Sanctuary Pines [2006] QBCCMCmr 383 (20 July 2006)

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

I hereby order that the application for orders:

1. A Declaration that the Body Corporate is not entitled to require the payment of an amount pursuant to Section 85 of the Standard Module of the Body Corporate and Community Management Act 1997 in respect of the transfer of the interest of Andrew Kingston Batt and Northston Pty Ltd ACN 091 634 052 in the Management and Letting Agreement dated 8 September 2000 between The Proprietors "Sanctuary Pines" Community Titles Scheme no. 22961 and Brian William Dix and Marlene Kearney.
2. In the event that the Applicant has paid any sum in respect of the transfer fee pursuant to Section 85 of the Standard Module at the time any order is made by an adjudicator then an order that the transfer fee paid to the Body Corporate be refunded to the applicant.
3. A declaration that the fee or other consideration claimed foe the Body Corporate's reimbursement of costs, being $5,222.45 (consisting of the Body Corporate Managers claimed expenses of $3,836.45 and Body Corporate Lawyers expenses of $1,386.00), involves expanses which are excessive and have not been reasonably incurred and that the claim is in breach of Section 84(6)(b) of the Standard Module together with an Order that a refund be made.
4. Such further or other orders as the Commissioner or Adjudicator thinks fit.

is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0072-2006

"Sanctuary Pines" CTS 22961

The Sanctuary Pines community titles scheme (Sanctuary Pines) consists of 117 lots and common property. The community management statement for Sanctuary Pines indicates that the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module) applies to the scheme.

APPLICATION

This application was made by Andrew Batt, then owner of Lot 1, and Northston Pty Ltd, then caretaking service contractor (applicant) on 1 February 2006 under the Body Corporate and Community Management Act 1997 (Act). The applicant sought orders against the Body Corporate for Sanctuary Pines (respondent) in the following terms:

PROCEDURAL MATTERS

Under section 243 of the Act, a copy of the application was provided to the Body Corporate and to all owners, with an invitation to the committee and all owners to respond to the matters raised in the application. Submissions were made on behalf of the Body Corporate and by three owners^[1]. The applicant inspected the submissions received and made a written reply (see sections 246 and 244 of the Act respectively). A dispute resolution recommendation was then made referring the dispute to departmental adjudication.

JURISDICTION

Section 227 of the Act defines the allowable parties to a dispute under the dispute resolution provisions. The application was lodged just over an hour before the transfer of the management rights and several days before the sale of Lot 1. Therefore, when the application was lodged, Northston Pty Ltd was the caretaking service contractor for the scheme. As such, they were within a category of persons entitled to make an application, and were parties to a dispute in respect of which an adjudicator could make an order.
Although the applicant has since sold their management and letting rights, they are still eligible parties to a dispute in that the transfer fee is still in dispute. This situation is distinguishable from a dispute involving, for example, a by-law contravention, where, upon the sale of the party’s lot, an order regarding a by-law contravention would usually be irrelevant.

Accordingly, I am satisfied that this is a matter which falls within the dispute resolution provisions of the legislation (see sections 227, 228, 276 and Schedule 5 of the Act) and that I have jurisdiction to determine this application.

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:

(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

The application relates to the disputed transfer fee and expenses charged by the respondent on the transfer of the applicant’s management and letting agreements. The facts of the dispute, as outlined in the application, submissions and reply to submissions, can be summarised as follows.

On 8 December 2000 the Body Corporate executed a Caretaking and a Letting Agreement (Management Agreement) with Brian Dix and Marlene Kearney. The Management Agreement had a term of five years and was due to expire on 7 September 2005, with an option to extend or renew for a further 5 years (to 2010). At some point the rights in the Management Agreement were transferred to Sujede Pty Ltd. On 13 March 2003 a Deed of Variation of the Management Agreement was executed which appears to have primarily adjusted the duties of the caretaker.

