Carrington Court - Main Beach [2004] QBCCMCmr 78 (9 February 2004)

Last Updated: 30 September 2005

REFERENCE: 0597-2003

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	10447
Name of Scheme:	Carrington Court - Main Beach
Address of Scheme:	3576 Main Beach Parade MAIN BEACH QLD 4217

TAKE NOTICE that pursuant to an application made under the abovementioned Act by the Body Corporate for Carringto Court – Main Beach

I hereby declare that the meaning of "contract date" for the purposes of section 85(3) of the standard module is the date of the formal document or documents evidencing the engagement of the person as a service contractor or authorisation of the person as a letting agent, and is not the date on which those engagements or authorisations commence. I further order that the relevant percentage transfer fee to be applied to the transfer in this instance is 2% and not 3%.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0597-2003

"Carrington Court - Main Beach" CTS 10447

The applicant, the body corporate of Carrington Court – Main Beach has sought the following order of an Adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote –

That the adjudicator made a declaratory order that Kater Enterprises Pty Ltd ... as transferor of the Caretaking and Letting Rights ... be ordered to pay to the body corporate a "relevant amount of $26500.00 calculated on a "relevant percentage of 3% on a consideration of $885000 being the amount received by Kater Enterprises Pty Ltd on the transfer of the aforementioned Caretaking and Letting Rights.

Section 276(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about-

(a) a claimed or anticipated contravention of the Act or the community management statement; or

(b) the exercise of rights or powers, or the performance of duties, under the Act or the community management statement; or

(c) a claimed or anticipated contractual matter about-

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

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

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

The scheme is a subdivision of 45 lots recorded under a building format plan of subdivision. The scheme currently operates under the standard module regulation.

The facts of the matter are not in dispute. What is in dispute is the applicable percentage rate to be applied to the transfer as the transfer fee. The dispute requires an interpretation of the provisions of section 85 of the standard module, quote –

85 Payment of amount on transfer
(1) This section applies to an engagement of a person as a service contractor, or the authorisation of a person as a letting agent, if--
(a) section 122(3)30 of the Act applies to the engagement or authorisation; and
(b) the engagement or authorisation is not the result of the exercise of an option by the service contractor or letting agent under the terms of the engagement of the person as a service contractor, or the authorisation of the person as a letting agent, contained in a previous engagement or authorisation for the scheme; and
(c) the approval of the body corporate is sought to the transfer of a person’s rights under the engagement or authorisation.
(2) The body corporate may require, as a condition of approving the transfer, that the transferor under the transfer pay the body corporate an amount (the "relevant amount").
(3) The body corporate may require the payment of the relevant amount only if the date (the "approval date") on which the body corporate approves the transfer is not more than 3 years after the date (the "contract date") on which the engagement or authorisation was entered into, or on
which the term of the engagement or authorisation was extended.
(4) The relevant amount is the relevant percentage of the amount representing fair market value for the transfer.
(5) The relevant percentage is--
(a) if the approval date is not more than 1 year after the contract date--3%; or
(b) if the approval date is more than 1 year, but not more than 2 years, after the contract date--2%; or
(c) if the approval date is more than 2 years, but not more than 3 years, after the contract date--1%.
(6) The body corporate may not require the payment of the relevant amount if--
(a) the transferor is a financier under section 12331 of the Act who is acting under the provisions of the financier’s charge over the engagement or authorisation; or
(b) the transferor is seeking approval to the transfer on the basis of genuine hardship not reasonably foreseeable by the transferor at the contract date.
(7) The relevant amount must be paid into the body corporate’s sinking fund.

The relevant dates applicable to the dispute are –

• 19/12/01 – Body corporate resolved to enter and execute new service contractor agreements with Kater Enterprises Pty Ltd (the respondent).
• 14/08/02 – date of commencement of the new service contractor agreements.
• 04/06/03 – date of transfer of service contractor agreements by the respondent.

The question is which of the first two dates is the "contact date" for the purposes of section 85(3). The body corporate argues that it is the later date (ie. The date of commencement of the new agreements) whereas the respondent alleges that it is the former (ie. The date the body corporate resolved to, and did in fact enter into, the new agreements). The relevance of the determination is that depending on which date is the "contract date", then the rate of the transfer fee will differ. If it is the former, then the applicable transfer fee will be 2%, however if it is the later, then the applicable transfer fee will be 3%, owing to the reduced period of time which elapsed before the date of transfer of the agreements.

