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Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders |
Last Updated: 30 September 2005
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ORDER OF AN ADJUDICATOR
MADE PURSUANT TO SECTION 276 OF THE
Applicant: THE BODY CORPORATE FOR CAMPBELL MARQUE COMMUNITY TITLES
SCHEME 24172
Respondents: KENNETH ALAN MAYES and CAROL SUSAN MAYES as trustee for the
MAYES FAMILY TRUST
|
TAKE NOTICE that pursuant to an Application made under the abovementioned
Act by the Applicant:
1. I declare that the written contract dated 21 February 2003 between the Respondents, as Vendor, and Timothy Ian Mayes, as Purchaser, for the sale of the "Management Rights of Campbell Marque CTS 24172" was a Contract of Sale to a bona fide third party within the meaning of clause 18.1 of the Letting Authority and clause 18.1 of the Caretaking Agreement each dated 20 November 2002. 2. I order that the Applicant is responsible for payment of my costs as Specialist Adjudicator. |
Certified as a true copy of the Order.
STEPHEN R
LUMB
Applicant: THE BODY CORPORATE FOR CAMPBELL MARQUE COMMUNITY TITLES SCHEME 24172
Respondents: KENNETH ALAN MAYES and CAROL SUSAN MAYES as trustee for the MAYES FAMILY TRUST
STATEMENT OF REASONS FOR THE DECISION
Background
1. The Applicant is the Body Corporate for Campbell Marque Community Title Scheme 24172.
2. The Respondents are the caretakers and letting agents pursuant to separate agreements entitled "Letting Authority" and "Caretaking Agreement", both dated 20 November 2002.
3. By an Application to Resolve a Dispute dated 18 March 2003 ("the Application"), the Applicant seeks the following orders against the Respondents:
(a) "The contract dated 21 February 2003 ("the Primary Contract") between Kenneth Alan Mayes and Carol Susan Mayes ("the Manager") as vendors and Timothy Ian Mayes as purchaser for the sale and purchase of the interests of the Manager under the Letting Authority and Caretaking Agreement both dated 20 November 2002 is not a 'contract of sale to sell their interest ... to a bona fide third partys' within the meaning of Special Condition 18.1 of the Letting Authority and 18.1 of the Caretaking Agreement."
(b) "The Manager has not, by the Termination Date defined in Special Condition 18.1 of the Letting Authority and the Caretaking Agreement, entered into a contract of sale within the meaning of Special Condition 18.1."
(c) "The Letting Authority came to an end on 21 February 2003 pursuant to the provisions of Special Condition 18.3 of the Letting Authority."
(d) "The Caretaking Agreement came to an end on 21 February 2003 pursuant to the provisions of Special Condition 18.3 of the Caretaking Agreement."
(e) "The Manager pay the Body Corporate's costs of and incidental to this application fixed at $3,000.00."
4. I have been appointed a specialist adjudicator under s.265 of the Body Corporate and Community Management Act 1997 ("the BCCMA") to adjudicate the dispute between the Applicant and the Respondents.
5. Although not strictly framed as declaratory orders, I propose to treat the orders sought in paragraphs 3(a) to 3(d) above as declaratory orders (see s.276(1) BCCMA).
Interlocutory steps
6. By letter dated 2 July 2004 I directed that:
(i) by 14 July 2004, each party is at liberty to provide any further information, in the form of a statutory declaration or by way of documentation, concerning the factual matters and subject of the respective submissions of the parties;
(ii) by 16 July 2004, each party give written notice to the other party if any declarant to a statutory declaration is required for cross-examination;
(iii) by 16 July 2004, the Respondents are at liberty to provide written submissions in response to paragraphs 17 to 21 inclusive of the Applicant's submissions (in reply) dated 1 September 2003.
7. By letter dated 5 July 2004 I extended time in respect of the previous directions as follows:
(i) by 19 July 2004, each party is at liberty to provide any further information, in the form of a statutory declaration or by way of documentation, concerning the factual matters and subject of the respective submissions of the parties;
(ii) by 21 July 2004, each party give written notice to the other party if any declarant to a statutory declaration is required for cross-examination;
(iii) by 21 July 2004, the Respondents are at liberty to provide written submissions in response to paragraphs 17 to 21 inclusive of the Applicant's submissions (in reply) dated 1 September 2003.
8. On 19 July 2004 I received a facsimile transmission from Hynes Lawyers advising that they had now received instructions to act on behalf of the Respondents; that initial instructions were received on 12 July 2004; that final instructions were received when documents, including copies of the Family Trust, various emails and other material were delivered to the offices of Hynes Lawyers on 16 July 2004; and that it was proposed to obtain a statutory declaration from the Respondents' previous solicitor. In those circumstances, the Respondents sought an extension of 7 days for each of the subject directions.
9. By letter dated 21 July 2004 from TressCox Lawyers, they advised that:
(a) the Applicant had no objection to the proposed 7 day extension;
(b) a meeting of the Applicant had been set down for 6 August 2004 to consider approval of my anticipated fees as a Specialist Adjudicator.
10. I also received a letter from Ms Rosemann on behalf of the Office of the Commissioner for Body Corporate and Community Management dated 19 July 2004. This letter enclosed a letter from the Respondents to Ms FitzPatrick, the Commissioner for Body Corporate and Community Management, dated 24 June 2004. This letter stated:
"We suggest you receive senior legal advice on the subject of letter dated 20 May 2004 to you and your response dated 17 June 2004.
We suggest you refer to the 1997 Act Section 100 and Regulations Section 26(b) NOTING THIS IS A RESTRICTED ISSUE. Your response infers the Body Corporate does not need authority to PROCEED.
Please re read our letter. It states the Body Corporate (not the Committee) has not given authority to START this proceeding which will be contested in the District Court.
The Body Corporate being ALL the owners have NEVER authorised these proceedings.
The Body Corporate being ALL the owners have NEVER authorised the dollar $ expenditure to START or PROCEED.
NOTE
We advised you that in the Body Corporate financial year 2002/03 the budgeted expenditure for legal advice was $5,000. The actual expenditure was $21,227.40 as authorised by the Committee (not the Body Corporate) note – a budget does not authorise expenditure. We advise you that in the Body Corporate financial year 2003/04 the budgeted expenditure for legal advice is $5,000. The actual expenditure to date (being part of a year) is $8,372.07 to 5th April 2002, as authorised by the Committee (not the Body Corporate).
The additional secretarial expenses are $8,818.64.
We also advise you that under the Act Section 297 and 298 (false and misleading information) that we STATE you are receiving FALSE AND MISLEADING information ON THIS SUBJECT from the Committee including the Body Corporate submission and response – that the Body Corporate has authorised this START & PROCEEDINGS as stated. You appear to believe the Body Corporate authority exists to START. It does NOT.
You are also advised the Body Corporate (all the owners) have NOT authorised the expenditure to appoint a Specialist Adjudicator.
We suggest you receive SENIOR advice from your legal department.
We again request a copy of the Body Corporate authority from you to START this proceeding as it is a "restricted issue" to cancel a Contract affecting all owners.
We again request a copy of the Body Corporate authority from you to EXPEND this considerable amount of money which includes the $38,418.11 to date excluding the Specialist Adjudicator.
Yours faithfully,
Ken and Carol Mayes
Property and Letting Managers
PS Be advised there are still 3 NON owners on Committee."
11. By letter to Hynes Lawyers, with a copy to TressCox Lawyers, dated 23 July 2004, I:
(a) granted the 7 day extension;
(b) advised that I was prepared to make a separate decision in respect of the issues raised in the Respondents' letter dated 24 June 2004 and requested advice, by 28 July 2004, whether each party requested that I make a decision in respect of the issues raised in that letter in advance of a final decision in respect of the application.
12. I received no response from Hynes Lawyers.
13. By letter from TressCox Lawyers dated 6 August 2004 it was stated:
"We refer to your letter to Hynes Lawyers dated 23 July 2004, and confirm that our client does not request that you make, in advance of a final decision in respect of the application, a decision in respect of the issues raised by the respondents in the respondent's letter dated 24 June 2004.
The body corporate met on 6 August 2004 to consider your anticipated fees, and authorised spending as foreshadowed.
As the respondent has not provided further information or submissions within the extended time provided, please proceed with the adjudication at your earliest convenience."
14. On 10 August 2004 I received a facsimile transmission from Hynes Lawyers requesting that each of the items in the timetable be extended by 7 days. The letter stated, inter alia:
"The meeting has resolved that the expenditure of fees for adjudication be approved. Accordingly this matter is now to proceed. It would now be appropriate for our client to expend fees in complying with the previous orders made by you, and not before.
In the circumstances, we would ask that each of the items in the timetable be
extended by seven days from the date of confirmation
by you that the orders are
in fact extended.
