Zanzibar Mooloolaba [2006] QBCCMCmr 425 (2 August 2006)

Last Updated: 17 September 2007

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Application Reference: 0564/2005

Applicant: BEACHBOURNE PTY LTD (ACN 086 471 089)

and

Respondent: BODY CORPORATE FOR ZANZIBAR

MOOLOOLABA - CTS 27494

ORDER

Before: Specialist Adjudicator, Mr Kiernan Dorney QC Date: 2 August, 2006 Initiating Document: Application filed 8 August, 2005

IT IS ORDERED that: 1. The Dispute Resolution Application dated 5 August, 2005 be dismissed 2. The Applicant pay the Specialist Adjudicator’s costs of the Adjudication (including the balance amount of $5,940.00) within 21 days 3. The Applicant pay $1,667.86 (being the total legal costs and other expences incurred by the Respondent relating to the Applicant’s request for consent to the transfer of the Caretaking Agreement and the Letting Agent’s Agreement to S8 Property Trust with Wellington Capital Limited as trustee) to the Respondent within 7 days.

Mr. Kiernan Dorney QC
Specialist Adjudicator

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Application Reference: 0564/2005

Applicant: BEACHBOURNE PTY LTD (ACN 086 471 089)

and

Respondent: BODY CORPORATE FOR ZANZIBAR

MOOLOOLABA CTS 27494

REASONS FOR FINAL DECISION IN SPECIALIST ADJUDICATION

INTRODUCTION

1. This specialist adjudication concerns issues arising from a Dispute Resolution Application, dated 5 August, 2005, and lodged by the Applicant on 8 August, 2005. The Applicant was, and is, both the Manager under a Service Contractor’s Agreement and the Agent under a Letting Agreement, as assignee under prior assignments. The Respondent is the Body Corporate who was, and is, a party to each Agreement and who consented to the prior assignments, and from whom the Applicant had sought approval for an assignment of its rights under both Agreements.

RELEVANT LEGISLATION

2. This specialist adjudication is conducted under Parts 8 and 9 of Chapter 6 of the Body Corporate and Community Management Act 1997 (Queensland) ("BCCM Act").

3. Section 122 of the BCCM Act deals with relevant Regulation Modules. In particular, s.122(1)(d) states that the Regulation Module applying to a community title scheme may prescribe, amongst other things, particular circumstances under which the engagement of a person as a body corporate manager, or the authorisation of a person as a letting agent, for the scheme, may or may not be terminated or "transferred", despite anything in the engagement or authorisation or in another agreement or arrangement.

4. In turn, Regulation 82(1) of the relevant Regulation Module, being the Body Corporate and Community Management (Accommodation Module) Regulation 1997 ("Accommodation Module"), provides that a person’s rights under an engagement as a body corporate manager, or under an authorisation as letting agent, may be transferred "only if the body corporate under the engagement or authorisation approves the transfer". Clearly, the "transfer" in this context would cover any "assignment" of the rights under the relevant Agreements.

5. It will be necessary, later, to examine in more detail the legislative framework and, in particular, the Accommodation Module.

BACKGROUND

6. The dispute between the Applicant and the Respondent is as to whether or not the decision by the Respondent on 3 June, 2005 to withhold approval for a "transfer" of the management and letting rights was one which was in contravention of s.82(6)(a) of the Accommodation Module in terms of the rights of the Applicant arising from Clause 6 of the relevant Service Contractor’s Agreement made 7 December, 1999 and Clause 6 of the relevant Letting Agreement made 7 December, 1999.

7. After considering submissions by both parties, I made an interim Order on 26 April, 2006. That Order, relevantly, has limited the adjudication of the present dispute in the way indicated above.

8. On 28 June, 2006, after receiving extensive written submissions prior to that date, final oral submissions were made on behalf of both the Applicant and the Respondent. Those submissions were in addition to the Applicant’s Grounds for Application (contained in Annexure "C" to the Dispute Resolution Application), the Respondent’s original submissions in Response dated 7 October, 2005 and the Applicant’s original Reply dated 17 November, 2005.

9. The relevant evidence is contained in documents originally filed by both parties, as well in those documents attached to the written Submissions made by both parties before the final hearing of oral argument.