On 18 March 2003 Sujede Pty Ltd transferred the Management Agreement to Northston Pty Ltd (Northston). In the Deed of Assignment, Andrew Batt (Batt) – the sole director of Northston - is referred to the ‘guarantor’. On 8 July 2005 a further Deed of Variation was executed, giving Northston the option for a second extension or renewal for a further 5 years to September 2015.

On 5 January 2006 Batt wrote to the Body Corporate advising he had sold the Management Agreement rights to Mal and Margaret Arnold of Malani Enterprises Pty Ltd (Malani Enterprises).

Batt’s letter asserted that he had suffered severe back pain for 12 months and now believed there was no cure. The accompanying doctor’s report dated 7 December 2005 said that x-rays revealed "a moderately severe spondylosis of the thoracic spine and disc degeneration of the lower lumbar spine" and recommended that Batt "avoid any heavy work or repetitive workload on your back". The application states that this condition is a form of arthritis of the spine and is a degenerative disease. The application indicates that the condition can be managed but not cured, and has resulted in Batt being unfit to manage the complex. In addition, the application claims Batt suffers from ‘lateral epicondylitis’ (tennis elbow) which is claimed to be non-reversible and "...causes severe discomfort and pain when presented with physically challenging work...". This is mentioned in the doctor’s letter but is not linked to the recommendation about work.

The applicant later provided a medical report from an orthopaedic surgeon who Batt consulted on 17 May and 2 June 2005 and 10 May 2006. This report restates the conditions mentioned in the general practitioner’s letter and states: "With diagnoses in mind he would find it difficult to continue in a position that required heavy lifting, bending and twisting."

It is not evident when Batt first pursued the sale of the management rights however the sale clearly occurred before 5 January 2006 and settlement was set as 1 February 2006, conditional on the Body Corporate’s consent. A Body Corporate Committee meeting on 25 January 2006 agreed to grant consent subject to the payment of a transfer fee.

On 27 January 2006 the Body Corporate wrote to the applicant stating that consent was conditional on payment of a transfer fee of 3% and the fees of the Body Corporate’s solicitor Home Wilkins Lowry (HWL) and the body corporate manager Stewart Silver King and Burns (SSKB). The SSKB fees were quoted as $3,030.80. The HWL fees were quoted as $1,386 providing that "no further significant attendances are necessary". Itemised details of these fees were provided in a further letter dated 31 January 2006. On the same date a further invoice showed SSKB’s fees had increased to $3,836.45.

On 31 January 2006 the Body Corporate wrote to Batt advising that the transfer fee and other costs would be required. The letter indicated that while the Body Corporate was entitled to claim a 3% transfer fee a Flying Minute was to be sent to committee members authorising consent to the assignment on the basis of a 1% transfer fee. Committee meeting minutes dated 3 February 2006 recorded a Flying Minute agreement to the 1% transfer fee apparently because of the medical condition. A later Budget Committee meeting of 20 February 2006 rescinded the Flying Minute decision and reinstated that 3% transfer fee. This final decision was apparently "...as instructed by legal council (sic)..." and because the Committee felt they were forced into the previous decision because of the limited time to consider and ‘pressure’ from Batt.

On 1 February 2006 Northston executed a formal agreement with the Body Corporate and Malani Enterprises entitled the Consent to Assign Management Rights. Clause 7 of this agreement provided that Northston would pay the reasonable costs of the Body Corporate’s consent and signing of the agreement.

The three submissions lodged by owners do not support the application. One comments that the remuneration was sufficient to employ assistance, that this had occurred in the past, and that there was no expectation that Batt undertake all the work himself. Another owner alleges that Batt had prior injuries as a result of his war service, however the submission notes that Batt denied this.

DETERMINATION

I will first consider the issues associated with the disputed transfer fee – namely whether the applicant suffered genuine hardship and whether the agreement was within its first three years. I will then look at whether the other costs charged by the Body Corporate fall within the scope of reasonable expenses.

