Terminated Caretaking Agreements – is it the Courts Problem

TERMINATED CARETAKING AGREEMENTS – IS IT THE COURTS PROBLEM?

 

We all know that disputes about terminated caretaking and letting agreements are heard by QCAT. However the Supreme Court of Queensland has recently considered whether the Courts have jurisdiction to hear claims arising out of a terminated caretaking and letting agreement (Dunlop Case). 

If they do, it would appear likely that access to litigation by caretakers and letting agents may increase.

The facts

  • Mr Dunlop conducted a caretaking and letting business at an apartment complex in Port Douglas;
  • Mr Dunlop was subsequently convicted of an offence, and at the time of the conviction, Mr Dunlop’s property licence was cancelled;
  • The Body Corporate made enquiries in to Mr Dunlop’s cancelled licence and, upon confirmation, resolved to terminate the caretaking and letting agreement;
  • Mr Dunlop filed a claim in the Supreme Court for the lost value of the caretaking business, alleging that there was a breach of contract and Australian Consumer Law;
  • Mr Dunlop’s claim was against the Body Corporate, committee members and solicitor;
  • The Body Corporate sought an order setting aside Mr Dunlop’s claim on the basis that the Supreme Court did not have jurisdiction, as the claim should be considered a “complex dispute” within the meaning of the Body Corporate and Community Management Act 1997 (Qld) (BCCMA);
  • The Body Corporate alleged that the “only remedy” for resolution of the dispute is by an order of a specialist adjudicator or QCAT.

 

What did the Supreme Court think?

The Supreme Court largely agreed with the Body Corporate’s position, given the very precise wording of the BCCMA, by commenting:

“The applicants submit the claim against the body corporate is a complex dispute … namely a dispute between the body corporate and a caretaking service contractor and letting agent about a contractual matter, namely the termination of the engagement of the contractor and letting agent. From this it follows… that pursuant to s 229 the “only remedy” for resolution of the dispute is by an order of a specialist adjudicator or QCAT.” 

The Judge further commented that “these conclusions trend in favour of granting the application to set aside the claim and statement of claim in respect of the body corporate for the reason that it is a complex dispute to be resolved pursuant to s229(2)”. 

The Court considered that some aspects of the claim may be heard in QCAT and the remainder heard in the Supreme Court. However this outcome would be less than desirable, given that each claim has some connection to the other claims put forward by Mr Dunlop. 

In these uncertain circumstances, the Courts ultimately refrained from reaching a conclusion on the matter of jurisdiction pending further submissions on the matter. 

What does this mean? 

Whilst the outcome of this case is yet to be determined, it is of particular note to any Strata Manager that should the Courts take the view that such matters are within the jurisdiction of the Courts, it would appear likely that access to litigation may increase for a terminated caretaker/letting agent. 

Regardless of the outcome, the case serves as a timely reminder to ensure that any Body Corporate considering taking such steps to terminate a caretaker/letting agreement seek the professional advice of a Body Corporate lawyer.

 

Article Written by Brendan Pitman (1 July 2021)

 

Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

 

 

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What is Gallery Vie

WHAT IS GALLERY VIE?

 

What is Gallery Vie, and why is the caretaker wanting to vary the caretaking agreement?

 

Gallery Vie is the name of a strata building which was involved in a 2015 Queensland Civil and Administrative Tribunal (QCAT) decision that significantly changed how Body Corporate legislation was interpreted going forward. In particular it changed how termination clauses in caretaking and letting agreements are applied when the caretaker has taken out a loan and used the caretaking and letting business as security for that loan.

In the Body Corporate legislation, when a bank has provided a loan to a caretaker, the bank is granted a special ability to step in and take control of the caretaking and letting business in the event the Body Corporate intends to terminate the caretaking and letting agreements. This special right is intended to prevent disruption to the services being provided to the Body Corporate and provide comfort to banks to encourage them to invest in the caretaking industry. Without bank investment, the vast majority of caretakers would not be able to operate.

Prior to the Gallery Vie QCAT decision it was widely understood that a Body Corporate could not terminate a caretaking or letting agreement that was secured by a bank for any reason without first allowing the bank the opportunity to rectify the breach or step in and take control of the business. The Gallery Vie decision however came to the conclusion that if the caretaking or letting agreement included additional termination rights over and above the rights granted in the Body Corporate legislation, it was possible for a Body Corporate to terminate an agreement without allowing the bank the option to step in first. This outcome severely undermined the protections the banks thought they held under the legislation and immediately led to banks cancelling or limiting lending to caretakers who were affected by the precedent set by the Gallery Vie decision.

To address the banks’ concerns raised by the Gallery Vie decision and ensure that loans could continue to be offered to caretakers, most caretaking and letting agreements need to be amended to remove termination triggers that deny the banks the option to step in. These are triggers that allow the Body Corporate to terminate the agreements, such as:

  • the caretaker becoming bankrupt,
  • the caretaker having receivers appointed,
  • the caretaker being convicted of a crime, or
  • the caretaker becoming physically or mentally incapacitated.

By varying caretaking and letting agreements to remove the ability of these triggers to prevent banks stepping in, it returns the caretaking industry to the position it was in prior to the Gallery Vie decision (as originally intended in the legislation) and gives the banks the comfort they need to continue offering finance to caretakers. If the caretaking and letting agreements are not varied as required by the banks, the caretaker faces the prospect of losing their finance altogether or having to agree to finance on significantly less viable terms.

    Article Written by Ben Ashworth (7 May 2021)

     

    Liability limited by a scheme approved under Professional Standards Legislation
    Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.

     

     

    GET IN TOUCH

    Tel:          +61 7 5552 6666

    Fax:         +61 7 5528 0955

    Office:      Level 2, 17 Welch Street, Southport Qld 4215

    Postal:      PO Box 1876, Southport QLD 4215

     

    OFFICE HOURS

    Open:        8:30am – 5:00pm Monday to Friday

    contact small myers hughes

    Categories