Sailfish Point [2002] QBCCMCmr 180 (10 April 2002)

P J HANLYREFERENCE: 0713-2001

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	20973
Name of Scheme:	Sailfish Point
Address of Scheme:	300 Cottesloe Drive MERMAID WATERS QLD 4218

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

DG Den Hollander & Co and Dirk Gerardus Den Hollander and Juliet Ann Den Hollander, the service contractors and letting agents for Sailfish Point and owners of lot 77

RA MeekI hereby order that the application by DG Den Hollander & Co and Dirk Gerardus Den Hollander and Juliet Ann Den Hollander, the service contractors and letting agents for Sailfish Point and owners of lot 77, for an order that -

1.

The body corporate is not entitled to impose a premium pursuant to section 85 of the Act (Standard Module) 1997 in respect of the assignment of the interest of DG Den Hollander & co Pty Ltd in the Caretaking and Letting Agreement dated 7th day of June 2000 from DG Den Hollander & Co Pty Ltd to KO International Pty Ltd.

2.

The committee meeting of the body corporate held on the 21st November 2001 at which it was resolved to consent to the assignment of the Caretaking and Letting Agreement dated 7th June 2000 from DG Den Hollander & Co Pty Ltd to KO International Pty Ltd should have also resolved pursuant to section 85 of the Act (Standard Module) 1997 either not to require payment of a premium on the assignment referred to above on the grounds of genuine hardship or alternatively to waive payment of any premium to which the body corporate may be entitled under Section 85 of the Act (Standard Module) 1997 on the basis of genuine hardship which was not reasonably foreseeable on the 7th June 2000 being the date of the Caretaking and Letting Agreement between the body corporate and DG Den Hollander & co Pty Ltd and Dirk Gerardus Den Hollander and Juliet Ann Den Hollander

is dismissed.
n
STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0713-2001

“Sailfish Point” CTS 20973

The applicant DG Den Hollander & Co and Dirk Gerardus Den Hollander and Juliet Ann Den Hollander, the service contractors and letting agents for Sailfish Point and owners of lot 77 has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

A. The body corporate is not entitled to impose a premium pursuant to section 85 of the ... Act (Standard Module) 1997 in respect of the assignment of the interest of DG Den Hollander & co Pty Ltd ... in the Caretaking and Letting Agreement dated 7^th day of June 2000 from DG Den Hollander & Co Pty Ltd to KO International Pty Ltd on the basis that DG Den Hollander & Co Pty Ltd and its directors Dirk Gerardus Den Hollander and Juliet Ann Den Hollander sought approval of the body corporate to the transfer on the basis of genuine hardship not reasonably forseeable by them on 7^th June 2000.

B. The committee meeting of the body corporate held on the 21^st November 2001 at which it was resolved to consent to the assignment of the Caretaking and Letting Agreement dated 7^th June 2000 from DG Den Hollander & Co Pty Ltd to KO International Pty Ltd should have also resolved pursuant to section 85 of the Act (Standard Module) 1997 either not to require payment of a premium on the assignment referred to above on the grounds of genuine hardship or alternatively to waive payment of any premium to which the body corporate may be entitled under Section 85 of the Act (Standard Module) 1997 on the basis of genuine hardship which was not reasonably foreseeable on the 7^th June 2000 being the date of the Caretaking and Letting Agreement between the body corporate and DG Den Hollander & co Pty Ltd and Dirk Gerardus Den Hollander and Juliet Ann Den Hollander.

Section 223(1) provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

a) a claimed or anticipated contravention of the Act or the community management statement; or

b) the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or

c) a claimed or anticipated contravention of the terms, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

The facts of this dispute are relatively straight forward and I do not propose to restate these in any detail. They are known to the body corporate in consequence of the submission process. The applicants are claiming to be exempted from the payment of a transfer fee on the basis of alleged “genuine hardship”. The amount of the transfer fee in question is $8100. Section 85(6) of the standard module provides that the body corporate may not require the payment of the a transfer fee if the transferor is seeking approval to the transfer on the basis of genuine hardship not reasonably foreseeable by the transferor at the contract date.
The applicant’s claim of “genuine hardship” is based on medical conditions which they say arose in consequence of their engagement as managers, and that were aggregated by their continuation in that role, thus necessitating their sale of the management rights for the scheme. The applicants state that in August 2000, Mrs and subsequently Mr Den Hollander presented to their doctor with “stress related anxiety / depression”. The applicant’s statements to this effect are supported by a letter of 22 October 2001 from their doctor to their lawyer.

Briefly, the doctor attributes Mrs Den Hollander’s conditions to “a consequence of her reaction to the stresses brought to bear upon her as a consequence of her position in managing an accommodation complex”. Similarly, the doctor says of Mr Den Hollander that “the stressful situations encountered with confrontations with the residents at the current complex has resulted in (him) becoming quite anxious and affected by the stresses encountered in this position”. The doctor concludes –

It is my opinion that unfortunate, unforeseen circumstances have contributed to the deterioration in the health of both Mr and Mrs Den Hollander. This deterioration has been only in evidence since working as a management team at the accommodation resort and has been a consequence of their exposure to psychological pressure in this position. In their previous employment at similar positions there have been no circumstances that have contributed to their health deterioration.

