Walton's Retreat [2005] QBCCMCmr 669 (30 November 2005)

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

Richard Birch and Judith Birch, the former caretaking service contractors for the scheme and former co-owners of lot 30

I hereby order that the application by Richard Birch and Judith Birch, for an order that the body corporate is not entitled to recover the sum of $1,974.72 which the body corporate seeks as reimbursement of its costs in relation to determination of whether the applicants were entitled to assign their management rights to Feehely Investments Pty Ltd. is dismissed.

The alternative application for an order that the Commissioner assess the fee that the body corporate is reasonably entitled to recover in respect of costs incurred in relation to the assignment of management rights to Feehely Investments Pty Ltd is also dismissed.

And I further order that if the sum of $1,974.72 has not at the date hereof been reimbursed to the body corporate that Richard Birch and Judith Birch shall pay that sum to the body corporate sinking fund within seven days of the date of this order.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0545-2005

"Walton’s Retreat" CTS 22687

THE APPLICATION

This is an application dated 2^nd August 2005 and amended by 22^nd August 2005, by Richard and Judith Birch (the applicants) co-owners of Lot 30, and the caretaking service contractors for the scheme, against the body corporate for the scheme (the body corporate) for an order that the body corporate is not entitled to recover the sum of $1,974.72 which the body corporate seeks as reimbursement of its costs in relation to determination of whether the applicants were entitled to assign their management rights to Feehely Investments Pty Ltd. (the prospective purchasers.) In the alternative, the applicants ask the Commissioner to assess a reasonable fee in respect of costs claimed by the body corporate in relation to the assignment.

JURISDICTION

"Walton’s Retreat" Community Titles Scheme 22687 is a community titles scheme under the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Accommodation Module). There are 30 lots in the scheme created under a Group Title Plan of subdivision.

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

(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 body corporate have raised a jurisdictional issue as to whether on 2^nd August 2005, the date of the application, the applicants were lot owners, as on that date they transferred Lot 30 and their management rights to another party. I am satisfied that the applicants have standing to bring an application as their application was received at this office at 9.30am and the transfer settlement time was 11.30am.

The applicants say that they are the caretaking service contractors by virtue of an agreement dated 5^th November 1996, as varied on 18^th November 1999. The applicants sought the permission of the body corporate committee to assign the agreement, at first verbally, on 23^rd March 2005, and then in writing via their solicitors Cockerill and Co (Cockerills) on 4^th April 2005.

Strataworld Pty Ltd ( the body corporate manager) responded to Cockerills that the body corporate wished to seek advice from a solicitor, and that the body corporate manager would advise the applicants of the costs involved. Early in April 2005, the body corporate manager telephoned the applicants and said that the costs would be approximately $500.

Correspondence between the body corporate, Cockerills and the prospective purchasers’ solicitor Mr. T.F.Wardrobe (Wardrobe) then ensued between 18^th April 2005 and 17^th May 2005. The body corporate engaged Hynes Lawyers (Hynes) on 6^th May 2005 but had sought legal advice prior to 17^th April 2005, as referred to in a fax from the committee secretary to the body corporate manager.

The applicants say that "because of the delays by the body corporate the consent was not provided by the 17^th May 2005" which was the chosen settlement day, and the proposed purchasers backed out, treating the contract as at an end. The body corporate was charged $1,974.72 by Hynes which fee was passed on to the applicants, pursuant to section 82(6)(b) Accommodation Module.

Section 82(6) states –

transfer (other than reimbursement for expenses reasonably incurred by the body corporate in relation to the application for

its approval).

The body corporate committee made a submission. It says that Hynes invoice was dated 30^th May 2005 for payment due on 13^th June 2005. It was passed on to the applicants who sought and obtained a breakdown from Hynes on 3^rd June 2005. The committee queries why it took the applicants until 2^nd August 2005 to lodge a dispute application concerning the account.

The committee denies that any of the delays were caused by the body corporate or its lawyers but by the prospective purchasers themselves with whom it was difficult to arrange meetings, although the committee remained available. The body corporate felt obliged to seek legal advice as the real estate agent for the applicants made threats to the committee. The body corporate denies that it ever objected to the prospective purchasers, as such, but was concerned at their calibre in that they had little or no experience of managing a complex, which complicated the transfer process.

