Nobbys Outlook [2002] QBCCMCmr 253 (30 April 2002)

C G YOUNGREFERENCE: 0133-2002

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	14822
Name of Scheme:	Nobbys Outlook
Address of Scheme:	122 Marine Parade MIAMI QLD 4220

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

Wayne John MATHESON and Adrienne Jane MATHESON, as the co-owners of Lot 7,



C G YOUNGI hereby order that the application for an order that the body corporate must –

• call an extraordinary general meeting to consider the engagement of a Body Corporate Manager; and

• must engage an appropriately qualified person to audit the body corporate records maintained by Lee Garvey Secretaries and Robert Fearnley,

is dismissed. 2y

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0133-2002

“Nobbys Outlook” CMS 14822

The applicants, Wayne and Adrienne Matheson of Lot 7, have sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (“the Act”), quote -

“That the Body Corporate formally requests quotations from at least two Body Corporate Managers to undertake the task of Body Corporate management of Nobby’s Outlook. Upon receipt of the quotations, the Body Corporate should call an Extraordinary General Meeting to enable the appointment of the successful Body Corporate Manager.

Further, the Body Corporate be directed to arrange an independent audit of the books administered by Lee Garvey Secretaries.”

The applicants have also sought the following interim order of an adjudicator, quote -

“We therefore seek:

a) The engagement of a Body Corporate Manager to administer the Body Corporate until a formal tendering process can be initiated;

b) The calling of an Extraordinary General Meeting; and

c) The formal appointment of a Body Corporate Manager.”

JURISDICTION:
Section 225(1) of the Act provides that an adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates. An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1) of the Act).

This is a dispute by a owner concerning the conduct of the body corporate as against legislative requirements, and therefore comes within the dispute resolution provisions of the Act (see sections 182, 183 and 223 of the Act).


APPLICATION AND SUBMISSIONS:
In the supporting grounds, the applicants show concern that $9,750 in fees have been paid for “accounting and secretarial” fees, though it is unclear who is being paid that money; the secretary is shown as Robert Fearnley while body corporate notices are sent out under the hand of “Lee Garvey Secretaries”. If the money is paid to Lee Garvey Secretaries (hereafter “LGS”) , then there is no evidence of a contractual arrangement between it and the body corporate for body corporate management.

They give an example of the confusion in an extract of a letter addressed to them dated 26 February 2002, signed by Robert Fearnley as “Secretary/Treasurer, Nobby’s Outlook BUP 234”, which states, “The Committee wished to advise that a vote of confidence was passed in Lee Garvey as the Treasurer and Secretary of the Body Corporate”.

The applicants have also submitted copies of correspondence with both LGS and the chairperson (Mr A Haviland), and copies of minutes of the annual general meeting held on 26 August 2001 and a committee meeting held on 18 January 2002. The applicants are also concerned that the amount paid, as well as $1,000 for GST obligations and $500 for incidental costs, is in excess of quoted fees from professional Body Corporate Managers.

A copy of the application and attachments was provided to the secretary for distribution to committee members, inviting the committee to respond to the issued raised in the application. The committee submitted a response under the hand of the chairperson.

The committee advises that LGS has maintained the books and records of the body corporate since its establishment in the late 1960’s and the body corporate considers it has done so, “in a professional, skilled and timely manner.” It also states that it maintains due vigilance over body corporate finances through quarterly meetings where a financial report is presented.

In regard to LGS not being properly appointed as a Body Corporate Manager, the committee says it has taken legal advice that the arrangement with LGS accords with the legislation and no formal agreement as a Body Corporate Manager is necessary.


DETERMINATION:
In broad terms, the applicants seek the interim appointment of an Administrator until such time as a Body Corporate Manager is appointed at an extraordinary general meeting ordered to be held.

At the outset I must say that I cannot make the substantive order sought by the applicants. The legislation does not require that a body corporate must engage a Body Corporate Manager, although schemes of the size of “Nobby’s Outlook” with 46 lots almost invariably do so. However, it is not a mandatory requirement and each body corporate has the right to administer itself.

Accordingly, neither the interim appointment of an Administrator nor the calling of an extraordinary general meeting for owners to choose amongst tenders of various Body Corporate Managers, are orders I may make in these circumstances and I have therefore dismissed the application.

However, there are matters which concern the applicants that I will comment on. That will not include any comment on the comparative costs of LGS as against Body Corporate Managers generally – costs are a commercial matter for bodies corporate to decide for themselves and it would be improper for me to comment in these circumstances.

