Willahra Tower [2005] QBCCMCmr 629 (11 November 2005)

Last Updated: 16 January 2006

REFERENCE: 0712-2005

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30990
Name of Scheme:	Willahra Tower
Address of Scheme:	540 Queen Street, BRISBANE QLD 4000

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

Wesley and Doreen Grimshaw, the Owners of lot 101.

I hereby order that the application for interim and final orders is dismissed pursuant to section 270(1)(b) of the Body Corporate and Community Management Act 1997 on the grounds that that this is an appropriate case for determination by a court of competent jurisdiction.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0712-2005

"Willahra Tower" CTS 30990

"Willahra Tower" is a subdivision of 106 lots in a Building Format Plan. The regulation module applying to the scheme is the Accommodation Module.

APPLICATION

By application dated 12 October 2005 the applicants seek the following:

Interim Orders

The Body Corporate Immediately withdraw its approval of the Transfer by Deed of assignment of the Caretaking and Letting Agreement for Willahra Tower from Raftbrook to Amrites Ltd., granted by the Body Corporate Committee on 21 April 2005 and advise Raftbrook Pty. Ltd. accordingly, pending the outcome of this dispute.

If the above Order is not granted, the following alternative interim Order is sought:
Within 14 days the Body Corporate requires that Raftbrook Pty Ltd. provides security for monies likely to be owing pursuant to the overcharging for electricity:

(a) in the amount of $90,000 in the form of a bank guarantee made out in favour of the Body Corporate; or in the alternative
(b) by paying $90,000 in the Body Corporate solicitors trust account pending the outcome of this Dispute Resolution Application; or in the alternative
(c) provides a guarantee, and that the Directors of Raftbrook Pty. Ltd. also provide personal guarantees to the extent of $90,000 for monies likely to be owing pursuant to overcharging for electricity.

Outcomes Sought

1. In relation to S.118(2) of the Regulations, overcharging beyond the negotiated rate for the supply of bulk electricity has taken place; and

2. The Body Corporate ascertain the exact amount of overcharging by Raftbrook Pty. Ltd. above that allowed by S.118(2) of the regulations and that we be included in any group appointed for that purpose; and

3. The Body Corporate take all steps necessary to recover the balance of overcharged monies from Raftbrook Pty. Ltd. ; and

4. The Body Corporate requires that Raftbrook Pty. Ltd. co-operate completely, and at its own expense, with the Body Corporate in relation to all orders issued by the Commissioner; and

5. The Body Corporate requires that Raftbrook Pty. Ltd. provides security for monies likely to be owing pursuant to the overcharging for electricity in the amount of $90,000 in the form of a bank guarantee made out in favour of the body corporate or in the alternative

6. The Body Corporate requires that Raftbrook Pty. Ltd. pays $90,000 into the Body Corporate administration account within 14 days for reimbursement of electricity overcharges by the Body Corporate to all contactable owners and tenants between 1 December 2003 and 31 March 2005; or in the alternative

7. The Body Corporate requires that Raftbrook Pty. Ltd. provides a guarantee and that the directors of Raftbrook Pty. Ltd. also provide personal guarantees, to the extent of $90,000 for monies likely to be owing pursuant to overcharging for electricity; and

8. The Body Corporate take all steps necessary to recover from Ernst Body Corporate Management Pty. Ltd. an amount of $432.44 being GST unlawfully collected on ambulance levies; and

9. The Body Corporate obtains from Energex and / or Raftbrook Pty. Ltd. copies of all electricity accounts relating to Willahra Tower from 1 July 2003 to date; and

10. The Body Corporate makes these accounts and those for the Common Property (from EBCM) freely available to any owners who wish to view, or to copy, these accounts.
BACKGROUND

The applicants are the owners of lot 101 in "Willahra Tower", a subdivision of 106 lots in a Building format plan governed by the Accommodation Module Regulation.

Raftbrook Pty. Ltd. is the current caretaker and letting agent for the scheme but on 29 November 2004, entered into a contract for the sale of the "management rights" to Queensland Rights Operators Pty. Ltd., a subsidiary of Amrites Ltd. The proposed transfer was approved by the body corporate committee on 21 April 2005.