Again, given that our clients were not aware whether the
motion would carry, they were not in a position to expend considerable sums
of
money on making submissions, which if the motion was not carried would have been
of no use. It is only just therefore that the
timetable be extended."
15. By facsimile transmission dated 12 August 2004 I requested that the Applicant's solicitors advise me by 4:00pm on Monday 16 August 2004 whether the Applicant opposed the proposed 7 day extension and, if so, the grounds of opposition.
16. I received no notice that the Applicant opposed the proposed 7 day extension.
17. On 12 August 2004 I also received a 14 page facsimile transmission direct from the Respondents. That facsimile transmission included a 2 page letter. I do not propose to set out the contents of that letter.
18. On 17 August 2004 I extended the timetable as follows:
(a) by 5:00pm on 24 August 2004, each party is at liberty to provide any further information, in the form of a statutory declaration or by way of documentation, concerning the factual matters the subject of the respective submissions of the parties;
(b) by 5:00pm on 26 August 2004, each party give written notice to the other party if any declarant to a statutory declaration is required for cross-examination;
(c) by 5:00pm on 26 August 2004, the Respondents are at liberty to provide
written submissions in response to paragraphs 17 to 21
inclusive of the
Applicant's submissions (in reply) dated 1 September 2003.
19. On 24 August 2004 Hynes Lawyers provided an executed statutory declaration by Robert Herd, a solicitor who had previously acted on behalf of the Respondents, sworn on 24 August 2004, and an unexecuted statutory declaration by Mr Mayes (the male Respondent). Hynes Lawyers also advised that they would require Mr Mellick for cross-examination.
20. On 25 August 2004 Hynes Lawyers provided an executed statutory declaration by Mr Mayes.
21. On 26 August 2004 Hynes Lawyers further provided a response to paragraphs 17 to 21 inclusive of the Applicant's submissions (in reply).
22. On 27 August 2004 TressCox Lawyers provided a response to the submissions made on behalf of the Respondents concerning paragraphs 19 and 20.
23. On 26 August 2004 TressCox Lawyers made written objections to various parts of Mr Herd's statutory declaration and to paragraph 6 of Mr Mayes' statutory declaration. It was further stated that insofar as portions of Mr Herd's declaration were admissible, the Applicant required him to be available for cross-examination. There was no request by TressCox Lawyers that Mr Mayes be made available for cross-examination.
24. By letter to the respective solicitors dated 31 August 2004 I stated, inter alia:
"...
With respect to the letter from TressCox Lawyers dated 26 August 2004, the objections to the statutory declarations of Mr Herd and Mr Mayes will be dealt with in my final decision.
Given that Mr Mellick and Mr Herd are required for cross-examination by the respective opposing parties, I propose to convene a hearing for that purpose in the offices of the Office of the Commissioner for Body Corporate and Community Management on either Friday, 10 September 2004, Monday, 13 September 2004 or Tuesday, 14 September 2004. I also propose to allocate 2 hours for the hearing.
I request that the parties advise me by 5:00pm Wednesday, 1 September 2004:
(a) whether any, and if so which, of the above dates is unsuitable;
(b) whether they consider that 2 hours is sufficient time for the
hearing."
25. Further correspondent ensued in an attempt to have the matter set down for hearing.
26. On 27 September 2004 TressCox Lawyers advised that the Applicant would appoint another firm of solicitors to act on its behalf (in response to a facsimile transmission of Hynes Lawyers dated 6 September 2004 suggesting that it would be inappropriate for TressCox Lawyers to continue to act in this matter). Alex Mackay & Co were appointed the solicitors for the Applicant.
27. Further correspondence ensued in late November 2004 including advice by Hynes Lawyers that they no longer acted for the Respondents.
28. On 29 November 2004 I directed that the hearing take place on 10 December 2004. I was subsequently advised that Mr Herd would not be available on that date.
29. By letter dated 9 December 2004 to the parties, I directed that:
"With respect to the proposed cross-examination of Mr Mellick and Mr Herd, I direct that the cross-examination be limited to:
(a) exploration of the factual matters the subject of the respective statutory declarations; and
(b) any cross-examination in respect of matters that are relevant to
the credibility of Mr Mellick and Mr Herd respectively."
30. On 10 December 2004, a hearing was held to permit Mr Mellick to be cross-examined. Mr and Mrs Mayes appeared on their own behalf on that day and Mr Mayes conducted the cross-examination. Mr Mellick did not resile from any of the matters set out in his statutory declaration.
31. At the conclusion of the hearing on 10 December 2004 I directed the Applicant's solicitors to advise whether they still required Mr Herd for cross-examination.[1]
32. Other correspondence has passed between the parties and me. I have only referred to that correspondence which I consider to be of relevance.
Authorisation to bring the
Application
33. Before dealing with the issues the subject of the Application, I propose to deal with the issues raised in the Respondents' letter dated 24 June 2004 which, as I understand the contentions, are that:
(a) the Committee of the Applicant was not authorised to file the application as it involved a decision on a "restricted issue";
(b) the Committee did not have authority to file the application as the Applicant in general meeting had not authorised the expenditure to appoint a Specialist Adjudicator. The Respondents refer specifically to Section 100 of the BCCMA and "Regulation 26(b)" (which appears to be a reference to the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module Regulation").
34. The Respondents' reference to s.26(b) of the Standard Module Regulation appears to be intended to refer to s.26(1)(e) of the Standard Module Regulation which provides:
"(1) A decision is a decision on a restricted issue for the committee if it is a decision –
...
(e) to start a proceeding, other than –
(i) a proceeding to recover a liquidated debt against the owner of a lot; or
(ii) a counterclaim, third-party proceeding or other proceeding in relation to a proceeding to which the body corporate is already a party; or
(iii) a proceeding for an offence under chapter 3, part 5, division 4 (Chapter 3 (Management of community titles schemes), part 5 (By-laws), division 4 (By-law contraventions) of the Act) of the Act; or
(iv) a prescribed chapter 6 proceeding; or ..."
35. Section 100(1) of the BCCMA provides that a decision of the Committee is a decision of the Body Corporate. Section 100(2) provides that subsection (1) does not apply to a decision that, under the Regulation Module, is a decision on a restricted issue for the Committee.
36. A decision which is a decision on a restricted issue for a Committee is identified in s.26 of the Standard Regulation Module. The only subsection of s.26(1)(e) which has possible application to the present case is subsection (iv) which provides that a decision is a restricted issue if it is a decision by the Committee to start a proceeding other than a prescribed chapter 6 proceeding.
37. "Prescribed chapter 6 proceeding" is defined in s.26 and:
"(a) means a proceeding, including a proceeding for the enforcement of an adjudicator's order, under chapter 6 (Chapter 6 (Dispute resolution) of the Act) of the Act; but
(b) does not include an appeal against an adjudicator's order."
38. Chapter 6 of the BCCMA established arrangements for resolving specified disputes in the context of community title schemes (see s.228 BCCMA).
39. The provisions relating to specialist adjudication are contained in chapter 6.
40. In my opinion, a decision of the Committee to lodge the Application was not a decision on a restricted issue because the Application fell within the compass of a prescribed chapter 6 proceeding.
41. In respect of the authorisation of the likely costs of a Specialist Adjudicator, I find that such expenditure does not have to be authorised by the Body Corporate in general meetings.
42. Once an application is lodged and is referred to a Specialist Adjudicator, costs of the specialist adjudication are governed by s.280 of the BCCMA. Subsection 280(2) of the BCCMA provides that unless the Adjudicator otherwise orders, the applicant is responsible for the costs of the adjudication.
43. I also note that s.103 of the Standard Module Regulation provides, inter alia, that the Committee may only carry out a proposal involving spending above the relevant limit for Committee spending for the scheme if the spending is necessary to comply with, inter alia, the order of an Adjudicator.
44. In any event, on 6 August 2004 the Applicant authorised expenditure in respect of my anticipated fees in this specialist adjudication.[2]
The issues for determination
45. The primary issue for determination is whether the Purchaser, in entering into the Business Contract, was "a bona fide third party" within the meaning of that phrase in clause 18.1 of each of the Letting Authority and the Caretaking Agreement.
46. The Applicant's case is, in essence, that there was no sale to "a bona fide third party" because:
(a) the phrase "bona fide third party" excluded a child of the Respondents and, accordingly, the Purchaser was not a bona fide third party as he was the son of the Respondents;
(b) further or alternatively, that the facts demonstrated that the Purchaser was not a "bona fide third party".
Chronology of events
47. A chronology of the relevant events in this matter is set out below.
48. On 3 September 1997, the Applicant and the Respondents (in their capacity as trustees for the Mayes Family Trust) entered into a written Property Management Agreement and a Letting Agreement in relation to the Scheme ("the original agreements").
49. The original agreements contained an option of renewal for a further period of 5 years from the expiration of the original term.
