Ipanema [2006] QBCCMCmr 328 (21 June 2006)

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

Moonlight Group Pty Ltd, the Owner of lot 1, and caretaking service contractor for the scheme as at 26^th October 2005

I hereby order that the application for orders as follows -

"that the Body Corporate repay to the applicant the amount of $42,042.01 paid by the applicant to the Body Corporate as a condition of the Body Corporate consenting to the assignment of the Management Rights"

"that further and/or in the alternative, a Declaratory Order that the fee required by the Body Corporate in consenting to the assignment of $42,042.01, representing legal costs incurred by the Body Corporate and/or the Secretary of the Committee, Mr Teedla in relation to a Dispute Resolution Application between the Applicant and the Body Corporate and/or a defamation proceedings between the Applicant and Mr Teedla, is unlawful pursuant to section 82 of the Accommodation Module, and the Body Corporate has no entitlement to require such money;"

"that the costs incurred by Stewart Silver King & Burns in the amount of $7,191.16 is excessive and unreasonable and accordingly costs incurred by Stewart Silver King & Burns should be limited to an amount of $2,500 including GST. Accordingly the amount of $4,691.16 is to be refunded to the Applicant within seven (7) days from the date of this Order; "
are dismissed

In lieu I order that the body corporate may not seek payment from the applicant of the sum of $42,042.01 in consideration of the body corporate’s approval of a transfer of the applicant’s rights under an engagement as a service contractor, contrary to section 82(6)(b) of the Body Corporate and Community Management (Accommodation Module) Regulation 1997.

I further order that the sum of $7,191.16 being the total of Silver Stewart King and Burns’ invoice number 861 dated 21st October 2005 should be paid by the applicant within 14 days of the date of this order, if such sum has not already been paid by the applicant.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0756-2005

"Ipanema" CTS 32267

APPLICATION
This is an application by Moonlight Pty Ltd, (the applicant) who at the time of making the application on 26^thOctober 2005, was the caretaking service contractor for the scheme Ipanema CTS 32267. The orders sought against the body corporate are as follows :

The applicant sought an interim order that the body corporate be prevented from seeking the sum of $42,042.01, as a condition of its consent to the assignment taking place on 28^th October 2005. The applicant claimed that the sum is a "fee" and as such prohibited by virtue of section 82(6)(b) of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 ( the Accommodation Module). On 27^th October 2005, following a teleconference with solicitors for the body corporate and the applicant, I made an interim order that the body corporate shall not impose as a condition of its consent to the transfer, that the sum of $42,042.01 be paid to it by the applicant.

The question of liability for the sum of $42,042.01, and whether Silver Stewart King and Burns’s charges were reasonable, remain to be settled.

JURISDICTION
Ipanema CTS 32267 is a community titles scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Accommodation Module. There are 82 lots in the scheme.

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

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 about a claimed or anticipated contractual matter about the engagement of a person as a caretaking service contractor, must be by specialist adjudication. (Section 265 Act).

Section 82 (6) of the Accommodation Module states, that when a body corporate is deciding whether to approve a proposed transfer of a service contractor’s rights under a contract of engagement -
(6) The body corporate must not--

(7) Subsection (6) applies subject to section 83.
.
The proviso in section 83 is that the body corporate may require a payment of an amount on transfer, if the transfer approval date is between 1 and 3 years of the date of the contract date. (section 83(5))

SUBMISSIONS
The applicant says that the sum claimed of $42,042.01 is "a fee" and therefore contrary to section 82(6)(b) of the Accommodation Module. It says, that the sum is "a fee" because it is not a sum pertaining to the "reimbursement of expenses reasonably incurred by the body corporate in relation to the application for its approval" but relates to other "previous and continuing" legal proceedings.

It further says –

"The legal costs incurred in relation to ...(other proceedings) is not and could not be seen to be an expense incurred by the Body Corporate in relation to its consenting to the assignment of the Management Rights. Such costs which would ordinarily be incurred as a result of the Body Corporate consenting to the Management Rights are, legal fees in considering the assignment, subsequent Deed of Assignment, and proposed financials and other details of the proposed Assignee.........."

The body corporate, in a letter dated 20^th October 2005, from its solicitors Delaneys Lawyers to solicitors for the applicant McDonald Balanda and Associates, acknowledged that the sum of $42,042.01 "represents the legal costs and related expenses concerning defaults by (the applicant) under the Management and Letting Agreements."

Following the interim order, submissions were also sought from all owners, the committee, and the body corporate manager Silver Stewart King and Burns, (the body corporate manager.) There were no submissions from owners.

