Macleay Tower & Villas [2006] QBCCMCmr 295 (8 June 2006)

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

David Lorenz and Nina Cheryl Emery, the (now former) caretaking service contractors and letting agents for "Macleay Tower & Villas" and (now former) Owners of Lot 13

I hereby order that the application for the following orders:

1. An Order that at the Committee meeting held on 11 October 2005, the Committee of the Body Corporate resolved to consent to the assignment of the Management and Caretaking Agreement dated 21 October 1998 and the Building Letting Agreement dated 21 October 1998 without a condition imposing the payment of an amount pursuant to section 85 of the Body Corporate and Community Management (Standard Module) Regulation 1997.
2. A Declaration that to the extent that the minutes of the Committee meeting of 11 October 2005 failed to record the consent to the assignment, that the minutes are inaccurate and did not correctly record the business of the Committee meeting.
3. A Declaration that any purported resolution of the Committee of the Body Corporate purported to have been passed on a date subsequent to the Committee meeting whereby the said Committee purports to make any resolution approving the said assignment upon conditions or otherwise is invalid or ineffectual upon the grounds that the Committee meeting of the 11 October 2005 consented to the assignment and which consent is binding on the Body Corporate.
4. An order that the sum of $16,500 being the purported transfer fee plus GST paid by the Applicant to the trust account of the Solicitor’s for the Body Corporate be paid out without deduction to the Applicant.

is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0778-2005

"Macleay Tower & Villas" CTS 24663

Scheme

"Macleay Tower & Villas" is registered as a building format plan of subdivision comprising 107 lots and common property. It is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Standard Module).

Application

This application is brought by the former Owners of Lot 13, David Lorenz Emery and Nina Cheryl Emery (the Applicants), who were also letting agents and caretaking service contractors for the scheme, against the Body Corporate seeking the following orders:

Submissions in response to the application were sought from all owners (excluding the Applicants) and the committee. The body corporate made a submission through its legal representatives, Hopgood Ganim Lawyers. The Applicants exercised their right under section 246(1)(a)(ii) of the Act to inspect the submission and make a reply, through their legal representatives, Short Punch & Greatorix. The Body Corporate inspected the Applicants’ reply pursuant to their right under section 246(1)(a)(iii).

Further Material Submitted by Applicants

In their reply to the submission of the Body Corporate, the Applicants raised a "Further Submission" in the following terms.

The Applicants state that "it is unlawful to impose a transfer fee if the circumstances do not fit the prescription under section 85(3) SM". They allege that the Deed of Variation entered into between the Applicants and the Body Corporate on 28 September 2004 does not fit the entitlement of the body corporate contained under section 85 of the Standard Module in that:

They go on to allege that the agreement (being the assignment to the Applicants dated 3 August 2000) was entered into more than three years ago and has not been extended since entered into. Therefore, they argue, a transfer fee may not be imposed by the body corporate.

I consider that this "further submission" by the Applicants substantially affects the nature of the application. In such circumstances, the Applicants could have requested, under section 245, the Commissioner’s permission to change the application prior to an initial case management recommendation being made. They did not request any change to the application nor did they seek any additional orders. As such, I propose to disregard the "further submission" made except to say that I find no merit in it in any event.

I consider that the granting of an option to extend amounts to an extension at the time the option is granted for the purposes of section 85 of the Standard Module. In my view, sections 80, 81 and 82 of the Standard Module can lead to no other conclusion. All three sections, when limiting the term of engagements, provide that the term provided for in the relevant engagement is to be considered after allowing for any rights or options of extension or renewal (bolding my emphasis). The granting of an option to extend would certainly be included in the term of the contract within the meaning of sections 80, 81 and 82.

