Admiralty Quays [2005] QBCCMCmr 102 (22 February 2005)

Last Updated: 5 July 2005

REFERENCE: 0801-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	24592
Name of Scheme:	Admiralty Quays
Address of Scheme:	32 Macrossan Street BRISBANE QLD 4000

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Letico Management Services Pty Ltd, the former Letting Agent and Caretaking Service Contractor

I hereby order that the application by Letico Management Services Pty Ltd, the former Letting Agent and Caretaking Service Contractor, for an order that the body coproate is not entitled to charge the transfer fee in respect of the transfer of the management rights by the applicant, and that the body corporate refund the amount of $63,030.00 being the amount claimed as the transfer plus GST, is dismissed. I further order that the body corporate shall be entitled to recover from Letico Management Services Pty Ltd, the former Letting Agent and Caretaking Service Contractor the amount of $1897.66 for legal costs associated with approving the assignment of the management rights. I further order that the body corporate should refund to Letico Management Services Pty Ltd, the former Letting Agent and Caretaking Service Contractor any amount held or retained by it (for legal fees associated with the assignment) above this amount. I further order that I decline to determine the third requested order; namely whether the body corporate is not entitled to increase the amount of the transfer fee by the amount of GST and that the fee is GST inclusive.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0801-2004

"Admiralty Quays" CTS 24592

The applicant, Letico Management Services Pty Ltd, the former Letting Agent and Caretaking Service Contractor, has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote –

An order that the body coproate is not entitled to charge the transfer fee in respect of the transfer of the management rights by the applicant. An order that the body corporate refund the amount of $63,030.00 being the amount claimed as the transfer plus GST.
The applicant is not required to pay the body corporates’ solicitors fee in excess of $1897.66 and that any amount over this amount that has been paid be refunded to the applicant.
That the body corporate is not entitled to increase the amount of the transfer fee by the amount of GST and that the fee is GST inclusive.

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 some 173 (or so) lots recorded under a building unit plan (now a building format plan) of subdivision. The regulation module applying to the scheme is the standard module.

The dispute concerns the right of the body corporate to charge the applicant, on the transfer of the management agreement, the transfer fee. The right of a body corporate to charge an outgoing service contractor a transfer fee is provided in 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 body corporate has chosen to impose the transfer fee on the applicant, and the application seeks to impugn this action on the basis that the body corporate (committee) resolution to impose the transfer fee was subsequent in time (14 December 2004) to the committee’s resolution to consenting to the assignment (30 November 2004). The applicant’s grounds state:

The issue of the transfer fee was not discussed at all during the applicant’s presence at the committee meeting held on November 30, 2004.
On December 14, 2004 the body corporate resolved by flying minute to impose the transfer fee as a condition of the assignment. ...
As the minutes of the committee meeting of November 30, 2004 do not make the consent to the assignment condition upon the payment of the transfer fee the body corporate consented to the assignment ... (and) also executed the Deed of Assignment prior to the resolution to impose the transfer fee ... . It is not open for the body corporate to subsequently impose additional conditions on the assignment.

The above statements summarise in my view the applicant’s submission for it not being liable for payment of the transfer fee. The body corporate has responded to the application by way of submission, opposing the application. The submission is reasonably lengthy and not necessary to set out in any detail, though the following passages are relevant:

On 15 November 2004 the applicant’s lawyers, Mahoney, advised the body corporate manager of a proposed assignment of the applicant’s rights under (the) agreements, and submitted motions and a deed of assignment for consideration ... .

On 16 November 2004 some of committee met at the offices of Maunsell Pennington Solicitors and confirmed a transfer fee would be sought.

In a fax of 22 November 2004 by Maunsell Pennington to Mahoney, the following passage appears:

Our client has also instructed that they will be imposing a transfer fee in accordance with section 85 of standard module. Such fee will be 3 percent of the amount representing fair market value for the transfer. Would you please provide our office with the contract of sale as a matter of urgency so that the fee can be calculated.

On 23 November 2004 Mahoney replied attaching relevant pages, and the following passage appears: "In relation to the transfer fee, we attach a copy of the relevant pages from the management rights business sale contract for your records."