Applicable law

The Body Corporate resolved to impose a fee as a condition of approving the transfer of the management rights. Section 85 of the Standard Module provides as follows in regard to transfer fees:

(b) the engagement or authorisation is not the result of the exercise of an option by the service contractor or letting agent under the terms of the engagement of the person as a service contractor, or the authorisation of the person as a letting agent, contained in a previous engagement or authorisation for the scheme; and

(c) the approval of the body corporate is sought to the transfer of a person’s rights under the engagement or authorisation.

(a) if the approval date is not more than 1 year after the contract date 3 %; or

(b) if the approval date is more than 1 year, but not more than 2 years, after the contract date 2%; or

(c) if the approval date is more than 2 years, but not more than 3 years, after the contract date 1%.

(a) the transferor is a financier under section 123 of the Act who is acting under the provisions of the financier’s charge over the engagement or authorisation; or

(b) The transferor is seeking approval to the transfer on the basis of genuine hardship not reasonably foreseeable by the transferor at the contract date.

Section 84 of the Standard Module outlines general provisions regarding transfers of engagements and authorisations and, regarding costs of the transfer, subsection (6) provides as follows:

(b) require or receive a fee or other consideration for approving the transfer (other than reimbursement for expenses reasonably incurred by the body corporate in relation to the application for its approval).

Transfer fee – genuine hardship

The first ground upon with the applicant contests the validity of the committee’s imposition of a transfer fee is their ‘genuine hardship’. Unless an exception in section 85(6) applies, a body corporate has discretion to impose a transfer fee or not. But, if an exception applies, there is no discretion and the body corporate is prohibited from charging a fee. To fall within the section 85(6)(b) exception, the applicant must demonstrate firstly that they have suffered genuine hardship, and secondly that the hardship was not reasonably foreseeable at the contract date.

The Adjudicator determining application 0474-1997^[2] has made the following comments regarding authorities on the meaning of ‘hardship’ (the applicant has also referred to these cases):

In Re Kabalan [1993] FCA 76; (1993) 113 ALR 330, Gummow J, when reviewing the Bankruptcy Rules (Cth), defined "hardship" as "...any condition which presses with particular asperity upon a person..." This was also considered an appropriate definition by the Full Tribunal of the A.A.T. in Re Dorevitch Pathology and Minister for Health [1993] AATA 377; (1993) 32 ALD 170 at 177 (paragraph 17). In Re Qld Medical Lab. and Dept. of H.H.C.S. (1994) 33 ALD 159 at 167 (paragraph 32) the Full Tribunal of the A.A.T., when considering the word "hardship" as it appeared in the Health Insurance Act 1973 (Cth) ruled that "the term ‘hardship’ can potentially cover a broad spectrum of connotations including meaning an appreciable detriment whether it be financial, personal or otherwise." All of the authorities indicate that each case must depend on its own particular facts and circumstances.

It appears that ‘hardship’ can take many forms but involves a degree of severity and seriousness. To amount to ‘hardship’ any ill health must arguably be severe and have a debilitating impact. I refer also to the adjudicator’s comments in another decision^[3]:

The legislation prefaces the term hardship with the adjective genuine, imposing in my view a heavy onus on the transferor in establishing its existence such that the body corporate may be deprived of a fee designed to compensate bodies corporate for the disadvantages of having a new caretaker service contractor relatively soon after engaging, or renewing, the transferor’s agreement (see Second Reading Speech of 9 May 1997 for the Body Corporate and Community Management Bill, pages 1796, 1805-6, and 1816).

I have some reservations about the impact of Batt’s medical condition on his ability to undertake the caretaking role, given that Northston did not seek Body Corporate approval for a sale until some 12 months after Batt indicates that he was aware of a back problem and more than 6 months after he had consulted a specialist.

I am also concerned that the applicant has not provided any medical evidence in regard to when the back condition first arose and what the cause of the condition was. While in January 2006 Batt indicates he only recently discovered the true nature of his condition, this must surely have actually occurred when he saw his specialist in mid May and at the beginning of June 2005, before the Deed of Variation was signed.