50. On 16 May 2002, the Respondents gave notice purporting to exercise the options under the original agreements.[3]
51. On 13 August 2002, the Committee of the Applicant passed a resolution[4] that an Extraordinary General Meeting be convened to consider, inter alia, a motion:
"That as a consequence of the Manager and Letting Agent being in default of the Property Management Agreement dated 3 September 1997 and the Letting Agreement dated 3 September 1997, the Body Corporate will NOT accept the exercise of the Manager and Letting Agent's option as contained in the Agreements."
52. The Extraordinary General Meeting of the Applicant was scheduled for 13 September 2002.
53. By letter from the Applicant's solicitors to the Respondents' solicitors dated 17 September 2002,[5] it was stated:
"We confirm that during negotiations prior to the extraordinary general meeting held on 13 September 2002, the body corporate and your clients (the manager) agreed in principle as follows:
1. The parties will enter into a new property management agreement and letting agreement (the New Agreements).
2. The New Agreements will each be for an initial term of five years (commencing 21 August 2002) and will each contain one five year option.
3. The manager has purported to renew the property management agreement and letting agreement each dated 3 September 1997 (which purported renewal is and currently remains in dispute). Insofar as the renewal has any effect, those agreements will automatically be terminated when the New Agreements come into effect. Such termination will be effected pursuant to a special condition in the New Agreements.
4. The New Agreements will contain a provisions that, if the manager does not sell or otherwise dispose of its rights under the New Agreements, together with the manager's unit, within six months (ie. by 21 February 2003), the New Agreements, including the option for renewal, will automatically terminate on 21 February 2003.
5. It is implicit in this agreement that your client will sell its interest in the New Agreements and in the manager's lot to a third party unconnected with the present manager. Please frame a special condition accordingly.
6. This settlement is subject to the New Agreements being approved by a meeting of the body corporate, such meeting to be held at 10:00am on 8 November 2002. If the New Agreements are not approved at that meeting, or within such extended time as the parties may agree, the parties will be in the same position as if this settlement had not been reached and the 13 September extraordinary general meeting which has been adjourned to 8 November 2002 will consider the motions of which notice has already been given.
7. The parties will endeavour in good faith (and so far as the body corporate has power) to resolve the difficulties with the Brisbane City Council in respect of visitor car parking.
This agreement is not binding on the parties until the terms of the New
Agreements are agreed between the parties and approved by
the body corporate.
Please forward a draft of the New Agreements as soon as possible."
(underlining added)
54. On 3 October 2002, the Respondents' solicitors forwarded to the Applicant's solicitors drafts of a proposed new Letting Authority and Caretaking Agreement.[6]
55. Clause 18[7] of the proposed Caretaking Agreement was in the following terms:
"18.1 The Body Corporate may terminate this Agreement at any time after 6 months from the commencement of this Agreement by giving one month's prior notice in writing of the decision of the committee to the Letting Agent to so terminate. Upon termination the Letting Agent shall have no further rights or entitlements under this Agreement.
18.2 This right to terminate shall cease immediately upon the transfer of this Agreement in accordance with clause 12 by the Caretaker to a bona fide third party within 6 months of the date of commencement of this Agreement.
18.3 The parties acknowledge and agree that in the event of a transfer occurring which results from the effect of this clause, the Body Corporate shall be fully entitled to exercise its rights for the payment of a transfer fee pursuant to section 85 of the Body Corporate and Community Management (Standard Module) Regulation 1997.
18.4 This Agreement cancels and supercedes any previous caretaking agreement or agreements between the parties."
56. The proposed Letting Authority contained an analogous provision.[8]
57. On 20 November 2002, the Applicant and the Respondents entered into a written Letting Authority and a written Caretaking Agreement.[9]
58. Clause 18 of the Letting Authority was in the following terms:
"18.1 The Letting Agent shall enter into contract of sale to sell their interest in this Agreement to a bona fide third party ("Contract of Sale") within 6 months of the date of commencement of this Agreement ("the Termination Date").
18.2 The Contract of Sale must be unconditional by the Termination Date in all respects other than the satisfaction of the condition of the approval of the Committee pursuant to clause 12 of this Agreement.
18.3 This Agreement shall be at an end if
(a) the Letting Agent has not entered into a Contract of Sale by the Termination Date; or
(b) a Contract of Sale is entered into prior to the Termination Date but is not completed for any reason other than the refusal of the Committee's approval to the assignment of the Letting Agent's interest in this Agreement.
18.4 Clause 18.1, 18.2, 18.3 shall not apply to this agreement after the Letting Agent has assigned their interest in this agreement pursuant to clause 12 of this Agreement.
18.5 The parties acknowledge and agree that in the event of a transfer occurring which results from the effect of this clause 18.1, the Body Corporate shall be fully entitled to exercise its rights for the payment of a transfer fee pursuant to Section 85 of the Body Corporate and Community Management (Standard Module) Regulation 1997.
18.6 This Agreement cancels and supercedes any previous caretaking agreement or agreements between the parties." (underlining added)
59. Clause 18 of the Caretaking Agreement was in analogous terms.
60. It is common ground that the "Termination Date" pursuant to clause 18 of each agreement was 21 February 2003.
61. The Respondents assert the following:[10]
"Steps taken by the Respondent to effect the sale of the Caretaking/Management Agreement and Unit 1 of the Premises.
From the time of entering into the new Agreement and to the sale of the business to the Purchaser, the current Caretaker and Letting agent had listed the business for sale with over 9 Real Estate Agents, and Business Brokers, as well as having personally placed a number of advertisements in Queensland and New South Wales Newspapers.
Experiencing difficulty in selling the unit, the respondent sought written clarification from Michael Bostock of Dave Allan Real Estate, as to whether the price sought by the respondent of $325,000 for unit 1, and $202,000.00 for the Resident Caretaker and Letting Rights was realistic. (Appendix 11)
In reply by correspondence dated 21 November 2002, Mr Bostock stated that the package was realistically priced. (Appendix 12)
After the sale of a similar unit in the complex, the respondents increased the sale price of Unit 1, to $340,000.00 and reduced the Caretaking and Letting package to $190,000."
62. The Applicants do not admit the truth of those assertions.[11]
63. I am satisfied that the Respondents actively sought to market unit 1 and the Caretaking and Letting Rights with Dave Allan Real Estate Pty Ltd.[12] However, the Respondents have not adduced any direct evidence of the respective asking prices referred to in paragraph 61 above.
64. The Applicant asserts[13] that:
"On 21 February 2003 the Manager, through its
solicitor Robert Herd who by then was practicing as Herdlaw Solicitors
("Herdlaw"),
confirmed in a telephone conversation with Mark Mellick, a senior
associate employed by OCW, that on 19 February 2003 the Manager
through the said
Robert Herd verbally requested that the Body Corporate extend the time for sale
pursuant to clause 18 for three
months to 21 June 2003. That request was not
confirmed in writing, and the Body Corporate therefore did not consider
it."
65. On 21 February 2003, at 4:29pm, the Respondents' solicitors forwarded by facsimile transmission to the Applicant's solicitors a letter dated 21 February 2003 and a copy of a "Contract Business Sale" dated 21 February 2003 ("the Business Contract").
66. The letter[14] stated, inter alia:
"...We advise that our clients' have entered into an unconditional contract for the sale of the Management Rights and Lot 1 in the scheme to Mr Timothy Ian Mayes. We enclose copy of items schedule special conditions and signing page of the contracts for your information.
We confirm settlement of the contract will be the earlier of 60 days from the receipt of the consent of the committee of the Body Corporate to the assignment or the date that is two days after the Restricted Real Estate Agents licence is granted to Mr Timothy Mayes.
We accordingly hereby give notice of the proposed assignment of the Caretaking and Letting Agreement to Mr Timothy Ian Mayes and request the consent of the Committee to the proposed assignment.
We understand Mr Mayes solicitors will contact you shortly to confirm that an
unconditional contract has been entered into and request
from you the
information that your client requires to be satisfied in that he is a reputable
responsible and respectable person,
who is capable of satisfying the obligations
under the agreement..."
67. The Business Contract was entered into between the Respondents and Timothy Ian Mayes ("the Purchaser").
68. Pursuant to the Business Contract, the Purchaser agreed to buy the business described as "Management Rights of Campbell Marque CTS 24712" for a purchase price of $130,000. The contract also provided for a deposit of $100.
69. The Business Contract contained the following Special Conditions:
"1. This contract is subject to the consent of the Body Corporate to the Assignment to the Purchaser of the Caretaking Agreement dated 20 November 2002 and the Letting Agreement dated 20 November 2002 between the Seller and the Body Corporate being obtained within thirty (30) days of the date hereof (attached hereto as Annexure "A").
2. Settlement of the contract must be contemporaneous with the settlement of the contract for sale of the Vendors lot being Lot 1 on BUP 106218.
