Heritage Village Strathpine [2003] QBCCMCmr 138 (26 September 2003)

Number of Scheme:	23328
Name of Scheme:	Heritage Village Strathpine
Address of Scheme:	101 Grahams Road STRATHPINE QLD 4500

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Charles Albert Grainger and Deley Ellen Grainger, the co-owners of lots 5 and 20

I hereby order that within 1 month of the date of this order that body corporate shall refund to the applicants, Charles Albert Grainger and Desley Ellen Grainger, the sum imposed by the body corporate by way of a transfer fee under section 83(2) of the Accommodation Module as a condition of approval of the transfer of the caretaking and letting agreement entered into between the applicants and the body corporate on 7 August 2002.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0023-2003

"Heritage Village Strathpine" CTS 23328

The applicants, Charles Albert Grainger and Desley Ellen Grainger, have sought an order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) as follows;

That Desley Ellen Grainger and Charles Albert Grainger (the on-site managers) not be required to pay a transfer fee upon transfer of the property management agreement and lot letting agreement.

Section 276(1) of the Act 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 the Act or the community management statement; or

(i) the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or

(ii) the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

The applicants stated that they purchased the management and letting rights for this scheme in August 1996. The agreement provided a term of 15 years, but upon commencement of the Act in 1997, that term was reduced to 10 years, because the scheme was at that time regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module) and such agreements were limited to 10 years (sections 81 and 82). The applicants further stated that they approached the then body corporate manager, Barard Management, in September 2000 and enquired about a new agreement. Negotiations with the committee then extended from January 2001 until March 2002, by which time the scheme was regulated by the Accommodation Module, under which the maximum term allowed for management and letting agreements was 25 years. The applicants further stated that the new management and letting agreement was agreed to on 24 June 2002, and executed on 7 August 2002. Following this, Mrs Grainger retired from her part-time position at Queensland Newspapers so that she could work full time in the management role. The applicants stated that they made a commitment to owners that they would remain in the role for 3 years.

The applicants explained that Mrs Grainger was diagnosed with a tumour in the right breast on 21 October 2002, and underwent surgery for removal of the tumour on 9 December 2002. The applicants stated that on medical advice Mrs Grainger was advised to find a less stressful way of life, and they therefore had no choice but to put the management rights on the market. A sale was made shortly after.

The body corporate committee and all owners were invited to respond to the application. A submission was received from the committee.

As a preliminary issue, the committee submitted that, as at the date of determination of this dispute, an adjudicator would have no jurisdiction, because the applicants had already sold the management and letting rights, and their lot in the scheme, with both having settled on 9 January 2003.

I note that the application was lodged in this office on 8 January 2003.

Section 182 (now section 227) of the Act defines the parties to a dispute. The applicants were, at the time that the application was lodged, service contractors and Mrs Grainger was a letting agent for the scheme. Accordingly, they were within a category of persons entitled to make an application.

Section 192 (now sections 238 and 239) of the Act prescribes how to make application for an order. At the time that the application was made, the applicants were parties to a dispute, for which an adjudicator could make an order. Although the applicants have since sold their lot and the management and letting rights, they are still parties to a dispute, in that the amount of the transfer fee to which the body corporate claims it is entitled is still disputed by the applicants. This situation is distinguishable from a dispute involving, for example, a by-law contravention, where, upon the sale of the respondent’s lot, an order regarding a by-law contravention would be irrelevant.

I am therefore satisfied that I have jurisdiction to determine this application.

In this event, the committee’s submission was that the applicants did not seek approval of their transfer of the management and letting agreement on the basis of genuine hardship not reasonably foreseeable by them at the time that they entered into the new agreement with the body corporate. The committee provided the historical background to the dispute. It submitted that, in passing the resolution to impose the transfer fee, it "considered its duty of care to owners", the intention of the legislation, and the applicants’ submission in relation to genuine hardship. Amongst the reasons for rejecting the applicants’ claim, the committee cited the fact that it is based "solely on a handwritten letter of Dr Michael Callan dated 20 December 2002." The committee stated that Dr Callan provided no evidence as to the nature or seriousness of the tumour or any prognosis as to the after effects of surgery, and the committee therefore formed the view that the surgery would not have impacted upon Mrs Grainger’s ability to carry out her duties under the agreement.