Aside from the issues of the contract date and reasonable foreseeability (which I will address in due course), this apparently severe back pain did not prevent the Northston from entering into the Deed of Variation to add an additional 5 year option to the contract and therefore give the potential life of the contract a total of 10 further years. Whilst it might be argued that it was good business practice to maximise the value of the asset, it is certainly disingenuous.

Notwithstanding this, I accept the available medical evidence is sufficient to argue that it was not reasonable for Batt to continue with the physical maintenance aspect of the caretaking role. I do not consider that is necessary to demonstrate that Batt’s condition is caused or aggravated by the caretaking role. The next question is whether the inability of Batt to undertake physical labour is sufficient to amount to ‘genuine hardship’ necessitating the sale of the management rights.

In replying to the respondent’s assertion that the applicant has failed to establish hardship on the part of Northston, as the legal entity who was the caretaking service contractor, the applicant has referred to order reference 0713-2001^[4]. In that dispute the respondents had argued that while the company directors may be incapable of carrying on the caretaking role, section 85(6)(b) does not extend to directors of a transferor and the hardship of the corporate entity had not been established. In his decision, the adjudicator made the following comments:

Whilst I acknowledge that the body corporate’s submission is probably technically correct, I consider that the purpose and intent of the legislation is clearly directed to individuals. Principally for tax reasons, but also issues of legal liability, it would be very unusual for individuals to enter a management rights contract in their individual capacity and not use a company as the contracting entity. The possibility or circumstances of a corporation suffering "genuine hardship" in the performance of its contractual obligations is extremely limited, and probably non-existent. "Hardship" is a concept associated with individuals, not corporations, and in order to give the section the purpose I consider the legislature intended it to have, it is necessary to extend the concept to the individuals who are behind the corporate entity.

I accept this reasoning and that establishing the genuine hardship on Batt’s part will be sufficient in regard to the requirements of section 85(6)(b).

However, while the issue was squarely raised by the respondent in submissions, the applicant has not commented on or explained why Northston or Batt were not able to engage an alternative person to undertake the manual labour component of the caretaking role.
One of the submissions has noted that there was no expectation that Batt should undertake all the work himself and suggests that previous caretakers had employed others to assist. I have been provided with no evidence or justification that it was essential for Batt to undertake all physical labour himself or that there was no capacity to make alternative arrangements such as hire contractors. Therefore I consider the applicant has not sufficiently demonstrated that Batt’s medical condition meant it was impossible for Northston to fulfil its contractual obligations. On that basis I find that the applicant has not substantiated the existence of genuine hardship.

Even if genuine hardship did exist, a further question is whether Batt’s medical condition was reasonably foreseeable at the time of the contract date. By his own assertion Batt was aware of a back problem at least at the beginning of 2005. On the basis of the specialist’s evidence, it can be assumed that Batt was aware of the severity of his condition by at least 2 June 2005.

While the applicant has provided some comments regarding the progress, monitoring and treatment of back conditions of this nature, these are not supported by any medical authority. I do not consider that these comments are sufficient to displace the presumption that the applicant had full knowledge of his condition as of at least 2 June 2005, particularly as he did not consult his specialist again, except in May 2006 for the purpose of gaining a medical report for this application.

As I will canvass below, there are three possible dates which could be considered as the contract date for the purposes of section 85(6) - 8 September 2000, 18 March 2003 and 8 July 2005. If the contract date was 8 July 2005 it is clear that Batt was aware of his condition. However there is no evidence presented by the parties to suggest that Batt was aware of his condition in 2000 or 2003. Even if Batt was aware of some back problems at those earlier dates, it is not likely that he was aware of the extent or severity.

I will now turn to the question of the disputed ‘contract date’.

Transfer fee– contract date

Under section 85(3) of the Standard Module a body corporate is entitled to require a transfer fee if the date that the body corporate approves the transfer (the approval date) is within 3 years of the contract date. The contract date is defined as the date on which the engagement or authorisation was entered into, or on which the term of the engagement or authorisation was extended.

