Flecker House [2002] QBCCMCmr 112 (26 February 2002)

DP GardinerREFERENCE: 0591-2001

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	1337
Name of Scheme:	Flecker House
Address of Scheme:	5 Upward Street CAIRNS QLD 4870

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

Mr Werner Steffen, the owner of lots 15 & 18



I hereby order that the application for an order that the decision of the committee of the body corporate to install an air conditioning unit in unit 2, the coffee shop, at the expense of the body corporate be set aside and reimbursement of the Body Corporate by the owner of the coffee shop for the expense of acquisition and installation of an air conditioning system for the benefit of the coffee shop is granted and I make an order declaring that a resolution purportedly passed at a meeting of the body corporate approving the installation of an air conditioning system in the coffee shop on level 2 is, and was at all times, void. I make a consequential order that the owner of the coffee shop fully indemnify the Body Corporate for any expense incurred by the Body Corporate in acquiring and installing an air conditioning system for the benefit of the coffee shop.
STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0591-2001

“Flecker House” CTS 1337

The applicant Mr Werner Steffen, the owner of lots 15 & 18, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote –

“that the committee decision to install a separate air conditioning unit at the coffee shop at the expense of the body corporate be overturned as above owners voted to have this done at the cost to the Body Corporate when they should have abstained from voting as they are owners of the coffee shop and so gaining a financial advantage for themselves.”

By letter dated 25 October 2001, the Applicant amended his application to seek an order for reimbursement of the Body Corporate by the owner who received the benefit of the air conditioning which has been installed.

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)).

Section 223(3)(l) relevantly provides that an adjudicator may make an order declaring that a resolution purportedly passed at a meeting of the body corporate was at all times void.

In the supporting grounds, the applicant has raised the propriety of three members of the committee voting on this issue when they had a vested interest in the outcome annexed a range of documents which include the minutes of a meeting of the committee of the body corporate on 8^th March 2001 which relevantly record:

Present: Dr M Stewart, Dr J Knott, Dr G Atkinson, Dr M Mansfield, Mr W Steffen (the applicant), Dr R Waterfield and Mr G Coonan

It was resolved as follows:

(iii) That subject to requesting Environ to undertake a flow analysis in order to determine exactly where the problem with lack of cool air on the coffee shop side of level 2 is, the manager should contract Environ to install a split system air conditioning unit in the coffee shop such that the remaining ducted air to that side of Level 2 can be concentrated in the Cairns Pathology Area.

However, it was also resolved that the manager has further discussions with Environ to ensure that the other option of providing a separate stand alone ducted system to the coffee shop would not be more cost effective. The indicative costs approved were in the vicinity of $8,000 for the split system and $12,000 for the ducted system. The manager is to obtain a written quote from Environ and is to go ahead with the more suitable option subject to approval by the chairman and the treasurer.

Dr. Atkinson excused himself from the meeting at this point.

There are a number of provisions of the Body Corporate and Community Management Act 1997 and the Body Corporate and Community Management (Standard Module) Regulation 1997 which are of significance in the resolution of this dispute.

The first issue concerns the provisions of Section 34 of the regulations which provide:

(1)

A member of the committee must disclose to a meeting of the committee the member’s direct or indirect interest in an issue being considered, or about to be considered, by the committee if the interest could conflict with the appropriate performance of the member’s duties about the consideration of the issue.

(2)	A member required to disclose an issue must not, if the member is a voting member, vote on the issue.

The submission received from Distenlawn Pty Ltd, a company which owns the coffee shop and in which three of the members of the committee have an interest, confirmed that these members voted in favour of the resolution in circumstances where a direct conflict of interest arose. The provisions of Section 38 when applied to the present facts make it clear that a conflict of interest clearly arose and this factor alone is sufficient to warrant a declaration that the resolution was at all times void.

Whilst it is contended that mathematically the resolution would have been passed by two votes to one had these three members abstained from voting, I am not persuaded that such an approach is correct as the proper course to be followed should have been the immediate retirement of these three members before there was any discussion of this matter at the meeting. It is quite inappropriate for any member of a committee to remain at the meeting when a conflict of interest has arisen because an apprehension of undue influence exerted by the very presence of that member may arise.

The next issue of significance concerns the quantum of the cost of the air conditioning which the minutes record as being either $8,000 or $12,000. There are 20 lots in this scheme with Section 103 of the regulations when read with the definition of relevant limit for committee spending being $100 per lot means that the limit for spending by the committee is $2,000 or $4,000 if the purchase of the air conditioning unit is regarded as major spending (ie $200 per lot). As the resolution related to the spending of a greater sum of money beyond the committee’s upper limit, this decision was beyond the power of the committee and the resolution is consequentially void.

The last issue relates to the ability of the body corporate to purchase this air conditioning unit which is intended to be installed in the coffee shop or for its benefit.

Section 21 of the Act provides that common property for a community titles scheme includes all utility infrastructure forming part of scheme land, except utility infrastructure:-

(a) solely related to supplying utility services to a lot; and

(b) within the boundaries of the lot ( according to the way the boundaries of the lot are defined in the plan of subdivision under which the lot is created ); and

(c) located other than within a boundary structure of the lot.

The expression “utility infrastructure’ is defined in Schedule 4 of the Act as meaning cables, wires, pipes, sewers, drains, ducts, plant and equipment by which lots or common property are supplied with utility services.

The expression “utility service” means...(d) air conditioning.

Given that the intention is the installation of an air conditioning system for the benefit of the coffee shop as contrasted with an air conditioning system design intended to provide air conditioning to all or a majority of the lots in this scheme, I do not consider that such a system is susceptible of forming part of the common property and acquisition should be the responsibility of the Distenlawn Pty Ltd as the owner of the coffee shop. As a result, it was not appropriate for the committee or the body corporate in general meeting to acquire an air conditioning system for the coffee shop without the unanimous agreement of all lot owners.

In conclusion, I declare that the resolution purportedly passed at the meeting of the committee of the body corporate held on 8^th March 2001 was at all times void.

In the event that the Body Corporate has paid for the acquisition and installation of an air conditioning system in the coffee shop, I make a consequential order that the owner of the coffee shop fully indemnify the Body Corporate in respect of such expense.
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