10. While I have permitted documents to be given to me, and to be referred to by the parties in their submissions, which were not in the possession of or given to the Respondent on or before 3 June, 2005, as I indicated to both parties, I do not intend to rely upon documentation provided first after the Committee Meeting of the Respondent on 3 June, 2005 except to the extent to which such had already been within a party’s knowledge as at that date or reasonably could have been sought by one party from the other on or before that date. For present purposes, this excludes the last two documents attached to the Applicant’s Submissions dated 22 May, 2006, save that it must have been in the contemplation of the Committee of the Respondent that contracts of the kind referred to in paragraphs 4 and 5 of Section 1.0 would be necessary at some time.

NATURE OF DISPUTE

11. On Friday, 3 June, 2005, the Respondent, as the Body Corporate under the BCCM Act, through its Committee, considered a resolution that it consent, relevantly, to the assignment of the Service Contractor’s Agreement and the Letting Agreement. The resolution was considered in the meeting but not carried; and the vote against it was unanimous. It should be noted that the actual decision maker was the Committee of the Respondent. By s.82(2) of the Accommodation Module, approval by a body corporate under s.82(1) "may be given by resolution of the committee".

12. The reason that the issue came before the Committee of the Respondent was that, as earlier noted, by s.82(1) of the Accommodation Module, a person’s rights under an engagement as a body corporate manager or service contractor, or under an authorisation as a letting agent, may be transferred "only if the body corporate under the engagement or authorisation approves the transfer".

13. The present dispute arises because the Applicant contends that the Respondent, contrary to s.82(6) of the Accommodation Module, "unreasonably" withheld approval of each of the relevant "transfers": see paragraph 30 of the Applicant’s Grounds for Application. In response, the Respondent contends that the decision of the Committee not to consent "was both justified and reasonable": see paragraph 42 of the Respondent’s original Submission.

14. In order to put the Accommodation Module in context, s.21(1) of the BCCM Act states that a Regulation Module is a regulation under the Act that states it is a regulation module for the Act. Clearly the Accommodation Module is such. The reason that this particular Regulation Module applies is because, through the effect of s.21(2), the Community Management Statement identifies it as the regulation module applying the scheme: see p.1 of (New) Community Management Statement dated 29 September, 2000.

SERVICE CONTRACTOR’S AGREEMENT

15. Relevant parts of the Service Contractor’s Agreement are:

(a) Clause 2.2(a) which states that, where at any time the Manager shall be a corporation, it shall be the responsibility of the Manager to ensure at all times an adequate number of its officers, managers, servants or agents are available at the Property to carry out the Manager’s duties and functions;

(b) Clause 3.03(b) which states that, where the Manager is a natural person, the Manger’s duties shall be duly and punctually performed by the Manager "personally", subject to and presently a relevant proviso;

(c) Clause 6.01 which states that the Manager shall not assign his interest in the Agreement except in accordance with Clause 6 and that any purported assignment not made in accordance with Clause 6 shall not bind the Body Corporate and shall not pass any interest in the Agreement to any purported assignee, while providing that the Manager may assign its interest in the Agreement with the prior consent in writing of the Body Corporate "which consent shall not be unreasonably withheld if" certain things specified in Clause 6.01(a) to (i) (inclusive) are satisfied;

(d) Clause 6.01(d) which states that the proposed assignee "has entered into" a Deed at the time of the assignment being effected with the Registered Proprietor of the Manager’s Unit and the Body Corporate in a form required by the Body Corporate which Deed contains certain specified covenants;

(e) Clause 6.02 which states that after the Manager has complied with the provisions contained in sub-clauses (a), (b) and (c) of Clause 6.01, the Body Corporate shall consider the Manager’s request for consent to assign the Agreement within a period of 1 month from the date upon which the Manager provides to the Body Corporate all of the requirements referred to in those sub-clauses;

(f) Schedule Two which sets out a Schedule of the Manager’s Duties for Residential Precinct.

16. As for the Letting Agreement, Clause 6, similarly to the Service Contractor’s Agreement by Clause 6.1, restrains the Agent from assigning its interest except in accordance with Clause 6. Again, similarly to the Service Contractor’s Agreement, Clause 2.2(a) states that, where at any time the Agent shall be a corporation of any kind, it shall be the responsibility of the Agent to ensure at all times an adequate number of its officers, managers, servants or agents are available at the Property to carry out the Agent’s duties and functions pursuant to the Agreement.

