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Three strikes and you’re out – but only if you play fair

Three strikes and you’re out – but only if you play fair

We are pleased to announce a further victory for one of our resident manager clients in the Queensland Civil and Administrative Appeal Tribunal.

In this matter the Body Corporate by its committee had embarked on an endeavour to terminate the Grounds Maintenance Contract (“GMC”) with our client on the Gold Coast.

Here the Body Corporate sought to rely upon a “3 strikes and you’re out” clause commonly found in caretaking agreements. The Body Corporate contended that the right to terminate under the GMC was a separate contractual right and the remedial action notice procedure under Body Corporate and Community Management Act 1997 did not apply. At first instance, QCAT agreed with the Body Corporate.

Our client successfully appealed the decision on several grounds. The result has general application to the caretaking industry for two reasons.

First, the Appeal Tribunal held that the purported Body Corporate’s termination of the GMC was unlawful because it ran contrary to the remedial action notice procedure contained in the Standard Module. In effect, the "3 strikes and you're out" clause is unenforceable. A body corporate cannot terminate based purely on the fact of three breach notices being issued, unless the caretaker is found not to have remedied those breaches (and otherwise valid under the remedial action notice procedure).

Second, the Appeal Tribunal held that it was not reasonable for the Body Corporate to issue four RANs in one email when their contents could have been given in one notice and the only possible explanation for the giving of the four notices at the one time was to take advantage of the 3 strikes and you’re out provisions of the contract. The Appeal Tribunal said the four RANs were invalid and any resolution to terminate based on them was also invalid.

For questions regarding this issue or management rights disputes generally, Ben Seccombe is a Partner of Mahoneys and heads up the Litigation and Dispute Resolution team.

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