Marcoola Beach [2004] QBCCMCmr 279 (28 May 2004)

Last Updated: 30 September 2005

REFERENCE: 0062-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30404
Name of Scheme:	Marcoola Beach
Address of Scheme:	885 David Low Way MARCOOLA QLD 4210

TAKE NOTICE that pursuant to an application made under the abovementioned Act by PEB BEACHSIDE RESORT PTY LTD CAN 095 716 528, as the (former) caretaking service contractor for the scheme,

I hereby order that the application for an order that the body corporate was not entitled to impose a transfer fee under section 83 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 in respect to the assignment of the Management Agreement and Caretaking Agreement from Peb Beachside Resort Pty Ltd to Heathbush Pty Ltd on 30 January 2004, is dismissed. I further order that the body corporate is entitled to claim the amount of Thirty Five thousand Five hundred dollars ($35,500) being the relevant amount claimable under section 83(5) of the Accommodation Module Regulation in respect of the assignment, currently held in the trust account of Munro Thompson Lawyers, Mooloolaba.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0062-2004

"Marcoola Beach" CTS 30404

The applicant, Peb Beachside Resort Pty Ltd as the former caretaking service contractor for the scheme through its directors Ernest and Kaylene Allard, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 ("the Act") -

1. "A Declaration that the Body Corporate is not entitled to impose a transfer fee pursuant to Section 83 of the Accommodation Module of the Body Corporate and Community Management Act 1997 in respect of the assignment of the interest of Peb Beachside Resort Pty Ltd ACN 095 716 528 in the Caretaking Agreement and Letting Agreement dated 15 August 2002 to Heathbush Pty Ltd on the following basis:

(a) That the Body Corporate did not resolve to impose the transfer fee as a condition of the consent to the assignment;

(b) That the Directors of Peb Beachside Resort Pty Ltd, Ernest Allard and Keylene Allard have suffered a genuine hardship causing the transfer which was not reasonably foreseeable on the contract date.

2. In the event that the Applicant has paid any sum in respect of the transfer fee pursuant to Section 83 of the Accommodation Module at the time any order is made by an adjudicator then an order that the transfer fee paid to the Body Corporate be refunded to the Applicants.

3. That the Respondent pays the Applicant’s cost of and incidental to this Application; and

4. Such further or other orders as the Commissioner or Adjudicator thinks fit."

JURISDICTION:
This is a dispute between the former caretaker service contractor (the applicant Peb Beachside Pty Ltd ("Peb")) and the body corporate (the respondent) concerning whether a transfer fee was claimable from the applicant under section 83 of the Accommodation Module and, if claimable, whether there was genuine hardship not reasonably foreseeable by the applicant’s working directors (Ernest and Keylene Allard) within the meaning of that provision, such that the body corporate was not entitled to pursue the claim. This is a matter falling within the disputes resolution provisions of the legislation (see sections 227, 228 and 276 of the Act).

General powers of an Adjudicator in making an order:
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 this Act or the community management statement; or
c)	a claimed or anticipated contractual matter about –
(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) of the Act). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 284(1) of the Act).


APPLICATION AND SUBMISSIONS:
Under section 243 of the Act, a copy of the application was provided to the respondent body corporate (committee) and all owners, with an invitation to each to respond to the matter of dispute raised in the application. Submissions were received from the following: the body corporate by its solicitors, Munro Thompson Lawyers (Greg Hansen), opposing the application; the Body Corporate Manager, Strata Solutions Group Pty Ltd (Pam Walton), identical to that from Munro Thompson; and David Anderson of Lot 23, also opposing the application. The applicant’s solicitors, Short Punch & Greatorix, viewed the submissions but did not lodge a reply to them (see sections 244 and 246 of the Act).

The assignment of the interest of Peb under the Caretaking and Letting Agreements with the body corporate to Heathbush Pty Ltd ("Heathbush") was settled on 30 January 2004. The transfer fee of $35,500 claimed by the body corporate was deposited into the solicitor’s trust account of Munro Thompson on that same day until this dispute was resolved. Accordingly, the second order sought by the applicant is effectively for the moneys to be paid from the trust account, including any accrued interest.

I shall deal with the facts of the matter and the submissions of the parties under the following heading "Determination".


DETERMINATION:
"Marcoola Beach" was registered as a building format plan on 9 August 2002 and comprises 125 lots. The scheme is regulated by the Body Corporate and Community Management (Accommodation Module) Regulation 1997 ("the Accommodation Module").

