Kimberley [2001] QBCCMCmr 27 (18 January 2001)

C G YOUNGREFERENCE: 0590-2000

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	12275
Name of Scheme:	Kimberley
Address of Scheme:	40 Lang Parade AUCHENFLOWER QLD 4066

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

Lei Kien CHEUNG, owner of Lot 6, through her attorney Tung Ngan CHEUNG,



C G YOUNGI hereby order that Resolution 8 “Sinking Fund Budget Variation” declared passed at the annual general meeting held on 11 July 2000, is invalid.

I further order that the notice to owners dated 4 October 2000 for contributions payable to the body corporate for the period 1 October 2000 to 31 March 2001, in respect of the contribution for $310 for the sinking fund in reliance on Resolution 8, shall by this order be deemed to be a valid levy payable by owners as if it were made in respect of a valid budget resolution.

I further order that the secretary of the body corporate must forward a copy of this order and the accompanying reasons to each owner. 2n
STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0590-2000

“Kimberley” CTS 12275

The applicant, (Henry) Tung Ngan Cheung holding a general power of attorney for Lei Kien Cheung of Lot 6, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (“the Act”), quote -

1. I could nominate myself as committee member

2. My nomination as chairman, treasurer and secretary is valid.

3. The secret ballot voting for the chairman, secretary and treasurer is invalid.

4. Kimberley Body Corporate is need(ing) to have a valid administration agreement.

5. The manager Mr Daryl Patterson has no right to stop me to do the Kimberley Body Corporate record search.

6. Motion 6 and motion 8 of 2000 AGM voting paper is invalid.

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)).

In the supporting grounds, the applicant has submitted an extensive narrative and copies of certain documents in support of the multiple orders he is seeking.

Since lodging this application in October 2000, the Body Corporate Manager for the body corporate, Complete Body Corporate Management Pty Ltd (“CBCM”) has been placed into receivership and the agreement terminated. The body corporate has apparently now entered into a fresh body corporate management agreement with Body Corporate Services Pty Limited. In the circumstances there is no point in my investigating and determining Order 4 above which questions the validity of the agreement with CBCM.

I therefore need only deal with the other five orders sought, which I shall address in turn.

1.	I could nominate myself as committee member

I note that after the body corporate committee (through CBCM) initially excluded the applicant from the ballot for the three executive member positions, in its letter of 25 May 2000 to owners it advised that his nominations were valid and an amended ballot paper including his nominations was included with the letter. That is, CBCM/committee admitted its error in excluding the applicant and remedied it, and in doing so acknowledged that a person holding a power of attorney can self-nominate.

Accordingly there is no dispute between the applicant and the body corporate on this point for me to determine and therefore I make no order in the matter.


2. My nomination as chairman, treasurer and secretary is valid.

See my comments in 1 above. The applicant was in fact included as a candidate for these positions by the body corporate (per CBCM) and therefore, again, no dispute exists for an adjudicator to determine on this point.

However the grounds submitted in support of “2” go further than what is sought in the order above, namely that the other nominations be found invalid and for the applicant to be declared elected to all three executive positions. I shall deal with these two further points.

The applicant submits that the nominations by Barry Watkins as chairperson, Eddie Woodbury as secretary and Jamie Morson as treasurer, are all invalid and he should be declared elected in their place. The applicant states that he was previously the holder of all three executive positions.

The first point made by the applicant is that the nomination forms were dated “5-3-00”, a date that he claims is too early to comply with the provisions of sections 13(3) and (7). Section 13(3) of the Body Corporate and Community Management (Standard Module) Regulation 1997 (“the Standard Module”) requires that the notice inviting nominations for committee positions must be given at least 3 weeks before, but not earlier than 6 weeks before, the end of the body corporate’s financial year. The 30 April is reputedly the financial year-end date, and the applicant claims therefore that the nomination date of “5-3-00” is earlier than 6 weeks before 30 April.

Mr Watkins has submitted that he and the two others had met on 5 March 2000 and decided to nominate for the relevant positions. They completed the form at the meeting as a matter of convenience, ready for when nominations were called. The collective nomination form was subsequently lodged upon nominations being called, being received by the secretary on 19 April 2000.

The time intervals specified in section 13(3) relate to the serving of notice and not the dating of a nomination form. There is nothing to prevent an owner from completing an early nomination form and then submitting it when nominations are called. This is what the three did. There is no substance in this point requiring an order.

The applicant next alleges that the absence of Mrs Morson’s signature from the nomination form, when both persons co-own their lot, renders it invalid. This is incorrect. A co-owner is a member of the body corporate and under section 10 is eligible to self-nominate for a position. That is what Mr Morson did by entering his name for the position of treasurer and signing the form as a candidate.

There is no substance in the arguments advanced for the nominations of the chairperson, secretary and treasurer to be found invalid and in consequence that the applicant to be declared elected in their stead. No order is necessary in respect of matter 2.