17. The reason that the particular matters that are set forth in detail in both the Service Contractor’s Agreement and the Letting Agreement concerning relevant satisfaction need to be brought into account is that s.82(3)(e) of the Accommodation Module states that, in deciding whether to approve a proposed transfer, the body corporate may have regard to matters to which under the engagement or authorisation the Body Corporate may have regard. In addition to those matters set forth in the Service Contractor’s Agreement and the Letting Agreement, s.82(3) provides, in paragraphs (a) to (d) (inclusive) certain additional matters. In particular, paragraph (b) refers to the financial standing of the proposed transferee, paragraph (c) refers to the proposed terms of the transfer, and paragraph (d) refers to the competence, qualifications and experience of the proposed transferee and any related persons of the proposed transferee, and the extent to which the transferee and any related persons have received or are likely to receive training.

WITHHOLDING OF APPROVAL/CONSENT

18. For present purposes, the use of the different words - "approval" in the Accommodation Module and "consent" in the Service Contractor’s Agreement and the Letting Agreement - is of no moment.

19. The Minutes of the relevant Committee Meeting of the Respondent held on 3 June, 2005 make the following references to the proposed assignments of the two Agreements:

(a) that, in "considering the request" by the Applicant for the Respondent’s approval, "the committee has assumed that Wellington Capital Ltd will elect to exercise its option to buy from (the Applicant) the management rights business including the manager’s unit at Zanzibar Mooloolaba in the future" - the reference to Wellington Capital Ltd being a reference to the proposed assignee, as appears from the draft Deed of Assignment (as amended);

(b) that having "carefully considered all the information contained in the documents supplied with the meeting notice together with the fax from Short Punch & Greatorix Lawyers to Fuss Law dated 30 May, 2005, the committee has concluded that the proposed terms of the transfer from (the Applicant) to (the proposed assignee) including the proposed joint venture arrangement between those parties for performing the Service Contractor’s duties and operating the letting agent’s business for Zanzibar Mooloolaba will not be satisfactory to the (Respondent)" (emphasis added).

20. The reference in those Minutes to the "information contained in the documents supplied with the meeting notice" includes the email dated 24 May, 2005 from Fuss Law, as solicitors for the Body Corporate, to Archers Body Corporate Management. It is not in dispute that on 27 May, 2005, Archers sent a copy of that document, including all enclosures, to all of the members of the Committee of the Respondent.

21. In determining what are the reasons relied upon by the Respondent for its decision to withhold its approval/consent, in the original Submission in Response on behalf of the Respondent it is asserted that the reasons for resolving not to approve the request for assignment of the Service Contractor’s Agreement and the Letting Agreement are specified in those relevant Minutes.

DOCUMENTS AVAILABLE FOR CONSIDERATION

22. Although there was more correspondence passing between Short Punch & Greatorix, as solicitors for the Applicant, and the Body Corporate and its solicitors, Fuss Law, I have had particular reference to the following:

(a) facsimile of Short Punch & Greatorix to the Respondent dated 18 February, 2005 (together with Balance Sheet);

(b) email of Fuss Law to Short Punch & Greatorix dated 15 March, 2005;
(c) letter of Short Punch & Greatorix to Fuss Law dated 16 March, 2005;
(d) letter of Short Punch & Greatorix to Fuss Law dated 9 May, 2005;
(e) letter of Fuss Law to Short Punch & Greatorix dated 16 May, 2005;
(f) email of Short Punch & Greatorix to Fuss Law dated 17 May, 2005;
(g) email of Fuss Law to Short Punch & Greatorix dated 18 May, 2005;
(h) letter of Short Punch & Greatorix to Fuss Law dated 19 May, 2005;
(i) letter of Short Punch & Greatorix to Fuss Law dated 30 May, 2005.

Attached to some of that correspondence was the proposed Agreement between S8 Limited, the Applicant and Wellington Capital Limited and the final amended version of the proposed Deed of Assignment. Although one of the documents attached to that letter of 30 May, 2005 was the Product Disclosure Statement ("PDS"), the email from Fuss Law to Archers dated 24 May, 2005 had already made specific reference to the PDS.

ONUS

23. It was not contended by either party that the onus of establishing that the withholding of approval to the transfer was unreasonable, as contemplated by s.82(6)(a) of the Accommodation Module, is not on the Applicant, as the person seeking the approval of such a transfer.