Pursuant to a Deed of Assignment dated 3 August 2000, the Applicants became the caretaking service contractors and letting agents for the scheme. On 28 September 2004, the Applicants and the Body Corporate entered into a Deed of Variation in respect of the Management and Caretaking Agreement (dated 21 October 1998) and Building Letting Agreement (dated 21 October 1998) whereby the Applicants were granted an additional five year option period. I consider that the granting of an additional five year option on 28 September 2004 amounted to an extension of the agreements. As such, the further assignment of the letting agreement and caretaking service contract from the Applicants to Scott Property Management Pty Ltd enables the body corporate to impose a transfer fee. The relevant percentage is 2%, the body corporate approval for the assignment^[1] coming more than 1 year but less than 2 years after the contract date – the date the extension was granted.^[2]

Jurisdiction

At the time this application was lodged on 1 November 2005 (the same day as settlement for the sale of Lot 13, the management rights and letting rights), the Applicants were the Owners of Lot 13 and letting agents and caretaking service contractors for the scheme, such that the dispute falls within the definition of a "dispute" in section 227 of the Act.

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)).

Matters in Dispute

This dispute concerns the right of the Body Corporate to charge the Applicants, on the transfer of the Management and Caretaking Agreement and Building Letting Agreement, an amount pursuant to section 85 of the Standard Module. Section 85 provides as follows:

sinking fund.

The Applicants submit that the "relevant amount" as referred to in section 85 can only be imposed by the Body Corporate as a condition of approving the transfer. It is submitted that at the time of approving the transfer, namely at the Committee meeting held on 11 October 2005, the Committee in granting its approval at no time imposed a relevant amount pursuant to section 85(2). It is submitted that a "relevant amount" cannot be imposed at any other time as the "relevant amount" is a statutory imposition governed entirely by section 85 and a failure to observe the provisions of section 85(2) is fatal to its imposition.

The Body Corporate submits that the Committee did not resolve to approve the transfer at the Committee meeting held on 11 October 2005. Approval for the transfer, it states, was not given until 1 November 2005, pursuant to a vote taken outside a Committee meeting pursuant to section 35 of the Standard Module. Two motions were passed, one to consent to the assignment of the management and caretaking agreement and building letting agreement and one to impose the transfer fee.

Both parties approached this dispute by treating it as a factual dispute concerning what transpired at the committee meeting held on 11 October 2005. But what transpired at that committee meeting is only relevant if the assertion upon which the Applicants’ case rests is true.

The Applicants’ case rests on their argument that a transfer fee cannot be imposed at any time other than the time of approving the transfer. The Applicants appear to imply that the time of "approving the transfer" is the time of the committee meeting at which the committee grants its consent to the transfer. However, I could not find anything in their application to support this assertion. Despite the plethora of material submitted by the Applicants, only one sentence was devoted to the issue. The Applicants submitted that the "relevant amount" is a statutory imposition governed entirely by section 85 and a failure to observe the provisions of section 85(2) is fatal to its imposition. With respect to the Applicants’ solicitors, I found this sentence nonsensical. I convened a teleconference with the solicitors for each party on Thursday, 4 May and, among other things, invited each of them to make submissions in relation to the meaning of "approval date" in section 85(3) of the Standard Module.

The body corporate made submissions in relation to this as follows:

The phrase "approval date" in Section 85(3) of the Standard Module is not defined in the Standard Module, the Act or any other Regulation to the Act, apart from the statement in that Section that it is "the date ... on which the Body Corporate approves the transfer".

It is submitted that it appears that the phrase "approval date" can have one of the following meanings:

As a result, on a plain reading of sections 84(1), 84(2), 84(5) and 85(2) and (3), it is submitted that the meaning of "approval date" is ambiguous and unclear. Consequently, it is submitted that extrinsic materials may be referred to and relied upon in assisting in its interpretation pursuant to Section 14B of the Acts Interpretation Act 1954 (Qld).

The body corporate then gives several Dictionary definitions of the terms "approve" and "approval" and goes on to state:

From the above dictionary definitions, it is submitted that the phrase "approval date" can only refer to the date on which the transfer is confirmed or sanctioned officially. It is to be distinguished from "authorising" an act to occur, that is, the permitting of a thing or act to be done in the future. It is submitted that the phrase "approval date" does not refer to or envisage the future compliance with official consent being given; the phrase contemplates the date on which the immediate and binding effect of the approval has effect.

