Another big management rights win for Mahoneys

3 May 2017

Trojan Resorts v Body Corporate for the Reserve CTS

Mahoneys has reaffirmed its position as the leader in management rights litigation with a strong victory for our caretaker client in the appeal tribunal.

Trojan Resorts holds the management rights to a large complex at Varsity on the Gold Coast.

At the time of acquiring those rights, Trojan had two directors. In February 2013, one of the two directors resigned. Trojan did not notify the body corporate nor seek its permission to the resignation.

The resignation went unnoticed for nearly 18 months until July 2014 when the body corporate, through its lawyers, complained that its consent had not been sought or obtained. Almost immediately, Trojan reinstated the director.

Notwithstanding the reinstatement of the director, the body corporate:

1. served notice on Trojan that the resignation (and reappointment) were done without its consent and in breach of the relevant agreements; and

2. resolved, in general meeting, to terminate Trojan’s agreements.

In order to protect Trojan’s position, Mahoneys immediately commenced proceedings before the Queensland Civil and Administrative Tribunal (QCAT) and obtained an injunction preventing the body corporate from proceeding with the termination pending the tribunal’s decision as to the lawfulness of that decision.

The QCAT found that the body corporate was required, by the legislation, to act reasonably and that it had not done so by resolving to terminate in circumstances where there was no evidence as to any loss, damage or that the breach altered or affected the body corporate’s interests. As a consequence, the body corporate was not entitled to rely on the resignation as grounds to terminate Trojan’s agreements.

The body corporate appealed.

The QCAT Appeals Tribunal has now dismissed the appeal and confirmed that a body corporate must act reasonably when it votes on matters affecting caretaking services, including a vote to terminate a caretaking agreement. Where a body corporate acts unreasonably in its dealings with caretaking service contractors, then those actions will be subject to legal challenge.

This decision represents a strong victory not only for Trojan, but the management rights industry. It provides an additional layer of protection to management rights holders against bodies corporate who seek to terminate management rights contracts for trivial or capricious reasons or for collateral purposes.