I shall deal separately with the two grounds relied on by the applicant.


(a). That the Body Corporate did not resolve to impose the transfer fee as a condition of consent to the assignment.

The applicant argues that the transfer fee was not a condition of the body corporate for its approval of the transfer/assignment of the Management and Letting Agreements as required by section 83(2) of the Accommodation Module which states –

"(2) The body corporate may require, as a condition of approving the transfer, that the transferor under the transfer pay the body corporate an amount ("the relevant amount")."

The basis for this claim is that the resolution of the committee made outside-of-meeting and minuted for 21 January 2004, to impose the transfer fee was made after the resolution consenting to the assignment. There were three motions comprised in the voting paper (commonly known as a "flying minute") and all were concerned with the assignment of the management rights from Peb to Heathbush: the first was for consent to the assignment of the Management Agreement in accordance with the attached Deed of Assignment, subject to any changes recommended by the body corporate solicitors and agreed by Peb and Heathbush; the second was for consent to the assignment of the Letting Agreement subject to the same conditions; and the third motion was for the charging of the transfer fee calculated in accordance with section 83(5) of the Accommodation Module, as a condition for body corporate consent to the assignment of both agreements, payable to the body corporate at settlement.

The applicant’s claim that the third motion was of no effect as the consenting resolution had already been passed without a reference to or conditional upon the fee. I consider this claim to be a spurious one and of no merit. The three motions all related to the assignment and were the only motions to be voted on by the committee members. The vote was by "flying minute" and therefore considered privately by members, most likely at their home or place of work. All three motions were included on the one voting paper and if it was the case that a member did not read all three before voting on the first motion (and from documentation submitted all members would have been anticipating the vote), then they had the opportunity of amending their vote if a reading of the second or third motion changed their mind in respect of the first vote. That is, each member was in a position to consider all of the motions together and consequently their vote on each motion can reasonably be taken to have been made in the knowledge of the import of all the motions.

In the circumstances, I am of the view that the voting on the motions by members must be considered to have been made together and the fact that the consenting motion was first in the order of the related motions, is of no consequence. Accordingly, I accept that the consent of the body corporate to the assignment was conditional upon payment of the transfer fee by Peb.


(b). That the Directors of Peb Beachside Resort Pty Ltd, Ernest Allard and Keylene Allard have suffered a genuine hardship causing the transfer which was not reasonably foreseeable on the contract date.

Section 83(6) of the Accommodation Module provides that the Body Corporate may not require 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."

In a similar order made barely a week ago, I made the following statement concerning the standard of evidence required of an outgoing caretaking service contractor to avoid a claim by the body corporate for a transfer fee –

"The legislation prefaces the term hardship with the adjective "genuine", imposing in my view a heavy onus on the transferor in establishing its existence such that the body corporate may be deprived of a fee designed to compensate bodies corporate for the disadvantages of having a new caretaker service contractor relatively soon after engaging, or renewing, the transferor’s agreement (see Hansard Second Reading Speech of 9 May 1997 for the Body Corporate and Community Management Bill, pages 1796, 1805-6, and 1816)."

The relevant contract date here is 15 August 2002, the applicant being the purchaser of the original management rights for the scheme following establishment on 9 August 2002.

Documents submitted by both the applicant in support of the application, and the body corporate in its submission opposing the application, evidence the following sequence of events.

By letter dated 2 December 2003 the applicant, by its solicitors Short Punch & Greatorix, gave notice to the body corporate of its intention to assign its management rights. On 5 December the applicant by its solicitors forwarded the body corporate a draft motion for body corporate consent to the assignment, and a draft Deed of Assignment. There was neither mention of any hardship bringing on the assignment nor mention of relief from paying a transfer fee.

By letter dated 17 December, the applicant by its solicitors advised that Heathbush is a subsidiary of S8 Limited and being a publicly listed company gives protection to your client. Of more significance was its advice that –

"We have been advised by Heathbush Pty Ltd that at this stage the current managers, Mr and Mrs Allard, will remain as managers of Marcoola Beach Resort."

On 22 December the applicant by its solicitors advised that it would be seeking consent to the assignment on the basis that the assignment was caused by hardship through the heart condition of Kaylene Allard. It stated the sale was essential to remove her from a life threatening position. In response, by letter dated 5 January 2004 the body corporate by its solicitors sought additional information from the applicant as to why a transfer fee could not be imposed.