In addition, the body corporate submitted that the consideration that the interpretation that "best achieves the purpose of the Act is to be preferred to any other interpretation" as referred to in Section 14A(1) of the Acts Interpretation Act 1954 (Qld) should also be kept in mind.

To ascertain the "purpose of the Act", the operation of other relevant provisions of the legislation must also be considered. The Body Corporate considered sections 78 and 37 of the Standard Module and continued as follows:

From an analysis of the above provisions, it is submitted that any resolution by a Body Corporate to approve a transfer is merely that – a resolution "to approve" a transfer. It is not an approval of itself. Pursuant to Section 78 of the Standard Module, if such engagements are not recorded in writing to the degree required and are not formally executed by the Body Corporate, they are void and of no effect. Further, a resolution by the Body Corporate Committee to consent to the transfer may not be carried into effect unless the matters in Section 37 of the Standard Module are first satisfied.

Accordingly, it is submitted that a Body Corporate does not formally approve a transfer until the instrument of transfer evidencing the Body Corporate’s consent is formally executed by the Body Corporate. As such, it is submitted that the intention of the legislation must be that the "approval date" does not arise until such a document has been executed. Until that time, it is submitted that a mere resolution to approve a transfer has no binding effect.

Further, as provided in Sections 84(5) and 85(2) of the Standard Module, a resolution to approve may be subject to conditions, these including the payment of a transfer fee and/or the entry into a deed of covenant / deed of assignment for the new managers to comply with the previous managers’ obligations in a form satisfactory to the Body Corporate. It is submitted that, should any of these conditions be imposed, and in circumstances where any resolution to approve is merely a step envisaging the subsequent execution of a formal binding instrument of transfer, the resolution to approve amounts only to a mere conditional acceptance of the transfer occurring subsequently. It is not a conditional agreement or other binding agreement which, it is submitted, the term "approval date" envisages. In this respect, it is submitted that the condition requiring the subsequent execution of a formal document evidencing the transfer is a condition precedent to a contract forming at a later stage when the document is executed, and not merely performance of any prior agreement (see generally Halsbury’s Laws of England (4^th Edition) at paragraphs 669-670). It is submitted that the term "approval date" means the date on which a formal binding agreement is formed.

The Body Corporate further supported their submissions by making reference to previous Adjudicator’s decisions as to Section 85(3) of the Standard Module and the interpretation of the phrase "contract date". They state that In Budds Beach [2003] QBCCMCmr 240 (24 November 2003) and Carrington Court Main Beach [2004] QBCCMCmr 78 (9 February 2004), it was found that the phrase "contract date" in Section 85(3) of the Standard Module meant the date of the formal document or documents evidencing the engagement of the person as a service contractor and is not the date on which those engagements or authorisations commence.

Accordingly, based on all of the above, the Body Corporate’s submission is that the phrase "approval date" in Section 85(3) of the Standard Module means the date on which the Body corporate executes the formal instrument of transfer evidencing the Body Corporate’s consent to the transfer.

The Applicants also made submissions as to the meaning of "approval date" in section 85(3) of the Standard Module. After referring to sub sections (2), (3), (5) and (6) of 84 of the Standard Module and the Oxford Dictionary definition of "approval" as an "act of approving", they submit as follows:

In each of these sections, the use of the words approves, approve and approval are all referring to an "act of approving" as the ordinary and proper meaning given by the dictionary.

Further, the wording of Section 84(2) specifically states that the approval may be given by "resolution of the Committee ... or by ordinary resolution of the Body Corporate". A resolution of the Committee or the Body Corporate as an act of approval does not require a document, ie a deed or a contract in writing.

