Palm Springs Retirement Village [2005] QBCCMCmr 387 (20 July 2005)

Last Updated: 19 July 2006

REFERENCE: 0392-2005

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30852
Name of Scheme:	Palm Springs Retirement Village
Address of Scheme:	40 Carmichael Court WYNNUM WEST QLD 4178

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

D Garrett-Benson, the Owner of lot 30

I hereby order that interim relief will not be granted at this stage. The application for final orders remains outstanding. Lot owners will be given an opportunity to provide submissions regarding the application for final orders in due course.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0392-2005

"Palm Springs Retirement Village" CTS 30852

The scheme

"Palm Springs Retirement Village" is a subdivision of 82 lots on a Standard format plan. The regulation module applying to the scheme is the Accommodation Module.

Application

By application received by this Office on 31 May 2005, the applicant has sought the following outcome:

Recovery of funds for sale of service providers rights.

The applicant then raises a number of additional concerns including the following:

• Mr & Mrs Issakidis allegedly have a conflict of interest as directors/ shareholders of the service company and members of the body corporate committee;
• Validity of body corporate levies;
• Eligibility of Jodaway Pty. Ltd. nominees to be members of the committee;
• Alleged fraud on body corporate by sale of management rights;
• Failure to notify alleged encumbrances noted on the titles of lots subsequently acquired;
• Lack of transparency in the calculation of levies;
• The need for a transfer of management rights to be approved by the body corporate;
• The need for a legal firm to be involved in resales of lots;
• Failure to include her name on the body corporate roll;
• The Operations Management Contract provides that the whole of the $90,000 fee is subject to CPI;
• Transfers of common property;
• Entitlements to undercover parking;
• demeanour of the on-site managers;
• liability for body corporate fees;
• calculation of levies.

Jurisdiction

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)).

Section 279(1) & (2) provide that -
(1) The adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates.
Examples
1. The adjudicator may stop the body corporate from carrying out work on common property until a dispute about the irregularity of proceedings has been investigated and resolved.
2. The adjudicator may stop a general meeting deciding or acting on a particular issue until it has been investigated and resolved.
(2) An interim order
(a) has effect for a period (not longer than 1 year) stated in the order; and
(b) may be extended, varied, renewed or cancelled by the adjudicator until a final order is made; and
(c) may be cancelled by a later order made by the adjudicator; and
(d) if it does not lapse or is not cancelled earlier, lapses when
(i) the application is withdrawn; or
(ii) the commissioner gives the person who made the application a written notice under section 241 rejecting the application; or
(iii) a final order is made by an adjudicator to whom the application is referred. ...

Interim Orders

This dispute resolution application has been referred to me pursuant to section 267 of the Act for consideration of whether an interim order should be made. At this time, I am concerned with the threshold issue of whether because of the nature or urgency of the circumstances relating to the application, an interim order is in fact necessary or appropriate.

The examples included in the Act under section 279 are suggestive of the usual circumstances where an interim order might be made. Both examples are in the nature of injunctive relief. Whilst the range of matters that might be the subject of an interim order is not capable of definition, the applicant does need to establish that the circumstances of the application warrant the making of an interim order.

An interim order will not be made, or will be refused, in circumstances where the only urgency relates to the applicant’s desire to resolve or expedite the matter in dispute, or where the nature of the circumstances are such that the matter is not capable of being dealt with in the context of an interim order. Again, it is not possible to define these circumstances. However, given that an interim order may be made ex parte (that is, without reference to, or submission from the respondents named in the matter) where the circumstances or matters in dispute include matters or allegations not capable of expeditious and objective consideration, then the request for an interim order may be refused. It is a matter for an adjudicator to determine in respect of each application.

Background

The principal relief sought by the applicant is Recovery of funds for sale of service providers rights, although the applicant but also raised numerous additional concerns as outlined above.

This retirement village has a certain amount of "history" beginning in the late 1980’s with the marketing of leasehold interests by the original developer when the village was subject to a mortgage. I understand that the village was operated by a receiver for a considerable period of time before it was purchased by Jodaway Pty. Ltd.





On 2 December 2002, a Community Management Statement was registered with the Department of Natural Resources and Palm Springs Retirement Village, Community Titles Scheme 30852, was established from that date. At that date the freehold interest in each of the lots was held by Jodaway Pty. Ltd.

An Extraordinary General Meeting for the scheme was held on 21 January 2003, at which, according to the minutes, the following business was conducted:

• It was resolved that the body corporate appoint Jodaway Management Pty. Ltd. to attend to the body corporate management services for a fee of $8,300 plus GST per annum. These services were subcontracted to Body Corporate services Pty. Ltd.;
• It was resolved that an Operations Management Contract be entered into between the Body Corporate and Jodaway Management Pty. Ltd. (the operator) for a period of 25 years under which the operator is responsible for cleaning, maintenance, repairing, refurbishing and replacing common property and other property as set out in the agreement for a fee of $90,000 plus GST per annum;
• It was resolved that a lease agreement be entered into between the body corporate and Jodaway Management Pty. Ltd. For a period of 75 years at a rental of $1 per annum;
• It was resolved that until the holding of the First Annual General Meeting ,

- Michael Issakidis be appointed as Chairperson;

- Peter Meade of Body Corporate Services Pty. Ltd. Be appointed as Secretary and treasurer of the Body Corporate.
- Donrecka Issakidis be appointed as an ordinary committee member.

