Kapalua Sun Court [2000] QBCCMCmr 115 (1 March 2000)

P G DanielsREFERENCE: 0536-1999

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	11952
Name of Scheme:	Kapalua Sun Court
Address of Scheme:	1 TE Peters Drive BROADBEACH QLD 4218

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

Graham Lewis DANIEL the owner of lot 17

P G DanielsI hereby order that the Body Corporate can only adopt a sinking fund budget at its next annual general meeting that complies with section 94(3)(a) of the Body Corporate and Community Management (Standard Module) Regulation 1997.1n

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0536-1999

“Kapalua Sun Court” CTS 11952

The applicant, Graham Lewis DANIEL, the owner of lot 17, has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act):

1.	That the Body Corporate be ordered to register the community management statement approved by special resolution at the AGM on 27 June 1998 (Motion 8);
2.	That lots 2, 13 and 17 be declared as financial and able to vote as at the date of the AGM on 26 June 1999;
3.	That the Body Corporate be ordered to insure the common property and body corporate assets for full replacement value of at least $2,406,500 (s.127);
4.	That the Body Corporate be ordered to prepare a 10 year sinking fund budget and then to call an extraordinary general meeting to approve the sinking fund levies set in accordance with this budget or alternatively the Body Corporate be ordered to set the sinking fund levies in accordance with the budget and projections prepared by Ian Bloomfield dated 4 June 1998 plus further expenditure of $7,310 not covered in these projections;
5.	That the amount paid to committee member John Pugh of $900 be ordered to be repaid if this expenditure is not approved at an EGM ordered to be called to consider a motion authorising payment. The amount was for construction of pool fence, labour only.
6.	That an order be made under section 86, terminating the services of AM Strata Administration;
7.	That the Body Corporate be ordered to pay for the cost of lodging this application.

Section 223(1) provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

a) a claimed or anticipated contravention of the Act or the community management statement; or

b) the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or

c) a claimed or anticipated contravention of the terms, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

The applicant has sought seven orders. I will consider each order separately.

A submission was received from the body corporate manager, AM Strata Administration (the manager), on behalf of the Committee. I will refer to that submission where relevant.

1.	Community Management Statement

The applicant states that the Body Corporate resolved at its annual general meeting on 27 June 1998 to adopt a community management statement (CMS), yet it has still not been recorded.

The manager states that the CMS was rejected due to omissions but that these have been corrected. A new statement will be presented at the next body corporate general meeting.

It seems to have taken a very long time to correct some omissions. I question why a new corrected CMS could not have been presented at the Body Corporate’s AGM on 26 June 1999.

In any event, the matter is now on course. In my view it is appropriate for the Body Corporate to consider a revised CMS at its next general meeting.

2.	Voting rights

The applicant states that the manager declared at the commencement of the AGM on 26 June 1999 that the owners of lots 2, 13 and 17 were unfinancial and not entitled to vote.

The manager states that she made this declaration due to an oversight. The votes of these lots were included.

In light of the fact that the manager has admitted to a mistake and that the votes were included, I am not inclined to make a declaratory order that lots 2, 13 and 17 were financial at the time of the AGM on 26 June 1999.

3.

Insurance

The applicant has provided a letter from Ian Bloomfield Pty Ltd dated 15 May 1998 in which he estimates the cost to replace the building is $2.4 million. The Body Corporate is required to effect insurance that covers damage to the building. The insurance must cover reinstatement of the building to its condition when new including associated costs: section 128 of the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Regulation).

The manager states that the building is currently insured for a replacement value of $1,505,000 and that the insurer indicates this is adequate insurance.

There is approximately a difference of $.9million between the estimate of Bloomfield and the insurance currently effected.

The question is whether I am willing to find that the property is underinsured.

I am not willing to make that finding. The letter from Bloomfield is nearly two years old. There is certainly a difference of opinion about the amount of insurance. However, I am not of the view that the applicant has established on the balance of probabilities that the current level of insurance contravenes section 128 of the Regulation.

The manager states that the Committee resolved that the level of insurance will be reviewed in April 2000 when the policy is to be renewed. I think this is appropriate. The Committee should take into account the letter from Bloomfield that I have referred to above.

Sinking fund budget

The applicant states that a ten year sinking fund budget was not submitted to nor approved by the Body Corporate at its AGM on 26 June 1999.

This is not contested by the manager. The manager states that the Committee feels that the sinking fund meets with the requirements of the building for the current year.