The original Management Agreement was entered into on 8 September 2000, nearly five and a half years before the rights were sold on 1 February 2006. Northston acquired the rights on 18 March 2003, just under 3 years before the sale. The Management Agreement was varied on 8 July 2005, less than a year before the sale. Three dates - 8 September 2000, 18 March 2003 and 8 July 2005 – could potentially be the contract date under section 85. This date will determine whether a transfer fee can potentially be charged, and if so, how much can be charged.

The applicant argues the contract date is 8 September 2000 because the Management Agreement has not been extended since it was first entered into. They argue that the inclusion of an option which may or may not be taken up is not an extension of the term, and that until the option is exercised with a document extending the agreement, there is no extension. They refer to sections 76 and 77 of the Standard Module (although it appears they mean sections 78 and 79) regarding the form of an engagement or authorisation and refer to a previous adjudicator’s decision^[5] stating that the contract date is the date on which the agreement is signed, not when work commenced.

The respondent argues that the contract date is 8 July 2005, which is the date of the Deed of Variation. They argue this Deed served to extend the term of the original Management Agreement from 2005 to 2010 and add a further option to extend to 2015. They argue that, but for the Deed of Variation, the Management Agreement would have expired on 7 September 2005 and there would have been nothing for the applicant to transfer.
The applicant responds that an extension cannot be implied, that the Deed of Variation did not extend the Management Agreement, and that if the option is not exercised the agreement will end. They dispute that the applicant’s interest would have expired but for the Deed of Variation and instead argue that the applicant still had an interest in the form of an option for five years.

An Adjudicator in a recent matter^[6] before this Office has considered the question of whether the contract date is the date of an original agreement or the date of assignment of the agreement. On page 4 of her reasons the Adjudicators outlined the following argument:

In my view section 83(3) would have been clearer if had included the words "or on which it was assigned" after the words "entered into" on the second last line. However, it is difficult to sustain an argument that the contract date referred to in section 83(3) must refer to the original engagement even if there has been a subsequent engagement by way of assignment, given the practical necessity for the contract date in section 83(6)(b) to refer to the date of the assigned engagement in order for sense to be made of the provision.

The intent of the legislation is to compensate the body corporate to some extent by allowing for a transfer fee to be imposed. The compensation is not only for the inconvenience occasioned by a succession of caretakers within a short period of time, but also for having provided the service contractor with a valuable saleable asset for which the body corporate itself received no payment at the time of its inception.

During debate on the Body Corporate and Community Management Bill on 9 May 1997, Ms Cunningham referred to the transfer fee as being "in recognition of the body corporate’s involvement in creating that saleable asset". Later in the debate, Ms Cunningham stated that "the intent is that, if an agreement is sold several times within short periods, perhaps in the first 12 months and then in the second to third years – and depending on the length of time the module allows for renewals, there may be additional extensions - and the manager receives a profit from the sale the body corporate will be eligible to claim from the manager... a return to go to the body corporate...." (Hansard 1796, 1816)

The adjudicator’s decision in application 0553-2002 is not relevant to this argument. It related to whether the contract date was the date on which the agreement approving the engagement was entered into, or whether it was the date on which the engagement was stated to commence ... .

I am therefore satisfied that, for the purposes of section 83(3), the contract date in this matter is that date on which the applicant was effectively engaged by the body corporate to perform the duties under the caretaking agreement by virtue of the assignment from the original service contractor. The date of that assignment to the applicant was 15 October 2004 and the date of the applicant’s assignment to the subsequent service contractor was 15 September 2005. On that basis the transfer fee was correctly assessed by the body corporate at 3% of the sale price achieved by the applicant.

I am inclined to agree with the Adjudicator’s conclusions. As alluded to in the quoted comments, I think it would be an absurd and unintended interpretation of section 85 to require that Batt had to predict his condition some two and a half years before he (through Northston) was assigned the Management Agreement for his condition to be ‘reasonably foreseeable’ within the scope of section 85(6)(b). On that basis the contract date would be at least 18 March 2003.