In spite of being given the opportunity to do so, not one owner responded to the application.

On 24 September 2003, I conducted a teleconference with Mrs Grainger and Mr Hardy, the present body corporate manager.

Mrs Grainger explained that when her breast tumour was diagnosed on 21 October 2002 she was required to undertake further tests. These tests, conducted over the following week, confirmed that the tumour was growing rampantly and that surgery was necessary. Mrs Grainger stated that she was provided with considerable literature to read in order to prepare her for a partial or complete mastectomy. She further stated that her doctor advised her that 4% of tumours were hereditary and 96% were caused by stress. Mrs Grainger commented that as she and her husband had been in negotiations with the committee over a 21 month period to finalise the new management and letting agreement, she regarded that period as having been particularly stressful. Her doctor advised her that she should endeavour to reduce the stress levels in her life. Mrs Grainger stated that she was responsible for the administrative side of the business, and her husband took care of the maintenance and the gardens. She knew that her husband would not be able to cope with all of the work, if she were to follow her doctor’s advice to cease work. Accordingly, Mrs Grainger realised that the business would have to be put up for sale. She stated that a buyer was found within 4 days.

Mrs Grainger said that her surgery was performed on 9 December 2002, and the tumour was found to be benign. Although she must have regular check-ups (her next appointment is in November 2003), she has not had to undergo chemotherapy or radiotherapy treatment. Mrs Grainger described the period after the initial diagnosis as being very distressing for her and her husband. She said that they had always intended to continue as on-site managers and letting agents until they were ready to retire (a period of 3-4 years after the new agreement), and then they would still have had an agreement with sufficient time left to run that it was a saleable asset. This statement was supported by the committee’s submission, wherein it was stated that several owners in the complex had advised the committee that prior to the execution of the new agreement Mrs Grainger had stated that she was seeking the longer term as she and her husband intended to stay in the complex for several years. I accept that at the time these statements were made they were a genuine reflection of the Grainger’s intentions. Mrs Grainger’s tumour was not diagnosed until two and a half months later.

Mr Hardy advised me that he had forwarded a disclosure statement under section 163 (as it then was) of the Act to the Graingers on 4 November 2002, which confirmed Mrs Grainger’s advice that the business had sold very shortly after it was listed for sale. Mr Hardy further confirmed that the Graingers had been in negotiation with the committee for a lengthy period prior to the new agreement being executed on 7 August 2002. He stated that the new agreement better defined the Grainger’s role, as the previous agreement had been poorly drafted, and included many administrative tasks for which the body corporate manager should have been responsible. The new agreement also properly defined the Grainger’s duties, and, because it was for the maximum term (25 years including options) allowed under the Accommodation Module, it would have enabled them to remain in the position until their retirement as planned, and still have an agreement with sufficient time left to run that they could find a buyer for the business. Mr Hardy explained that banks traditionally would not finance the purchase of a management and letting business the agreement for which had fewer than 5 years left to run. Mr Hardy described the new agreement as benefiting both the body corporate and the Graingers.

Section 113 of the Act provides that there is to be no consideration payable to a body corporate for the engagement or authorisation of service contractors and letting agents. No party has suggested to the contrary, and I therefore find that no such consideration has been paid. Accordingly, by virtue of section 122(2), the provisions of section 122(3) are applicable to this matter. This section relates to the payment of an amount to the body corporate by the service contractor or letting agent if any rights under the relevant instrument appointing or authorising such a person are transferred within a specified period prescribed under the regulation module. Thus one turns to section 83 of the Accommodation Module.

