Broadbeach Motor Inn [2000] QBCCMCmr 54 (8 February 2000)

P G DanielsREFERENCE: 0652-1999

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	16849
Name of Scheme:	Broadbeach Motor Inn
Address of Scheme:	2651 Gold Coast Highway BROADBEACH QLD 4218

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

the owners of lots 6, 13, 16, 19, 22, 23, 26-29, 31-33, 39-44, 62 and 63

P G DanielsI hereby order that Broadbeach Motor Inn must not pay an account from the partners of Hickey Lawyers (Hickey) dated 18 March 1999 in the sum of $15,716.60 until Hickey has provided Broadbeach Motor Inn with an account that clearly sets out all items of work done for Broadbeach Motor Inn and the amount charged (whether by way of fees or costs) for each item.1y

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0652-1999

“Broadbeach Motor Inn” CTS 16849

The applicants, the owners of lots 6, 13, 16, 19, 22, 23, 26-29, 31-33, 39-44, 62 and 63 have sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act):

1.	A declaration that Motions 6 & 7 of the agenda for the Extraordinary General Meeting of the Body Corporate for “Broadbeach Motor Inn” Community Title Scheme 16849 [“the Body Corporate”] held on May 21 1999 [“motions 6 & 7] were out of order.

2.	A declaration that any resolutions of the Body Corporate consequential to motions 6 & 7 are invalid.

3.	An Order that the Body Corporate, its Committee and Manager, and their servants and/or agents be restrained from making payment of an account from Hickey Lawyers to the Body Corporate dated 18 March 1999 out of the administrative fund, sinking fund or any other Body Corporate funds.

4.	A direction that the Chairman of the Body Corporate produce to the Commissioner any client agreement as defined by Section 48 of the Civil Justice Reform Act 1998, in existence between the Body Corporate and Hickey Lawyers, within 14 days of the date of this application.

5.

A direction that, if no client agreement between the Body Corporate and Hickey Lawyers exists, the Chairman of the Body Corporate forthwith request Hickey Lawyers to provide an account for all items of work related to motions 6 & 7, performed by Hickey Lawyers for the Body Corporate and the amount charged (whether by way of fees or costs) for each item as is required by Section 48J of the Civil Justice Reform Act 1998.

6.

A Declaration that, at all material times relevant to this application, the Chairman, Treasurer and Secretary of the Body Corporate, were Mrs M Rupe, Mr T Jeans and Mrs W Cull, respectively and that the said Chairperson, Treasurer and Secretary of the Body Corporate, engaged Hickey Lawyers to perform the work the subject of Motions 6 & 7 without the express or implied authority of the Body Corporate.

7.	An Order that Mrs M Rupe, Mr T Jeans and Mrs W Cull, pay to the Body Corporate the sum of $25,476.30 wrongly appropriated by them from Body Corporate funds in payment of fees and costs contained in accounts received by the Body Corporate from Hickey Lawyers.

8.	An Order that Mrs M Rupe, Mr T Jeans and Mrs W Cull, indemnify the Body Corporate from any claim by Hickey Lawyers for any fees and costs found to be owing by the Body Corporate to Hickey Lawyers which relate to the performance of work by Hickey Lawyers referred to in Motions 6 & 7.

9.	An Order that Mrs M Rupe, Mr T Jeans and Mrs W Cull the said Chairman, Treasurer and Secretary of the Body Corporate pay the Applicant’s reasonable legal costs associated with this Application to the Commissioner.

10.	Such further or other Order as the Commissioner deems fit.

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)).

This application relates to the payment of two sets of legal fees. The fees have been charged by Hickey Lawyers to the Body Corporate. They are in the sums of $15,716.60 and $25,476.30. The sum of $25,476.30 has already been paid. I made an interim order restraining payment of the $15,716.60 amount on 16 December 1999.

I will restate the general background to this dispute as I did in my reasons for the interim order.

The Body Corporate for this scheme has been involved in specialist adjudication regarding the validity of a management contract.