24. Apart from statutory intervention of the kind that has occurred in England under the Landlord and Tenant Act 1988 where it is now the case that the burden is upon the person refusing consent (see NCR Ltd v Riverland Portfolio No. 1 Ltd [2005] EWCA Civ 312 at [11]), the position in Australia appears to be that none of the relevant statutory provisions places the onus on the person considering consent to establish reasonable grounds to withhold consent, it being noted that, at common law, the onus is on, for example, the lessee to establish the lessor’s refusal was unreasonable: see Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd & Ors [2003] WASCA 11 at [78], referring, amongst other cases, to J A McBeath Nominees Pty Ltd v Jenkins Development Corporation Pty Ltd [1992] 2 Qd R 121.

NEED TO SPECIFY REASONS?

25. Again, apart from statutory intervention which specifically requires reasons to be stated (see NCR Ltd at [11]) , the position appears to be that there is no obligation on a person such as the Respondent here to advance specific reasons for the relevant decision at the time of the decision. In Old Papa’s Franchise Systems, although the Commercial Tenancy (Retail Shops) Agreements Act 1985 (Western Australia) stated that a landlord could only withhold consent to an assignment on reasonable grounds (and that if the landlord failed to give notice in writing of consent or withholding of consent within a specified period the landlord should be taken to have consented to the assignment), it was still held that, since the landlord was not statutorily required to specify the grounds on which a consent is withheld, it followed that the section did not confine the landlord to the grounds that were actually so specified at the time: at [76] - [77].

26. In Queensland, on authority that is probably binding despite the differences in the legislative requirements, J A McBeath Nominees held that it (i.e. the Full Court of Queensland) should proceed on the basis that the lessor in that case was entitled to rely on a ground not expressly taken at or about the time of refusal: at 129.

27. As observed earlier, the Respondent appears content, so far as this area of reasons is concerned, to rely upon what is specified in the relevant Minutes of Committee of the Respondent.

CORRECT APPROACH TO REVIEWING DECISION

28. Different approaches have been advanced concerning this issue by the Applicant and the Respondent.

29. The Applicant contends that, in deciding whether or not the Respondent acted reasonably in making the relevant decision, it is necessary for the Specialist Adjudicator to decide whether or not: first, the Respondent had any reason to refuse the consent; and, secondly, if the Respondent did have a reason for refusing its consent, to investigate the correctness of the reason for such refusal.

30. For its part, the Respondent contends that the task of the Specialist Adjudicator is to place himself in the position of the Respondent as at the date of the relevant decision and to consider whether, upon the information available to the Respondent (through its Committee), the Respondent acted unreasonably in withholding consent.

31. My conclusion is that the following principles apply:

(a) the question of whether the Respondent’s conduct was reasonable or unreasonable is one of fact to be decided by the tribunal of fact (namely, the Specialist Adjudicator in this instance): see Tamsco Ltd v Franklins Ltd [2001] NSWSC 205 at [49];

(b) since particular cases are of illustrative value only, care must be taken not to elevate a decision made on the facts of a particular case into some principle of law: see Ashworth Frazer Limited v Gloucester City

Council [2001] UKHL 59; [2001] 1 WLR 2180 at [4];

(c) in determining whether the conduct was reasonable, it is not necessary to determine that it was either right or justifiable, if the conclusions which led to refusal of consent might have been reached by a reasonable person in the circumstances: see Ashworth Frazer at [5];

(d) the apparent paradox in (c) is no more than semantic (see NCR Ltd at [31]), because, although the essence of a reasonable decision is that there are reasons for it which can be justified at some level (even if only by showing the reasons are genuine and not wholly fanciful), what is not required is for those reasons to be justified by reference to some objective standard of correctness;

(e) the subjectivity arises because it is sufficient if a reasonable person in the Respondent’s position might have regarded the assignment as objectionable, even though some persons might take a different view, it being enough that such a person has genuine concerns on matters relevant to the value of the interest the person has, even if the prospect of those concerns being realised is small: see NCR Ltd at [33];

(f) reasonableness is to be determined at the date of refusal of consent: see JA McBeath Nominees at 129 [it being noted, in Old Papa’s Franchise Systems, that subsequent conduct and subsequent financial position is irrelevant: although that appears to be in conflict with Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 where it was observed to be "most unjust if the landlord could not take advantage of an important ground justifying refusal merely because it was not known to him at the time, e.g. the impending bankruptcy of the proposed assignee", although it may well be that a reconciliation is achieved if the ground, e.g. impending bankruptcy, existed as a fact at the date of refusal];