By letter dated 7 January, the applicant by its solicitors provided a letter by medical doctor Dr Peita Wilson of the Buderim Marketplace Medical Centre, dated 7 January, concerning the health of Kaylene Allard which states –

"Mrs Kaylene Allard has a medical condition which precludes her from working in her managerial position for Marcoola Beach Complex. This has only been present since 14.8.2003. She is now unfit for this work."

On 14 January a second letter from Dr Wilson added the following paragraph –

"On 14.8.03 she presented with her first episode of central chest pain. After discussion with cardiologist Dr Sean Mulhearn (Ph 54796886), she was admitted to Sunshine Coast Private Hospital Coronary Care Unit for further investigation. She was admitted for intensive monitoring for three days. She had a syncopal episode during her exercise stress test. It was suggested she reduce stress to help prevent further episodes."

The flying minute containing the three motions had been sent to committee members with only the first of the above medical letters – the latter letter was sent on 14 January to the two members who had not yet sent their vote to the secretary. In view of the majority of the committee not having voted with knowledge of the added medical comment, I caused enquiries to be made by this office of the Body Corporate Manager (Pam Walton) as to whether at any meeting since any member had said they would have voted otherwise if they had the second document before them at the time. She stated that no members had made such a statement but in fact had confirmed their opinions. I note also that though copies of this application (the first 6 pages which includes both medical letters) were forwarded to all owners, including committee members as owners, none has made a submission retracting their vote for claiming the transfer fee.

The applicable provision under section 83 of the Accommodation Module to the present circumstances is paragraph 6(b) which states –

84. Payment of amount on transfer.

(6) The body corporate may not require the payment of the relevant amount 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 sole basis for claiming unforeseeable genuine hardship being the cause why the applicant assigned the management rights, is the illness of Kaylene Allard. The applicant has made no submission as to why her participation in the business, whatever that participation may have been, was so vital that her withdrawal would make the business untenable. The management rights are held by the company Heathbush Pty Ltd and while the directors are Ernest and Kaylene Allard, the sole shareholders are three companies, Baluke Pty Ltd, Barook Pty Ltd and Emporium Management Pty Ltd. There has been no explanation given by the applicant as to why the company could not continue the business with either an alternative working director selected by the shareholders, or a person employed to replace Mrs Allard, or Mr Allard working alone. The applicant may have an argument that the business is still solely owned by the working directors through the company shareholders, and either cannot support the wages of an employee or that Mr Allard alone could not cope with the volume of work, but the situation is unexplained in this regard. The onus of proof rests with the party making the claim of unforeseeable genuine hardship – the applicant.

Apart from this, the advice to the body corporate in the applicant’s solicitors letter of 17 December (see above) was that "at this stage the current managers, Mr and Mrs Allard, will remain as managers of Marcoola Beach Resort", which, as the respondent body corporate points out, "clearly contradicts any claim that the transfer was sought by reason of undue hardship". The company S8 Limited, of which Heathbush is a subsidiary, holds the management rights for a large number of community title schemes located on the Gold Coast and employs resident managers to manage those schemes. Regardless that the advice may have only referred to a short-term hand-over/take-over period, it does not sit well with the statement that Mrs Allard was occupying a "life threatening position".

Further, the medical comment does not substantiate the claim made by the applicant that "The operation of the management rights of "Marcoola Beach Resorts" has been too stressful for Mrs Allard", though I do not consider it essential that the detriment in health constituting the hardship need necessarily be the result of involvement in the management rights business. However, the medical comments do not explain how her illness precludes her from continuing in her management tasks – there is no submission that she undertook physical work, for example performing part of the caretaking/cleaning duties, that she cannot now do, or why she cannot now continue with non-stressful office tasks such as taking bookings, maintaining the accounts, banking, etc. The medical advice is simply that she should "reduce stress to prevent further episodes".


Summary:
For the foregoing reasons, I do not consider that the applicant has established either that the body corporate gave unconditional consent to the assignment, or that genuine hardship not reasonably foreseeable by the transferor at the contract date was established in respect of the working director Kaylene Allard of the applicant company Peb. The onus of proof, which I contend is a heavy one for the very reason why the transfer fee was introduced, lies with the applicant to submit sufficient information to support its claim and I do not consider that it has done so.




My order is therefore to dismiss the application for an order seeking the transfer fee be refunded to the applicant. The order sought for the respondent body corporate to pay the applicant the costs of the application therefore lapses; in any case an adjudicator has only power to award costs in the circumstances of section 270(3) of the Act.