Nargoon Court [2001] QBCCMCmr 170 (22 March 2001)

C G YOUNGREFERENCE: 0653-2000

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	11130
Name of Scheme:	Nargoon Court
Address of Scheme:	14 Beelyu Street BURLEIGH HEADS QLD 4220

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

Martin LEE as occupier of Lot 1; Victor JIMENEZ as a co-owner of Lot 2; Ian BUSH as owner of Lot 5; John Patrick ROCHE as owner of Lot 6; and Robert Dakers LINDSAY as owner of Lot 7,



C G YOUNGI hereby order that –

1. the application for an order that Martin Lee be confirmed as the body corporate secretary in replacement of George Stepanoff, is dismissed and Stepanoff continues as secretary; and

2. the application for an order that Stepanoff surrender all of the body corporate records to Martin Lee is dismissed, however the records must be delivered to the Body Corporate Manager engaged by the body corporate, Body Corporate Services Pty Limited, in order that it can perform its duties under the agreement. 2y

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0653-2000

“Nargoon Court” CTS 11130

The applicants, Martin Lee, Victor Jimenez, Ian Bush, John Roche, and Rowan Lindsay of Lots 1, 2, 5, 6 and 7 respectively, have sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (“the Act”), quote -

To enforce the resolution of the body corporate majority members, to replace George Stepanoff with Martin Lee, as the new secretary, and order George Stepanoff to hand over all books, records, and authorities.

Section 223(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 –

(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)).

Before examining the substance of the matters raised in the application, there is a matter of standing in respect of one applicant which I need to deal with initially.

Whereas all of the other four applicants are either sole owners or co-owners of lots in the scheme, Martin Lee has no ownership interest in Lot 1 as the records of the Registrar of Titles shows Donna Gale Lee as the sole registered owner. The document attached to the application which Martin Lee (hereafter “Lee”) has signed as co-applicant, shows the words “of unit 1” against his name. As he cannot be an applicant on the basis of ownership, I have assumed that he has applied on the basis of occupancy (see section 182 of the Act). Whereas an owner has a general right to make application against another owner, an occupier, or the body corporate, the capacity of a non-owner occupier to do likewise will depend on the subject matter of the application and the order sought. For example, a tenant with no interest in body corporate finances has no standing to make an application as to the validity of a resolution concerning the budget for the body corporate administrative fund. On the other hand, a tenant will have standing as an applicant where, for example, the body corporate is seeking to assert a by-law concerning pets in the scheme and the tenant has a pet.




In this instance I have determined that Lee does have standing to be an applicant as the order sought directly concerns his appointment as the body corporate secretary and the possession of the body corporate records, usually a function of the secretary or the secretary and treasurer jointly, where a Body Corporate Manager is not employed. A non-owner may hold the office of secretary provided the special conditions of section 10(1)(b) and 16(5)(b) of the Body Corporate and Community Management (Standard Module) Regulation 1997 (“the Standard Module”) are met.

Under section 194 of the Standard Module, submissions were invited from the respondent Stepanoff and members of the body corporate other than the applicants. Responses were received from Stepanoff and owner Ray Rub.

This application follows upon a previous application, Application No. 329-2000, lodged co-jointly by Donna Lee and two of the present applicants, Ian Bush and John Roche. Although lodged against the body corporate, this previous application was founded on a number of alleged shortcomings by Stepanoff as secretary concerning maintenance, a refusal to account for body corporate funds, a refusal to convene a meeting, acting beyond his authority, and acting contrary to the interests of member owners. The order sought in that application was quoted by the Adjudicator as follows –

“To inforce(sic) the call for extraordinary meeting, to be given the opportunity to claim for damages caused by the said neglect and claim for the money spent in returning the place to habitable condition, to enforce the request for full finacial(sic) disclosure.”

In a number of areas, the present application is based partly on these same allegations raised previously against Stepanoff. Accordingly I intend to briefly revisit the matters surrounding the previous application, for which Order 329-2000 was issued by another Adjudicator on 25 October 2000.