(g) as a matter of principle, the question of what circumstances are to be considered is, statute apart, one of contract and therefore the terms of the contract must always be determinative (although circumstances may reveal a conception of reasonableness, e.g. based on the particular statute, that broadens the dimension and, in those sorts of cases, there may be relevant considerations apart from the character and personality of the proposed assignee and matters affecting the use or exploitation of the rights assigned): see Cathedral Place Pty Ltd & Anor v Hyatt of Australia Ltd & Ors [2003] VSC 385 at [27], with specific reference, for the last qualification, to J A McBeath Nominees;

(h) as a matter of principle, and as a matter of authority, the person considering consent may have regard to the question of whether the proposed assignee is a suitable substitute, whereby it might be entitled to resist the creation of a relationship between itself and the new person which differs from that created under the original agreement because the refusal to consent would be no more than necessary to ensure that it continued to enjoy the rights for which it had contracted: see Cathedral Place at [29]; and

(i) in the end, it is necessary to work out "what was the real and true reason for the refusal of consent": see Tamsco at [44].

32. Since there is little point in attempting to reduce those principles to some simple working proposition, I will bear them all in mind in making my adjudication.

REASON(S)

33. The Respondent has contended that it is appropriate to consider the Respondent’s position in light of the specific obligations cast on it pursuant to the BCCM Act. In particular, attention was directed to s.152. By s.152(1)(a) the Respondent, as the Body Corporate for a community title scheme, is required to "administer, manage and control the common property and body corporate assets reasonably and for the benefit of lot owners". This is complementary to s.94(2) which requires a Body Corporate to "act reasonably in anything it does" under s.94(1).

34. While undoubtedly the obligations under s.94(2) and s.152(1)(a) are of general importance, it is also of specific importance to take into account, as the authorities indicate, the matters set out in the respective Clause 6 of each Agreement and the additional matters set out in s.82(3) of the Accommodation Module when considering the conduct required under s.82 of the Accommodation Module.

35. The assumption has been made by the Committee of the Respondent that the assignee would elect to exercise its option both to buy the management rights business and the manager’s unit in the future. As to this, the Respondent contends that that assumption, being purely for the purposes of considering the Applicant’s seeking of approval, cannot lead to any inference of acceptance concerning the consequences of the assumption. As I read the Minutes of the Respondent, that qualification would not restrict the Respondent from relying on uncertainty regarding exactly "when" that event would occur. But this assumption precludes reliance upon the non-fulfilment of Clause 6.01(d), particularly where the Agreement does not expressly provide for consequences such as an acknowledgement that such a circumstance means that any withholding of consent is not unreasonable.

36. Therefore, what needs to be analysed is what was the real reason behind the words which led the Committee of the Respondent to decide that the "proposed terms of the transfer", including "the proposed joint venture arrangement", would "not be satisfactory to the Body Corporate".

37. A close examination of the email of Fuss Law to Archers of 24 May, 2005 does reveal the substance behind those statements. In particular, the Respondent was informed:

(a) (on the advice of Fuss Law) that the call option that S8 Limited (of which the Applicant was the wholly owned subsidiary) granted to the proposed assignee (which is the Trustee of S8 Property Trust) was subject to a number of conditions which included not only that the "relevant body corporate approvals" were obtained but also that the S8 Property Trust would raise a "minimum subscription" under the PDS;

(b) (on the advice of Fuss Law) that approval of the proposed transfer would mean:

(i) Wellington Capital Limited would be the Manager and responsible for performing the Service Contractor’s duties;

(ii) Wellington Capital Limited would be the entity authorised by the Respondent to operate the letting agent’s business;

(iii) the Applicant would perform the Service Contractor’s obligations and the letting agent’s rights "in conjunction with" Wellington Capital Limited (which S8 Limited’s solicitors "describe(d)" as a "joint venture");

(iv) the individual who would reside on site and hold the restricted letting agent’s licence would be an employee of Wellington Capital Limited which "clearly contradict(ed) the advice contained" in the initial letter from Short Punch & Greatorix dated 18 February, 2005 and "the statements contained in Clauses 7.2(b), 7.2(c) and 10.1 of the Letting Agreement";

