE MAINTENANCE PTY LTD

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

FINAL DETERMINATION

27 November 2007

Preliminary Determination

1. On 25 September 2007 I made a Preliminary Determination in relation to this matter. The facts of the matter are fully set out in that Preliminary Determination.

2. Suffice to say for the purpose of finally disposing of the application that over a period of some 6 months the Respondent served the following notices on the Applicant in relation to a Management and Letting Agreement dated 17 May 1993, as subsequently amended by Deed dated 2 October 1998 ("Agreement")–

a. Code Contravention Notice dated 6 October 2006 ("Code Notice");

b. Transfer Notice dated 16 November 2006;

c. Breach Notice dated 14 March 2007 ("First Breach Notice"); and

d. Breach Notice dated 14 March 2007 ("Second Breach Notice").

3. A number of preliminary matters were raised by the solicitor for the Respondent that were, as a matter of convenience and for economy of costs, disposed of in the Preliminary Determination.

4. The following matters still need to be determined –

a. whether the breaches of the Agreement alleged in items 2 and 3 of the Code Notice are substantiated by the evidence and, if so, whether they were complied with by the Applicant; and

b. whether the allegations in the First Breach Notice and/or the Second Breach Notice are substantiated by the evidence and, if so, whether they were complied with by the Applicant.

Further submissions

5. Following my Preliminary Determination the parties declined an offer to meet further with me for the purpose of providing further evidence or making final submissions. Instead, they both agreed that I should proceed to determine the remaining aspects of the matter "on the papers". I have proceeded on that basis.

Code Notice – Item 2

6. As regards the Code Notice, item 2 alleged a breach of clause 2 of the Code of Conduct for Body Corporate Managers and Service Contractors ("Code’) which is in the following terms:

"A body corporate manager or caretaking service contractor must act honestly, fairly and professionally in performing the person’s functions under the person’s engagement."

7. The grounds for the allegation are set out in detail in my Preliminary Determination, but, in summary, involved:

a. 2 letters written by a director of the Applicant referring to the Chairman of the body corporate as "Mr R. ‘Wimpey’" instead of "Mr R. Impey";

b. non-disclosure by Mr Neave, one of the Applicant’s directors, of alternative employment which was alleged to amount to a lack of honesty and fairness; and

c. persistent display of a non-cooperative and confrontational attitude towards lot owners.

8. In support of ground (c) above, 2 things were cited –

a. an incident involving the owner of unit 43 on 14 February 2006; and

b. an admission to "blowing my stack" in a committee meeting.

9. The Applicant, through its solicitors, responded to the 3 grounds in writing dated 28 February 2007. In relation to ground (a), the Applicant pointed out that Mr Impey’s nickname is "Wimpey" and is well used by owners in the complex. The Applicant also undertook to desist from using that name in the future.

10. In relation to ground (b), the Applicant claimed that the alternate employment was fully disclosed to the committee at the time the Applicant was interviewed for approval to transfer the management rights. The Applicant also claimed that :

a. Mr Neave’s other working hours were flexible;

b. Mr Neave often works for 6 or more hours a day in the complex;

c. the Applicant’s agreement does not prohibit Mr Neave from undertaking other activities;

d. Mr and Mrs Neave are available at all reasonable times to perform the duties or consult with owners; and

e. the alternative employment related to the management of an adjoining complex, Heritage Village East, which every manager since 1993 had managed jointly with Heritage Village West.

11. In relation to ground (c), the Applicant claimed justification and said they were even given an apology for the incident.

12. None of the Applicant’s responses to grounds (a), (b) and (c) were formally refuted by the Respondent. In the absence of clear evidence to the contrary, there is no basis for me to not accept those responses. Even assuming that ground (a) was established, given the circumstances, in itself, it is not sufficient to justify a forced transfer of the Agreement and, in any event, the Applicant has complied with that aspect of the notice by undertaking not to use the nick name again.

13. Ground (b) has simply not been established. Furthermore, I am not satisfied that ground (c), even if established, would justify transfer of the Agreement because:

a. the time elapse between 14 February 2006 and 6 October 2006, the date of the Code Notice;

b. the breakdown in the relationship between the parties and the contribution that no doubt made to any questionable conduct on the part of Mr and Mrs Neave at body corporate committee meetings; and

c. the ambit claim approach adopted by the Respondent which, on its face, lacked credibility (as to which, see my comments in the Preliminary Determination).