The Body Corporate engaged Hickey Lawyers to represent it at the adjudication. This included a substantial amount of preparation. In addition to the specialist adjudication Hickey Lawyers represented the Body Corporate in related Supreme Court litigation. Hickey had previously been appointed to represent the Body Corporate on an “as required” basis by resolution of the Committee on 27 March 1998.

Hickey Lawyers has charged the Body Corporate fees for the legal work that has been done. The Body Corporate sought approval for payment of the fees by placing motions 6 and 7 on the agenda for an extraordinary general meeting on 12 May 1999. Motions 6 and 7 provided as follows:

“6 Payment of Legal Fees Ordinary Resolution

Submitted by Committee

That a Memorandum of Fees from Hickey Lawyers, Body Corporate Solicitor, being for services provided in relation to the Specialist Adjudication, for a sum of $15,716.60 as per copy attached and marked Attachment “B” be approved.

7 Ratification of Legal Expenses to 31 March, 1999 Ordinary Resolution

Submitted by Committee

That payment of legal expenses as detailed in Attachment “C” totalling $25476.30 be ratified.”

The voting on both motions was Yes 38, No 22 with no abstentions or invalid votes. It is to be noted that motion 6 seeks approval to pay fees while motion 7 seeks ratification of fees already paid.

All of the orders sought relate to the payment of these two amounts.

The meeting that considered the above motions occurred on 12 May 1999. This application was not made until 27 October 1999. The fact that the application was made more than three months after the meeting means that section 193 of the Act is of relevance to the application. Section 193 provides as follows:

ú

Time limit on certain applications

193.(1) This section applies to an application for an order declaring void—

(a) a meeting of the committee for the body corporate, or a general meeting of the body corporate; or

(b) a resolution of the committee or body corporate; or

(c) the election of an executive or other member of the committee.

(2) The application must be made within 3 months after—

(a) if subsection (1)(a) applies—the meeting; or

(b) if subsection (1)(b) applies—the meeting at which the resolution was passed or purported to be passed; or

(c) if subsection (1)(c) applies—the meeting at which the executive or other member was elected.

(3) However, if the making of the application does not comply with

subsection (2)—

(a) the commissioner must deal with the application (including making a case management recommendation for the application) as if the making of the application complied with subsection (2); and

(b) an adjudicator to whom the application is referred for specialist or department adjudication may, for good reason, waive the non-compliance.

It will be noted that an application to invalidate a general meeting or resolution of a general meeting must be brought within three months of the meeting unless an adjudicator waives compliance for good reason. The question that arises is what circumstances come within the ambit of good reason. In the appeal of Weeks v. Commissioner for Body Corporate (Maroochydore District Court Appeal 13/99) Judge Dodds made the following statement about section 193 at pages 4 and 5 of the judgment:

“... the objects of the Act, for instance section 5(a) and (h) militate against too strict or legalistic a view about good reason for waiving non-compliance with the time limit. What will be required is a balancing of the length of the delay; the reason for the non-compliance; the effect of delay on others who are affected by the matter in dispute and importantly, whether apart from the question of non-compliance with the time requirement, an applicant will be entitled to the relief sought. The applicant, being the person seeking a waiver, will have the task overall of satisfying the adjudicator that the time limit should be waived in all the circumstances.”

The factors I take into account in assessing this matter are as follows. The delay has not been substantially long. It has been approximately two months. A letter was forwarded from solicitors for the applicants to the Body Corporate dated 29 June 1999 in which the issues raised in this application were thoroughly canvassed and undertakings regrading the two relevant motions were sought. The Body Corporate Manager replied by letter dated 1 July 1999 after the matter had been considered by the Committee. The Manager stated in part that “The committee is not authorising any further payments to Hickey Lawyers.” I am informed that the Committee specifically resolved on 29 October 1999 to withhold payment of the $15,716.60 amount until this application has been determined. It is clear from the correspondence that the applicants have been pursuing this matter for some time to the knowledge of the Body Corporate. It is not the case that the matters pertaining to this application have been brought to the attention of the Body Corporate for the first time more than three months after the general meeting. I find that the application does raise genuine and important issues about the consequences of failing to comply with the Act and Body Corporate and Community Management (Standard Module) Regulation 1997 (the Regulation). In light of the above, I waive compliance with the requirement to comply with section 193 of the Act. I will now consider the substance of the application.