In reply the applicants say they brought up the matter of the invoice at a committee meeting on 21^st June 2005, following the receipt of the itemised invoice from Hynes. At that meeting "no-one could explain why Hynes lawyers were called in on 6^th May 2005, or what their instructions to Hynes Lawyers were." The applicants’ consent was "never sought". They deny that their selling agent made any threats or remarks to the committee within their knowledge or at their instruction.

A further submission was made by the body corporate concerning Cockerills’ invoice to the applicants dated 2^nd August 2005., covering the period 18^th March to 19^th May 2005. It deduces from the wording of the account that the applicants were aware that the prospective purchasers were getting cold feet and that the reason for their withdrawal was not the refusal of their application by the body corporate.

It denies that delays were due to the body corporate but that the committee felt pressured in trying to assess the applicants in 30 days without all necessary information and the prospective purchasers failed to accept "2 repeat interview dates". It points out that until 9^th May 2005, Hynes fees appear to be only $414.00 and that anything after that date was only occurred because of the applicants and the prospective purchasers "inability to provide the necessary information and abide by the 30 day limit beginning once all necessary information was received."

The applicants replied to this further submission with a copy of a fax from the body corporate manager showing the body corporate committee had concerns about the prospective purchasers’ abilities and experience on 17^th April 2005. They also dispute the body corporate’s interpretation of the detailing of Hynes’ account.

The applicants made a second application to the body corporate in respect of subsequent purchasers, the Renshaws, on 6^th July 2005 with a settlement date proposed for 2^nd August 2005. On 19^th July 2005, the body corporate manager sought the applicants’ approval for the engagement of Q Solicitors to oversee the transfer with a fixed fee of $500. No such approval was sought before engaging Hynes say the applicants.

DETERMINATION

Section 82(6) of the Accommodation Module was amended in 2003, specifically to include reimbursement of any expenses reasonably incurred by the body corporate in relation to the application for its approval of transferees. Formerly, the wording was "legal expenses reasonably incurred."

It has therefore always been in the consideration of the legislation, that the body corporate is entitled to seek legal advice, and legal assistance, with regard to a proposed transfer and drafting of related documents. There is no need for the body corporate to feel threatened in any way before it seeks legal advice. It is considered by the legislation prudent for it to do so. Therefore, the reason why the body corporate sought assistance from Hynes is irrelevant. It was conducting a business transaction, and taking specialist advice about it.

The applicants do not allege that the behaviour of the body corporate or their lawyers frustrated the sale, or breached their existing agreement with the body corporate. They claim only that the body corporate "is not entitled to recover the amount of $1,974.72" that is, the body corporate has " no right" to recover that sum.

In fact, the body corporate has every right as set out in section 82(6) Accommodation Module to recover "expenses reasonably incurred..." The subject of the expenses is reasonable, that is, the expenses were for legal advice.

What I am being asked to decide upon is whether the lawyers fees themselves were unreasonable, or whether the lawyers fees were reasonable but because of the behaviour of the body corporate, the lawyers did more work than was reasonably foreseen by any party, thus rendering the body corporate costs "unreasonable."

I am unable to say whether I find lawyers fees per se reasonable. If the body corporate was not happy with the service of its lawyers, or if the fees charged were not commensurate with professional fees for the work done, the correct body to make such a complaint to would be the Queensland Law Society or other professional body.

It appears that the applicants would have been willing to pay $500 for the body corporate’s lawyers, and had understood this to be the benchmark cost to them. This understanding came from a courtesy call from the body corporate manager to the applicants. This figure is not supported by any evidence as to whether the body corporate manager had spoken to lawyers or whether this was just the body corporate manager’s guess in his experience of transfers generally. It is not denied by the body corporate that this sum was mentioned to the applicants, so I accept the applicants’ word that it was.

I do not accept however, that such an estimate given by a body corporate manager, or even a quotation given by lawyers binds the body corporate. Unless a fixed fee is offered by a legal firm then it is not within the body corporate’s power to know what the bill will ultimately be. The body corporate may have been as surprised as the applicants to get the bill from Hynes for $1,974.72.

With the benefit of hindsight, and I suggest because if the current dispute concerning payment of Hyne’s bill, the body corporate manager sought a fixed fee statement from the next lawyer engaged by the body corporate with regard to the transfer to the Renshaws, and asked the applicants to accept that. There is no reason other than the wish to avoid further discord, why he should have done this however. The legislation does not require that the transferors are consulted before the body corporate seeks legal advice, or that the transferors approve certain quotations for legal work.

