Whitsunday Waters Resort [2006] QBCCMCmr 39 (1 February 2006)

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

Aqua Vista Management Pty Ltd, the (now former) caretaking service contractor and letting agent and (now former) owner of lot 1

I hereby order that the application for an order:

1. A declaration that, for the purposes of applying section 83(3) of the Accommodation Module, the date on which the engagement of Aqua Vista Management Pty Ltd ACN 108 208 477 as service contractor and the authorisation of that company as a letting agent was entered into (the ‘contract date’) was 7 March 2003
2. That the body corporate for Whitsunday Waters Resort CTS 24733 reimburse the Aqua Vista Management Pty Ltd the sum of $12,500.00 within fourteen (14) days of this order.
3. That the transfer of the caretaking agreement and letting agreement both dated 7 March 2003 from Aqua Vista Management Pty Ltd to Whiteside Pty Ltd atf DJ Small Family Trust and Brownhill Pty Ltd atf Brownhill Family Trust has been validly and lawfully consented to by the body corporate for Whitsunday Waters Resort CTS 24733
4. A declaration that, for the purpose of applying section 82(6)(b) of the Accommodation Module, that:-

a) The legal expenses of Bernard Ponting & Co in the sum of $8,169.54; and
b) The costs of the body corporate in the sum of $2,065.04

that the body corporate for Whitsunday Waters Resort CTS 24733 required that Aqua Vista Management Pty Ltd pay as a condition of approving the transfer are not reasonable and that the body corporate for Whitsunday Waters Resort CTS 24733 reimburse Aqua Vista Management Pty Ltd that sum which the Commissioner or adjudicator thinks is an unreasonable expense for the purposes of section 82(6)(b) of the Accommodation Module within fourteen (14) days of this order.
5. Such further or other order as the Commissioner or adjudicator thinks fit.

is dismissed.

The above order was appealed to the District Court at Southport on the 15 March 2006. On 13 April 2007 THE COURT ORDERED THAT:

1. Appeal allowed.
2. The Order of the Departmental Adjudicator dated 1 February 2006, be set aside.
3. It be Declared that, for the purposes of applying section 83(3) of the Accommodation Module, the date on which the engagement of the Appellant as service contractor and the authorisation of that company as a letting agent was entered into (the ‘contract date’), was 7 March 2003.
4. The Respondent reimburse the Appellant the sum of $12,500.00 within twenty-eight (28) days of this order.
5. The question raised in paragraph 4(a) of the Order of the Adjudicator made on 1 February 2006 relating to a Declaration for the purposes of applying section 82(6)(b) of the Accommodation Module in respect of the legal expenses of Bernard Ponting & Co in the sum of $8,169.54, be, through the Commissioner for Body Corporate and Community Management, referred back to the Adjudicator to determine the matter in accordance with these Reasons for Decision and the law.
6. The Respondent Body Corporate pay the Appellant’s costs of and incidental to this Appeal on the standard basis to be assessed.
7. The Body Corporate is granted an indemnity certificate under s.15(2) of the Appeal Costs Fund.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0661-2005

"Whitsunday Waters Resort" CTS 24733

ORDERS SOUGHT

The applicant has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act):

JURISDICTION

The application evidences a dispute between a caretaking service contractor/letting agent in a community titles scheme and the body corporate for the scheme (section 227(1)(d) & (f) of the Act). Although at the date of this determination, the applicant has settled the sale of its caretaking and letting business, the application was lodged in the Commissioner’s Office prior to the settlement being effected.

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-

(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)).

SCHEME DETAILS

Whitsunday Waters Resort is a community titles scheme comprising 86 lots and common property registered in a building format plan. The scheme is regulated by the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation Module).