Before doing that, I mention at this time that in order to better understand the facts of the matter and the positions of the parties, on Wednesday 14 March 2001 I conducted a three-way teleconference with one of the applicants, Ian Bush, and the respondent Stepanoff. That teleconference lasted for over an hour and while Bush said that he did not represent his co-applicants, he proved to be fully conversant with the events giving rise to the application. I will be referring to matters discussed during the teleconference later in these reasons.

Two of the main areas of dispute under the previous application, which I believe to be still the major cause of dissent between the parties, concern (1) the alleged disrepair of the building and the parcel generally, and (2) the allegation by some owners that Stepanoff as secretary was the responsible party through his failure to carry out his duties as secretary. The consequences were: notice of a claim on the body corporate by the resident owners (Bush, Roche, Jiminez) for carrying out certain remedial maintenance work; a refusal by those same persons (or at least Bush and Roche) to pay contributions levied on them by the body corporate; an inability by the body corporate to carry out work because of the shortfall in its funds; and a desire to oust Stepanoff as the secretary/treasurer.

Order 329-2000 dismissed the application. The reasons given by the Adjudicator for that order can be briefly summarised as follows: under the legislation the body corporate, not the individual secretary, is responsible for maintaining the common property (see sections 109 and 114 of the Act); only the body corporate, not the secretary, has the power to authorise the reimbursement a person for work done on behalf of the body corporate; the secretary is obliged to call an extraordinary general meeting of the body corporate but only when served with a properly signed notice in accordance with section 61 of the Standard Module; the legislation requires the body corporate, not the secretary, to administer and manage the scheme (common property, assets, enforce by-laws etc). In a nutshell, the Adjudicator’s reasons were to the effect that in seeking to place the responsibility on the secretary for breaches of duty, the applicants were wrong and their proper course of action was to seek their remedies against the body corporate.

In the present application, the applicants firstly seek the implementation and acknowledgement by Stepanoff of the resolution of the meeting held on 7 October 2000, which was to dismiss him from the position of secretary and replace him with Martin Lee. The second order sought is really a consequence of the first, namely that Stepanoff relinquish the body corporate books and records to Lee as the new secretary.

I note that order, Order 329-2000, was made on 25 October 2000, a date some two weeks after the 7 October meeting. I also note that the file contains a copy of the minutes for that meeting.

My understanding of the steps taken in calling this meeting is as follows. It was called in response to a desire by a number of owners to remove Stepanoff. Stepanoff was of the belief, mistakenly, that as a number of these owners had not paid their contributions (Bush and Roche – Donna Lee had also not paid her contributions though it was Martin Lee who attended the meeting) they could not be party to a “requested extraordinary general meeting” under section 61 of the Standard Module. The section has no such condition attached to signatories.

Stepanoff was a reluctant attendee at the meeting, because of his mistaken belief in the ability of the parties to require him to call a meeting, and it appears he informed others not to attend because he considered the meeting invalid. Of course while being “unfinancial” (ie all due contributions and penalties not paid by the meeting date) is no bar to being a signatory to a section 61 request for a meeting, the voting restrictions imposed on unfinancial persons by section 49(11) applied to the meeting held in response to the request. Both parties agree that the proper means for the calling of a meeting, particularly the service of a proper notice of meeting in the required format including a voting paper, were not followed. While procedural errors and omissions are not necessarily fatal to the validity of a meeting, or a particular resolution, in this instance there was a fundamental failure to include a motion to oust the secretary under the provisions of section 25(2)(f) of the Standard Module, and to give notice of the intention and the means to appoint another in his place.

In regard to the “unfinancial” status of three of those present, Bush, Roche and Lee (see above), the claim by Bush, and taken up by the other two, is that they were not unfinancial because of the off-set affect of the moneys owed to them by the body corporate for the maintenance work referred to earlier. That claim is incorrect. The owners have no right to set-off any such alleged debt of the body corporate against their contribution levies, more particularly so as the body corporate had not resolved to either authorise them to carry out the work in the first place, or to ratify their actions and reimburse them.