The decision referred to above was appealed to the District Court on 15 March 2006, and the Court has not yet handed down a decision. I had contemplated deferring my determination of this matter pending the outcome of the appeal. However, in light of my findings below, I consider that I am able to determine this matter without waiting for a conclusive ruling on that issue.

The applicant appears to be arguing that the option to extend the original Management Agreement has not been executed because there is no deed or contract to record its execution. If that is the case, the Management Agreement must have expired on 7 September 2005 and accordingly the applicant has sold something that did not exist. If the first option has not been exercised and the contract ends, there cannot be any capacity to exercise the second option. Moreover it is evident from the terms of the Consent to Assign Management Rights document that all parties intended that the entire Management Agreement and not just the second option were being assigned. I find it astonishing that the applicant claims to have legally sold an interest in contract that they now argue had already expired. They cannot have it both ways.

Clause 9.2 of the Management Agreement specifically states that the caretaker simply needs to give notice to the Body Corporate at some point between 7 February and 6 September 2005 that they intend to take up the option. Clause 9.2 does not contemplate that the Body Corporate needs to consent to or sign an agreement to the option being taken up. However, section 318 of the Act prohibits a person from contracting out of the provisions of the Act. Therefore, if the legislation placed a more onerous requirement on the form of an extension, that requirement will override the provisions of the Management Agreement.

But I do not consider that the body corporate legislation prescribes that exercising an option to renew must be the subject of a written agreement. Sections 78 and 79 of the Standard Module outline the requirements of an engagement or authorisation. They state the engagement or authorisation must be in writing and, amongst other things, must include the term and the term of any right or option of extension or renewal. Throughout Part 6 of the Standard Module specific reference is made to rights or options to extend or renew an engagement or authorisation. However sections 78 and 79 do not indicate that the requirements in those sections extend to the exercise of an option. Similarly, section 87 provides the authority for a body corporate to make or amend an engagement or authorisation, but makes no such provision for an agreement for an option to be exercised. Accordingly, I am of the view that if the legislature intended that the exercise of an option must be in writing, it would have been explicitly stated.

More fundamentally, I have difficulty with the applicant’s argument that the term of an engagement or authorisation is only extended if an option to extend is taken up. This is clearly contrary to section 77B of the Standard Module. Section 77B defines the unexpired term of an engagement or authorisation to specifically include the term of a right or option or extension or renewal whether it was provided for in the original agreement or subsequently approved by the body corporate (along with any subsequent right or option). Therefore the terms of both options are included in the term.

Section 85(3) of the Standard Module includes in the definition of the contract date the date "on which the term of the engagement or authorisation was extended". The term of the Management Agreement was clearly extended by the 8 July 2005 Deed of Variation which added the second five-year option.

Reasonable expenses

Under section 84(6)(b) of the Standard Module a body corporate is entitled (but not required) to recover ‘expenses reasonably incurred’ by them in considering a request for transfer approval. Having withdrawn their objection to the legal fees invoiced by HWL, the applicant is objecting to the fees of $3,836.45 incurred by SSKB. Specifically the applicant objects to costs above $500 on the basis of their estimate of the reasonable cost for a body corporate manager to convene a committee meeting is $500 and their assertion that a body corporate manager should have no role in making the approval decision other than convening the meeting. The applicant argues that the Body Corporate has not justified these expenses.

The Body Corporate’s submission makes reference to Clause 7 of the Consent to Assign Management Rights which states that Northston will pay the Body Corporate’s reasonable costs in relation to the Body Corporate’s consent to and signing of the deed. As noted above, section 318 of the Act prohibits a person from contracting out of the provisions of the Act. Therefore, while the substance of this clause is similar to the legislative provision, the legislative provision must prevail if there is any suggestion that the clause imposes any greater responsibility for costs.

The SSKB invoices list items "Committee meeting agenda and minutes – assignment of management rights" ($1,452.91), "T Sheehan time re management rights sales" ($880), "Extra work re Management rights" ($805.65), Travel expenses reimbursement of travel expense re committee meeting ($697.89). A detailed list of SSKB activities from 5 to 31 January 2006 was provided by SSKB on 31 January 2006.