Delaneys Lawyers on behalf of the body corporate made written submissions on 19^th December 2005. The body corporate says that the applicant has breached the terms of its agreement and has failed to remedy breaches as at the date of the assignment on 28^th October 2005. At Clause 8.1 of the applicant’s contract of engagement with the body corporate, the body corporate agrees not to withhold its consent unreasonably if there are not at the time of the proposed transfer any existing unremedied breaches of the contract. Since the body corporate alleges that there were unremedied breaches of contract on the date of the assignment, it says it was entitled to withhold its approval. The way it proposed to resolve the deadlock was that the body corporate would give its approval if the applicant withdrew a prior application for dispute resolution (the "initial dispute") and pay "the Body Corporate’s costs" in relation to the initial dispute.

The sum of $42,042.01 represents the body corporate’s "legal fees with Gadens Lawyers" in defending the initial dispute.

The body corporate makes no submissions with regard to the body corporate manager’s fees of $7,191.16.

The body corporate manager made a submission in respect of the three outcomes sought by the applicant. The body corporate manager points out that at a meeting to decide whether to approve the transfer, the applicant proposed a draft deed of assignment which at Clause 5 gave a warranty that " all the conditions ( of the contract of engagement) had been performed." The Applicant asked the body corporate to agree that there was no existing breach, and the body corporate agreed.

I understand from this that the body corporate manager is saying that the applicant had agreed to pay what was asked by the body corporate. It says that "costs are a normal consideration in the settlement of commercial disputes."

In respect of its own fees of $7191.16, the body corporate manager says that the work done in respect of the transfer justified the fees as charged.

In reply to the submissions, the applicant on 7^th March 2006, says that the material provided in the submissions does not change the situation from the time of the interim order in October 2005. "Any issues concerning payment of the fees by the Applicant would need to be considered as part of the Specialist Adjudication to which those sums relate."

The applicant does not dispute that the body corporate agreed that there were no outstanding breaches of the contract of engagement at the time of the transfer, and that if breaches are alleged, this matter should be heard by Specialist Adjudication. With respect to the body corporate manager’s fees, it says this is a matter between the body corporate and its manager. The applicant agrees that pursuant to section 82(6)(b) of the Accommodation Module, the body corporate may be reimbursed ( by the transferor) for expenses reasonably incurred by the body corporate in relation to the application for approval of the transfer.

DETERMINATION
I understand that the sum of $42,042.01 was never paid by the applicant to the body corporate, so that the first outcome sought becomes irrelevant. The alternative outcome sought at item 2 becomes relevant.

I further understand that the body corporate manager’s fees have been paid by the applicant. (Second paragraph - Letter 24^th October 2005 from McDonald Balanda and Associates to Delaneys Lawyers and the body corporate manager’s submission .. "If the Commissioner is to order that these costs be refunded to ...( the applicant)...")

The history to this application is pertinent. On10th June 2005, the applicant lodged an application for dispute resolution with the Commissioner’s office, which application sought, inter alia, that a remedial action notice pursuant to section 84C of the Accommodation Module, served by the body corporate on the applicant be invalidated. The remedial action notice was served on 27^th May 2005 and stated that the applicant had failed to carry out certain functions under the terms of the contract of its engagement, which contract was dated 11^th March 2004.
By virtue of section 265 of the Body Corporate and Community Management Act 1997, an adjudication of a dispute must be by specialist adjudication if the dispute is about a claimed or anticipated contractual matter about the engagement of a person as a caretaking service contractor for a community titles scheme. The application was therefore referred to a specialist adjudicator agreed by the parties on 23^rd June 2005, and the parties made submissions to the specialist adjudicator at his request and through this Office. The matter was given the reference number 0425-2005.

The solicitors for the applicant at the time of lodging 0425-2005 were Short Punch and Greatorix; the solicitors for the body corporate were Gadens Lawyers. A meeting of the parties was scheduled by the specialist adjudicator for 18^th July 2005.

On 4^th January 2006, staff of the Commissioner’s office sought information as to the status of application 0425-2005 from Short Punch and Greatorix. Mr George of that office advised that Short Punch and Greatorix no longer acted for the applicant, but that the applicant’s solicitors were now McDonald Balanda and Associates, and that the specialist adjudicator Mr Cedric Hampson QC had been ill for several months, and possibly unable to continue practice as a specialist adjudicator. The staff of the Commissioner’s office then contacted solicitors McDonald Balanda and Associates on 9^th January 2006, and asked them to take instructions from the applicant as to the status of application 0425-2005. On 23^rd January 2006, the applicant sought to withdrew application 0425-2005.

By letter dated 25^th January 2006, parties to the dispute being McDonald Balanda and Associates for the applicant; Archers Body Corporate as body corporate manager for the body corporate, addressee for the committee, and addressee for the body corporate; the body corporate secretary Enn Teedla; and Gadens Lawyers were advised by this Office of the withdrawal. Subsequently Silver Stewart King & Burns, the newly engaged body corporate manager, was advised by letter dated 7^th February 2006 that the application had been withdrawn.