The legislation requires that the committee gives approval to the transfer, or approval may be given by ordinary resolution of the body corporate, . (section 82 (2)), and the body corporate must decide to approve a proposed transfer within 30 days "after it receives the information reasonably necessary to decide the application for approval."

This is an important proviso, as if the body corporate was to give its permission to the transfer by ordinary resolution of the body corporate at a general meeting, it would need at least 21 days notice to call the meeting. The legislation does not provide that the committee or the body corporate has only 30 days from the date of the application to give its approval.

However, I note that the applicants, in regard to the successful sale to the Renshaws made the application to the body corporate on 6^th July 2005 with a settlement date proposed for 2^nd August 2005. This is less than 30 days and would have required the committee to jump in order to meet the deadline arbitrarily imposed by the applicants (and perhaps the Renshaws).

In the circumstances I do not find it surprising that the applicants had to seek an extension for the settlement with the prospective purchasers. The applicants sought the approval of the body corporate on 4^th April 2005, (although the applicants verbally advised the body corporate of the application on 23^rd March 2005, two days before Easter, and presumably with no documents given at this stage) with the assignment to take effect on 22^nd April 2005.

On 4^th April the body corporate was sent a copy of the assignment deed between the applicants, the body corporate and "Feehely Investments Pty Ltd as Trustee for the Feehely Family Walton’s Retreat Trust."

By 17^th April 2005, the body corporate had not been provided with any references from nominated referees and did not know who was actually going to be performing the caretaking services. The body corporate manager wrote to Wardrobe on 18^th April 2005, requesting further information about the standing of the company assignee and the nature of the trust, and asking him to reply at his earliest convenience.

The settlement date was extended until 17^th May 2005. I note that the committee interviewed the prospective purchasers on 29^th April 2005, and proposed a second meeting on 9^th May 2005, but the prospective purchasers were on holiday.

On 10^th May 2005, a week before the settlement date, Hynes requested further documentary evidence about the prospective purchasers from the applicants’ lawyers because of their concerns that the prospective purchasers had not read the caretaking agreement, had not read the by-laws, had no knowledge of the legislation and no relevant experience, as had been revealed at the interview. Hynes also requested that the deed of assignment be amended to provide guarantees by the directors of the assignee company.

Hynes stated that the committee " is making every effort to facilitate the expeditious consideration of the proposed assignment..." and suggested that the draft document leave the date of the assignment blank " so that the date of the assignment is the date that the approval of the body corporate is obtained."

Hynes invoice details work done from 6^th May 2005 to 25^th May 2005, and covered 7 and a half hours professional work and one fax (outlays). It is not unreasonable amount of time to devote to the matter.

was interpreted by the prospective purchasers "as a refusal of the application."

The body corporate must not unreasonably withhold approval to the transfer (section 82(6)(a) Accommodation Module). It is not alleged that the body corporate has unreasonably refused the application. It was the prospective purchasers who took Hynes letter of 10^th December 2005 as a refusal, although how this was so in the light of the request for specific amendments to the instrument which would engage them as caretaking service contractors, with the date left to be inserted on the date of approval, I am not sure.

The applicants claim that the invoice in the sum of $1,974.72 from Hynes passed on to them from the body corporate, for the abortive transaction was "an outrageous amount when a verbal comment from ( the body corporate manager) suggested approximately $500 for such work."

As a comparison of two figures that may be so. However, for the applicants to rely on such a "verbal comment" without more, was simply wishful thinking. I do not find that the body corporate has acted unreasonably in its dealings with its lawyers or has taken any steps to delay the transfer to the proposed purchasers. On the contrary, it appears that the body corporate committee moved swiftly to try to understand the documents put before it, to get legal advice, and to interview the proposed transferees within an unrealistic deadline imposed on it, and consequently, on its lawyers.

The body corporate is entitled to be reimbursed for its legal expenses which were reasonably incurred by the body corporate, and I so order. If this account has not already been reimbursed to the body corporate, the applicants shall make payment to the body corporate within 7 days following this order.

Number of Scheme:	22687
Name of Scheme:	Walton’s Retreat
Address of Scheme:	60 Warana Street THE GAP QLD 4061

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Walton's Retreat [2005] QBCCMCmr 669 (30 November 2005)