I appreciate the applicant’s concerns over the significant scale of the body corporate manager’s costs. However I do not agree with the view that the only role of a body corporate manager in relation to a transfer issue is organising a committee meeting. I accept that it may be necessary for a body corporate manager to liaise with committee members and solicitors for each party, and to act for the committee in following up references and so on regarding the proposed transferee.

I do not propose to investigate each and every item of the SSKB invoice or list of activities. While I do consider the SSKB fees to be very high, I am not satisfied that the applicant has substantiated their claim that the fees are unreasonable. They have not provided any evidence to support the assertion that the cost of organising a committee meeting in this scheme and in these circumstances should be no more than $500 and they have not discussed any of the other items.

Other issues

In regard to the Body Corporate’s submissions that Batt should be "estopped from going back on his original acceptance of the imposition of a transfer fee" and deliberately omitting to tell the Committee that he intended to apply to have the transfer fee set aside. On the face of it I do not believe that the Body Corporate has satisfactorily made out the elements of estoppel but given my conclusions on the other aspects of the application I do not consider it is necessary for me to address this argument in detail.

I have some questions about the conduct of the Committee in changing its mind twice about the level of transfer fee to be imposed, and whether they have the capacity to change the fee after the transfer has been effected. However, as the applicant has not raised this question, the parties have not presented any arguments on the issue, and the fee ultimately imposed was the same as that first notified by the Body Corporate before the transfer occurred, I have not given further consideration to this issue.

As an aside, I note that there appears to be a difficulty with the term of the second option agreed to as part of the 8 July 2005 Deed of Variation which purports to allow an option up to 7 September 2015. Section 81(2) and 82(2) of the Standard Module provide that an option agreed to can only be a maximum of 10 years from the date of the Body Corporate resolution approving the additional option. As the Body Corporate resolution was clearly not on or after 7 September 2005, the Deed could not grant an option up to 7 September 2015. As the Deed was executed on 8 July 2005 the Body Corporate resolution must have been some time before that. As it is not directly relevant to the issues which I must determine in this application I have not sought details of the date of the Body Corporate resolution. However, section 81(3) states that if an unexpired term purports to be longer than 10 years it is taken to be 10 years. Therefore, whatever day and month in 2005 that the Body Corporate resolved to approve the option will be the day and month in 2015 that the term will expire if the second option is exercised. As it was not the subject of this application I have not made an order in respect of this matter but would suggest that the parties take note of the issue.

Conclusion

The principle of payment of a transfer fee and related expenses endeavours to balance the interests of caretaking service contractors and bodies corporate. On the one hand, the legislation allows caretakers the flexibility to transfer their interests. Transfers do not have to be prompted by necessity, but are often on the basis of a profitable, commercial decision. On the other hand, bodies corporate enter into or extend service agreements in good faith, with some expectation that the caretaking service contractor will complete the agreement. When an agreement is transferred bodies corporate can experience significant disruption and costs while the new caretaker settles into their role. The payment of the transfer fee recognises and compensates bodies corporate for this disruption. It also recognises that bodies corporate contribute to the value of the rights that the service contractor is transferring, and in many instances, profiting from.

I find that the applicant has not established genuine hardship. Moreover, I find that the relevant contract date was 8 July 2005, when the Deed of Variation which extended the term of the Management Agreement was signed. On that basis I find that even if genuine hardship did exist, it was clearly foreseeable by the applicant at the contract date. Because the contract date was within one year of the date of the Body Corporate’s approval of the transfer, I find that the Body Corporate was entitled to impose a transfer fee of 3% of the fair market value of the transfer.

In regard to the Body Corporate’s expenses associated with the transfer, I am of the view that the SSKB fees are very high but I do not consider that the applicant has provided sufficient evidence to justify their claim that that the fees were unreasonable.

In light of these findings I have made an order dismissing the application.