Section 83 of the Accommodation Module applies to the engagement of a person as a service contractor or the authorisation of a person as a letting agent provided certain specified prerequisites set out in subsection (1) are satisfied, which I find to be the case in this matter. In view of the fact that the applicants sought the body corporate’s approval to the transfer of the management and letting rights within three years after the date on which the engagement and authorisation was entered into, subsections (2), (3), (4) and (5) are applicable.

It is the applicants’ contention that section 83(6) of the Accommodation Module is also applicable to their circumstances, in that they have been forced to sell the management rights, the letting rights and their unit following Mrs Grainger’s diagnosis of a breast tumour, which diagnosis was not reasonably foreseeable at the time that the applicants signed the new management and letting agreements on 7 August 2002. It is further contended that the sale in such circumstances has caused genuine hardship to the applicants.

Whilst there appears to be no judicial determination of the meaning of the express term "genuine hardship", the definition of "hardship" as that word relates to various Australian legislation, has appeared in a number of decisions. In Re Kabalan [1993] FCA 76; (1993) 113 ALR 330, Gummow J, when reviewing the Bankruptcy Rules (Cth), defined "hardship" as "...any condition which presses with particular asperity upon a person..." This was also considered an appropriate definition by the Full Tribunal of the A.A.T. in Re Dorevitch Pathology and Minister for Health [1993] AATA 377; (1993) 32 ALD 170 at 177 (paragraph 17). In Re Qld Medical Lab. and Dept. of H.H.C.S. (1994)33ALD 159 at 167 (paragraph 32) the Full Tribunal of the A.A.T., when considering the word "hardship" as it appeared in the Health Insurance Act 1973 (Cth) ruled that "the term ‘hardship’ can potentially cover a broad spectrum of connotations including meaning an appreciable detriment whether it be financial, personal or otherwise."

All of the authorities indicate that each case must depend on its own particular facts and circumstances. The committee referred me to another adjudicator’s decision (in application 0713-2001) on this subject. In that application, the adjudicator was not satisfied that the applicants had made out their case for genuine hardship. I consider that the facts of this case are distinguishable.

In this case, I accept that the Graingers intended to continue in their roles as caretakers and letting agent until their retirement, a period of at least three years after they entered into the new agreement. I also accept that Mrs Grainger was greatly distressed by the diagnosis of a breast tumour, which was described to her as "growing rampantly" and that the decision to sell was based upon her doctor’s advice "that she should not work in her present occupation because of the physical and emotional strain." (Dr Callan’s report dated 20 December 2002)

I further accept that during the period of their management Mrs Grainger attended to all of the administrative work; that her husband carried out the maintenance and gardening and that her husband would not have been able to assume her workload as well as his own. I also note that the restricted letting agent’s licence was in Mrs Grainger’s name only. I am satisfied that in selling the business the Graingers have lost income, and have disrupted their plans for the next few years leading to the time that they had originally intended to retire. I find that this constituted an appreciable financial and personal detriment.

I consider that it is immaterial that Mrs Grainger’s tumour ultimately proved to be benign, as the contract for the sale of the business had already been signed by the time Mrs Grainger was advised of the pathology results after her surgery on 9 December 2002. Mrs Grainger told me during the teleconference that they did not expect the business to sell as rapidly as it did, but because they were feeling as if their world had been turned upside down, they were pleased that it did.

I also consider it to be most telling that not one owner opposed the application to have the transfer fee waived. The committee stated in its submission that it considered its duty of care to owners, amongst other things, when it decided to impose the fee. The committee is the administrative arm of the body corporate, and is charged with the responsibility of attending to the business of the body corporate. I have no doubt that the committee gave proper consideration to all of the material before it when making its decision. However, given the absence of opposition from owners to this application, I suspect that if the question of whether to impose the fee had been put to owners for their consideration at the time, the decision would have been different to that reached by the committee.

I am satisfied that the applicants have made out their case of genuine hardship, and I have therefore ordered that the transfer fee imposed by the body corporate shall be refunded to them.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Heritage Village Strathpine [2003] QBCCMCmr 138 (26 September 2003)