(v) S8 Limited would guarantee the obligations of Wellington Capital Limited under both the Service Contractor’s Agreement and the Letting Agreement;

(c) (on the advice of Fuss Law) that, although Wellington Capital Limited, as Trustee, would own the Management Rights Business, a totally separate legal entity (namely, the Applicant):

(i) would be solely responsible for operating the business;

(ii) would be entitled to use the Manager’s unit at the complex of the operation of the Business;

(iii) would be totally responsible for the expenses of the Business; and

(iv) would be "entitled to the nett profits derived from the Business";

(d) (on the advice of Fuss Law) that, having considered the "applicable law", the issues for the Respondent to consider were the proposed terms of the transfer (in particular, the Option and the Agreement) and the requirements of the Service Contractor’s Agreement and the Letting Agreement, with particular reference to:

(i) that it would be reasonable for the Respondent to decline to consider the request for approval until such time as the Applicant could notify the Respondent that Wellington Capital Limited "has exercised the Option and the sale of the Management Rights Business is definitely proceeding";

(ii) that it would be reasonable for the Respondent to decline to consider the request for approval because the Applicant "has not provided the Respondent with adequate information about those ‘arrangements’ ... which are .... very significant issues" for the Respondent to consider;

(iii) that the arrangements proposed by Wellington Capital Limited "were never contemplated by the provisions of the existing" Service Contractor’s Agreement and the Letting Agreement because the Applicant would not qualify as a "Representative of the Manager" as defined in Clause 2.2(a) of both Agreements;

(iv) that the Respondent would have no right to object if the "joint venture" parties decided "in the future for some other entity other than (the Applicant) to perform" the Manager’s Duties and the Respondent would not even have to be consulted;

(v) that given the Respondent’s duty under the BCCM Act, based on the information supplied, "the administration, management and control" of the common property would be "in the hands of a third party" (the Applicant) with whom the Respondent would have no direct contractual relationship, thus raising the "question" whether the proposed "joint venture" satisfied the fundamental duty of the Respondent.

REASONABLENESS

38. While undoubtedly an important factor in the decision of the Respondent was that it had received legal advice prior to making its decision on 3 June, 2005, what has to be considered is whether the Committee of the Respondent, as a lay body, should do other than, in terms of reasonableness, view the advice it was given as both accurate and important (where importance of particular issues was stressed in the advice). In determining the real reason for the decision and whether, in the context of this particular body of decision makers, the withholding of consent was reasonable, it is difficult to escape the conclusion that the reasons appear to be genuine and not wholly fanciful, even if they might be able to be criticised by reference to some objective standard of correctness.

39. The written, and oral, submissions of both parties descend to much particularity about the correctness or otherwise of the approach taken by the Respondent to the issues identified in the email of Fuss Law of 24 May, 2005. But, as analysed, correctness of itself is not the test.

40. As to the Respondent’s approach to those issues at the time of its decision, I conclude:

(a) that the suggestions by the Applicant’s legal advisors that the agreement between the Applicant and Wellington Capital Limited must be viewed "as the terms of a joint venture" (together with the assertion, taken in the context of the actual effect of the proposed assignments, that the "terms of the internal workings of the arrangements" concerning those persons "should not be of concern to" the Respondent - even if limited in effect to confirming the joint venture nature of such arrangements) were not clarified by the Applicant between that assertion on 19 May, 2005 (even in the further letter of 30 May, 2005) and when the decision was made by the Respondent, with the consequence that such concerns as might legitimately arise as a result of that assertion were proper for the Respondent to take into account;

(b) that the uncertainty about the timing of the actual assignment and the confusion that could be said to flow not only from the "joint venture" suggestion but also from the proposed financial "arrangements" between the Applicant, its holding company and the proposed assignee (even after acknowledging the fact that the PDS was not a contractual document between the relevant parties), together with the way in which the non-individual agent (namely, the present Applicant) was to be appointed, could well lead a reasonable person to the conclusion that the proposed assignee was not a suitable substitute because of doubt about whether the new relationship would be the same as that created under the existing Service Contractor’s Agreement and the existing Letting Agreement, as assigned to the Applicant; and

(c) any contest about the effect of the representatives of the Applicant inserting "DO NOT DATE" in the document referred to in paragraph 5 of Section 1.0 of the Applicant’s Submissions dated 22 May, 2006 is of no moment: if it should be of any moment, it only reinforces the conclusion about uncertainty of timing of the proposed assignments.