The failure of the Body Corporate to approve a ten year sinking fund budget contravenes section 94(3) of the Regulation which provides:

(3) The sinking fund budget must—

(a) allow for raising a reasonable capital amount both to provide for necessary and reasonable spending from the sinking fund for the financial year, and also to reserve an appropriate proportional share of amounts necessary to be accumulated to meet anticipated major expenditure over at least the next 9 years after the financial year, having regard to—

(i) anticipated expenditure of a capital or non-recurrent nature; and

(ii) the periodic replacement of items of a major capital nature; and

(iii) other expenditure that should reasonably be met from capital; and

(b) fix the amount to be raised by way of contribution to cover the capital amount mentioned in paragraph (a).

This is an important requirement that ensures the Body Corporate adequately plans for the future.

I will make an order that the Body Corporate comply with section 94(3) of the Regulation.

4. Work expenditure – $900

The applicant states that an amount of approximately $900 was paid to a Committee member, John Pugh for fencing work excluding materials. The applicant states that the payment does not appear to have been approved by the Committee and in any event is a restricted issue under section 27 of the Regulation.

A submission has been received from the Committee member concerned, Mr John Pugh.

Mr Pugh states that the Committee accepted a quote from him to do the work. He also undertook other work. The manager also states that the work was approved by the Committee.

I accept that the Committee did approve the work. The payment is not a restricted issue under section 27 of the Regulation. There is no basis on which to make an order.

5. Termination of the manager

The applicant seeks an order under section 86 of the Regulation terminating the services of the manager due to alleged negligence in carrying out its duties. The applicant provides some specific instances of the alleged negligence.

Section 86 of the Regulation provides:

ú

Termination

86.(1) The body corporate may terminate a person’s engagement as a body corporate manager or service contractor, or a person’s authorisation as a letting agent, if the person (including, if the person is a corporation, a director of the corporation)—

(a)	is convicted (whether or not a conviction is recorded) of an indictable offence involving fraud or dishonesty; or
(b)	is convicted (whether or not a conviction is recorded) on indictment of an assault or an offence involving an assault; or

(c) engages in misconduct, or is grossly negligent, in carrying out, or failing to carry out—

(i) functions required under the engagement; or

(ii) obligations (if any) under the authorisation; or

(d) does not carry out duties under the engagement or authorisation, and persists in not carrying out the duties for 14 days or more after the body corporate, by written notice, requires the person to carry out the duties; or

(e) carries on a business involving the supply of services to the body corporate, or to owners or occupiers of lots, and the carrying on of the business is contrary to law; or

(f) transfers an interest in the engagement or authorisation without the body corporate’s approval.

(2) Subsection (1) does not prevent the termination of the engagement or authorisation—

(a) by agreement; or

(b) under the engagement or authorisation.

It will be noted that the power to terminate an agreement vests in the Body Corporate. I do not have power to make such an order. The applicant can, if he so desires, submit a motion to terminate the agreement, which can be considered at the next general meeting of the Body Corporate. The applicant could also utilise section 61 of the Regulation which provides for the calling of an extraordinary general meeting. Section 61 provides as follows:

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Requirement for requested extraordinary general meeting

61.(1) An extraordinary general meeting (a “requested extraordinary general meeting”) of the body corporate must be called if a notice asking for an extraordinary general meeting to consider and decide motions proposed in the notice is—

(a)	signed by or for the owners of at least 25% of all the lots included in the scheme; and
(b)	given to the secretary or, in the secretary’s absence, the chairperson or, if the committee has not yet been chosen, given to the original owner.

(2) The secretary may be presumed to be absent if a notice is given to the secretary at the address for service of the body corporate, and no reply is received within 7 days.

(3) A requested extraordinary general meeting must be called and held within 6 weeks after the notice asking for the meeting is given.

(4) A requested extraordinary general meeting of the body corporate may be called even though the body corporate’s first annual general meeting has not yet been held.

The applicant will note that at least 25% of all owners of lots must sign a notice requiring the calling of an EGM.

6. Costs of application

I do not have power to make an order requiring the Body Corporate to pay the applicant’s costs of this application. Such an order can only be made where there is express statutory power. There is no such power in the Act.

Conclusion

The Body Corporate will consider a new CMS at its next general meeting and the level of insurance when the policy is to be renewed.

The only order to be made is to require the Body Corporate to comply with section 94(3) of the Regulation, regarding the sinking fund budget.