The applicants allege that the Body Corporate failed to comply with sections 103 and 104 of the Regulation which provide as follows:

ú

Spending by committee

103.(1) The committee may only carry out a proposal involving spending above the relevant limit for committee spending for the scheme if—

(a) the spending is specifically authorised by ordinary resolution of the body corporate; or

(b) the owners of all lots included in the scheme have given written consent; or

(c) an adjudicator is satisfied that the spending is required to meet an emergency and authorises it under an order made under the dispute resolution provisions; or

(d) the spending is necessary to comply with—

(i) a statutory order or notice given to the body corporate; or

(ii) the order of an adjudicator; or

(iii) the judgment or order of a court.

(2) For this section, if a series of proposals forms a single project, the cost of carrying out any 1 of the proposals is taken to be more than the relevant limit for committee spending if the cost of the project, as a whole, is more than the relevant limit.

(3) This section has effect subject to the requirements under this division for spending that is above the relevant limit for major spending.

ú

Quotes for major spending

104.(1) This section applies if—

(a) a motion to be moved at a general meeting of the body corporate proposes the carrying out of work or the acquisition of personal property or services, including the engagement of a body corporate manager or service contractor, but not including the engagement of a service contractor who also is, or is to be, a letting agent; and

(b) the cost of carrying the proposal into effect is more than the relevant limit for major spending for the scheme.

(2) The lot owners must be given copies of at least 2 quotations for carrying out the work or supplying the personal property or services.

(3) If the motion is proposed by the committee, the committee must obtain the quotations.

(4) If the motion is not proposed by the committee, the person proposing the motion must obtain the quotations and give them to the secretary.

(5) Copies of the quotations or, if voluminous, summaries of the quotations and advice about where the complete documents may be inspected, must accompany the notice of the meeting at which the motion is to be considered.

(6) If, for exceptional reasons, it is not practicable to obtain 2 quotations, a single quotation must be obtained and must accompany the notice of meeting.

Example—

If goods to be acquired by the body corporate are obtainable from only 1 source, a quotation for supplying the goods must be obtained from the source and circulated with the notice of meeting. The fact that goods with the necessary characteristics are only obtainable from a single source would be an exceptional reason for not obtaining 2 quotations for the supply of the goods.

(7) Each quotation obtained under this section must be retained as an attachment to the minutes of the meeting at which the quotation is considered.

It will be noted that sections 103 and 104 require that the Body Corporate approve expenditure above the “relevant limit for committee spending” prior to the funds being expended. Approval is given by the passing of an ordinary resolution in general meeting unless 103(1)(b), (c) or (d) applies. Where the amount of money to be spent is higher than the “relevant limit for major spending”, then the Body Corporate can only approve the expenditure where it has been given a choice of choosing between at least two quotations. The terms “relevant limit for committee spending” and “relevant limit for major spending” are defined in the Dictionary to the Regulation which is located in the Schedule. Committee spending is limited to the number of lots times $100. Major spending is limited to the number of lots times $200. In respect of this Body Corporate of 67 lots, the limit for Committee spending is $6,700. The limit for major spending is $13,400.

Both motions which the applicants seek to invalidate are above the limit of Committee spending and major spending. They are in the amounts of $15,716.60 and $25,476.30. This is the case whether they are considered alone or whether they are added together or parts are added together as envisaged by section 103(2) of the Regulation. On a strict application of the legislation, the services should not have been engaged until the Body Corporate had approved the overall expenditure and chosen between at least two quotes. The applicants further complain that the services that Hickey Lawyers performed were not necessary. They state that the contest in the specialist adjudication was between a minority group of owners supporting Gooley and a majority group of holders supporting Bruce and Partners and Lurneah Holdings. Both groups were represented by firms of solicitors. There was no need for the Body Corporate to have legal representation in the proceedings.