Code Notice – Item 3

14. Item 3 of the Code Notice alleged a breach of clause 3 of the Code which is in the following terms:

"A body corporate manager or caretaking service contractor must exercise reasonable skill, care and diligence in performing the person’s function under the person’s engagement."

15. In support of this allegation the Respondent claimed, in summary:

a. persistent refusal to water the gardens;

b. lawns are very roughly mowed (reference being made to an attached report);

c. an admission in January 2006 that the managers are "still learning about herbicides, etc."; and

d. removing plants from lot owner’s gardens.

16. In its written response, the Applicant stated (the lettering corresponding to the above):

a. there were water restrictions in force and the watering would be carried out if the body corporate supplied the water from alternate sources, as was done by other bodies corporate;

b. the allegation about lawns were vague and difficult to respond to and the other allegations were simply denied, reference being made to compliments the Applicants had received about lawns and gardens;

c. they had not used pesticides on windy days and had not poisoned plants, but if there was a specific problem with pesticides, please let them know; and

d. the allegation was denied and an explanation was given as to the circumstances surrounding the maintenance of the garden that the Applicant assumed was being referred to.

17. The question of watering the gardens was dealt with in some of the materials submitted to the Commissioner. It appears that under the then current water restrictions the gardens had to be hand watered and the lot owners had, at least to some degree, assumed responsibility for hand watering. Given that hand watering is not a requirement of the Agreement, this solution was probably adopted to avoid additional cost to the body corporate. It is difficult to see how the Applicant can be said to be in breach of the Agreement because of these circumstances.

18. Again, in relation to item 3 of the Code Notice there was no substantive issue taken with regard these explanations and it is difficult to conclude that any or all of the allegations are clearly established. On the evidence I am not satisfied that this breach has been made out.

Code Notice

19. It follows that the allegations in items 2 and 3 of the Code Notice have not been established. Furthermore, even if I were to conclude that the allegation in relation to use of the nick name "Mr Wimpey" was made out, the breach has been remedied by the Applicant’s undertaking. This being the case the entire Code Notice fails and cannot be relied upon by the Respondent.

First Breach Notice

20. The First Breach Notice was issued under clause 12 of the Agreement. The relevant provisions of that clause, operative as at the date of the First Breach Notice, are as follows:

"12.1 The Manager shall be in breach of an essential term if the Manager:-

12.1.1 fails to perform or observe any of the provisions of this agreement to the reasonable satisfaction of the Owner;

12.1.2 ....."

12.2 If the Manager is in breach of an essential term the Owner may at its option –

12.2.1 .......

12.2.2 In the case of a breach under clause 12.1.1, by notice in writing notify the Manager of the particular fault complained of and request the Manager to remedy the default within 14 days of being served AND if at the expiration of the 14 days the default complained of has not been remedied, either –

(a) terminate this Agreement by further notice to the Manager; or

(b) by notice to the Manager convert the Term or any extension or renewal of the Term to a month to month agreement AND at the same time or at any time thereafter by further notice to the Manager, terminate this Agreement."

21. Although the First Breach Notice does not indicate that it is served pursuant to clause 12 that would appear to be the case. The notice alleges breach of the provisions of the Manager’s duties in clauses 1.1.2, 1.1.10 and 1.1.12 of the Second Schedule of the Agreement. Those duties are as follows:

"1.1.2 Use its best endeavours to ensure the common property is kept in good order and repair.

1.1.10 So far as the Manager is reasonable (sic) able and lawfully capable, to keep order on the property.

1.1.12 To perform such other acts and things as are reasonably necessary and proper in the discharge of its duties under this Agreement including any additional duties or responsibilities that may be referred to the Manager by the Owner."

22. The particulars given are as follows:

"The Committee in correspondence to First Response Maintenance Pty Ltd on 31 January 2007 requested that immediate attention be made to remove all permanent watering systems including permanent distribution pipes and attachments from all units in Heritage Village West by 14 February 2007."

23. The Applicant, through its solicitors, responded in writing on 23 March 2007. The response was very detailed and said, in summary:

a. the removal of the irrigation system has nothing to do with the duties quoted in the notice;

b. the "additional responsibilities" in clause 1.1.12 must relate to the Manager’s other duties and the clause does not give the body corporate the right to impose additional duties as it sees fit;

c. the work is of a specialist nature and under the Agreement a tradesperson should do it;

d. the Agreement does not impose an obligation on the Manager to do the work;

e. the Committee does not have the power to decide to remove the irrigation system; and

f. the Manager is not obliged to do work in relation to "units" and its duties are confined to common property.

