Regatta Riverside Tower 1 [2004] QBCCMCmr 400 (18 August 2004)

Last Updated: 30 September 2005

REFERENCE: 0408-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	31200
Name of Scheme:	Regatta Riverside Tower 1
Address of Scheme:	9 Sylvan Street TOOWONG QLD 4066

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Lindsay & Suzanne Ekert, the Owner(s) of lot 21004

I hereby order that the application for, among other things: • A declaration that the body corporate is acting unreasonably in its assessment of the suitability of the proposed transferee of management rights; • A declaration that the body corporate is acting unreasonably in failing to require payment of a transfer fee; and • A declaration that the body corporate is acting unreasonably in failing to make adequate provision in its sinking fund, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0408-2004

"Regatta Riverside Tower 1" CTS 31200

Application

Regatta Riverside Tower 1 Community Titles Scheme (Tower 1) is a 76 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Accommodation Module Regulation (Accommodation Module).

This is an application by Suzanne and Lindsay Ekert, the owners of lot 21004 (applicants) against the body corporate (respondent).

The applicants claimed that the body corporate was acting unreasonably in failing to properly assess the suitability of a proposed transferee of the management rights for the scheme and in failing to require the payment of a transfer fee. Further, it was claimed that the sinking fund was in deficit and that the body corporate was acting unreasonably by failing to reserve appropriate amounts in this fund to meet anticipated expenditure.

An interim order was also sought to restrain the body corporate from taking any further steps to approve the transfer of the management rights pending determination of the dispute.

Background

Tower 1 is one of four subsidiary schemes to Regatta Riverside Principal Community Titles Scheme. By way of background, I understand that Finlay Management Pty Ltd held the management rights for each of the Regatta schemes. At around the time this application was lodged, Finlay Management Pty Ltd had sought, or was intending to seek, the consent of each respective body corporate to their transfer of the management rights for each scheme to proposed transferees, Jim Lowe and Gayle Goldsmith.

Submissions

The applicants make submissions to the effect that:

• The holder of the management rights has stated to the applicants’ solicitor that she would do everything she could to avoid paying any transfer fee in respect of the proposed assignment of management rights for each scheme;
• The holder of the management rights has submitted formal requests for consent to assignment of the management rights to all subsidiary bodies corporate except for the body corporate for Regatta 1. She told the applicants’ solicitor that she intends to remove the chairperson for Regatta 1 so that her own hand-picked committee will waive the transfer fee;
• These tactics operate unfairly to the detriment of the body corporate, particularly as there is a known deficiency in the sinking fund; and
• The proposed assignment is due to settle on 1 July 2004 and the new committee will have inadequate time to consider the suitability of the proposed transferee prior to the settlement date.

Submissions opposed to the application are to the effect that:

• One of the applicants was chairperson of Tower 1 and voted in favour of accepting the administrate and sinking fund budgets at the time they were adopted;
• A known deficiency in the sinking fund is admitted, caused by insufficient provision made in the sinking fund by Leyshon Properties Pty Ltd on the initial sale of the units;
• The deficiency in the sinking fund has been investigated at the request of the committee by Helga Kolbe. This matter is being addressed by the proposal for the striking of a special levy to be paid by lot owners over a 12 month period;
• The application claimed that "the orders seek to protect the lot owners from rushed and ill-informed decisions of the body corporate". However, the committee was properly elected by owners and the applicants did not know the minds of the new committee. The action by the applicants was premature;
• The committee did in fact act properly in approving the transfer. The committee interviewed the proposed transferees and had regard to their character, previous work experience, references, financial status, roles within the complex and decision to engage an office manager; and
• The committee did in fact act properly in waiving transfer fee. This was waived on the basis of genuine hardship not reasonably foreseeable at the contract date and after the committee had received legal advice and medical documentation.

Decision

Interim injunctive relief

An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates (Act, 279). Further, any orders granted must be just and equitable in the circumstances (Act, 276).