BACKGROUND

The dispute resolution application was lodged in the Commissioner’s Office at 10.15am on 15 September 2005. Settlement of the sale of the applicant’s business was effected in the afternoon of the same day. At the time of lodgement, the applicant was the caretaking service contractor and letting agent for the scheme, by virtue of an assignment on 15 October 2004 from the original caretaking service contractors and letting agents, Mission Prosperity Pty Ltd as trustee and MM Whitsunday Investments Pty Ltd as trustee, with whom the body corporate entered into a caretaking and letting agreement on 7 March 2003.

The applicant contracted to sell its management rights business on 25 July 2005, and the body corporate approved the transfer of the engagement and authorisation on 9 September 2005, subject to the payment of a transfer fee of 3% of the sale price. The deed of assignment was executed on 15 September 2005.

The applicant contends that the transfer fee should only be 1% of the sale price, on the basis that the "contract date" for the purposes of that calculation should be the date on which the original agreement was executed and not the date on which the deed of assignment was executed, which latter date was used by the body corporate for its calculation.

The body corporate was invited to respond to the application. A detailed submission was received from the body corporate’s solicitors.

The applicant replied to the submissions.

DETERMINATION

Section 83 of the Accommodation Module provides:

30 Section 123 (Meaning of financier for div 4) of the Act

The applicant’s solicitors argue that the contract date should be 7 March 2003, the date of the original engagement and authorisation, and not the date of the assignment, as determined by the body corporate.

In support of that argument, the solicitors point out that the legislation provides a specific mechanism by which an engagement and authorisation can be made (sections 76, 77 and 85 of the Accommodation Module). In particular, the solicitors note that an engagement can only be given and an authorisation can only be made by the body corporate in general meeting passing an ordinary resolution. Voting on such a motion must be by secret ballot, with no votes exercised by proxy. In contrast, the solicitors noted that the body corporate committee has the authority to approve a transfer of an engagement and authorisation.

The solicitors therefore conclude that the definition of "contract date" in section 83(3) of the Accommodation Module must of necessity refer to the date on which the original engagement or authorisation was entered into.

The body corporate challenges that argument, stating that the applicant’s interpretation would be inconsistent with the use of the expression "contract date" in section 83(6)(b) of the Accommodation Module. That section, in part, prohibits the body corporate from requiring payment of a transfer fee if its approval of the transfer is sought on the basis of genuine hardship which was not reasonably foreseeable at the contract date.
The body corporate states that on the applicant’s interpretation, and where there had been an intermediate transfer, as here, a subsequent caretaker would be required to show that the circumstances giving rise to the claim of genuine hardship were not reasonably foreseeable at a time before the subsequent caretaker had even been involved with the scheme in that capacity. The body corporate’s view is that this would be bizarre.

In reply, the applicant’s solicitors simply state that section 83(6)(b) is irrelevant to the transfer at hand and that no hardship has been claimed by the applicant.

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 (which in this case was 18 days later).

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.

Turning to the question of costs, the body corporate stated in its submission that the applicant had not advanced any argument that any of the body corporate’s legal or other expenses were unreasonable, nor had it sought any specific amount to be refunded.

In response to this the applicant stated that the grounds disputing the tax invoice of the body corporate’s solicitors were implicit in that if the application to reduce the transfer fee were successful then the applicant should not have to pay the legal costs relating to that issue. The applicant further stated that because the body corporate had made a submission in relation to costs then it was open for the applicant to respond.

Firstly, the applicant has not been successful in having the transfer fee reduced. Secondly, it was incumbent on the applicant to make out its case in its application in relation to a claim for reduction of costs. It did not do so. The applicant attempted to make out its claim in this regard in its reply, to which the body corporate, in turn, had no right of reply. The applicant abandoned its claim in relation to the body corporate’s costs of $2,065.04, but mounted its argument against the body corporate’s legal costs. I am, in any event, not persuaded by those arguments.
I have dismissed the application in its entirety.