The issue that needs to be addressed is what order should be made flowing from this contravention of the legislation.

The first issue I consider in that respect is that it may not have been in the reasonable contemplation of the Body Corporate at the time Hickey Lawyers was initially engaged to represent it at the specialist adjudication, that the services provided would eventually cost in excess of the limit of Committee spending and major spending. In this respect I take into account the fact that Hickey Lawyers represented the Body Corporate in related and perhaps unexpected Supreme Court proceedings in December 1998. Legal fees are generally incurred on an item by item basis. It may not have been known that the limits were going to be exceeded until the time that the limits were nearly reached. This is in contrast to a situation where the sum to be spent is certain from the start, for example, painting the exterior of a building. It is also my view that it was not unreasonable for the Body Corporate to be represented in the specialist adjudication until such time as the adjudicator excused its further attendance. These findings lead me to the view that it was reasonable for Hickey Lawyers to be engaged. I note that it was not until the 2 March 1999 and 12 March 1999 that the applicants informed the Body Corporate that they would not contribute to paying levies struck for paying Hickey. At this time, Hickey had already performed a substantial amount of work on behalf of the Body Corporate. The applicants complained about this matter to the Body Corporate at a relatively late stage of the proceedings.

I have also considered whether, once the appropriate limits had been reached, the Body Corporate should have voted on further expenditure of money in general meeting. This would have entailed obtaining two quotes for the legal services. I do not think the actions of the Body Corporate in this respect are at fault as it is highly unlikely that the Body Corporate would have decided to appoint another firm of solicitors other than Hickey given that Hickey already had substantial involvement in the matter.

The applicants suggest that Hickey Lawyers were receiving instructions from Ms Cull a solicitor then in the firm of Attwood Marshall who was acting for Bruce and Partners and Lurneah Holdings in the specialist adjudication. They state if Hickey were engaged to look after the minority lot owners in the adjudication and Ms Cull was a solicitor for the majority lot owners, then there was a conflict of interest. It is not my function to determine whether a solicitor is performing work in a conflict of interest situation. I note that even though the allegation is made, there is no indication in the documents provided to me that shows Hickey performed their role as lawyers for the Body Corporate improperly. This matter does not interfere with my finding that the engagement of Hickey was reasonable in all the circumstances.

An adjudicator must make an order that is “just and equitable” when there has been a contravention of the Act or Regulation. I decline to make orders 1-4, 6-8 and 9 as I do not believe those orders are just and equitable in light of what I have stated above. I do not propose to invalidate the resolutions on the motions or make the Committee responsible for the expenditure of the funds. In respect of order 8, it seems to me that Hickey Lawyers was engaged by resolution of the Committee. I decline to make that order. I have no power to order the payment of costs.

I will not make an order requiring the production of a client agreement as it is clear that no such agreement exists. I have considered whether an order should be made that the amount of $15,716.60 should not be paid until an itemised account is received from Hickey and scrutinised by the Committee. This, at least, would ensure that the account receives closer scrutiny. The order would probably only affect $7,191.20 of the bill. This represents work performed by Hickey. The remainder of the account is disbursements including $8,180 barrister’s fees to Jeremy Sweeney. I have decided that an order to that effect would be appropriate. The sum of $7,191.20 is a significant amount for the Body Corporate. A person from the Committee will need to contact Hickey and inform them that they will need to provide an itemised account. When the account is received, it will need to be examined by the Committee and a determination made about whether it will be paid or whether parts of it should be challenged. I wish to inform the Committee that it cannot act unreasonably when making decisions about this matter. If it does, an owner can make application to have the matter resolved.

Finally, I wish to inform all parties to the dispute that section 197(5)(e) of the Act provides that the interim order that I made on 16 December 1999 lapses as a result of making a final order to resolve this dispute.1y