The sale is conditional upon the following:

•	Issue of a Prospectus, registered with ASIC, by Amrites Ltd,
•	The minimum subscription under the Prospectus being achieved; and
•	The directors being satisfied that Amrites Ltd. will be unconditionally admitted to the Official List of the ASX.

The sale of the "management rights" is yet to settle because the Prospectus for the issue of shares in Amrites Ltd. requires amendment to reflect ASIC requirements regarding amortisation of company assets, and therefore projected profits. In response to my inquiries with the CEO of Amrites Ltd., I was advised that the new prospectus is likely to issue in early November and it is anticipated that listing on the ASX will occur in late November 2005. The applicant believes that the sale should not proceed until Raftbrook Pty. Ltd., the current caretaker and letting agent, has indemnified lot owners and the body corporate for the amount by which it allegedly overcharged for the on-sale of electricity. The applicants allege that the amount overcharged is in the vicinity of $90,000.

On 20 June 2003 the Body Corporate committee resolved to supply electricity to individual lots and to engage Ernst Body Corporate Management (EBCM) to invoice owners at $7.50 plus GST per invoice. Due to difficulties encountered by EBCM in issuing invoices and collecting payments, the committee resolved in October 2003 to engage the building manager, Raftbrook Pty. Ltd. to provide electricity to the individual lots and was authorised to charge up to the Tariff 11 rate. Accordingly, it would appear that Raftbrook Pty. Ltd. had the discretion to apply a combination of a mark up on the cost of bulk electricity and/ or an account administration fee, provided that the total did not exceed the equivalent of the Tariff 11 charge.

In March 2005 the applicants sought advice from the Department of Energy as to the legality of this arrangement. In response, the Department of Energy advised as follows-

•	The Electricity Act 1994 defines which persons may act as an on-supplier of electricity. A building manager cannot be the on-supplier because it is not "the owner or occupier of the complex and does not have the right to use the complex".
•	Any contestable electricity supply contract entered into by Raftbrook Pty. Ltd. in its own name would not be in accordance with the legislation because

(1) Raftbrook cannot purchase electricity for this purpose;

(2) Raftbrook does not have an electricity retail licence which would enable it to sell the electricity to the on supplying Body Corporate.

•	However, the building manager can still be the agent of the body corporate and for a fee, carry out invoicing, money collection and other administrative tasks;
•	The Act stipulates that a customer of an on supplier should not pay more for metered electricity than if the customer was charged at the appropriate franchise tariff (i.e. tariff 11);
•	While owner/ occupiers were not being charged more than the appropriate franchise tariff (Domestic Tariff 11), tenants were being charged at a flat rate of 14.6 cents per kilowatt hour (kwh) so that tenants using more than 400 kwh per month were paying more than what they would pay if they were being charged at Tariff 11.
•	Overpaid amounts should be refunded.

Since 1 April 2005, electricity has been supplied to lot owners by the body corporate and Raftbrook has been engaged to undertake billing and collection of payments on behalf of the body corporate on the basis of an agreed service fee per account.

The applicants submit that Raftbrook was never entitled to make a profit on the resale of electricity and the agreement purporting to allow Raftbrook to charge an additional amount on top of the supply cost, up to Tariff 11, was not permitted. It is claimed that Raftbrook was able to buy bulk electricity at the rate of 8.8 cents per KWH when, as at 1/12/03, tariff 11 was described by Energex as:

1^st 100 kwh per month – 18.81 cents per KWH
Next 300 kwh per month – 12.77 cents per KWH
Remainder – 11.4 cents per KWH

It is alleged that the arrangement did not comply with the requirements of section 76 of the Accommodation Module Regulation which requires that the appointment of a service contractor be recorded in a written agreement addressing certain specified details.

The applicants also argue that the arrangement involves a contravention of section 118 of the Accommodation Module Regulation because the body corporate should be the on-supplier of electricity and the amount charged should not exceed the cost of reimbursing the body corporate for providing the service.

The applicants also refer to section 96 of the Act which prohibits the body corporate from carrying on a business.