For it to be just and equitable to grant interim relief at this stage, before full and final consideration of all the issues raised, I would need to be satisfied that the application raises a serious question to be determined. I would also need to be satisfied that the balance of convenience between the parties justifies the grant of injunctive relief. That is, I would need to balance the inconvenience to the body corporate of allowing the sign to remain pending a final determination against the inconvenience to the applicant of requiring removal pending a final determination.

Serious question to be determined

Approval of transfer

The grounds supplied by the applicants indicated that the settlement date for the sale of management rights was likely to be 1 July 2004 and that the consent to transfer would be given on that date without time for the committee to consider the suitability of the proposed transferees or to pass the necessary resolutions. However, settlement did not occur until 14 July 2004. The committee claims that it acted properly in considering and approving the proposed transferees. It is also claimed that the committee considered legal advice and medical information in considering the transferor’s request to waive the transfer fee.

The application does not establish any serious doubt about the election of the committee members or the relevant decision making processes of the committee. I am therefore not satisfied that there is any serious question to be determined in relation to the approval of the transfer.

There could be some argument over whether the claimed hardship was of sufficient degree of seriousness and severity to outweigh the body corporate’s entitlement to the transfer fee (Accommodation Module, 83). However, an adjudicator will not review the merits of every committee resolution. The committee has authority to decide whether to impose the transfer fee (Act, 100). In order for the applicants to challenge this committee decision before this office they would need to establish that the decision is unreasonable (Act, 94(2)) or otherwise contrary to the legislation. The application does not contain any evidence that would raise serious concerns that the committee acted unreasonably in considering the medical evidence provided and deciding not to impose a transfer fee. It is a matter clearly within the discretion of the committee. If sufficient owners opposed the transfer or supported the imposition of a transfer fee then they could have called an extraordinary general meeting to vote on the matter (Accommodation Module, 59). However, the applicant has not provided any substantive evidence upon which an adjudicator could overturn the decision.

Deficit in sinking fund

The applicants have also failed to substantiate the claims to the effect that the committee is acting unreasonably in relation to the deficit in the sinking fund.

I do not consider a deficit in the sinking fund is sufficient reason in itself to render unreasonable a decision by the committee not to impose a transfer fee. The new committee submits that it is taking steps to remedy the deficit and, provided it does this within a reasonable time, it is difficult to argue that the committee is acting unreasonably. There is nothing to indicate that the present committee will fail to adopt an appropriate budget for next year based on a ten year forecast.

Therefore, I conclude that there is no serious question to be determined.

Balance of convenience

I will refuse relief on the basis that there is no serious question to be determined and it is therefore unnecessary for me to determine whether the balance of convenience justifies the interim relief sought. However, I will make some brief comments in this regard.

The interim relief sought was to restrain the body corporate from taking any steps to approve the transfer pending a final determination. This is not the type of order that the balance of convenience is likely to favour. For example, if there was a concern that the committee did not have any information about the proposed transferees then the balance of convenience is only likely to favour an order restraining the body corporate from proceeding with settlement unless or until it properly considered and resolved to approve the proposed transferees.

Further, if there was a dispute over payment of the transfer fee, the balance of convenience is likely to dictate against preventing settlement pending a final determination of the dispute. Instead, it is likely that the only requirement would be to hold the disputed transfer fee in trust pending a final determination of the dispute. This is sufficient to protect the financial interests of the body corporate and would be a prudent approach for the committee to take when approving any transfer where the imposition of a transfer fee is disputed.

The applicants have complained that the committee for Tower 1 initially did resolve to approve the transfer subject to the transfer fee being kept in trust. However, after the committee meeting had closed, the committee purported to reverse this resolution under pressure from the transferor. If this is the case then it appears highly unusual and could potentially render those individual committee members liable for the amount of the transfer fee if it was found to be payable but the body corporate was subsequently unable to recover the fee from the transferor. However, in the present circumstances, I will not be making an order reversing the committee’s decision so this matter is of no consequence.

Order

I have concluded that the application does not raise any serious question to be determined. For this reason I consider it appropriate to make an order that will dismiss both the interim and final applications.