3. The Settlement Date of this contract shall be the date that is the earlier of
(a) 60 days from the receipt of the consent of the committee of the Body Corporate to the assignment; or
(b) two days after the Restricted Real Estate Agents licence is granted to Mr Timothy Mayes."
70. On 21 February 2003, at 4:23pm, the Purchaser's solicitors, Patel Lawyers, sent a facsimile transmission to the Applicant's solicitors,[15] which letter was in the following terms:
"We refer to the above matter and advise that we act for Timothy Mayes.
We advise that our client has entered into an unconditional contract to purchase the Management Rights and Lot 1 in the Scheme from Kenneth Mayes and Carol Mayes.
Settlement of the contract will be the earlier of 60 days from the receipt of the consent of the committee of the Body Corporate to the assignment or the date that is two days after the restricted real estate agent's licence is granted to Timothy Mayes.
We request your client's consent to the assignment and ask you to advise the
information that your client requires to be satisfied
in terms of clause 12.2(b)
of the agreement."
71. It is common ground that the Purchaser is the son of the Respondents.
72. A full copy of the Business Contract is contained at Respondents' Submissions, Appendix 15.
73. That Appendix also contains a copy of the contract for the sale of unit 1 by the Respondents to the Purchaser ("the Unit Contract"). The purchase price under that contract was $340,000 with a deposit of $100 payable when the "Buyer" signed the Unit Contract.
74. On 21 February 2003, the Respondents' solicitors sent a facsimile transmission to the Applicant's solicitors[16] stating, inter alia:
"We refer to our telephone conversation and your subsequent facsimile of February 21, 2003.
We confirm that as our clients have entered into an unconditional contract of sale that they will continue as mangers until the assignment has been approved by the committee and the settlement of the sale.
...
We confirm that our client has complied with the terms of the
agreements and it is not for your client to unilaterally determine the
bona
fides of the purchaser and purport to avoid the agreements.
We note that there are dispute resolution provisions in the agreements, which your clients are entitled to avail themselves of. Unless and until your client obtains a declaration regarding the lack of bona fides of the purchaser, your client is required to comply with the terms of the agreements. In this regard we require your clients undertaking that it will comply with the terms of the agreement..."
75. On 26 February 2003, the Applicant's solicitors sent a facsimile transmission to the Purchaser's solicitors[17] stating, inter alia:
"... Our client does not consider the contract of sale entered into by your client to be a contract under which your client can be considered a 'bona fide third party'. In these circumstances we hold instructions to seek an order from the Commissioner for Body Corporate and Community Management that the Manager has not entered into a contract of sale to sell its interest in each agreement to a bona fide third party and therefore pursuant to the operation of clause 18.3(a) of each agreement, each agreement is at an end.
Without prejudice to that position and the application to the Commissioner, the body corporate will consider your client's request for consent in the event that the agreements are not at an end. For this purpose, please have your client provide the following:
1. At least two character references;
2. At least two business references;
3. Evidence of your client's financial standing and his financial capacity to complete the purchases and perform the obligations under the caretaking agreement and the letting authority;
4. Evidence as to the competence, qualifications and experience of your
client, and in particular evidence which goes to prove that
your client will be
able to adequately perform his obligations under each agreement. Specifically,
we require evidence as to any
previous management rights experience your client
may have had, which evidence includes the names and address of any schemes of
which
your client has previously been the caretaker/letting agent ..."
76. On 26 February 2003, the Applicant's solicitors responded to the letter from the Respondents' solicitors dated 21 February 2003[18] stating, inter alia:
"...We acknowledge your facsimile received at 6:14pm on 2 February 2003. The Body Corporate has instructed us to apply to the Commissioner to determine the dispute. Please advise by return whether you have instructions to accept service.
Please provide a complete copy of the contract of sale to demonstrate that it is unconditional.
Special Condition 2 provides that settlement must be contemporaneous with the settlement of the contract for sale of Lot 1. That portion of the contract which you have supplied is silent as to what happens if the contract for sale of Lot 1 is not completed. Conditions in the contract of sale of Lot 1 may influence performance of the disputed contract. Please supply a complete copy of the contract for the sale of Lot 1..."
77. On 3 March 2003, the Respondents' solicitors wrote to the Applicant's solicitors[19] stating, inter alia:
"We refer to your correspondence of 26 February 2003.
We enclose a copy of the complete contract of sale for Lot 1 in the above scheme and Business Contract of sale as requested.
...
We note that you have been instructed by your client to obtain an order from the Commissioner for the Body Corporate and Community Management that our client has not entered into a contract of sale with a 'bona fide third party'.
In the interest of preventing unnecessary costs for both parties, we request that your client desist from making such submission until they have received and perused the requested material from the purchaser as it may be the case that the material provided is sufficient to establish to your client's satisfaction that the purchaser is a bona fide third party."
78. By letter dated 24 March 2003 from the Purchaser's solicitors to the Applicant's solicitors[20] it was stated:
"We refer to the above matter and enclose some of the relevant information received from our client as required by you, which information was received by this office on 12 March 2003 but inadvertently sent to the wrong address.
Our client is attending to the balance of your requirements which we will forward to you upon receipt.
Our client has verbally obtained the seller's agreement to grant a further 21 days to our client from today's date, to obtain the consent of the body corporate to the proposed assignment."
79. The material enclosed with that letter is contained in the Respondents' Submissions.[21] That material comprised the following:
(a) an unsigned letter from the Purchaser dated 12 March 2003;
(b) three character references;
(c) a letter from the ANZ Bank (University of Queensland Branch) dated 11 March 2003.
80. In the Purchaser's letter dated 12 March 2003 it was stated, inter alia:
"I am capable of satisfying all the financial commitments associated with the completion of the purchases and the financial requirements of the Resident Unit Management business and my obligations under the caretaking and letting agreements. I have been involved for a number of years in business dealings which have been supported with significant economic and financial education as part of a Bachelor and Doctor of Philosophy of Engineering (Mining).
...
My experience in the area of body corporate and property management and unit ownership is significant. I have been involved with the responsibilities of body corporate and property management since 1985 on several properties including a unit complex on the Sunshine Coast. On these properties I assumed management responsibilities for pool maintenance (both fresh and salt water pools), building maintenance and grounds maintenance. Pool maintenance has been undertaken in all aspects including water chemistry/quality, cleaning, chemical dosing and equipment maintenance. Building maintenance has included preventative maintenance, painting, repairs, cleaning and problem diagnosis. Grounds maintenance includes gardening, area cleaning, lawn maintenance and general repairs. I have been more than able to undertake responsibilities associated with these areas and to facilitate appropriate licensed specialist labour.
I have been involved with the Resident Unit Management business at Campbell Marque since before construction of the property (now five and a half years old). Subsequently I have been aware of the issues involved with operating the property from a building, property and grounds maintenance perspective. I have been involved in part with the building and grounds maintenance since this time including aspects as mentioned above and some responsibilities as part of the letting activities. I have been an owner and member of the Body Corporate at Campbell Marque since 2001. As an interested owner subsequent to the Campbell Marque unit purchase I actively pursued a nomination for a committee member position only to be accepted and then later rejected. This has not deterred me from being actively interested in the management of the property in my capacity as an owner.
These experiences have been concurrent with the successful completion of education to a postgraduate level. During my tertiary education I have completed a number of placements as an engineer on mine sites fulfilling all of the responsibilities of the position filled.
I have progressed in my investigation of the licensing requirements for the Restricted Letting Agent License as issued by the Department of Fair Trading. The successful issuing of this license is dependent on written approval by the Campbell Marque Body Corporate as evidence indicating an acceptance of myself as Resident Unit Manager and a property on which to operate. The written approval and nomination of a property are minimum requirements as set by the Department of Fair Trading."
81. The letter from the ANZ Bank stated, inter alia:
"We have found Mr Mayes to be financially responsible in all his dealings with this bank, operating all accounts in a satisfactory manner and in accordance with the terms and conditions of the relevant facility.
82. By letter dated 27 March 2003, the Purchaser's solicitors wrote to the Applicant's solicitors[22] attaching a two-page document purporting to be the details of the Purchaser's experience in respect of management duties or letting agent responsibilities.
83. By letter dated 28 March 2003 from the Applicant's solicitors to the Purchaser's solicitors,[23] it was stated:
"We acknowledge your facsimile dated 27 March 2003, and will continue to adopt the numbering in your facsimile.
1. In accordance with the terms of the Letting Authority and the Caretaking Agreement, in deciding whether to approve a proposed transfer the Body Corporate may have regard to all relevant matters including the financial standing of the proposed transferee, the proposed terms of the transfer and the competence, qualifications and experience of the proposed transferee. These provisions in the agreements are inclusive, not exhaustive.