I will comment of the status of LGS. The legislation defines a Body Corporate Manager (“BCM”) in section 15 in the following terms –

15. A person is a “body corporate manager” for a community titles scheme if the person is engaged by the body corporate (other than as an employee of the body corporate) to supply, including through the exercise of delegated power, administrative services to the body corporate.”

(NOTE: Adjudicator’s emphasis)

The person providing “administrative services” need not be acting under the delegated power of secretary, treasurer, chairperson or the committee (see term “including”). The term “administrative services” is a wide one, necessarily so in order that bodies corporate employing professional assistance have the protections built into the legislation regulating BCM behaviour. A person does not need to be engaged as a BCM to be a BCM within the meaning of section 15 and the legislation generally.

These protections include:

• written contract setting out the terms of the engagement, including the basis of all fees (eg , flat rate per lot, additional meeting attendance fee, photocopy charges) – see section 78 Standard Module regulations.

• reserving engagement decision for general meeting with all owners being first provided with the terms of engagement (s. 87 Standard Module).

• mandatory disclosure of any commission under any contract with the body corporate; disclosure of an interest in any associated company supply goods or services to the body corporate; and other disclosure provisions (ss. 88 –90 of Standard Module).

• statutory termination provisions for: misconduct; failure to carry out a duty after notification; conviction of an indictable offence; and others (s.86 Standard Module).

• not voting in committee; not exercising proxies in any meeting; not submitting motions.

• paramountcy of committee for decisions (s.92 Act).

• and many others.

From the information provided, it is my opinion that LGS is acting as a BCM and therefore should be complying with the provisions concerning engagement, disclosures of terms and charges, disclosures of any commissions (eg insurance commission) or relevant associations, and all of the other requirements, some of which have been listed above.

In reaching this decision I have noted information provided by the committee that, “charges are made for not only the general maintenance of books and records and secretarial activities but also the attendance at four committee meetings and one general meeting including the preparation and distribution of minutes and the preparation of a financial report for each meeting.” I have also noted the role of LGS in the preparation and sending of notices. It prepares and sends correspondence, as secretary, for the committee in return for a fee. I have no doubt that LGS is caught by, and subject to, the relevant legislative provisions.

I have read through the minutes of the last annual general meeting, and note that there is no motion for the engagement of LGS. It appears to be employed through the election of one of its partners, Robert Fearnley, as secretary and treasurer. This is undoubtedly because only an individual, and not a company, can be elected to a committee position. The minutes do not show the fees charged by Fearnley/LGS, the term of engagement or the duties to be performed. The only indication owners would have regarding fees would be those showing in the previous years financial statement – not an advisable basis of engagement.

I can only assume that it is the committee that authorises the payments of fees to LGS. In doing so, the committee is breaching the expenditure limits imposed on committees as well as paying a person that should have been properly engaged by contract as a Body Corporate Manager on the express authority of the body corporate in general meeting.

In passing, I have noted errors in the election of committee members. Section 9 of the Standard Module provides that the committee cannot exceed 7 members, whether voting or non-voting. The election provisions of the Standard Module (see section 11 onwards) require that, where the minium committee number (3 persons) is met by nomination, further members cannot be sought from the floor of the meeting. Accordingly, with Haviland elected as chairperson and Fearnley as secretary and treasurer, there could only ever have been a further 5 member and not 6 as stated in the minutes. Apart from that, as there were 4 candidates for ordinary committee membership, then the minimum membership of 3 (Haviland, Fearnley and 1 more needed) was met and no further nominations should have been called from the floor. The committee should consist of Haviland, Fearnley, Carroll, Gasson, Griffiths and Walton. Note that the nomination of Brinsmead, reported to have been received prior to the meeting, would presumably mean that it was not received by the body corporate financial year-end date and was therefore invalid.

These regulations concerning committee nominations and election are designed to allow all owners, including absentee owners, the opportunity to elect members. Here, those owners not at the meeting had no say in the additional persons elected.

Although I have dismissed the application, the body corporate, and the committee in particular, will need to consider the requirements of the legislation in accepting and setting the motions for the forthcoming annual general meeting.

LGS may wish to offer itself for engagement as the BCM. An owner, or the committee, may submit a motion to this effect, as may the applicants in respect of another BCM. Depending on the amount of the fee, section 104 of the Standard Module may need to be complied with in having at least one alternative tender as BCM.

In the circumstances, it is not intended to invite further submissions regarding this matter, or to make a further order, since this decision, though an interim one as sought by the applicant, is final in its determination of this matter. If the applicant considers that an appeal of this decision is warranted, then it should appeal the interim order.