The body corporate has responded to the application by way of submission, seeking to have the application dismissed on a technical basis. In particular, it states –

2.02 The applicant is a corporate, which has its own separate and distinct legal entity to that of Mr and Mrs Den Hollander, its directors and undoubtedly its shareholders.

2.03 Whilst Mr and Mrs Den Hollander may be incapable of carrying on as the building Managers, Mr and Mrs Den Hollander are not the building manager or letting agents for Sailfish Point ...

2.04 Section 85(6)(b) ... does not extend the benefit of the section to directors of a corporate building manager.

2.05 The applicants have failed to provide evidence of the alleged hardship of the corporate vendor, only hardship of Mr and Mrs Den Hollander.

Whilst I acknowledge that the body corporate’s submission is probably technically correct, I consider that the purpose and intent of the legislation is clearly directed to individuals. Principally for tax reasons, but also issues of legal liability, it would be very unusual for individuals to enter a management rights contract in their individual capacity and not use a company as the contracting entity. The possibility or circumstances of a corporation suffering “genuine hardship” in the performance of its contractual obligations is extremely limited, and probably non-existent. “Hardship” is a concept associated with individuals, not corporations, and in order to give the section the purpose I consider the legislature intended it to have, it is necessary to extend the concept to the individuals who are behind the corporate entity.

The body corporate submission does not, in the alternative, address the circumstances of hardship alleged by the applicants. I have however been provided with a document prepared by committee members and sub-titled Support for application of legislated fee of $8100 charged in respect of transfer of caretaking agreement from Den Hollander Pty Ltd to KO International Pty Ltd under the provisions of the Act. That document, a copy of which was presumably sent to owners at some point, sets out a list of dot-point reasons why the committee members mentioned considered that the transfer fee should be applied. Specifically regarding the issue of the applicant’s medical conditions, the document states –

One medical letter has been submitted which indicates that both Derek and Juliet had some medical problems. These problems did not appear to have in any way affected their ability to carry out the caretaking contract. Neither took sick leave and both only took 1 weeks recreation leave during the 18 months at SP.

I consider that in the current circumstances, there are two aspects to the question of “genuine hardship”. The first is whether stress related conditions which arise in direct consequence of the applicant’s engagement as a service contractor might be considered a sufficient basis for an allegation of “genuine hardship”. Assuming this question is answered in the affirmative, the second question in my view is the sufficiency or conclusiveness of the applicant’s medical evidence in corroboration of their allegation of the medical conditions alleged.

Section 85 entitles a body corporate to require the payment of a transfer fee if a manager requests approval for the transfer within the first three years of the commencement of the contract. This right is subject only to two specific and limited exemptions. It is my view that the legislature did not intend the concept of “genuine hardship” to be interpreted too liberally so that many circumstances occurring ordinarily in people’s lives might be construed so as to entitled that person to avoid the payment.

With some, but not significant reservations, I must answer the first question I have posed in the negative. I do not consider that, at least in the present circumstances, the stress related conditions complained of, are sufficient to warrant the conclusion of “genuine hardship” entitling the applicants to be relieved of payment of the transfer fee. The stress complained of by the applicants can be contrasted with the diagnosis of a life threatening (and potentially debilitating) illness (eg. a serious cancer) following the entering into of a contract. Whilst I accept that stress (and associated conditions) might be considered a debilitating condition, I don’t consider it of such a scale as to warrant the conclusion of “genuine hardship”. Moreover, it seems to me that the facts don’t support a conclusion of “genuine hardship”. Whilst the applicants allege that the stress arising from performance of the contract arose almost immediately, this apparently did not prevent the applicants seeking and being granted an extension of two years on the initial one year term. Whilst it might be argued that this is simply good business practice, to ensure a saleable asset, the applicants on the other hand alleged that the stress of performing the contract was such that it forced them into a sale of the management rights. I consider there is some inconsistency in these two aspects. If the stress was of such consequence to the applicants, one wonders at the advisability of extending the term of the contract.

Whilst not strictly relevant given my finding in respect of the first question, I am further not satisfied of the sufficiency or conclusiveness of the applicant’s medical evidence in corroboration of their allegation of the medical conditions alleged. In particular, I consider the one medical report provided in support or corroboration of the application to have been written with the provisions of section 85(6) in mind. In this regard, I refer to the terms of the final paragraph I have quoted above.

In the circumstances, I consider that the applicants have not established that the approval of the transfer was sought on the basis of “genuine hardship not reasonably foreseeable by the transferor at the contract date”, and I therefore intend to dismiss the application. n