3. The secret ballot voting for the chairman, secretary and treasurer is invalid.

The applicant contends that the amended ballot paper of 25 May which includes the statement The number of persons to be elected as Secretary is one (1) and Treasurer is One (1), misleads owners into thinking that the same person cannot be elected to both positions. The candidates are shown as: Cheung and Watkins for chairperson; Cheung and Woodbury for secretary; and Cheung and Morson for treasurer.

I do not believe that the wording would lead people to this conclusion. It merely means than only one person can be elected to each position, and that could be the same person. If this were not the case then the body corporate would presumably have alerted owners to the fact that the same person had nominated for more than one position and owners could not vote him into two or more positions. No such warning was given.

The letter also included an instruction, Do not include your vote for all positions in one envelope as this will make your vote invalid. This instruction was incorrect. It was corrected in a second letter dated 27 June 2000. The applicant states that no second amended ballot paper was forwarded, however I cannot see why he believes that necessary. The letter of 27 June merely tells owners that the previous letter was in error in saying that ballots not put into separate envelopes would be invalid. It was in the nature of an advice of a policy error. If those owners who had already voted at that time had put their votes in separate envelopes, then their votes would be counted; if they had put them in the one envelope, then they would also be counted. No further ballot paper was necessary.

The applicant also states that the letter was sent out some 8 days after he had brought the error to the attention of CBCM. Again, as it concerned only a policy error then the lateness was not crucial, though I would agree with the applicant that the delay was poor practice.

None of these events are cause for the election of the three executive members to be set aside. More owners voted for the other candidates than for the applicant and there is nothing to suggest that they would have voted otherwise if the errors had not occurred. Setting aside an election for procedural errors is not done lightly, especially where it would result in a minority candidate being appointed, as will only provoke a spill of the relevant position or positions under section 25(2)(f) of the Standard Module and a fresh election with the election of the same party or parties.

Having said that, I want to make known to the parties an error in the ballot that the applicant has not raised. It does not affect the election of the executive members but it could have been the cause of

The ballot paper includes the wording cross out the person or persons name you do not wish to vote for until there is ...four (4) names left for the Committee. The system of having a predetermined number of committee members was a feature of elections under the previous legislation, the Building Units and Group Titles Act 1980. This system was replaced by the “floating” committee concept under the new Act. The committee is merely limited by a minimum size of 3 and a maximum of 7, with the size of the nominations determining the size of the committee within those limits. There may, for example, be nine candidates for ordinary membership and an owner may vote for one or all nine, with the maximum size of the committee determined by the number nominating within the maximum size.

I find it both astonishing and disturbing that over 3 years after the new Act was introduced, a Body Corporate Manager would not be aware of this procedure and one can only guess at how many elections in other bodies corporate administered by this manager may have been carried out in this fashion.

Fortunately in this instance I am only concerned with the election of executive members and the error does not affect the result.

In summary, I am satisfied that the persons declared elected to the executive positions should retain their positions. I would also add that the lateness of the application (3months) after the election, and the nearness of the next annual general meeting, do not detract from my decision. Owners will shortly have the opportunity to elect the applicant to the executive if they so desire. However, I would say that in my experience with a scheme of this size (11 lots) where there are persons willing to serve, a body corporate is best served by a committee with a varied membership and in particular not having the same person occupying the positions of chairperson, secretary and treasurer. Different executive members, particularly the chairperson, provide for both a check on actions of each executive member and the independence that committees need to have. The ability for a person to occupy all three positions is meant for those schemes where persons are unwilling to take on the responsibility of chairperson, secretary or treasurer, or in situations where there are a majority of absentee owners.


5. The manager Mr Daryl Patterson has no right to stop me to do the Kimberley Body Corporate record search.

There is conflicting evidence as to the behaviour of the applicant and certain staff members of CBCM in the application and the submission of CBCM. The applicant claims that he was unjustly accused of having caused a nuisance and that he was pushed, causing him to contact the Police, and was refused access to the records of the body corporate. CBCM states that the applicant had been asked to leave the office on at least three previous occasions because of his argumentativeness and time wasting. CBCM states that not only did he call the Police after he was physically removed from the office (the Police laid no charges) but also called an ambulance.

As the body corporate apparently now has a new Body Corporate Manager there is no purpose in my pursuing this matter further.

However, I would say that the legislation does give a right to owners to make application to view the records of the body corporate (see section 162 of the Act). While I make no judgement as to the behaviour of the applicant, there have been instances in other bodies corporate where the behaviour of some owners is so obnoxious or violent that special arrangements have had to be made. That is, there may be situations where an owner may, for example, have to view records only in a secure situation or appoint an agent to view records on their behalf. That would only be justifiable in extreme situations.


