Rainbow Commodore [2004] QBCCMCmr 309 (17 June 2004)

Last Updated: 30 September 2005

REFERENCE: 0067-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	9744
Name of Scheme:	Rainbow Commodore
Address of Scheme:	255 Boundary Street, Rainbow Bay QLD 4225

TAKE NOTICE that pursuant to an application made under the abovementioned Act by John Graham Donnelly and Margaret McNeil Young Donnelly, the former letting agents, caretaker service contractors and owners of lot 1

I hereby order that the application by John Graham Donnelly and Margaret McNeil Young Donnelly, the former letting agents, caretaker service contractors and owners of lot 1, for orders including a declaration that the Body Corporate is not entitled to impose a transfer fee in respect of the assignment of their interest in the Deed of Engagement dated 19 September 2002 to Heathbush Pty Ltd on the basis that the applicants have suffered a genuine hardship causing the transfer which was not reasonably foreseeable on the contract date, and other associated orders, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0067-2004

"Rainbow Commodore" CTS 9744

The applicants, John Graham Donnelly and Margaret McNeil Young Donnelly, the former letting agents, caretaker service contractors and owners of lot 1, have sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote –

The applicant seeks the following orders:-

1.	A declaration that the Body Corporate is not entitled to impose a transfer fee ... in respect of the assignment of the interest of John Graham Donnelly and Margaret McNeil Young Donnelly in the Deed of Engagement dated 19 September 2002 to Heathbush Pty Ltd on the following basis:

That the applicants 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 applicant.
3.	That the respondent pay the applicant’s costs of an incidental to this application; and
4.	Such further or other orders as the Commissioner or Adjudicator thinks fit.

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

(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)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

The scheme

The scheme is a subdivision of 43 lots registered under a building unit plan (now a building format plan). The regulation module applying to the scheme is the accommodation module.

The application and submissions

This office sought submissions in respect of the application from all owners and the body corporate committee. I do not intend to set out in any detail the applicant’s grounds, nor the contents of submissions in response. I am satisfied that all parties are aware of the position of the other from the application, submissions and the right of reply processes. I therefore intend only to refer to those materials necessary for a determination of the issues raised.

I note that the solicitors for the applicant are Short Punch & Greatorix, Lawyers (SPG) of Surfers Paradise. From personal knowledge of applications of this type (relief from payment of the transfer fee on the sale of management rights on the basis of "genuine hardship") received by this office from time to time, I am aware that SPG have now represented a number of applicants for such relief. I consider that SPG must by now be aware of the several pronouncements of adjudicators of this office on the requirements for establishing genuine hardship not reasonably foreseeable by the transferor at the contract date.

By way of example, in the recent decision by adjudicator, CG Young in application no. 62 of 2004 (which I acknowledge was made after the making of this application but which itself makes reference to an early pronouncement on the subject), it was stated -

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)."

Further, not only is there in my view a heavy onus on the transferor to evidence "genuine hardship", but in addition, this hardship must not have been reasonably foreseeable by the transferor at the contract date.

In correspondence to the body corporate, SPG state –

We point out to the body corporate that Mr and Mrs Donnelly are selling as a result of hardship caused by Mr Donnelly’s recently diagnosed medical condition. In that respect, we are instructed to advise that Mr Donnelly has been diagnosed with a form of diabetes and hypertension causing excessive blood pressure.

Mr Donnelly’s condition creating the hardship was not known or foreseeable at the time of the body corporate arrangement for the addition of an option to extend the Agreement made early last year.

The correspondence then refers to certain medical evidence in support of the relief sought. The medical evidence consists of a letter from Dr Donald McCombe of the Robina Medical Centre stating that –

(Mr Donnelly) was advised to retire from his occupation from his occupation of unit manager because of his medical conditions.

I consider this medical evidence completely unconvincing of the requirement to establish "genuine hardship". The reference in SPG correspondence to the Privacy Act for not disclosing the specifics of the conditions is, in my view, simply evasive. Perhaps SPG also concluded this, as subsequently, greater elaboration of Mr Donnelly’s medical condition was provided. This time, the explanation states –

(Mr Donnelly) has experienced a significant deterioration in his health as a result of the stressors involved in his occupation as resident manager ... . In particular, there has been a significant deterioration in his diabetes and a severe increase in his blood pressure. This has necessitated increasing doses of medications and his conditions are still not under control. His health risks remain significantly elevated.

SPG indicated in their correspondence to the body corporate that the "condition creating the hardship was not known or foreseeable at the time of the body corporate arrangement for the addition of an option to extend the Agreement". This appears in conflict with the medical evidence. It suggests pre-existing medical conditions - deterioration in his diabetes and a severe increase in his blood pressure, bought on as a result of "stressors".

Given that the medical conditions were in my view pre-existing, then I cannot conclude that there is evidence of "genuine hardship". Moreover, I am not satisfied that a deterioration in these pre-existing medical conditions was not foreseeable. The applicants had worked in their position for a period of time. There is no evidence of any fundamental or even significant change in the work arrangements which resulted in "stressors" not reasonably foreseeable at the time of the applicant’s entering into the relevant contract. What I am saying is that the applicants were at all relevant times aware of the nature of the job and associated stressors. Consequently I conclude that even if genuine hardship were able to be established, which on the evidence I conclude it is not, I further consider that such hardship was in any event reasonably foreseeable.

I therefore intend to dismiss this application, without the need to consider the contents of submissions which opposed the application and which provide further evidence in support of this position.

I suggest to SPG that in respect of future applications of this nature on behalf of clients, that it give greater consideration to the several pronouncements of adjudicators regarding what an applicant seeking such relief needs to establish to succeed in such an application, and realistically assess whether their client’s circumstances would appear to meet such requirements. Failing this, it may be that such clients, in making applications of this type but found to be lacking any real substance or merit, subject themselves to the possibility of an award of costs imposed against them under section 270 of the Act.