SUBMISSIONS

The applicants advised that settlement of the sale to Amrites Ltd. is scheduled for late October 2005. Given the apparent urgency of the matter, submissions were sought from the Committee, Raftbrook Pty. Ltd. and Amrites Pty. Ltd.

The Chairman of the body corporate advised that given the short time frame in which to make submissions and the divergent opinions of committee members, it was decided that each member would respond individually and Ernst Body Corporate Management would also make a submission. Three committee members made submissions supporting the application.

The Chairman made brief submissions and concurred with the submission from the body corporate manager. These submissions included the following:

• Under section 20(j)(6) of the Electricity Act Raftbrook was entitled to charge up to Tariff 11 (T11) i.e. the lowest rate that residents would have paid if they had been a non contestable customer of Energex;
• Raftbrook was entitled to keep the difference between the purchase price and T11 for administering the supply and carrying bad debts;
• Section 118 of the Accommodation Module Regulation was not applicable as charges were levied by Raftbrook and not the body corporate;
• Raftbrook was not a "Service Contractor" within the meaning of the Act as it was not engaged as a contractor to supply a service for a period of more than one year.
• In consultation with the Department of Energy, Raftbrook Pty. Ltd. has re-worked all accounts it issued during the period it was responsible for administration and supply of electricity and has issued refund cheques to tenants who were contactable. Where forwarding addresses were not available, overcharged amounts (total $3,076.22) have been paid into the body corporate solicitors’ trust account so that when former tenants are located they can be reimbursed; and
• As the supply of electricity was not part of the Caretaking and letting Agreement, there are no grounds upon which to withhold approval for the transfer of the agreement.

Another committee member corroborated this account of events and provided the following information:

• The electricity account was transferred from the body corporate to Raftbrook with effect from 6 February 2004, but was transferred back to the body corporate on 1 April 2005 when Raftbrook was engaged to undertake billing and collection of payments on the basis of an agreed service fee per account.
• The body corporate did not profit from the electricity sale arrangements with the exception that the cost of supplying electricity to the common property was significantly less. From 5 February 2004 to 31 March 205, Raftbrook billed the body corporate for the common property usage at the cost of supply and thereby saved the body corporate $13,000. Owner occupiers also paid for electricity at a rate significantly lower than Tariff.
• The body corporate’s decision to allow charges of up to tariff 11 for consumption by occupiers was consistent with the Electricity Act;
• Once the body corporate became aware of non-compliance with the Electricity Act, Ernst and Young were engaged to conduct an audit of the electricity sales by Raftbrook . The audit found that the operating margin to Raftbrook was approximately $25,000 per annum and the net margin was $9,848 after deduction of administration and account management costs.
• Raftbrook agreed to make copies of accounts available to the electricity sub-committee on a confidential basis.
• On 25 August 2005 the committee unanimously agreed that there had been sufficient analysis to identify key information relating to electricity transactions and that due to confidentiality and privacy considerations, there was no justification for access to this material by other owners.
• The application is vexatious and there are no matters of legal substance raised to justify the orders sought.

Solicitors for Raftbrook made the following submissions:

• The application is frivolous, vexatious misconceived and without substance;
• Raftbrook has co-operated with the audit by Ernst and Young and refunded any amounts overcharged;
• section 118 of the Accommodation Module Regulation is not applicable as Raftbrook charged lot owners directly for electricity consumption.
• Release of electricity account details would be futile and also involver a breach of the Privacy Act ;
• The contract date for transfer of the "management rights" to Qld Rights Operators Pty. Ltd. has been validly extended to accommodate the listing of the parent company, Amrites Ltd. and there is no risk to the vendor as personal guarantees have been obtained from the directors of the parent company.

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 276(3) provides that an adjudicator may make an order mentioned in Schedule 5.

DETERMINATION

This application was referred to me for consideration as to whether the urgency of the matters raised would justify the making of an interim order. Given the perceived urgency of this application I sought submissions from the Body Corporate Committee and the Body Corporate Manager.

The applicants seek the following Interim Orders:

1. The Body Corporate Immediately withdraw its approval of the Transfer by Deed of assignment of the Caretaking and Letting Agreement for Willahra Tower from Raftbrook to Amrites Ltd., granted by the Body Corporate Committee on 21 April 2005 and advise Raftbrook Pty. Ltd. accordingly, pending the outcome of this dispute,

or alternatively.