The body corporate seeks to rely on the terms of the contract of engagement and common commercial practice in settlement of disputes. These may both be relevant concerns in a specialist adjudication. However, the only questions that can be determined in this present application are –

Whilst I understand the position adopted by the body corporate, the full submissions do not change the situation which existed at the time at which the interim order was made. It is not disputed that the sum of $42,042.01 relates to Gadens Lawyers’ fees , and "related expenses" in the body corporate’s " defence" of application 0425-2005. I am not provided with a breakdown of those fees but I do not consider that a hindrance to my determination, since unless those fees relate to costs in another matter. For the body corporate to use the occasion of transfer as a lever in order to reclaim funds which it has voluntarily spent, whether with good grace or not, is to seek "a fee or other consideration" which the legislation forbids. The sum spent equates to the consideration chosen to allow the transfer to proceed.

The submission by the body corporate that if the ‘initial dispute’ had proceeded to specialist adjudication "that it is more than likely that the adjudicator would have found the Applicant to have been liable for the Body Corporate’s costs," is complete conjecture and untenable, particularly since it was the body corporate who pressed for the application to be withdrawn. (vide letter dated 21^st October 2005 from Delaneys Lawyers to McDonald Balanda & Associates.)
There is very limited power for an adjudicator to award costs under the Act. Section 270(3)(a) allows an adjudicator to order costs against an applicant in the circumstances where an application is dismissed for being frivolous, vexatious, misconceived or without substance. That sum is limited to a maximum of $2,000. (section 270(4)). There is no other power to award costs.

Both parties were represented by solicitors and had the benefit of legal advice. If a body corporate engages legal advisers, for whatever reason, it must be aware that there is no certainty that it will recoup its costs of so doing, even if it is successful in a matter heard in the civil courts. Costs are only awarded as a presiding judge sees fit and within the power given to the judge by the court.

If, as the body corporate alleges, the payment of $42,042.01 was enforceable under the contract of engagement, or was part of an agreement made subsequently between the parties, that is not a matter which can be dealt with by departmental adjudication. As I said in the interim order, that is not to say that the body corporate may not have other remedies it might pursue.

I am obliged to the body corporate for pointing out the Palm Springs Residences matter to me. (ref. 0494-2004 decided 31^st January 2005 by specialist adjudication.) I find that that matter concerned an agreement made between parties to a contract of engagement for works to be performed, for a commercial monetary settlement in lieu of seeking remediation for alleged breaches of that contract. That matter did not concern legal fees, nor did it concern reimbursements of costs relating to another matter.

Prior to the amendments to the Accommodation Module made to the legislation in March 2003, section 82 allowed the body corporate to recover only legal expenses in relation to the body corporate’s approval of a transfer. That section was changed to incorporate other "expenses reasonably incurred", but the understanding is that such expenses are restricted to those necessary for the body corporate to be advised in the business of the transfer. Such expenses might involve a lawyer, an accountant, or a body corporate manager.

It is in my view, quite "reasonable" for the body corporate to seek advice or assistance from such persons prior to a transfer. The subject of the expenses is reasonable, in that the body corporate manager says it was asked to perform certain additional duties by the body corporate.

What I am being asked by the applicant to decide however, is whether the body corporate manager’s fees per se are "reasonable." The applicant believes that $200 per hour is unjustifiable. It denies that any particularly difficult or onerous duties were required or that the circumstances of the transaction were unique as submitted.

I am unable to say whether the body corporate manager’s fees are unreasonable. In its Reply, the applicant said it had not been provided with a copy of the body corporate manager’s agreement with the body corporate, which may or may not have specified hourly rates for specific tasks, although such agreement would be available to the applicant as a lot owner, and an "interested person" within the meaning of the Act (section 205).

The legislation does not require that transferors are consulted before the body corporate seeks advice, nor to agree on what the expenses are to be beforehand. Whilst I find the figure of in excess of $7,000 in itself high, there is simply not enough evidence to be able to determine whether there was duplication between the body corporate manager and the body corporate’s solicitors, or if the body corporate manager was over zealous, or simply charging too much.

In the circumstances, I do not order that the sum of $4,691.16, or any other sum in respect of the body corporate manager’s fees, is repaid to the applicant if the applicant has paid such fees. In the event that Silver Stewart King & Burns invoice no. 861 dated 21st October 2005 has not been paid, it may be forwarded to the applicant for payment, and must be paid within 14 days, as reimbursement of expenses reasonably incurred by the body corporate in relation to the application for its approval in accordance with section 82(6)(b) of the Accommodation Module.

Number of Scheme:	32267
Name of Scheme:	Ipanema
Address of Scheme:	2865 Gold Coast Highway SURFERS PARADISE QLD 4217

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Ipanema [2006] QBCCMCmr 328 (21 June 2006)