The Body Corporate is entitled to make enquiries as to your client's ability to perform his proposed obligations, including by reference to his performance in previous positions of a similar character. You have not identified the alleged relevant properties, nor indicated any basis on which your client is allegedly prohibited from providing us with a contact at or connected with each of those premises. Please provide us with full contact details immediately.
2. The request for financial information is not intended to be offensive. It is intended purely to protect the rights of the Body Corporate and to fulfill the duties of the committee towards the Body Corporate. As pointed out above, the agreements expressly provide that the body corporate may consider the financial standing of a proposed assignee.
You have not previously disclosed any information about finance to effect the purchase. Please provide details and corroborating documentation sufficient to establish your client's financial standing, including details of the financier and the conditions of finance.
As required by Section 84(4) of the Body Corporate and Community Management (Standard Module) Regulation 1997, the Body Corporate will decide whether to approve the proposed assignment within 30 days after it received the information reasonably necessary to enable it to do so. The information requested is reasonably necessary. Please provide it urgently."
84. By letter dated 4 April 2003 from the Purchaser's solicitors to the Applicant's solicitors[24] a response was made to the previous letter of 28 March 2003. The Purchaser's solicitors stated, inter alia:
"...
2. In relation to our client's financial standing, we hereby authorise you to speak to our client's bank manager at ANZ Bank, Toowong Business Centre, telephone number 3871 3862, facsimile number 3371 3088.
We confirm that our client has obtained verbal finance approval and expects written approval to issue either today or on Monday 7 April 2003. The amount of the loan for which our client has received financial approval is $100,000.00.
As an aside, our client is in the process of lodging an application today with the Australian Property College with a view to immediately commencing his studies/associated training for the training for the restricted letting agent's licence.
In light of the above, we repeat our request that your client urgently consent to the assignment of Management Rights, particularly since our client has, in his submission, given you all the relevant information required for the Body Corporate to consent to the assignment."
85. The Applicant's solicitors sent a facsimile transmission dated 14 April 2003[25] to the Purchaser's solicitors in the following terms:
"We refer to your facsimile of 4 April 2003.
1. The Body Corporate instructs us, that to this time, the bank has not responded to its request for financial information. The bank may not regard the purported authority in your letter as sufficient authorisation to disclose detailed financial information.
2. The Body Corporate may take into account pursuant to both the Act and the agreements the proposed terms of the assignment. The manager has not as yet submitted a proposed deed of assignment or deed of covenant on assignment, and has insisted that we direct all communications to you rather than to Herdlaw Solicitors.
3. The caretaking agreement and letting authority require the manager's presence on site. Our client infers from the material supplied so far that your client has other employment or commitments which engage his time. Please provide particulars to demonstrate that he is able to devote the time to fulfill the obligations under the agreements.
4. Please confirm that the assignors will not, after completion, participate directly or indirectly in, or obtain any benefit from, the caretaking agreement or letting authority.
We note that your client's main claim to relevant competence and experience is that, while a teenager, he assisted his parents in the management of Campbell Marque. The Body Corporate has no information as to what functions your client performed, or how often, or with what result. Please provide complete particulars.
The Body Corporate wishes to reach a decision as soon as possible on the vendor's request for consent to the proposed assignment to your client, subject of course to the Commissioner or the Court resolving the dispute between the manager and the Body Corporate as to whether the manager has complied with clause 18 of the caretaking agreement and the letting authority. It will do so within the prescribed time after your client provides the information reasonably required to enable the decision to be made. Please have your client or the manager do so urgently."
86. The Purchaser's solicitors sent a facsimile transmission dated 16 April 2003 to the Respondents' solicitors[26] which facsimile transmission was in the following terms:
"Further to your letter dated 14 April 2003, we have been instructed by our client as follows (adopting your numbering):
1. We enclose a copy of the letter from ANZ Bank addressed to our client and confirm that you are authorised to speak to our client's bank manager as referred to in item 2 of our facsimile to you dated 4 April 2003.
We respectfully submit that the enclosed letter from ANZ Bank in relation to our client's financial position for purchase of the Management Rights should be sufficient to satisfy your client particularly since there are no other expenses associated with the business and further given that the salary/income from the business would be utilised to repay our client's loan.
2. We are liaising with Herdlaw Solicitors in relation to the proposed Deed of Assignment/Deed of Covenant on Assignment and will revert to you in due course. It is likely that Herdlaw Solicitors will prepare and submit to you a Deed of Assignment/Deed of Covenant on Assignment.
3. Our client intends to be present on site. Whilst it is true that our client has other commitments which occupy part of his time, our client can be contacted at all times via email, facsimile and on his mobile and is able to devote the time required to fulfill his obligations under the agreements. In addition, our client also intends to engage the services of a part time assistant if required to ensure that all his obligations under the agreements are fulfilled.
We point out that it is quite common for body corporate managers/letting agents to employ staff on a part-time or full-time basis to assist in the duties of caretaking and letting.
The complex is a low maintenance complex which is reflected by the salary. The management of the property is not a full-time business and therefore our client does not perceive any problems in devoting the time required to fulfill his obligations under the agreements as referred to above.
4. The assignors will not, after completion, participate either directly or indirectly in, or obtain any benefit from, the caretaking agreement or letting agreement.
5. We respectfully submit that we have provided more than adequate information to you in this regard and draw your attention to our client's statement attached to our facsimile to you of 27 March 2003 wherein he specifically detailed many of his duties undertaken in relation to caretaking and letting responsibilities/duties from 1996 to date pertaining to the Campbell Marque unit complex.
Please note that our client was not a teenager but was in fact eighteen (18) years of age in 1996 when he undertook various responsibilities/duties at the Campbell Marque unit complex.
The work undertaken by our client during this period also involved work done when the managers were off-site.
As foreshadowed in our facsimile to you of 4 April 2003, our client is now enrolled with Australian Property College in relation to the associated training for the restricted letting agent's licence.
We trust that you now have all the relevant information and await to hear from you in relation to the consent required from your client."
87. The letter from the ANZ Bank enclosed with that letter was in the following terms:
"We wish to advise that the bank would consider you a bona fide borrower if you were to purchase the above business/unit should the sale go ahead."
88. By letter from the Applicant's solicitors to the Purchaser's solicitors dated 24 April 2003,[27] it was stated:
"As your client has not supplied any further submissions or information in support of the request for the consent of the Body Corporate, we understand that the committee is considering the request and will contact Mr Mayes direct shortly to arrange a mutually convenient time for the usual interview.
We emphasise once again that nothing said or done during the course of the committee's considerations are to be taken as abandoning or prejudicing in any way the Body Corporate's right to have determined whether the manager has complied with clause 18 of the Caretaking Agreement and of the Lending (sic) Authority."
89. It appears that on 19 May 2003 the Committee of the Applicant conducted an interview with the Purchaser.
90. On 28 May 2003, the Committee of the Applicant passed the following Resolution:
"That Mr Timothy Mayes not be approved as a suitable appointee for the position of Resident Unit Manager at Campbell Marque Community Titles Scheme 24172 in accordance with results of an interview conducted on 19 May 2003.
91. By letter from the Purchaser's solicitors to the Respondents' solicitors dated 11 June 2003[28] it was stated:
"We refer to the above matter and advise that as per our client's instructions, the contracts between our respective client for the purchase of the management rights and the unit at the abovementioned address is hereby terminated as a result of the body corporate's failure to consent to the Assignment of the Management Rights to our client.
As per our client's instructions, we place on record that our client considers the body corporate's actions in refusing to consent to the assignment, to be unreasonable and in this regard our client reserves his rights.
Kindly arrange for refund of all deposit moneys held in your trust account
directly to our client."
92. Mr Mayes, the male Respondent, has provided a Statutory Declaration which states, inter alia:
"4. I confirm in the event of a sale being effected to Timothy Mayes or any other party for that matter, was the intention of myself and my wife to retire and no longer be involved with the Body Corporate for Campbell Marque.
5. I am informed and verily believe that Timothy Mayes enrolled in a Resident Unit Manager's Court. Exhibit and marked with the letter "A" is a copy of a receipt and letter confirming same.
6. I am further informed and verily believe that as an independent adult he
had make (sic) an application for finance, however was not able to
finalise that application until such time as the Body Corporate confirmed
acceptance
of the assignment of Management Rights to him. The manner in which
the balance of monies were to be raised is not a consideration
in determining
whether Timothy Mayes was a bona fide third party purchaser."
93. The Applicant's previous solicitors objected to the last sentence of paragraph 6 of Mr Mayes' Statutory Declaration on the basis that it is argumentative and does not depose to a relevant fact. I uphold that objection.
Is a child of the Respondents excluded by the phrase "bona fide third party"?
94. The Applicant relies on the pre-contractual conduct of the parties in support of its contention that the phrase "bona fide third party" excludes a child of the Respondents.
