Palm Springs Residences [2005] QBCCMCmr 47 (31 January 2005)

Last Updated: 5 July 2005

OFFICE OF THE COMMISSIONER FOR
BODY CORPORATE AND
COMMUNITY MANAGEMENT







DISPUTE RESOLUTION APPLICATION
REF: 0494-2004
PALM SPRING RESIDENCES









SPINTRA PTY LTD
-V-
THE BODY CORPORATE FOR
PALM SPRING RESIDENCES

DISPUTE RESOLUTION APPLICATION – SPECIALIST ADJUDICATION RE: "PALM SPRING RESIDENCES" COMMUNITY TITLES SCHEME

ORDERS

I:- 1. dismiss the application; and 2. order the Applicant to pay the costs of the Specialist Adjudicator within twenty-eight (28) days of the publication of these reasons to it.

D A Savage S.C.
Specialist Adjudicator

REASONS FOR ORDERS

The Application

Spintra Pty Ltd (hereafter "Spintra"), a one time "body corporate and caretaking service contractor" (as that term appears in the Body Corporate and Community Management Act 1997) ("the Act") applies pursuant to s.239 of the Act for orders against the Body Corporate Palm Springs Residences CTS 29467 (hereafter "the Body Corporate") in the form of:-

1.	a declaration that "the Body Corporate Committee acted unlawfully in demanding and receiving the payment of $8,000.00 from Spintra;
2.	an order that the sum of $8,000.00 "be refunded" to Spintra;
3.	the "Body Corporate Committee...pay all of the costs associated with [the] application".

The Facts

On 15 March 2004 the Body Corporate Committee gave a "notice of default" to Spintra under a caretaking/letting agreement ("the agreement") between the Body Corporate and Spintra’s predecessor in title dated 6 September 2001. The notice contained 15 categories of alleged default. Amongst the defaults were past but (presumably) remedied breaches, continuing breaches, past irremediable breaches and future presumed breaches of the agreement. Some of the alleged defaults were of the most general kind, viz: "A general failure to recognise deterioration in condition...". Amongst the matters of complaint was the lack of maintenance of the gardens at Palm Spring Residences – the maintenance of which was a particular duty of the caretaker under the agreement.

Service of the notice was a step precedent to termination of the agreement (see clause 8.1.2) and purchase of the caretaker’s lot at Palm Spring Residences (see clause 15.1).

On 22 March 2004 Spintra (by Mike and Blissa Sun) wrote to the committee of the Body Corporate about the alleged defaults. The letter admits some defaults and accepts some of the directions to remedy contained in the notice. In general however the position put forward in the response contradicted the contentions of the Body Corporate contained in the notice.

The alleged defaults were not remedied to the Body Corporate’s satisfaction within the time limited by the notice. Whether or not there were in fact defaults or whether in fact any such default was in fact remedied is now not necessary to determine.

Many proprietors provided written commendation of the contractor in response to the notice. No doubt others did not. Nothing relevant for present purposes flows from the correspondence or lack of it.

On 5 May 2004 Spintra entered into an apparently conditional contract to sell the business carried on under the agreement and the caretaker’s lot in Palm Spring Residences from which it conducted the business. To complete that sale I presume Spintra required amongst other matters to establish to the purchaser that the agreement was not determinable by the Body Corporate - that it had a business to assign and a lot to sell - the very thing that the unremedied notice (unless otherwise resolved prior to completion) made difficult. The extent of the difficulty cannot be determined because Spintra has not put into evidence the contract of sale of its business.

Spintra sought the consent of the body corporate to the proposed assignment as it was obliged to do under clause 7 of the agreement and regulation 82 of the applicable Accommodation Module Regulations. It is not clear when the matter of consent was first raised but it was raised with the body corporate committee in some way prior to 28 May 2004.

On 28 May 2004 the committee of the body corporate met. It noted (at Item 13 of the minutes) that an estimate had been received from a qualified horticulturalist that $10,000.00 would be needed to "rectify the problem" of the deterioration of the gardens supposedly caused by Spintra’s neglect of obligations under the agreement – the subject of the unremedied notice. Spintra and the Body Corporate by its Committee then agreed that the notice would be withdrawn (see Item 14 of the minutes of that meeting).

On 28 May 2004 Stewart Silver King & Burns for the Body Corporate wrote to Mr M Sun of Spintra recording the terms of the agreement reached that day for the withdrawal of the notice of default. That letter was returned signed by Mr Sun.

The terms of the agreement reached between Spintra and the Body Corporate (as found in the correspondence) were:-

"...

That upon payment of $8,000.00 to be deposited into a bank account with two signatories, one being yourself, the other the writer, as monies to be held for the provision of remedial and maintenance works to the Palm Spring Residences common property gardens to provide for the current breach notice to be remedied with the monies to be deposited into the Body Corporate’s bank account on written advice from Mike Sun or his representative that an unconditional contract has been entered into between Sprintra Pty Ltd and another party for the purchase of management rights. Should you not be successful in securing an unconditional contract by Friday, 4^th June, 2004 the monies will be refunded to you upon written advice of same or should an extension be required by your purchasers the Committee agreed to extend the refund schedule by 14 days.

The Body Corporate agrees not to commence any renovation or remedial works to the gardens until settlement of the sale of Management Rights is confirmed.