Bush states that he obtained advice from the Information Service of this office (entirely separate from the Dispute Resolution Service arm), the body corporate’s insurers and a legal adviser, who all said that if the body corporate failed to maintain the parcel then owners had a responsibility to maintain it and the body corporate would have to reimburse them for any costs outlaid (materials and services) and perhaps their labour. If that was the advice given then it was wrong. I note in an email transmission from the Information Service dated 11 July 2000, given in response to an email from Bush regarding emergency maintenance (amongst other things) carried out by owners and tenants, it was suggested that if the body corporate was not complying with the legislation then he should lodge an application to have the matter adjudicated. This response does not accord with the advice allegedly obtained by Bush. What Bush and the others should have done was to submit a properly made out claim to the committee which would have either decided the matter itself if it was within the jurisdiction and financial limit of the committee, or referred it to the body corporate in general meeting for decision. Alternatively, they could have submitted their own motion of claim to the secretary for inclusion on the agenda of the next general meeting (see section 41(1) of the Standard Module). The motion would need to be supported by proper documentation, for example, purchase receipts, invoices from service providers, work times etc. Stepanoff has denied receiving any such detailed motion or claim and I am not convinced otherwise. Bush has spoken of compensation in general terms a number of times but there is no evidence of a detailed claim. In fact in a letter dated 9 October 2000 from the secretary (presumably Lee), the relevant comments are, “In due course we will submit to you an account of how much you owe us, but we have to inspect all books, accounts and balances, before we will submit a final claim against you”. This was confirmed during the teleconference, that is, no detailed claim had been made and that it would be made after they had viewed the records of the body corporate.

I do not understand the relevance in Bush and the others requiring they be provided with body corporate financial records before they lodge their claim for the maintenance work done. Surely the claim is independent of the body corporate finances – it is merely a matter of detailing the costs incurred that bear no relationship to the body corporate’s finances. In any case, I point out that the law is that an owner has a right to view all of the records of the body corporate under the provisions of section 162 of the Act. The section requires that an owner make application (see Form 12-“Requiring Information from a Body Corporate”) in writing and lodge it along with the prescribed fee, with the body corporate (secretary) for access within 7 days – copies of records can also be obtained upon payment of the prescribed copying fee.

I have seen no evidence of such an application being made, though I note Bush has requested of Stepanoff access to every invoice, account, bank statement etc. While owners must know the law themselves, it would have been practical for Stepanoff to have advised Bush (and others) of the proper manner in which the records could be accessed. Also, as in many bodies corporate that are not professionally managed, the fees could have been waived. I am not saying this should have been policy but that is a common practice in such bodies corporate as “Nargoon Court” was at the relevant time (i.e. self-managed). However this does not change the fact that Bush and others did not make proper application for the records in accordance with the legislation.

In any case, as I have already said, there is no relationship between the release of the records and the lodgement of a claim by the relevant owners. For all of the above reasons, Bush and the others had no right to set-off an unauthorised, unknown and unquantified claim against contributions levied. I would also mention that during the course of the teleconference, when asked to roughly quantify his claim, Bush suggested that for work done, damages to his lot and belongings, the amount would be around $5,000. It seems to me from his remarks that the claim comprises a significant proportion of “damages” and “compensation” in comparison to actual reimbursement and therefore this claim may, in a large part, have to be pursued in a civil court. However this is a matter that Bush will need to seek his own legal advice on – I am merely concerned here with the matters relative to the legislation that are within my jurisdiction.

Stepanoff states that as at the end of November 2000, the following owners had contributions and penalties outstanding: Bush $1,477; Lee $1,586.50; and Roche $881.50. Stepanoff states that payments outstanding by Bush and Lee date back to 1998 while those of Roche date back to March 2000. The failure to pay these amounts will undoubtedly have had a significant effect on the finances of such a small scheme body corporate and, consequently, its ability to operate effectively. Those owners should pay these amounts promptly and if they are not, the body corporate should consider legal action to require them to do so. In turn, Bush and the relevant others may make their claim against the body corporate for what they believe is owed to them.