41. In particular, with respect to Clause 2.2(a) of both Agreements, the reference in that provision to "an adequate number" being "available" appears to be a reference to individual persons, particularly because they are required to be available "at" the Property to "carry out" the requisite "duties and functions". This appears, in context, to be supported by Clause 3.03(b). Although it is quite possible that the correct interpretation is that the term "agents" may include a company (or companies), the very fact that there is confusion about the correct interpretation provides support for the view that, until clarified, the issue could well be one of genuine concern to a Body Corporate considering its position in determining whether to withhold consent. As such, the onus being on the Applicant, it would be reasonable, in the context in which that has to be interpreted in a case such as this, for a Body Corporate to rely upon the concern as a real reason.

42. I have found it unnecessary to determine whether or not, in terms of the submission made by the Respondent, there was in truth an "ultimatum" made by the Applicant (in its correspondence, through its solicitors, to the Respondent, through its solicitors, particularly by the letters of 19 May, 2005 and 30 May, 2005 from Short Punch & Greatorix to Fuss Law) in such a manner as to exclude in reality any further discussions or offers of further information in terms of s.82(4) of the Accommodation Module. What the correspondence, and in particular the letters of 19 May, 2005 and 30 May, 2005, to that date proves is that the Applicant had considered that it had complied with all its obligations in relation to providing information reasonably necessary to decide the applications for consent. Taking that to be true, at face value, then the Respondent, pursuant to s.82(4) of the Accommodation Module, would be obliged to move forward in order to decide whether to approve the two proposed transfers, because it had only 30 days after which it received the information "reasonably necessary to decide the application" to make that decision; and it had already received, through its solicitors, a number of clarifications and additional documentation since the 18 February, 2005 Notice of Intention to assign (subject to approval) had been delivered to Archers. Even without an ultimatum, it was reasonable to accept that the concerns expressed in the advices of Fuss Law would not be overcome in any short, or even longer, term view. Thus, given that approach by the Applicant, through its solicitors, it was reasonable for the Committee of the Respondent to proceed to make a decision such as it did on 3 June, 2005 (particularly given the response time of 7 days set forth by the Applicant in the last paragraph of the 30 May, 2005 letter) after considering the advice it received (which included a survey of all material given to it up to and including those letters of 19 May, 2005 and 30 May, 2005).

43. In the end, I conclude that the Applicant has not discharged its onus of establishing that the withholding of the Respondent’s approval to the two requested transfers was unreasonable, given the actual circumstances that existed at the time when the Respondent held its meeting on 3 June, 2005 and given the advice on which it could, and did, rely which was placed before it.

ORDERS TO BE MADE

44. The Respondent, in its original submissions in Response dated 7 October, 2005 submits that the following orders be made:

(a) that the application be dismissed;

(b) that the Applicant pay the Specialist Adjudicator’s costs of the adjudication;

(c) that the Applicant pay the expenses incurred by the Respondent relating to the Applicant’s request for consent to the transfer of the Service Contractor’s Agreement and the Letting Agreement to Wellington Capital Limited; and

(d) that the Applicant pay the Respondent’s costs in relation to this specialist adjudication.

45. While I have no difficulty with orders (a) and (b), I am concerned as to whether I have the requisite power to make the orders in (c) and (d). It may well be suggested that such an order as in (c) is an "ancillary" or "consequential" provision [pursuant to s.284(1) of the BCCM Act], but it is a matter that occurred prior to the actual dispute in question arising. As to the order sought in (d), I am not at all sure that s.276, Schedule 5 and s.280 are, together or in part, sufficiently wide to enable such an order to be made; but I am open to accept submissions about this issue. I also wish to receive submissions from both parties concerning whether or not the persons mentioned in my letter to the Office of the Commissioner for Body Corporate in this proceeding dated 24 February, 2006 are persons who come within s.274(1)(d) and, therefore, persons to whom I am required to give a copy of any orders made. For those reasons, and generally, I will refrain from making any final orders until both parties have had an opportunity to respond as to the nature of the orders to be made and the legal basis for making the same.

Dated this day of , 2006.


.................................................
Kiernan Dorney, QC
(Specialist Adjudicator)