At the first AGM, held on 30 January 2004, it was resolved as follows:

•	That an auditor, Panell Kerr Forster, be appointed;
•	That a new community management statement be recorded;
•	That exclusive use of common property areas be given to the proprietors of certain lots (31,32,66 & 67) and that the owners of these lots be given permission to erect structures on the exclusive use areas; and
•	Title to certain lots was either combined or extended.

The respondents have made the following submissions:

• Jodaway was the owner of all lots in the scheme from the date of registration of the plan until April 2003 when sales began to take place.
• It was resolved that an Operations Management Contract be entered into between the Body Corporate and Jodaway Management Pty. Ltd. (the operator) for a period of 25 years under which the operator is responsible for cleaning, maintenance, repairing, refurbishing and replacing common property and other property. This function was sub-contracted to a Mr Andrew Fleming.
• As a lot owner Jodaway Pty. Ltd. Cannot be denied its right to vote because of the existence of common shareholdings and directorships.
• Unless advice was received to the contrary, all new lot owners gave a Power of Attorney to Jodaway Pty. Ltd. to vote on their behalf at meetings of the body corporate for a period of 12 months after settlement. The applicant signed such a Power of Attorney which commenced from October 2003. A copy of the Public Information Document for the scheme was provided to the applicant at the time of purchase.
• The respondent says there has been no transfer of the management rights to Mr Fleming. Rather certain functions were subcontracted by Jodaway Pty. Ltd. to Mr Fleming.
• The respondents point out that as at the date of their submission, approximately two thirds of the lots had been sold and the initial 12 month powers of Attorney granted to the scheme operator will progressively expire so that at the next AGM, individual lot owners will have the majority of votes.

• The Respondents deny the existence of a "Conflict of Interest" in relation to the sale of the "management rights", entry into the contract with Body Corporate services Pty. Ltd. and insurance arrangements.
• All levies and charges are disclosed in the Public Information Document which is provided to all prospective purchasers. Under the Retirement Villages Act the charges cannot be increased by more than the CPI without the approval of the residents.
• No parking areas are allocated exclusively to any particular lot and parking is available on a first to park basis.
• The scheme operator does not own any lots and therefore does not vote.

Determination

This application has been referred to me for consideration as to whether the urgency of the matters raised would justify the making of an interim order. As outlined above, at this point in time, I am concerned with the threshold issue of whether because of the r urgency of the circumstances, an interim order is in fact necessary or appropriate. Accordingly, to date, I have only sought submissions from the Body Corporate Committee and the Body Corporate Manager.

At this point in time I am not satisfied that the circumstances are such as to justify immediate intervention by this Office and would like to obtain submissions from all residents and making a final order.

The principal relief sought by the applicant is Recovery of funds for sale of service providers rights which is based on the applicant’s belief that the sale of management rights amounts to a fraud on the body corporate. However, I am unable to see anything unusual or unlawful about the Operations Management Contract entered into between the Body Corporate when under the control of Jodaway Pty. Ltd. and Jodaway Management Pty. Ltd. Under this agreement Jodaway Management Pty. Ltd has been engaged for a period of 25 years and is responsible for cleaning, maintenance, repairing, refurbishing and replacing common property and other property as set out in the agreement for a fee of $90,000 plus GST per annum.

This type of arrangement is almost universal in most new developments of any size and is expressly recognised in section 112 of the Body Corporate and Community Management Act 1997 which provides as follows:

112 Original owner’s obligations about engagements and authorisations
(1) This section applies if--
(a) the body corporate for a community titles scheme intends to--
(i) engage a person as the body corporate manager or a service contractor (the contracted party); or
(ii) authorise a person to conduct a letting agent business (also the contracted party); and
(b) the engagement or authorisation is to be made or given in the original owner control period.
(2) The original owner must exercise reasonable skill, care and diligence and act in the best interests of the body corporate, as constituted after the original owner control period ends, in
ensuring each of the following--
(a) the terms of the engagement or authorisation achieve a fair and reasonable balance between the interests of--
(i) the contracted party; and
(ii) the body corporate as constituted after the original owner control period ends;
(b) the terms are appropriate for the scheme;
(c) the powers able to be exercised, and functions required to be performed, by the contracted party under the engagement or authorisation--
(i) are appropriate for the scheme; and
(ii) do not adversely affect the body corporate’s ability to carry out its functions.

The remuneration payable under a caretaking or operations management contract, and in turn the value of such a contract, is generally determined by market forces and variables such as responsibilities involved, amount of labour required, resale prospects and also lifestyle issues. While $90,000 per annum is a reasonable income, from my observations it is not an unusually high amount for management of an 80 unit complex on a 7 day a week basis.

While the sale of management rights for lengthy periods of time has been the subject matter of debate from time to time, the legal position is that such arrangements are lawful and only subject to challenge in specific circumstances. Prospective purchasers of lots in a managed complex are able to obtain all details of levies and outlays and are able to make a choice at that point in time as to whether they purchase a lot.

Accordingly, as mentioned above I am not satisfied that the circumstances are such as to justify immediate intervention by this Office regarding either the principal relief sought or the other matters raised by the applicant. I consider that it is appropriate that the application now be distributed to all lot owners to enable them to make submissions to this Office before making a final order.