Since the lodgement of the application there has been a significant development that bears on this application. On 30 November 2000 the annual general meeting of the body corporate was held. Unlike the meeting of 7 October 2000, the procedures adopted in the calling and the conduct of the meeting were in accordance with the legislation. This is because a professional Body Corporate Manager, Body Corporate Services Pty Limited, was involved in the preparation of the notice of meeting and other documentation. This company was engaged by Stepanoff in his capacity as secretary/treasurer and Rub as chairperson, both constituting the remaining committee. Rub has confirmed with me this consultation to engage the company and to call the meeting. The fall of membership below the minimum requirement of two persons (see section 9(3) of the Standard Module) resulted from the remaining member selling her lot. As the remaining committee members, Stepanoff and Rub should have appointed a substitute member for the balance of the term to the casual vacancy, but did not. Despite this, I am satisfied that they constituted the committee at the time. Also, though the company may have prepared the notice, Stepanoff signed it as the secretary – I have sought and obtained a copy of that document from the company to verify that for myself.

In view of my earlier determination that the decision to oust him at the meeting of 7 October 2000 was invalid, Stepanoff’s signing of the notice was correct. Though I am concerned that a replacement committee member was not appointed, that does not affect the secretary in his performance as secretary in issuing a notice to call a meeting, in accordance with a decision made co-jointly with Rub.

The unfortunate aspect of this meeting is that Bush and others boycotted the meeting, calling it invalid on the basis of their belief that Lee was the secretary and therefore Stepanoff had no power to call the meeting. However, even had they attended the meeting then at least Bush, Lee and Roche would have been ineligible to vote on the motions (all requiring ordinary resolutions) or in the election of committee members because of their unfinancial status. Accordingly their absence would not have affected the vote; for even if both Lindsay and Jiminez had attended and voted against the motions, the vote would be 3 in favour and 2 against, and the motions would still have been carried.



In all the circumstances, I am satisfied that the meeting must be regarded as valid and the decisions taken at the meeting should stand.

The two matters raised by the applicants have been resolved by this meeting, namely that Stepanoff has been properly elected secretary and a Body Corporate Manager has been engaged and the books and records will be maintained by that company. While the applicants may not be happy with the election of Stepanoff, they might recognise that the appointment of a professional Body Corporate Manager will provide owners with the benefit of an independent party to convene meetings, attend to the body corporate’s finances and the administration of the body corporate generally.

Although my orders are against the applicants, I have made my decision for the reasons given and I have not been required to investigate the finances and financial records of the body corporate. Given that the applicants, particularly Bush, have made many complaints to Stepanoff over his handling of the finances, it is important for the peace of mind of all owners that the Body Corporate Manager administer the body corporate funds. Of course it will be the body corporate and the committee, not the Body Corporate Manager, making the decisions on revenue and expenditure, but a major part of the fee paid to a Body Corporate Manager is for it to properly manage the financial affairs of the body corporate.

The body corporate needs to now recover all of its outstanding contributions and resolve the question of exactly what are the legitimate claims of Bush and others. I must say that in regard to these claims, I find it difficult to believe that the three owners can collectively claim some $4,000 for carrying out what I gather to be fairly minor maintenance work. When questioned on this matter during the teleconference, Bush was somewhat vague in listing the work done and the amounts involved – he did recall them painting a path, emptying bins, garden work and having to employ an electrician and plumber to do certain work. However the work of the plumber was less than $200. I would point out that the maintenance of garbage bins is not a body corporate responsibility but an individual owner one. I would also point out that in many schemes owners carry out minor common property maintenance work, such as gardening, the mowing of lawns, sweeping of stairwells and entrances, etc. This work is done without expectation of payment since the common property, especially in smaller suburban schemes, is regarded as a shared extension of everyone’s “home”. Sometimes owners forget that the “body corporate” is not a separate or commercial entity, but is merely the collective owners of lots. Any claim on the body corporate, or unpaid contribution levy, impacts on the pockets of fellow owners, not outsiders. Bush and the others might care to consider this when making out their claims against fellow owners.

For all of the foregoing reasons, my decision is that the orders sought should not be made and I have therefore dismissed the application.