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

Aqua Vista Management Pty Ltd, the (now former) caretaking service contractor and letting agent and (now former) owner of lot 1

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0661-2005

"Whitsunday Waters Resort" CTS 24733

This matter was determined originally by order dated 1 February 2006. The following orders were made at that time:

I hereby order that the application for an order:

is dismissed.

The applicant lodged an appeal in the District Court on 15 March 2006. That appeal was heard on 17 and 18 October 2006, and on 13 April 2007 the Court ordered as follows:

In accordance with the learned Appeal Judge’s order 5, the matter was referred to me by the Commissioner for further determination in relation to the legal expenses of Bernard Ponting & Co.

On 18 July 2007 a member of the Commissioner’s staff telephoned Mr Ponting and requested that he prepare an itemised bill of costs.

On 20 August 2007, Mr Ponting wrote to the Commissioner in the following terms:

As requested I have prepared a costs statement to exclude the costs related to the transfer fee issue. In preparing the statement I have disregarded all costs items which were wholly or mainly in respect of the transfer fee issue. Where a costs item dealt substantially with both transfer fee and other issues it has been apportioned, and only the costs in respect of the issues not connected with the transfer fee issue have been brought to account.

On 27 August 2007, the applicant/appellant’s solicitors were provided with a copy of Mr Ponting’s letter, and the costs statement, totalling $6,728.42, and were invited to respond to the information contained therein.

On 1 October 2007, the following response was received from the applicant/appellant’s solicitors:

After reviewing the Costs Statement of Bernard Ponting & Co we consider there are some potentially arguable issues and that further investigation would be involved however the expense to further pursue this matter will definitely out weigh any perceived benefit. Our client has been made aware of this.

Accordingly we advise that our client accepts the Respondent’s legal costs as set out in the Costs Statement attached to your letter dated 27 August 2007 and we are instructed to seek an order that the Respondent pay to the Applicant the sum of $1,441.12 within 14 days.

On 15 September 2005 the applicant had paid the body corporate, "under protest and duress", the sum of $8,169.54 on account of legal fees payable to Bernard Ponting & Co. The payment was made in order to facilitate settlement of the sale of the management rights. The applicant reserved its rights in relation to that payment, and others made at the same time.

Given that the applicant has accepted the body corporate’s revised statement of costs in the sum of $6,728.42, the difference between this sum and the sum paid on 15 September 2005 amounts to $1,441.12.

I am therefore satisfied that the body corporate should pay the applicant the sum of $1,441.12, and I have ordered accordingly.

Number of Scheme:	24733
Name of Scheme:	Whitsunday Waters Resort
Address of Scheme:	Beach Road DOLPHIN HEADS QLD 4740

Number of Scheme:	24733
Name of Scheme:	Whitsunday Waters Resort
Address of Scheme:	Beach Road DOLPHIN HEADS QLD 4740

8.	Appeal allowed.
9.	The Order of the Departmental Adjudicator dated 1 February 2006, be set aside.
10.	It be Declared that, for the purposes of applying section 83(3) of the Accommodation Module, the date on which the engagement of the Appellant as service contractor and the authorisation of that company as a letting agent was entered into (the ‘contract date’), was 7 March 2003.
11.	The Respondent reimburse the Appellant the sum of $12,500.00 within twenty-eight (28) days of this order.
12.	The question raised in paragraph 4(a) of the Order of the Adjudicator made on 1 February 2006 relating to a Declaration for the purposes of applying section 82(6)(b) of the Accommodation Module in respect of the legal expenses of Bernard Ponting & Co in the sum of $8,169.54, be, through the Commissioner for Body Corporate and Community Management, referred back to the Adjudicator to determine the matter in accordance with these Reasons for Decision and the law.
13.	The Respondent Body Corporate pay the Appellant’s costs of and incidental to this Appeal on the standard basis to be assessed.
14.	The Body Corporate is granted an indemnity certificate under s.15(2) of the Appeal Costs Fund.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Whitsunday Waters Resort [2006] QBCCMCmr 39 (1 February 2006)