If we turn to the Act and the Module to determine how a Body Corporate can make a decision, we see that:

If the legislature intended any different form of decision making in the transfer of engagements or authorisations this would have been detailed in the specific provisions. A specific reference to a document which is said to evidence and constitute body corporate approval would have to be made. There is no such reference. Hence, to read an interpretation that approval is only constituted by the execution of the instrument of transfer would be inconsistent with not only the wording but also the way the provisions regulating the procedure are laid out. This is clearly a case where "the Act means what it says, and, what is more important, it does not mean what it does not say.^[3]

Consequently, from all of the above, it is clear that "the approval to the transfer" and "the making of a requirement as a condition of approving the transfer occurs "when the decision of the committee is made".

In relation to the effect of the Deed of Assignment, the Applicants go on to submit as follows:

The Deed of Assignment entered into is a document recording the assignment between three parties being the Body Corporate, the previous Manager and the new Manager (and in addition it includes a guarantor and lot owner arrangement).

Between the previous Manager and the new Manager, it records the assignment. Between the Body Corporate and those parties, in Clause 6, it records the consent of the Body Corporate which follows on from the act of approval, as decided at the Committee Meeting.

After studying the submissions of both parties, I am not convinced that the committee "approves" a transfer within the terms of section 85 of the Standard Module at a committee meeting at which a resolution approving a transfer is passed. I am more inclined to the view that at such a meeting, the committee resolves to consent to or approve a transfer and that the transfer is not in fact "approved" until it is executed. As such, any conditions to which the approval is subject can be made at any time prior to execution.

I believe my view is supported by the fact that committee resolutions can be carried out only if no Notice of Opposition is received^[4], as submitted by the body corporate. Further, there is nothing in the legislation to stop a committee from revoking a resolution previously made, by passing an appropriate resolution. I am not convinced that the wording of section 84(2) of the Standard Module compels a conclusion that the "approval date" for the purposes of section 85(3) is the date the committee passes a resolution granting approval, as the Applicants suggest. Rather, I consider that section 84(2) merely makes it clear that approval for a transfer can be given by the body corporate in general meeting passing an ordinary resolution, or by resolution of the committee. Further, an adjudicator in a previous application (0661-2005) has determined that a transfer fee was correctly assessed by the body corporate at 3% on the basis that the "approval date" spoken of in section 83(3) of the Accommodation Module was the date of the assignment rather than the date the body corporate resolved to approve the transfer of the engagement and authorisation, six days prior.

I consider that the effect of the Deed of Assignment is more significant than the Applicants suggest. It is the Deed that creates legal obligations between third parties and the body corporate and, as the Applicants correctly point out, it is via clause 6 of the Deed that the body corporate consents to the transfer.

Even if the Applicants’ assertion were true, I would nevertheless have dismissed this application on the basis that the committee did not resolve to "approve" the transfer at the committee meeting held on 11 October 2005. My reasons are as follows.

Did the Committee Resolve to Approve the Transfer at the Committee Meeting Held on 11 October 2005?

Both parties to this dispute have gone to some lengths to provide their version of what occurred at the committee meeting held on 11 October 2005. After considering all of the material submitted in this respect, I find the position of the body corporate to be more convincing than that of the Applicants.

Five voting committee members attended the committee meeting held on 11 October 2005. The Applicants’ assertion that the committee did resolve to approve the assignment of management and letting rights is supported by only one of those voting committee members. In contrast, the body corporate have submitted supporting statements by three of those voting members refuting that the assignment was consented to at that meeting.

The minutes of the committee meeting of 11 October 2005 were considered at a subsequent committee meeting held on 7 February 2006. At that meeting, two motions were voted on in relation to the issue in dispute. The first motion, proposed by M Hart to amend the minutes failed, with two votes for, two against and one abstention. Similarly, the second motion to approve the minutes failed with two votes for, two against and one abstention. Five voting members were present at the meeting of 7 February 2006, four of whom were also present at the meeting of 11 October 2005. The minutes of the meeting reveal that Mark Holmes did not attend, but had given a proxy to Steve Hill. However, the proxy vote is not accounted for in the counting of votes cast for and against motions considered at the meeting. I believe that had the proxy vote been accounted for, then the motion to approve the minutes may have passed, given that Mark Holmes and Steve Hill have both submitted statements in support of the body corporate’s position in relation to what transpired at the committee meeting on 11 October 2005.