^[1] A further submission was received from an owner over a month after the extended closing date for submissions and after the matter was referred to adjudication. I have not accepted this submission, but it appears that it simply comments on the character of applicant Andrew Batt.
^[2] Southern Cross Burleigh Heads, 14 July 1998
^[3] Riverlink Grove (0778-2003), 12 May 2004
^[4] Sailfish Point, 10 April 2002
^[5] Sirocco Resort (0553-2002), 20 January 2003

^[6] Whitsunday Waters Resort ((0661-2005), 1 February 2006. This scheme falls under the Accommodation Module and references to section 83 in this quote are equivalent to section 85 in the Standard Module.

Number of Scheme:	22961
Name of Scheme:	Sanctuary Pines
Address of Scheme:	180 Santa Barbara Road HOPE ISLAND QLD 4212

	The back condition was not reasonably foreseeable and that when the Management Agreement was signed, Batt enjoyed good health. The applicant was unable to conduct the business due to the physical stress involved, and was required to sell on the basis of genuine hardship. The Body Corporate was given details of this hardship when consent was sought.
	A transfer fee cannot be charged because the Management Agreement was entered into more than three years prior to the transfer.
	The Body Corporate expenses charged were not reasonably incurred or necessary.

	The relevant contract date was the date of the Deed of Variation – 8 July 2005.
	No evidence has been provided of when the back condition commenced and the applicant has not proven that the back condition was not foreseeable on 8 July 2005.
	The back condition is described in terms consistent with gradual degeneration from age.
	Northston, as the party to the Management Agreement, has not established hardship and that it is unable to arrange for heavy work to be undertaken by someone other than Batt.
	Batt should be estopped from going back on his acceptance of the transfer fee and deliberately omitting to tell the Committee that he intended to apply to have the transfer fee set aside.
	The applicant has not given any reasons why the costs charged are unreasonable.

	A caretaking and letting agreement is only extended if an option is added to the agreement and that option is actually exercised. Therefore the 8 July 2005 Deed of Variation does not extend the term of the Management Agreement because the option added in the Deed can only be exercised within 6 months of 7 September 2010.
	The contract date is when the Management Agreement was entered into - 8 September 2000.
	On the basis of previous adjudications, Batt is the appropriate party to establish hardship.
	Batt’s role is physical, including cleaning, lifting and removing rubbish, and maintaining gardens and grounds including trimming trees.
	The Body Corporate has not substantiated estoppel, has not suffered a detriment, and could not have withheld its approval even if it knew the applicant would challenge the transfer fee.
	In the experience of the applicant’s solicitor reasonable legal costs for a transfer are between $500 and $1,200. The applicant consequently withdrew their objection to the HWL fees, although maintained that they were at the higher end of the scale.
	The reasonable cost for a body corporate manager to convene a committee meeting is $500 and, as the body corporate manager should not have been involved in making the approval decision other than convening the meeting, costs above that amount are excessive.

1.	A Declaration that the Body Corporate is not entitled to require the payment of an amount pursuant to Section 85 of the Standard Module of the Body Corporate and Community Management Act 1997 in respect of the transfer of the interest of Andrew Kingston Batt and Northston Pty Ltd ACN 091 634 052 in the Management and Letting Agreement dated 8 September 2000 between The Proprietors "Sanctuary Pines" Community Titles Scheme no. 22961 and Brian William Dix and Marlene Kearney.
2.	In the event that the Applicant has paid any sum in respect of the transfer fee pursuant to Section 85 of the Standard Module at the time any order is made by an adjudicator then an order that the transfer fee paid to the Body Corporate be refunded to the applicant.
3.	A declaration that the fee or other consideration claimed foe the Body Corporate's reimbursement of costs, being $5,222.45 (consisting of the Body Corporate Managers claimed expenses of $3,836.45 and Body Corporate Lawyers expenses of $1,386.00), involves expanses which are excessive and have not been reasonably incurred and that the claim is in breach of Section 84(6)(b) of the Standard Module together with an Order that a refund be made.
4.	Such further or other orders as the Commissioner or Adjudicator thinks fit.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Sanctuary Pines [2006] QBCCMCmr 383 (20 July 2006)