95. The legal bases relied upon by the Applicant to sustain such an argument are as follows:
(a) that rectification ought be ordered to conform to the parties' intentions[29];
(b) that the Respondents are estopped from denying that the phrase has the meaning for which the Applicant contends[30];
(c) that it would be "unconscionable" for the Respondents to deny that the common meaning of both parties intended the phrase to exclude a child of the Respondents.[31]
96. The Applicant also appears to rely on parol evidence to establish that the parties intended that a child of the Respondents was excluded from the phrase.[32]
The evidence of the respective solicitors
97. Mr Mark Mellick, Solicitor, has provided a statutory declaration which deals, inter alia, with discussions Mr Mellick had with Mr Herd, the solicitor then acting for the Respondents, on 13 September 2002. In paragraph 4 of the statutory declaration Mr Mellick states:
"Before the meeting started, Robert Herd or I suggested that the Body Corporate might enter into a new caretaking agreement and letting authority, with his clients agreeing to sell their rights under those agreements ('the management rights') and the manager's unit in the scheme. We discussed a time limit for the sale. I believe that I said to him that we wanted a provision that if the managers did not sell the assets within a certain period, the caretaking and letting agreements would automatically terminate, because I did not want the body corporate to have to call another meeting to vote on the issue of terminating the agreements. We specifically discussed that the purpose of the manager selling the assets, including the manager's unit, was to ensure that Mr Mayes specifically could not sell the rights but remain a resident in the scheme. We may have discussed or alluded to the fact that the managers were not to sell the rights to a company which they controlled, but only by way of example, and not in such a way as to indicate that this was the sole extent of our concern."
98. In paragraph 5 of his statutory declaration, Mr Mellick states, inter alia:
"... Paragraph 18.1 of the letting authority
and of the caretaking agreement emailed by Robert Herd provided that the
managers would
enter into a contract of sale to sell their interests in each of
those agreements 'to be a bona fide third party'. In the circumstances
I
understood that this provision had been inserted in response to our request that
he 'frame a special condition accordingly', and
that the respondents understood
the expression 'a bona fide third party' to mean the same as "a third party
unconnected with the
present manager". We did not subsequently discuss the
term, 'a bona fide third party' prior to the signing of the new
agreements."
99. Mr Herd, in his statutory declaration, states, inter alia:
"...
4. On 13 September 2002 I attended at the premises of Barard Management at Toowong for the purposes of advising the Respondents at an Extraordinary General Meeting ("EGM") of the Body Corporate for Campbell Marque CTS 24172 ("the Body Corporate").
5. At the EGM, a motion was considered as to whether or not to accept an exercise of an option, by the Respondents, to renew the Letting Agreement and Property Management Agreement ("the Agreements").
6. The entitlement of the Body Corporate to refuse to honour the option as exercised by the Respondents was disputed and the parties entered into a compromise with a view to avoiding litigation.
7. It was decided at that meeting that the Applicant would abandon its claim for a further five year term pursuant to the exercised option and the Respondents would abandon their assertions of breaches of the agreements in consideration of the parties entering into new agreements, with special provisions inserted that the Respondents would enter into an unconditional Contract of Sale of the agreements, with a 'bona fide' third party by 21 February 2003.
8. It is my recollection of the agreement reached at the 13 September 2002 meeting that:
(a) the insertion of the term 'bona fide' was to prevent the Respondents from assigning the agreements to a company or other legal entity controlled by them and thereby circumvent the settlement; and
(b) It was not specifically discussed, asserted or taken to be implied that the Respondents could not assign the agreement to a relative.
9. Mr Timothy Mayes was at all material times an adult and various submissions have been made in relation to the bona fides of Mr Timothy Mayes at pages 7 through to 12 of the Respondents' submissions.
10. The Applicant asserts that it relies upon correspondence to my office (marked Annexure A in the Applicant's submission) which states at paragraph 5:-
'It is implicit in this agreement that your client will sell its interest in the new agreements and in the Manager's to a third party unconnected with the present manager. Please frame a Special Condition accordingly.'
11. The correspondence referred to (Annexure A) was forwarded after the agreement was reached at the 13 September 2002 meeting and was not in accordance with the discussion and terms agreed to at the meeting.
12. I refer to the last sentence of paragraph 4 of the Statutory Declaration of Mr Mark Joseph Mellick and note that Mr Mellick confirms that only the example of a company may have been discussed and I confirm that no other limitation or 'concern' was raised by the Applicant.
13. The clause drafted by my office and incorporated in the final agreements, was not drafted within the confines of the implication raised by the Applicant's solicitor (Annexure A). That is, it was not drafted with a view to imposing an obligation to transfer to a third party unconnected to the Manager's as is now being submitted.
14. There was no express exclusion of related parties or associates and it was my understanding that the clear intention of the insertion of the word "bona fide" was to avoid the transfer to a company or other entity controlled by the Respondents in order to circumvent or nullify the purpose of the settlement reached between the parties.
15. The Respondents at no time agreed to restrict the ability to sell to a relative nor did the Applicants seek to impose such restriction, as Mr Timothy Mayes was not a party to the dispute or settlement agreement reached at the meeting of 13 September 2002.
16. As Mr Timothy Mayes was an independent adult owner, the Respondents were not at law or otherwise able to direct or control Mr Timothy Mayes in the performance of the duties under the Management Rights so that it could not be said that he was a company or other entity under the control of the Respondents. Accordingly, I submit that a transfer to Timothy Mayes was not in breach of the terms of the settlement reached between the parties.
17. I submit that this is clearly the understanding of the parties as the Body Corporate interviewed Mr Timothy Mayes for the purpose of approving him as the new manager.
18. I further submit that had the Body Corporate felt that Mr Timothy Mayes was prejudiced under the relevant clause that the Applicant would have refused to consider Mr Timothy Mayes.
100. There is no suggestion in the material that Mr Herd or his firm brought to the attention of the Applicant's solicitors the matters identified in paragraph 13 of Mr Herd's statutory declaration.
101. I note the objections raised by the Applicants' solicitors to Mr Herd's statutory declaration.[33] I consider paragraphs 16, 17 and 18 to be objectional on the grounds that they constitute mere argument. I consider paragraph 8(a) to be objectionable on the ground that it pleads a conclusion rather than the facts upon which such a conclusion is based. I consider the balance of the evidence objected to be admissible notwithstanding the subjective nature of parts of it.
Rectification
102. The Applicant's submissions do not make clear whether the Applicant seeks rectification on the basis of common mistake or unilateral mistake.
103. The principles in respect of rectification for common mistake and for unilateral mistake are conveniently set out in the decision of Young CJ in Eq in Kelly v Ollis (2003) 11 BPR 21,267; [2003] NSWSC 1032.
104. With respect to common mistake it was said by Young CJ at [48] and [49]:
"[48] As to cases where both parties have made the same mistake, LW Street J said in Australasian Performing Right Association Ltd v Austarama Television Pty Ltd [1972] 2 NSWLR 467, 473 (a passage expressly adopted by Menzies J in Hooker Town Developments Pty Ltd v Director of War Service Homes (1973) 47 ALJR 320, 323-4):
'The true principle involves finding an identical corresponding contractual intention on each side manifested by some act or conduct from which one can see that the contractual intention of each party met and satisfied that of the other'.
[49] It must be remembered, as MH McLelland AJA said in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329, 345 that the court only acts in rectification suits where:
'It is established by clear and convincing proof that at the time of the execution of the instrument the relevant party or parties as the case may be had an actual intention (if more than one party, a common intention) as to the effect which the instrument would have which was inconsistent with the effect which the instrument as executed did have in some clearly identified way.'"
105. With respect to the unilateral mistake it was said by Young CJ at [58] and [59]:
"[58] As made clear by Buckley LJ in Thomas Bates & Son Ltd v Wyndham's (Lingerie) Ltd [1980] EWCA Civ 3; [1981] 1 WLR 505, 516, for there to be rectification in cases of unilateral mistake:
'it must be shown: first, that one party A erroneously believed that the document sought to be rectified contained a particular term or provision, or possibly did not contain a particular term of provision which, mistakenly, it did contain; secondly, that the other party B was aware of the omission or the inclusion and that it was due to a mistake on the part of A; thirdly, that B has omitted to draw the mistake to the notice of A ... there must be fourth element involved, namely that the mistake must be one calculated to benefit B.'
[59] This analysis has been followed in Australia; see eg Budget
Stationery Supplies Pty Ltd v National Australia Bank Ltd (1996) 7 BPR
14,891, 13, 936 (Santow J affirmed by Court of Appeal (1997) 9 BPR 17,413,
17,428); Re Freehouse Pty Ltd (1997) 26 ACSR 662, 682 (Victorian Supreme
Court) and the murmur of approval by the High Court in Taylor v Johnson [1983] HCA 5;
(1983) 151 CLR 422, 431."
