QLD: Conciliation Agreements are Binding and Enforceable

This article is about how conciliation agreements in Queensland body corporate disputes can still be legally binding even without a consent order.

Conciliation is often viewed as an informal, good‑faith step in resolving community titles disputes, but its legal consequences are frequently underestimated. The recent QCAT appeal decision in Blue Water Co Pty Ltd v Castillo highlights that what parties agree to in a conciliation session may bind them long after the meeting ends. Even without a consent order, a conciliation agreement can operate as an enforceable contract, making it crucial for participants to understand the weight their negotiated promises may carry.

How Conciliation Sessions Work

Conciliation sessions are run by a department conciliator. The sessions are conducted as quickly and with as little formality as possible. Usually, only parties to the conciliation application attend the sessions, although another person may attend if the conciliator is satisfied the person may help to resolve the dispute.

Importantly, evidence of anything said or done about the dispute in a conciliation session is unable to be used as evidence in a proceeding. If an agreement is reached, it is ineffective to the extent of any inconsistency with the Act.

Is a Conciliation Agreement Binding Without a Consent Order?

If an agreement is reached, it is commonly understood to be a good will agreement. It must be in writing, and signed by all parties and the conciliator. Unlike an adjudicator’s order, there is no specific provision in the legislation regarding the enforceability of a conciliation agreement.

Where the parties to the conciliation agreement agree, the agreement may be referred to an adjudicator for a consent order. This however is not often pursued. If a conciliation agreement has been converted to an adjudicator’s order, it may be enforced in the usual ways.

The issue becomes, if the parties do not refer the conciliation agreement for a consent order, or for some reason a consent order is not made by an adjudicator, does that deprive the conciliation agreement of being enforceable?

When Conciliation Agreements Operate as Contracts

If no consent order is made, the conciliation agreement may nevertheless be enforced against another party to the agreement as a contract. Whether the conciliation agreement constitutes a contract will depend on the interpretation of the agreement reached.

If the elements of a contract formation are established, a conciliation agreement is capable of being enforceable as a contract at common law rather than under statute as an adjudicator’s consent order. The key will be determining the precise nature of the promises made and whether the parties have given valuable consideration for the making of those promises.

What happened in Blue Water?

In 2015, about nine years before the Adjudicator’s decision at first instance, a conciliation agreement was reached however no consent order was made. The conciliation agreement recorded:

1. The applicant will cease trying to change by-law 12 and will withdraw his motion to remove paragraphs 12.3 and 12.4 from the by-laws.


2. The respondent will vote in favour of a motion at the forthcoming general meeting to approve the following improvements to common property within the applicant’s exclusive use area, subject to conditions that the applicant bears all costs associated with the improvements, maintains the improvements in good condition, and promptly remedies any adverse impacts upon lot 1 or the common property that result from the works:


1. Installation of 3 gravel car parks;


2. Landscaping;


3. Installation of a new grease trap just outside the Eastern boundary of the applicant’s lot; and


4. Installation of a small slab with a roof over it for storing lot 2’s bins just outside the Eastern boundary of the applicant’s lot.


3. The applicant will, at his own cost, install a water meter to separately measure lot 2’s water consumption before lot 2 commences operation as a café.


4. The applicant will restore the grease trap in lot 1’s exclusive use area to the condition it was in prior to the recent inspection by a plumber.

In 2023, one of the two lot owners in the scheme lodged an application in the Commissioner’s Office challenging the validity of a by-law and seeking an order that the by-law be removed. Blue Water, the other lot owner in the scheme, claimed:

1. the applicant is estopped from bringing an action regarding the by-law because in the earlier conciliation agreement dated 16 June 2015, the applicant had agreed to “cease trying to change by-law 12 and will withdraw his motion to remove paragraphs 12.3 and 12.4 from the by-laws.”


2. the conciliation agreement is binding in nature, and that in reliance on that promise, Blue Water acted to its detriment by performing its portion of the agreement. By now challenging the by-law, Blue Water claimed the applicant is acting contrary to the promise made under the conciliation agreement, which would be unconscionable.

The applicant was ultimately successful and the Adjudicator ordered the relevant by-laws to be removed from the community management statement. In making the decision, the Adjudicator did not consider anything in the 2015 conciliation agreement precluded the applicant from challenging the validity of the by-laws and that the estoppel argument was not made out.

On appeal to QCAT, Senior Member Traves held the conciliation agreement constituted a contract:

“The applicant in this appeal submits that the agreement reached amounted to a contract. I agree. Both parties agreed to forbear from pursuing their legal rights in order to compromise a dispute. That is consideration sufficient to support the contract.”

However, the terms of that contract did not amount to the owner forever abandoning the right to challenge the validity of the by-laws. The appeal was dismissed.

What does this mean?

A written agreement reached at a conciliation can be binding between the parties to that agreement. Parties to a conciliation should be careful when agreeing to obligations recorded in these agreements. If a party fails to comply with their obligations in that agreement, the agreement may be terminated, or a proceeding can be commenced through the Courts to seek damages or orders that the other party fulfil their obligations.

Summary

Conciliation agreements in community titles schemes carry real legal weight, even without being converted into consent orders. Blue Water reinforces that where the elements of contract formation are present, these agreements can be enforceable at common law. Their impact, however, turns on the promises actually made and the scope of the parties’ intentions. The decision underscores the need for careful drafting and clear expectations, ensuring parties appreciate both the advantages of early resolution and the lasting obligations that may follow in a body corporate context.

Brendan Pitman Grace Lawyers E: brendan.pitman@gracelawyers.com.au P: 07 5554 8560

This post appears in Strata News #783.

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This article has been republished with permission from the author and first appeared on the Grace Lawyers website.

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