The committee resolved to approve the transfer and impose the transfer fee by voting outside a committee meeting on 1 November 2005 by a vote of four for, nil against. I believe the transfer was "approved" by the body corporate when the relevant instrument was executed later that day.

Further, the minutes of the "Voting on Motions Outside Committee Meetings" resolved on 1 November 2005 which recorded the committee’s resolutions to consent to the assignment and impose a transfer fee, were approved by a vote of 5 to nil at the committee meeting of 7 February 2006. A proposal by M Hart to alter the wording of the resolution passed on 1 November 2005 was lost by a vote of 2 for and 3 against.

Considering all of the above, I find in favour of the Body corporate in terms of what transpired at the committee meeting held on 11 October 2005. I find no evidence that the body corporate did resolve to consent to the transfer of the management and letting rights at that meeting. The minutes of the committee meeting of 7 February 2006 confirm that the committee in fact consented to the transfer and imposed the transfer fee on 1 November 2005.

Having made this finding, I must dismiss each of the orders sought by the Applicants. I am satisfied that the body corporate was entitled to and did impose a transfer fee of 2% of the amount representing fair market value of the transfer. Solicitors for the body corporate calculated the transfer fee to be $15,000 plus $1,500 GST on the basis that the purchase price under the contract for the sale of the management rights (being $750,000) represents the fair market value of the transfer.

Dismissal of Application Pursuant to Section 270(1)(c) Act

I have read and considered the submissions from both parties in relation to me making an order dismissing the application under section 270(1)(c) of the Act. I have dismissed the application for the reasons above rather than that the application may have been misconceived or without substance. I therefore cannot make a costs order under section 270(3) of the Act.

^[1] The formal Deed of Assignment was executed on 1 November 2005.
^[2] See section 85(5) Standard Module
^[3] Secretary of Department of Health v. Harvey (1990) 21 ALD 393 per Meagher JA
^[4] See section 37 Standard Module

Number of Scheme:	24663
Name of Scheme:	Macleay Tower & Villas
Address of Scheme:	QUEENSLAND

(a)	the Deed does not extend or vary the agreement
(b)	the Deed only gives an option which may or may not be exercised and as such is not an extension of the term.

(a)	The date on which the Body Corporate resolves to consent to the transfer prior to the Body Corporate acting on the resolution and executing any formal instrument of transfer evidencing that consent; or
(b)	The date on which the Body Corporate executes the formal instrument of transfer evidencing the Body Corporate’s consent to the transfer.

1.	An Order that at the Committee meeting held on 11 October 2005, the Committee of the Body Corporate resolved to consent to the assignment of the Management and Caretaking Agreement dated 21 October 1998 and the Building Letting Agreement dated 21 October 1998 without a condition imposing the payment of an amount pursuant to section 85 of the Body Corporate and Community Management (Standard Module) Regulation 1997.
2.	A Declaration that to the extent that the minutes of the Committee meeting of 11 October 2005 failed to record the consent to the assignment, that the minutes are inaccurate and did not correctly record the business of the Committee meeting.
3.	A Declaration that any purported resolution of the Committee of the Body Corporate purported to have been passed on a date subsequent to the Committee meeting whereby the said Committee purports to make any resolution approving the said assignment upon conditions or otherwise is invalid or ineffectual upon the grounds that the Committee meeting of the 11 October 2005 consented to the assignment and which consent is binding on the Body Corporate.
4.	An order that the sum of $16,500 being the purported transfer fee plus GST paid by the Applicant to the trust account of the Solicitor’s for the Body Corporate be paid out without deduction to the Applicant.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Macleay Tower & Villas [2006] QBCCMCmr 295 (8 June 2006)