6. Motion 6 and motion 8 of 2000 AGM voting paper is invalid.

For both the administrative fund and the sinking fund, the agenda for the annual general meeting contains two motions, a budget motion and a “budget variation motion”, being motions 5 and 6, and motions 7 and 8, respectively. The variation motions include that the contribution be varied from $x (the budget motion amount) to.......”.

The kindest explanation I can infer for the existence of such “variation motions” in an agenda and voting paper, is that they are meant as a signal to owners that an amending motion may be forthcoming from the floor of the meeting to adjust the budget following some discussion at the meeting.

Section 57 of the Act does provide that a motion can be amended but that the motion to amend the motion and the amended motion, can only be passed where, in the case of an ordinary motion, the votes in favour constitute an absolute majority of all person having the right to vote on the motion. That is, in respect of persons with the right to vote, but who do not vote on the motion, they must be counted as a “no” vote. This section reads -

ú

Amendment of motions at general meetings

57.(1) A motion may be amended at a general meeting by the persons

present, and having the right to vote, at the meeting.

(2) However, an amendment cannot be made that changes the subject

matter of the motion.

(3) In counting the votes cast for and against a motion to amend a

motion, or an amended motion, all persons who are not present personally

or by proxy at the meeting, but would, if present, have the right to vote,

must be taken to have voted against the motion.

Taking the administration budget variation motion to be an amending motion, Motion 5 was passed with 6 votes in favour and as this represents an absolute majority of the 11 lots which constitute the scheme, then it was capable of being passed. However in regard to the sinking fund variation motion, Motion 8 was declared passed (“Resolution 8”) with only 5 votes in favour. Assuming that all owners were eligible to vote on the matter, and no notation in the minutes says otherwise, then the remaining 6 votes should have been taken to be “no” votes and the motion therefore declared lost. Accordingly, this resolution is invalid and my order is to that effect.

A copy of a contribution levy notice submitted by the applicant shows a contribution of $310 levied for the sinking fund, being the half-year amount of the $620 referred to in the incorrectly passed

However, I also note that the sinking fund motion, Motion 7, was for an annual contribution of $100 to be levied. This appears to be a token amount that is not based on the requirement of the legislation that the body corporate must estimate its expected capital costs for the next 10 years and proportionately calculate the immediate annual levy. Under the previous legislation, bodies corporate only had to budget a year ahead and too often this resulted in token amounts (such as this scheme’s $100) being budgeted and levied, leaving large projects costs (such as painting, balcony railing de-rusting etc) to be met by the owners at the time by a lump sum special levy. Often some owners could not afford these lump sum levies creating ill-feeling and the deferral of repairs with a consequent large increase in remedial costs. For these reasons the means of accumulating funds for the sinking fund were drastically altered in the new legislation.

Section 94(3) of the Standard Module, which specifies the 10 year projection of estimated expenditure (ie current year plus 9 future years) is designed to ensure that all owners over the years share in the cost of major maintenance and, importantly, that the funds for each expected project will have been accumulated in the fund to allow the work to be carried out when due. The section reads -

94. Budgets

(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 20 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).

I note that both of the owners (Lots 4 and 9) who have made submissions in support of the applicant, seem to have done so on the basis that they do not want to pay the higher contributions and see the applicant as championing the reduction of contributions back to the previous years’ token amounts.

However, even though Resolution 8 was passed in error, and is invalid, this does not mean that the body corporate can resume its previous practice. The legislation requires that bodies corporate must carry out an assessment of expected repair/replacement/maintenance costs over future years and levy annual contributions such that these expected works are fully funded at the time they need to be undertaken. There can be no return to the $100 a year sinking fund contribution.

Had Resolution 8 been for the administrative fund rather than the sinking fund, then invalidation of the resolution would have caused a problem in preventing further contributions being levied until such time as a meeting was held to strike a fresh levy. Such an inconvenient situation might have had to be taken into account in some accommodating ancillary order. However, as it concerns the sinking fund then it is more likely than not that the second levy will not be immediately necessary to meet expenditures. If that is the case, as I suspect it will be, then no second half-year levy notice should be issued. If the funds are necessary to meet some impending cost (and accumulated funds in the sinking fund are insufficient) then a general meeting will have to be called to strike a levy. However as the holding of an extraordinary general meeting will incur additional costs for owners, this course should be avoided if possible.

In respect to the incorrect levy which has already been levied (and paid in most if not all instances), I consider a pragmatic view is the best in reaching a just and equitable determination of this matter. I therefore propose to leave this contribution as levied. There will be no refund to owners who have paid it, and no release from the liability of paying if an owner has not yet paid it.

Accordingly, my order is that Resolution 8 is invalid and it will be a matter for the body corporate to consider its circumstances to determine whether it can do without the further funds until next year’s first levy, or if holding an extraordinary general meeting to strike a replacement levy is warranted.

Because of the impact this order will have on all owners I have included a requirement in my order that a copy of the order and these reasons be sent to all owners.