106. The uncontradicted evidence of Mr Mellick is that during the meeting between himself and Mr Herd on 13 September 2002, they specifically discussed that the purpose of the manager selling the assets including the manager's unit was to ensure that the male Respondent specifically could not sell the rights but remain a resident in the scheme. Mr Mellick also believes they may have discussed or "alluded" to the fact that the managers were not to sell the rights to a company which they controlled and that this was done by way of "example".
107. There is no evidence that on 13 September 2002 the respective solicitors discussed, or even raised, the question of whether the Respondents could sell the management and letting rights to a relative.
108. In the Applicant's solicitors' letter dated 17 September 2002[34] it was stated that it was implicit in the agreement reached on 13 September 2002 that the Respondents would sell their interests in the proposed fresh agreements and in the manager's lot to a third party "unconnected" with the present manager. A request was made to frame a special condition accordingly.
109. In my opinion, the term "unconnected" does not, on its face, exclude a party who was related to the Respondents (particularly when considered against the background as set out in Mr Mellick's statutory declaration). There is no evidence of any discussion or written correspondence dealing with the meaning of "unconnected". When considered in context, the term "unconnected" may be taken to refer to a company over which the Respondents exercise control (and, perhaps, a person as nominee for the Respondents).
110. In the absence of any evidence that the Respondents were advised that the Applicant required the management rights under the agreement to be sold to a party who was not a child or relative of the Respondents (or an "associate" within the meaning of that phrase in s.309 of the BCCMA, particularly s.309(2)(b)), I consider that there is no basis to establish that both parties had an actual intention that the effect of the phrase "bona fide third party" was to exclude the son (or a child) of the Respondents.
111. There is no evidence that the Respondents by themselves or their agent, Mr Herd, intended that a child of the Respondents was to be excluded from entering into a contract for the purchase of the relevant management and letting rights. The evidence of Mr Herd is to the contrary.
112. With respect to unilateral mistake, I consider that the evidence does not go so far as to establish that the Applicant by itself or its agent, Mr Mellick, believed that clause 18 of the Letting Authority and the Caretaking Agreement respectively was intended to exclude a child of the Respondents. In any event, the evidence falls far short of demonstrating that the Respondents were aware that the Applicant mistakenly believed that the phrase "bona fide third party" had the meaning for which it now contends. Consequently, that contention fails.
Estoppel
113. I also consider that the Applicant's reliance on the doctrine of estoppel is unfounded.
114. Based on the factual evidence referred to above, I consider that the Applicant has failed to establish that the Respondents, by their conduct, induced the Applicant to adopt an assumption or expectation that the draft clause 18 would exclude a sale to the Respondents' son and, further, that the Respondents knew or intended that the Applicant would execute the Letting Authority and the Caretaking Agreement in reliance on any such assumption or expectation.
Unconscionable conduct
115. The Applicant does not develop, in its written submissions, the argument based on unconscionable conduct.
116. In any event, I consider that the Applicant has failed to establish any unconscionable conduct on the part of the Respondents. Again, absent any discussions (or correspondence) concerning the exclusion of the Respondents' son (or a child of theirs) as a potential purchaser of the rights under the proposed agreements, any argument that the Respondents engaged in unconscionable conduct fails at the threshold.
Parol evidence
117. I consider it doubtful whether the evidence identified is admissible as it is (apparently) sought to be relied upon as evidence of the subjective intention of the parties, or at least the Applicant (cf DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429).
118. In any event, for the reasons stated above, I consider that such evidence does not establish that the phrase "bona fide third party" had the meaning contended for by the Applicant.
119. In my opinion, the pre-contractual conduct of the parties does not permit a conclusion that, on any of the various bases raised by the Applicant, the Purchaser was excluded from the phrase "bona fide third party" because he was a child of the Respondents.
120. The next issue concerns the meaning of the phrase "bona fide third party" and whether or not, in fact, the Purchaser was such a person.
Prima facie
meaning of "bona fide"
121. The phrase "bona fide" appears in various contexts including administrative law (eg. NAML v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCA 1190).
122. Clause 18.1 of each of the Letting Authority and the Caretaking Agreement requires the contract of sale to be to a "bona fide third party".
123. In Federal Commissioner of Taxation v Taylor [1929] HCA 13; (1920) 42 CLR 80 it was said by the High Court, at p.90, that the meaning of the expression "bona fide" (in s.3 of the Estate Duty Assessment Act 1914 (Cth)) meant no more than "real or genuine" as distinct from "unreal or colourable". See also Re Estate of AE Grace (Deceased) 43 SR (NSW) 139 at 145.
124. I consider that such an approach is appropriate to a consideration of the expression "bona fide third party" in clause 18.1 of the Letting Authority and the Caretaking Agreement. That is, was the Purchaser a genuine buyer or was his entry into the respective contracts colourable?
125. The Applicant asserts that the Purchaser is not a bona fide third party and that the Business Contract is a "sham".
126. The bases upon which the Applicant makes that contention are summarised under the heading "Summary" in the Application.
127. I will deal with each of those bases in the same order as contained in the Application.
128. First, it is asserted that the letting and management rights remained actively listed for sale on the open market with an independent agent for $160,000.
129. It appears uncontested that the management and letting rights continued to be marketed for sale following entry into the Business Contract. However, as the Respondents' (previous) solicitors contend,[35] the decision to keep the rights on the market was that of the seller, namely the Respondents. In light of the letter from the Applicant's solicitors dated 26 February 2003,[36] I consider that the continued marketing of the management and letting rights (and the unit) does not support the Applicant's case that the Purchaser was not a bona fide third party.
130. Next, it is asserted that the Business Contract was a "last minute and collusive effort" to satisfy clause 18.1 of the Letting Authority.
131. The Business Contract and the Unit Contract were entered into on the last day prior to which the Letting Authority and the Caretaking Agreement would automatically have ended had the Respondents not entered into a relevant contract within the meaning of clause 18 of the respective contracts. It also appears from the matters identified by the Applicant[37] that the contracts were prepared and entered into with a degree of urgency.
132. The Applicant does not identify the persons who were party to the alleged collusion. I assume the Applicant is referring to, at least, the Respondents and the Purchaser. Whether it is alleged that the collusion also involved the Respondents' solicitors and/or the Purchaser's solicitors is unclear. In any event, there is no evidence to support the conclusion that there was some collusion between the relevant parties.
133. Next, it is asserted that there was no evidence that the Purchaser had any previous experience or even interest in owning such rights.
134. I refer to, without repeating the content of, the unsigned letter from the Purchaser dated 12 March 2003.
135. That letter was accompanied by copies of various references including one from a Mr Caddey in which Mr Caddey stated, inter alia:
"[The Purchaser] has been involved with various business ventures. In my opinion he has always been honest in his dealings, hardworking and reliable. He is clearly a highly intelligent man who has the ability to perform well in managerial positions. He enjoys a challenge and would be well suited to handling the responsibilities of a resident unit manager."
Mr Caddey, who apparently holds a Bachelor of Science Degree, states that he has known the Purchaser for a period of 8 years.
136. The Purchaser apparently had some involvement with the resident unit management business at Campbell Marque for a number of years. It is not disputed that he pursued a nomination for a committee member position (which was rejected). The evidence does not establish that the Purchaser was a person wholly lacking in knowledge as to how the unit management business may operate. I consider the Purchaser's experience to be such that it is not far-fetched to expect that he may have an interest in acquiring the business from his parents (the Respondents).
137. Next, it is asserted (and it is undisputed) that the Purchaser is the son of the Respondents.
138. Next, it is asserted that the parties intended the expression "bona fide third party" would exclude a child of the Respondents. This has been dealt with above.
139. Next, it is asserted that there is no evidence that the Purchaser has the financial resources to complete the transaction.
140. There is no positive evidence that the Purchaser had the financial resources to complete each of the respective contracts.
141. In a letter from the Purchaser's solicitors to the Applicant's previous solicitors dated 4 April 2003,[38] it was stated, inter alia:
"We confirm that our client has obtained verbal finance approval and expects written approval to issue either today or on Monday 7 April, 2003. The amount of the loan for which our client has received financial approval is $100,000."
This amount is not sufficient, of itself, to complete the Business Contract. There is no evidence as to what funds the Purchaser held at the relevant time. There is also no evidence as to whether any, and if so what, finance had been obtained in respect of the completion of the purchase of the Unit.
142. The Applicant has not positively established that the Purchaser had insufficient financial resources to complete the respective contracts. However, I note that the Respondents did not obtain a Statutory Declaration from the Purchaser and, consequently, the Purchaser was not subject to cross-examination.
143. Next, it is asserted that the Respondents failed to confirm that they were not providing the funds for the "purchase".