The body corporate argues that the contract date refers to the commencement date of the engagement or authorisation. The submission states –

To claim the "contract date" is other than the date of commencement of a term of Engagement or authorisation leads to section 83 of the regulations being able to be manipulated in an endeavour to avoid payment of a relevant amount or alternatively reduce the relevant amount to be paid.

The respondent states that –

It is submitted therefore that words "was entered into" in section 85(3) must refer to the date the general meeting was held at which the ordinary resolution was passed engaging the service contractor and authorising the letting agent. ...

The Legislature was aware of the wording of both section 83(2) and of section 85(3). If the "contract date" was to be the commencement date it is submitted that it would have used those words rather than the words "was entered into".

Determination

In interpreting the meaning of "contract date" I have had reference to the Acts Interpretation Act 1954, relevantly sections 14A and B which provided relevantly –

14A Interpretation best achieving Act’s purpose
(1) In the interpretation of a provision of an Act, the interpretation that will best achieve the purpose of the Act is to be preferred to any other interpretation. ...

14B Use of extrinsic material in interpretation
(1) Subject to subsection (2), in the interpretation of a provision of an Act, consideration may be given to extrinsic material capable of assisting in the interpretation--
(a) if the provision is ambiguous or obscure--to provide an interpretation of it; or
(b) if the ordinary meaning of the provision leads to a result that is manifestly absurd or is unreasonable--to provide an interpretation that avoids such a result; or
(c) in any other case--to confirm the interpretation conveyed by the ordinary meaning of the provision. ...

Referring to section 14B, I considered the use of extrinsic material and perused the second reading speech. However I did not find any reference to the relevant provision which assists my interpretation. However, I consider that the ordinary meaning of the term "contract date" supports the position of the respondent. The term, on its ordinary meaning is a reference to the date of the engagement or authorisation. This is in contrast to the date on which the engagement or authorisation is to commence. If this interpretation was intended, then presumably words like "the "commencement date of the engagement or authorisation" would have been used so as to distinguish it from the date of the actual engagement or authorisation which has the ordinary meaning of "the contract date". Moreover, the words of the section further support this conclusion; the date (the "contract date") on which the engagement or authorisation was entered into. The ordinary meaning of the words "was entered into" is again the date of the formal document evidencing the engagement or authorisation, and not the date of commencement of that engagement or authorisation.

In any event, the argument of the body corporate is a flawed one and this can be shown practically. The body corporate alleges that the contract date is the later date (ie. 14 August 2002). What then would the position be if the respondent had transferred the engagement or authorisation prior to this date but after the time the engagement or authorisation had been entered into (ie. At any time from 19 December 2001 to 14 August 2002). Clearly there was a concluded agreement which was capable of transfer. The mere fact that the term of that agreement had not commenced is in my view irrelevant. The relevant engagement or authorisation was capable of transfer during this period.

If the body corporate’s interpretation of "contract date" was adopted, then the provisions of section 85(3) would have no application to the transfer. This leads to an absurdity in the interpretation of the legislation which the legislature did not intend. It means that a transfer that was intended to be "caught" by the legislation would not be caught. It would possibly lead to attempts to avoid the payment of a transfer fee by service contractors by them seeking to transfer their engagements after they had been approved but before they commenced. This would mean some transfers would happen very quickly after the engagement or authorisation had been approved but before it commenced, which is contrary to what the legislature intended in enacting section 85(3). In my view, the intention of the legislature was to extend the period engagements or authorisations were held before being transferred; the incentive to hold rather than transfer being the imposition of a transfer fee.

In the circumstances, I intend to declare that the meaning of "contract date" for the purposes of section 85(3) of the standard module is the date of the formal document or documents evidencing the engagement of the person as a service contractor or authorisation of the person as a letting agent, and is not the date on which those engagements or authorisations commence.

I further intend to order that the relevant percentage transfer fee to be applied to the transfer in this instance is 2% and not 3%.