In its reply to the submission, Mahoney’s (Solicitors for the applicant) after referring to the above passages, have stated:

However no copies of these correspondences have been annexed to the Respondent’s sub mission. Therefore it is respectfully submitted that the commissioner is unable to have recourse to the allegations contained in paragraphs (above) ... .

However, this information goes to the very substance of the dispute; namely whether, and more relevantly when, the applicant was advised or informed of the intention to impose the transfer fee. In this light, the passages are of significant relevance. As for my ability to have recourse, my investigative powers in section 271 of the Act specifically allow me to require a party to the application "to obtain, and give to the adjudicator, a report or other information". On this basis my office obtained a copy of the relevant correspondence from Maunsell Pennington. Not only can I confirm the correspondence exists, but include the above quoted passages. I suggest that the existence of this correspondence, and the relevant passages, destroys the applicant’s case. I can hardly contemplate a clearer statement of the committee’s intention of "imposing a transfer fee in accordance with section 85 of the standard module". The applicant’s solicitor in reply then attached a copy of relevant extracts of the business sales contract so that the relevant fee might be calculated.

The applicants failed to acknowledge such correspondence in their initial grounds, and then sought to suggest I was unable to have recourse to it. I consider the conduct of the applicant, and their legal representative who have signed the application on their behalf, to be less than forthright. I suggest it would have been more appropriate to acknowledge the existence of the correspondence and have sought to argue against it on some basis. Perhaps more tellingly, given the existence of the correspondence, the application might not have been proceeded with. Given their chosen approach in respect of the correspondence, the applicants have failed to address the correspondence, and I suggest have no answer to its contents. Clearly the applicants had been informed, in the clearest possible terms, and at least a week before the meeting at which the committee resolved to approve the assignment, that their assignment of the management rights would attract the imposition of the transfer fee. Moreover, the correspondence of 22 November 2004 to the applicant’s solicitor contains much information relevant to the proposed assignment, and in fact, three further conditions which would be part of the proposed approval of the assignment. I am referring to the three final paragraphs of the letter excepting the very final paragraph. I conclude that these were similarly intended conditions of the proposed assignment. These conditions were also not reiterated in the formal committee approval to the assignment on 30 November, 2004, but clearly were intended to be conditions of the approval.

I intend to dismiss the applicant’s requested orders that

1. the body corporate is not entitled to charge the transfer fee in respect of the transfer of the management rights; and that
2. the body corporate refund the amount of $63,030.00 being the amount claimed as the transfer plus GST,

on the basis that such application is without merit.

The second order sought is that the applicant is not required to pay the body corporates’ solicitors fee in excess of $1897.66 and that any amount over this amount that has been paid be refunded to the applicant.

The applicant’s grounds state that "the body coprorate solicitors have advised that they will issue a new invoice for an additional amount in respect of the assignment costs". The difference in the two invoices is some $574.20 in additional costs between the first and second invoice. The applicant alleges that these costs relate to "dispute resolution and not the assignment".

The body coprorate states that its "legal costs increased by $522.00 (in professional fees) to obtain advise on the omission of the transfer fee collection in the motion as worded". The submission states:

The body coporate needed these additional services in light of the protest the applicant raised over payment of the transfer fee, and the fees would not otherwise have been incurred.

I am not satisfied that the additional costs relate to the assignment of the management rights. I suggest that had the body corporate been clearer in its resolution approving the assignment of the management rights as to the issue of the transfer fee, than no potential for dispute would have arisen. I conclude that failure of the body corporate to be sufficiently clear was a matter in respect of which the applicant had no input. I consider that the body corporate is entitled to recover the amount of the first invoice and no more. I have ordered accordingly.

The final order sought is that the body corporate is not entitled to increase the amount of the transfer fee by the amount of GST and that the fee is GST inclusive. This is a technical question of whether GST (on the transfer fee) is payable in addition to the transfer fee or whether the transfer free is GST exempt. This is a technical question not within the scope of my jurisdiction under the Act. I decline to consider the question and refer the parties to other means of resolving this issue. Perhaps an approach to the Australian Taxation Office might resolve this issue. Otherwise, given the number of transfer fees which have been paid since the introduction of the provision, I suggest that the issue is a reasonably settled one within the general legal community. I leave it for the parties to make their own enquiries.