2. Within 14 days the Body Corporate requires that Raftbrook Pty Ltd. provides security for monies likely to be owing pursuant to the overcharging for electricity:

(a) in the amount of $90,000 in the form of a bank guarantee made out in favour of the Body Corporate; or in the alternative
(b) by paying $90,000 in the Body Corporate solicitors trust account pending the outcome of this Dispute Resolution Application ; or in the alternative
(c) provides a guarantee, and that the Directors of Raftbrook Pty. Ltd. also provide personal guarantees to the extent of $90,000 for monies likely to be owing pursuant to overcharging for electricity.

There are two threshold issues to be considered by me in dealing with this application, including the following:

• Does the material evidence a "dispute" within the meaning of section 227 of the Act?;
• Does the legislation give an adjudicator Jurisdiction to make the orders sought?

Section 227 provides as follows:
(1) A dispute is a dispute between--

(a) the owner or occupier of a lot included in a community titles scheme and the owner or occupier of another lot included in the scheme; or

(b) the body corporate for a community titles scheme and the owner or occupier of a lot included in the scheme; or

(c) the body corporate for a community titles scheme and a body corporate manager for the scheme; or

(d) the body corporate for a community titles scheme and a caretaking service contractor for the scheme; or

(e) the body corporate for a community titles scheme and a service contractor for the scheme, if the dispute arises out of a review carried out, or required to be carried out, under chapter 3, part 2, division 7;39 or

(f) the body corporate for a community titles scheme and a letting agent for the scheme; or

(g) the body corporate for a community titles scheme and a member of the committee for the body corporate; or

(h) the committee for the body corporate for a community titles scheme and a member of the committee; or

(i) the body corporate for a community titles scheme and a former body corporate manager for the scheme about the return, by the former body corporate manager to the body corporate, of body corporate property.

As would be noted from S.227(1)(d), only the body corporate, and not an individual lot owner may bring an application for resolution of a dispute with a caretaking service contractor.

In effect, the applicants are seeking the following orders:

•	An order preventing the transfer of the "management rights" by the current service contractor and letting agent;
•	An order that Raftbrook Pty. Ltd. reimburse the body corporate for the amount of $90,000 which the applicants claim it has allegedly overcharged the body corporate for the supply of electricity.
•	An order that the body corporate manager reimburse the body corporate for the amount of $432.44 being GST unlawfully collected on ambulance levies

The only way that I have jurisdiction to consider the above matters involves a consideration of whether the body corporate has acted reasonably in performing its functions as required by section 94 of the Act which provides as follows:

94 Body corporate’s general functions
(1) The body corporate for a community titles scheme must--
(a) administer the common property and body corporate assets for the benefit of the owners of the lots included in the scheme; and
(b) enforce the community management statement (including any by-laws for the scheme); and
(c) carry out the other functions given to the body corporate under this Act and the community management statement.
(2) The body corporate must act reasonably in anything it does under subsection (1).

The term "unreasonable" has been the subject of much judicial comment including the recent decision Dubler Group Pty Ltd v Ku- Ring-Gai Municipal Council [2004] NSWLC 305 at para 47
where the Land and Environment Court of NSW relied upon the following meanings which have been given to the term:

•	" whether the opinion held was so unreasonable that no reasonable Minister could have ever formed that opinion: Associated Provincial Picture Houses Pty Ltd v Wednesbury Corp [1948] 1 KB
•	"whether the opinion held was so devoid of any plausible justification that no reasonable person could ever have reached" it: Bromley London Borough Council v Greater London Council [1981] UKHL 7; [1983] 1 AC 768;
•	"whether it was a decision which is so outrageous that its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it" : Council of Civil Service Unions v Minister for the Civil Service [1985] 1 AC 374 at 410."

Based on the above I am of the view that in considering whether the body corporate Committee has acted reasonably in the circumstances, I should have regard to the following considerations:

•	whether the decision of the lot owner to oppose the motion was so unreasonable that no reasonable person could ever have reached that decision;
•	whether the opposition of the lot owner has no plausible basis; and
•	whether the opposition of the lot owner was so outrageous that no sensible person could have logically reached it.