24. Frankly, I agree with virtually all of the points made by the Applicant’s solicitors. In my opinion, the First Breach Notice is totally unfounded and cannot be relied upon by the Respondent.

Second Breach Notice

25. The Second Breach Notice also appears to have been issued under clause 12 of the Agreement. It also identifies the duties in clauses 1.1.2 and 1.1.12 of the Second Schedule as being the duties that the Applicant has breached. In addition, it identifies the monthly routine of "Trim hedges" on the common property as the specific duty.

26. The particulars given in the Second Breach Notice are as follows:

"The Committee in correspondence to First Response Maintenance Pty Ltd on 24 January 2007 requested that immediate attention be made to trimming hedges on the common property behind units 54, 55, 56 and 79."

27. The Applicant, through its solicitors, again responded in writing on 23 March 2007. The response was very detailed and said, in summary:

a. the hedges referred to are not easily accessed but the Applicant managed to trim the hedges adjacent to lots 54, 55 and 56 with the co-operation of the owners of lots 55 and 56;

b. the hedge behind lot 79 could not be accessed and it is impossible to trim that hedge from the back yard of lot 79;

c. specialist equipment would be needed to trim the hedge behind lot 79 and this would be at body corporate expense;

d. trimming the hedge behind lot 79 is a specialist task and under the Agreement is the body corporate’s responsibility; and

e. the Applicant has done its best to trim the hedges.

28. There is material on the Commissioner’s file that supports the contention that prior to issue of the Second Breach Notice the hedges on the common property behind units 54, 55 56 and 79 were in need of trimming. It also appears probable that those hedges had not been trimmed on a monthly basis as required by the Agreement. However, the Applicant contends that, following receipt of the correspondence of 24 January 2007 it did all that was reasonable to trim the hedges and that, as at 14 March 2007 the relevant duty had been complied with. The Applicant also contends that the trimming is so difficult in some areas as to require the services of a skilled tradesperson, which, under the Agreement, must be provided by the body corporate. The Respondent has not directly disputed the Applicant’s solicitor’s response.

29. On balance, I am not convinced that at the time the Second Breach Notice was served the Applicant was in default as alleged and therefore the Second Breach Notice is not, in my view, valid and effective.

Findings

30. In addition to my findings set out in my Preliminary Determination I formally find, on the basis of the reasons I have stated, that:

a. the Code Notice is not valid and effective to require forced transfer of the Applicant’s management rights;

b. the First Breach Notice is not valid and effective; and

c. the Second Breach Notice is not valid and effective.

31. I propose to make declarations accordingly.

Costs

32. The costs of the adjudication are at my discretion. In exercising that discretion I am entitled to take into account:

a. the outcome of the adjudication (i.e. which party has been successful);

b. the merits of the respective parties cases; and

c. the conduct of the parties.

33. In relation to (a), the Applicant’s application has clearly been successful and on that account the Applicant would, prima facie, be entitled to an order for the costs of the adjudication. In relation to (b), the Applicant has effectively established its position as set out in its response to the various notices served by the Respondent. The Respondent appears to have embarked upon a course of conduct more designed to get rid of a caretaker that its committee did not want to continue dealing with rather than genuinely seeking remedy to deficiencies in the Applicant’s performance. This is clearly demonstrated by the ambit claim made by the Respondent in its Code Contravention Notice and Transfer Notice.

34. This claim was so extreme that it included an alleged breach of a rule that does not even apply to the Applicant. Furthermore, during the course of its dealings with the Applicant the Respondent, through its solicitors, made a number of extraordinary claims, including false representation, deceit and fraud. None of those claims are backed by clear evidence.

35. In relation to (c), the Respondent has contributed to the length and complexity of this determination by insisting on proceeding with each and every one of its claims after declining the opportunity to discontinue any dubious claims. This has contributed to the level of costs in the matter and is clearly a matter I should take into account.

36. Having regard to all of those matters it is appropriate for the Applicant to have the benefit of an order for costs of the adjudication against the Respondent and I propose to make such an order. Given the size of the scheme I do not propose to exclude the Applicant from any levy to fund those costs.

G F Bugden OAM
Specialist Adjudicator