144. By the letter dated 26 February 2003,[39] the Applicant's solicitors sought confirmation that if the Commissioner ruled that the Caretaking Agreement and Letting Authority were not at an end, and the contract of sale subsequently completed, the Respondents would not, after completion, participate directly or indirectly in, or obtain any benefit from, the Caretaking Agreement or Letting Authority.
145. The Respondents' solicitors letter in response dated 3 March 2003,[40] did not respond to that request for confirmation.
146. Next, it was submitted that the Purchaser displayed no urgency in facilitating the consent of the Applicant notwithstanding that the "purchase contract" provided an abbreviated time to obtain the consent.
147. On the available material, I consider that there is insufficient evidence to sustain the contention that there was a lack of urgency on the part of the Purchaser in seeking the consent of the Applicant. In my opinion, the correspondence identified in Annexures "17" to "27" inclusive of the Respondents' submissions evidence an intention on the part of the Purchaser to facilitate the process for the obtaining of the consent of the Applicant.
148. Next, it is asserted that the Purchaser displayed no urgency about obtaining a restricted real estate agent's licence notwithstanding the terms of the contract.
149. The Statutory Declaration of Mr Mayes, the male Respondent, indicates that the Purchaser had enrolled in a Resident Unit Manager's course from 14 April 2003 to 15 April 2003. On the available material, I consider there is no substance in the Applicant's contention in respect of the obtaining of a restricted real estate agent's licence.
150. Next, the Applicant asserts that the purchase price was not the true market value.
151. The purchase price for the Unit was $340,000. There is no evidence to suggest that this did not represent the market value.
152. With respect to the management and letting rights, the purchase price was $130,000. 153. In asserting that this price was at an under value the Applicant relies on what it asserts it was advised by Mr Dennis Hale from Active Management.[41] The Applicant has not obtained a statutory declaration from Mr Hale.
154. The Respondents had, it is said, listed the letting authority and management agreement for sale at a price of $187,000. Clearly no sale was achieved. It is unclear what offers, if any, were received.
155. On or about 21 February 2003 the listing price of the management and letting rights was reduced to $160,000.
156. I consider that the hearsay evidence of Mr Hale does not go so far as to establish that the contract price of $130,000 was at an under value. In the absence of suitable valuation evidence, I am not prepared to find that the sum of $130,000 did not represent the true market value.
157. Next, it is contended that the settlement date implied the contract was a "sham".
158. The Special Conditions to the Business Contract are set out at paragraph [69] above.
159. I accept that the Special Conditions have been poorly drafted given that the Purchaser would have been required to complete the contract on the settlement date had the restricted real estate agent's licence been granted to the Purchaser within 27 days of the date of the contract. This would be so notwithstanding that the time for the obtaining of the Applicant's consent had not expired. However, I do not accept the Applicant's further contention that this indicates that the Business Contract was a "sham". It may indicate that the contract was prepared hurriedly (consistently with the Applicant's contention that the contract was prepared at the "last minute").
160. Next, the Applicant relies upon a number of miscellaneous matters to demonstrate that the Purchaser did not "behave as a bona fide third party with independent legal advice".
161. First, the Purchaser waived the cooling off period.
162. In my opinion, given the Purchaser's filial relationship with the Respondents and his previous involvement in the business (as well as being a part owner of a unit in the building), the waiving of the cooling off period is unsurprising and does not assist the Applicant's case.
163. Secondly, the sale was not through an agent. Again, given the filial relationship between the parties, I consider this does not assist the Applicant's case.
164. Thirdly, the deposit was uncommercial. The deposit was $100 in respect of each of the contracts. Given that the respective purchase prices were $130,000 and $340,000, the deposits were nominal and were not in an amount one would usually expect if the contracts had been entered into at arm's length. Once again, the filial relationship between the contracting parties may have been a consideration in this respect.
165. Fourthly, it is contended that the contract did not provide for various "important" matters.
166. Such matters are identified in the Applicant's submissions, at paragraphs (xxv), (xxvi) and (xxvii) (first sentence). I accept the contentions contained therein.
167. However, it is clear that the Purchaser had solicitors acting for him who gave him advice in respect of the contract at least insofar as the waiving of the cooling off period was concerned. There is no suggestion that the Purchaser was not relying upon the expertise of his solicitors to prepare the necessary documentation. In that event, I consider that the inadequacies of the contractual documentation do not in themselves assist the Applicant's case.
Conclusion
168. I consider that the thrust of the Applicant's case rests on the combination of the following factors:
(a) the Purchaser was the son of the Respondents;
(b) the relevant contracts were entered into immediately prior to the expiry of the existing Caretaking Authority and Letting Agreement;
(c) the respective deposits were nominal in amount;
(d) there was no positive evidence of the Purchaser's financial means to complete both of the contracts (which required an amount of, by my calculation, $469,800).
169. The ultimate question is whether those factors taken in combination lead to a conclusion, on balance, that the execution of the respective contracts was colourable and that the Purchaser was not a genuine buyer.
170. Although the lack of evidence of the Purchaser's financial resources has caused me some disquiet, I conclude that, on balance, the Applicant has failed to establish that the Purchaser was not a genuine buyer. Consequently, it has not satisfied me that the Purchaser fell outside the ambit of the phrase "bona fide third party".
171. In the circumstances, I consider it just and equitable to declare that the Business Contract constituted a Contract of Sale to a "bona fide third party" within the meaning of clause 18.1 of the Letting Authority and clause 18.1 of the Caretaking Agreement.
Costs
172. With respect to my costs as a Specialist Adjudicator, s.280(2) of the BCCMA provides that the Applicant is responsible for such costs unless I order otherwise. Since the Applicant has been unsuccessful, I consider that the usual order should apply.
173. As to the legal costs of the respective parties, the Respondents have sought an order that the Applicant pay the costs of and incidental to the submission.[42] I am not minded to make such an order. Section 270 of the BCCMA provides express power to make an order for costs against the Applicant in the circumstances identified in s.270(1)(c). As is evident from my reasons, I do not consider the Application to be frivolous, vexatious, misconceived or without substance. Whilst the Applicant has been unsuccessful, I consider there was an arguable basis for the bringing of the Application. In those circumstances, I do not propose to make an order for costs in favour of the Respondents.
[1] A hearing date of 21 December
2004 had been set for the purpose of enabling them to cross-examine Mr Herd. On
14 December 2004 the
Applicant's solicitors advised that the Applicant did not
require Mr Herd for
cross-examination.
[2] TressCox
Lawyers' letter dated 6 August 2004; Hynes Lawyers' facsimile transmission dated
10 August 2004.
[3] Respondents'
Submissions, paragraph (A)(3); Applicant's Response, paragraph
3.
[4] Respondents' Submissions,
Appendix 2.
[5] Applicant's
Submissions, Annexure "A".
[6]
Applicant's Submissions, Annexures "B", "C" and
"D".
[7] Applicant's Submissions,
Annexure "D".
[8] Applicant's
Submissions, Annexure "C".
[9]
Applicant's Submissions, Annexures "E" and "F"; Respondents' Submissions,
Appendix 10.
[10] Respondents'
Submissions, Part (A)(6).
[11]
Applicant's Response, paragraph
13.
[12] Respondents'
Submissions, Appendices 11 and
12.
[13] Applicant's Submissions,
paragraph (ix).
[14] Applicant's
Submissions, Annexure "G".
[15]
Applicant's Submissions, Annexure
"H".
[16] Applicant's
Submissions, Annexure "I".
[17]
Applicant's Submissions, Annexure
"J".
[18] Applicant's
Submissions, Annexure "M".
[19]
Applicant's Submissions, Annexure
"N".
[20] Respondents'
Submissions, Appendix 17.
[21]
Appendix 16.
[22] Respondents'
Submissions, Appendix 24.
[23]
Respondents' Submissions, Appendix
25.
[24] Respondents'
Submissions, Appendix 25.
[25]
Respondents' Submissions, Appendix
26.
[26] Respondents'
Submissions, Appendices 19;
27.
[27] Respondents'
Submissions, paragraph 28.
[28]
Respondents' Submissions, Appendix
38.
[29] Applicant's Response,
paragraph 19.
[30] Applicant's
Response, paragraph 20.
[31]
Applicant's Response, paragraph
18.
[32] Applicant's Submissions,
paragraph (v).
[33] TressCox
Lawyers' letter dated 26 August
2004.
[34] See paragraph [53]
above.
[35] Respondents'
submissions pp. 9-10.
[36] See
paragraph [75] above.
[37]
Applicant's submissions, paragraphs (ix), (x),
(xi).
[38] Respondents'
submissions, Annexure 18.
[39]
See paragraph [53] above.
[40]
Respondents' submissions, paragraph
"N".
[41] Applicant's
submissions, paragraph
(xxi).
[42] Respondents'
submissions, p. 14.
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