Transfer of the Caretaking and Letting Agreement

The applicants submit that the body corporate should withdraw its approval of the proposed transfer of the Caretaking and Letting Agreement on the following grounds:

•	The prospectus for Amrites Ltd. (the parent company) requires revision and therefore the issue of the prospectus has been delayed;
•	Profit projections contained in the prospectus will be altered to reflect the amortisation of assets;
•	The revised prospectus and transfer application must be considered by the committee following ASIC approval and ASX listing.

Having regard to the above judicial interpretations of the word "unreasonable" I do not believe that there is sufficient evidence to establish that the Committee has acted unreasonably. I am advised that the contract date for transfer of the "management rights" to Qld Rights Operators Pty. Ltd. has been extended to accommodate the listing of the parent company, Amrites Ltd., and there is no risk to the vendor as personal guarantees have been obtained from the directors of the parent company. Further, the body corporate manager points out that any attempt to withdraw its approval could render the body corporate liable for substantial damages.

In the meantime Raftbrook Pty. Ltd. will continue to operate as the caretaker and letting agent. I am not aware of any complaints against Raftbrook Pty. Ltd. regarding the performance of its duties and obligations, and in any event, remedies are available to the body corporate under the Caretaking and Letting Agreement.

Recovery of Monies Paid for Electricity

The applicants also seek orders that Raftbrook Pty Ltd. provide security for monies likely to be owing pursuant to the overcharging for electricity. Unfortunately, I do not believe I have jurisdiction to make the orders sought. Even if I were to assume that I have jurisdiction, I do not believe that it is appropriate for an adjudicator appointed under the Body Corporate and Community Management Act 1997 to determine complex contractual issues involving interpretation of the Electricity Act 1994 as it applies to the scheme.

The applicant is seeking relief on the assumption that Raftbrook Pty Ltd is in debt to the body corporate to the extent of $90,000, being the amount of alleged overcharging for electricity. However, the calculation by the applicants is based on estimates of total electricity consumption, electricity usage by tenants as opposed to owner occupiers and assumptions regarding the operating margin to Raftbrook. On the other hand, the audit of the electricity sales by Ernst and Young refers to a total revenue of $126,658 and concludes that the operating margin to Raftbrook was approximately $25,000 per annum and the net margin was $9,848 after deduction of administration and account management costs.

The Chairman of the body corporate and the body corporate manager submit that Raftbrook Pty. Ltd. had the discretion to charge lot owners a combination of a mark up on the cost of bulk electricity and/ or an account administration fee, provided that the total did not exceed the equivalent of the Tariff 11 charge. On the other hand, the applicants claim that Raftbrook Pty. Ltd. was only ever entitled to charge a flat rate "service fee".

I have concerns about whether it would be appropriate for me to make a determination regarding the above issues. Although the Act establishes procedures for resolution of disputes regarding body corporate issues, not all disputes of that nature are appropriate for determination by an adjudicator. Section 270(1)(b) of the Act allows for an adjudicator to dismiss an application if they are satisfied the dispute should be dealt with in a court or tribunal of competent jurisdiction. In this case, proper consideration of the validity of the electricity supply arrangements will involve interpretation of the Electricity Act 1994 and private contractual rights between the owners and Raftbrook Pty. Ltd.
In my opinion, the dispute resolution mechanisms provided for under chapter 6 of the Body Corporate and Community Management Act 1997 are simply not appropriate for resolution of this type of dispute. The object of the dispute resolution provisions contained in the Act is to ensure that disputes are resolved in an informal and cost efficient manner. The process of departmental adjudication involves an examination of material submitted in writing, and there is no provision under the Act for an adjudicator to conduct a hearing or to take evidence on oath. In considering the conflicting material before me, I have concluded that the evidence could only satisfactorily be tested if the parties and their witnesses were able to be examined and cross examined.

I have therefore concluded that having regard to the complexity of the issues involved and the need for conflicting evidence to be tested, the matter is one which should be determined in a court or tribunal of competent jurisdiction (section 270(1)( b) of the Act).
I have dismissed the application accordingly.