..." (the 28 May agreement)

On 6 July 2004 the Body Corporate met and consented to the assignment of the agreement. The agreement was assigned. Thereafter the $8,000.00 paid to the body corporate under the 28 May agreement was expended in rectification of the deterioration of the gardens at Palm Springs Residences.

Regulation 82 of the applicable Accommodation Module Regulations for this community title scheme inter alia provides:-

"(1) A person’s right under an engagement as a body corporate manager or service contractor, or under an authorisation as a letting agent, may be transferred only if the body corporate under the engagement or authorisation approves the transfer.

...

(3) In deciding whether to approve a proposed transfer, the body corporate may have regard to –

(a) the character of the proposed transferee and related persons of the proposed transferee; and

(b) the financial standing of the proposed transferee; and

(c) the proposed terms of the transfer; and

(d) the competence, qualifications and experience of the proposed transferee and any related persons of the proposed transferee, and the extent to which the transferee and any related persons have received or are likely to receive training; and

(e) matters to which, under the engagement or authorisation, the body corporate may have regard.

...

(6) The body corporate must not –

(a) unreasonably withhold approval to the transfer; or

(b) require or receive a fee or other consideration for approving the

transfer."

Spintra submits that in it paying the $8,000.00 to Stewart Silver King & Burns under the 28 May agreement the body corporate either then or subsequently received from it a "fee or other consideration for approving the transfer" of Spintra rights under its engagement as body corporate manager.

The body corporate submit that the money was received as compensation for breach of the agreement not for approving the transfer of same.

The structure of Regulation 82 is not novel. For centuries the law has regulated the taking of money in exchange for a consent to assignments of personal or real property rights. See, for example, s.121 Property Law Act 1974 Qld ("PLA") as regards the taking of a fine for consent to assignment of a lease.

Cases decided on s.121 PLA and its analogues in other jurisdictions demonstrate the direct causal nexus required between the demand for money and the grant of the requisite approval – Hughes v. Waite [1957] 1 All ER 603; Waite v. Jennings [1906] 2 KB 11, 18; Barina Properties Pty Ltd v. Bernard Hastie (Australia) Pty Ltd [1979] 1 NSWLR 480; Burke v. Gillett [1997] 1 VR 81 – the last contains an exhaustive analysis of the nature of fines and the relationship of fines with various statutory prohibitions from the 11^th Century.

The approach taken to the construction of s.121 PLA is consistent with the use of language in regulation 80 of the Accommodation Module of the Act. The word "for" rather than (for example) "in connection with" or "in relation to" in subregulation 80 (6) indicates that a direct causal relationship between the fee or other consideration and the approval is required.

In my opinion the settlement of the instant claim by the Body Corporate against the caretaker prior to consideration of approval of a proposed assignment cannot be described as the payment of a fee or other consideration for approval. If it were otherwise all claims for breach of service contracts would, in a practical sense, never be settled prior to and in contemplation of an assignment. That can hardly have been the intention of the legislature.

The 28 May agreement does not in fact provide for a fee for any approval. Under that agreement $8,000.00 is paid on trust to be used to remedy an admitted breach of the existing caretaker/letting agreement. The money was to be paid to the body corporate if an unconditional contract was made for sale of Spintra’s business – if not the money was to be refunded (with the consequence that the alleged breach would remain without remediation). There is no provision which provides for body corporate approval of the transfer. It can hardly be supposed that the Body Corporate was committing itself to approval of the assignment without knowing on 28 May 2004 who the assignee might be. It did not do so by the 28 May agreement.

I would therefore not make the first order sought.

For completeness I should add that I would not make the second order sought in any event.

Section 114 of the Act contains a similar provision to Regulation 82 in respect of an authorisation of a person as a letting agent or service contractor or extending the term of authorisation of such a person. Section 114(3) of the Act expressly provides that if such an amount is paid it is recoverable by the payee as a debt. Regulation 82 whilst in similar form does not provide for recovery of the sum paid as a debt. There is no obvious reason for the different treatment of similar classes of payment. The present application seems however to contemplate the difference by seeking an order for a refund rather than the money sum as a debt.

At common law money paid in breach of a deemed proviso to a covenant in a lease arising from statutory analogues to Regulation 82 was not generally recoverable - Andrew v. Bridgman [1908] 1KB 596; Waite (supra); West v. Gwynne [1911] 2 Ch 1; Lord v. Proctor [1923] ALR 350.

The structure of most analogous provisions is dissimilar to regulation 82 since most operate by deeming the prohibition against taking the money as a term of a contract between the parties.

The amount paid here was paid voluntarily and without protest. The mere fact that the sums were paid on Spintra’s argument in breach of a statutory prohibition would not render the transaction illegal or automatically require the result that the "money be refunded" as is sought.

It would be manifestly unjust to allow Spintra to resile from its bargain, leaving the body corporate to take steps to sue it for breach of contract now that the gardens have been repaired. Restitution of the sum paid in the above circumstances is not warranted.

For the above reasons I decline to make the orders sought by the Applicant. The Applicant should pay the costs of the Specialist Adjudicator in accordance with the tax invoice delivered within 28 days of publication of these reasons to it. Since no other orders for costs was sought no other order is necessary.


D A Savage SC – Specialist Adjudicator
31 January 2005