Manlee Lodge [2002] QBCCMCmr 358 (4 June 2002)

RA MeekREFERENCE: 0131-2002

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	12781
Name of Scheme:	Manlee Lodge
Address of Scheme:	54 Sixth Avenue KEDRON QLD 4031

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

Ronald Leslie Wilson, the owner of lot 4



RA MeekI hereby order that motion 3(a) headed “Refurbishment of Complex” purportedly carried at the EGM of the body corporate of Manlee held on 29 January 2002 is invalid and of no effect.

I further order that the owner of lot 4, Ronald Leslie Wilson, shall not be liable to contribute in any way to the cost of the refurbishment of the building by T&S Foldvary Pty Ltd.
STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0131-2002

“Manlee Lodge” CTS 12781

The applicant, Ronald Leslie Wilson, the owner of lot 4, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

a) The resolution resulting from motion 2 of the purported meeting of 29^th January 2002 is ruled to be invalid. Costs of an applied finish to the external surfaces of the building shall not be paid from Body Corporate funds. Any payment already made from Body Corporate funds shall be repaid by T&S Foldvary Pty Ltd.

b) The resolution resulting from motion 3 of the purported meeting is ruled to be invalid. No levy for refurbishment of external surfaces of the building for work carried out prior to the date of these orders shall apply to lot 4 of CTS 12781.

c) No levy for maintenance costs for the external finish applied to the building prior to the date of these orders shall apply to lot 4 of CTS 12781.

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)).

The applicant objects to the validity of a resolution purportedly carried at an EGM of the body corporate held on 29 January 2002 (the meeting). The motion in question was motion 3(a) headed “Refurbishment of Complex”. The motion resolved that –

... by Special Resolution that the quotation from T&S Foldvary Pty Ltd totalling $44100 including GST for the refurbishment of Manly Lodge be approved and that a special levy of $7350.00 per lot of entitlement be determined and be due and payable in one lump sum on 1 March 2002.

Voting on the motion was 5 for and one against (the applicant). All lots excepting the applicant’s lot 4 were owned by a company T&S Foldvary Pty Ltd, the company contracted by the body corporate to undertake the refurbishment of the building as per motion 3(a) of the meeting.

The applicant raises a number of objections to the validity of the meeting, including that it was not chaired by an elected chairman, and there was no quorum. Further, the applicant alleges that it was not valid for a body corporate to “make a decision on a matter after that decision had been carried into effect”. Further, the applicant argues that the finish which has been applied to the building is not in the interests of owners for several reasons which are set out in the grounds.

The then owner of all other lots, T&S Foldvary Pty Ltd (Foldvary) did not respond to the notice inviting submissions forwarded by this office. Correspondence was received from Barard Management which, in response to the notice inviting submissions, merely encloses both the notice and minutes of meeting of 21 January 2002. The correspondence does not indicate the status of Barard Management in responding to the notice. According to the application, Barard is neither the elected secretary of the scheme, nor the appointed body corporate manager. I can only assume that Barard acts as the agent for Foldvary, and in that capacity convened and attended the meeting.

Section 114 of the Act provides that -

114 Body corporate’s duties about common property etc.
(1) The body corporate for a community titles scheme must—
(a) administer, manage and control the common property and body corporate assets reasonably and for the benefit of lot owners; and
(b) comply with the obligations with regard to common property and body corporate assets imposed under the regulation module applying to the scheme.

This section imposes a duty on a body corporate to act reasonably and for the benefit of lot owners in making any decision. The question is whether it is reasonable and for the benefit of owners (including a minority of owners) for a body corporate to resolve to refurbish a building, as it did in the present instance.

Given that there is no submission from Foldvary, there is no material against which I can weigh the statements of the applicant. I conclude however that the resolution should be invalidated. In the absence of material to the contrary, I have assumed that Foldvary purchased 5 of the 6 lots in this building with the intention of refurbishing the building and then re-selling the lots. The fact that the refurbishment work commenced and was largely completed before the meeting was held suggests that the purpose of the meeting was merely to confirm Foldvary as the contractor. I consider the commencement of the work before the meeting, which has not been denied, indicates contempt for proper procedure, the requirements of the legislation, and the rights and interests of minority owners. Further, there are issues of conflict of interest. Whilst as an owner, Foldvary is entitled to vote for a motion in respect of which it has a financial interest, that does not prevent me for considering the process a sham contrary to the rights and interests of minority owners, in this case the applicant.

As the applicant notes, it is now not practical to restore the original finish. The applicant states that he “should be granted relief from the recurring maintenance costs which will occur because of this inferior finish”.

What I intend to order the applicant is that motion 3(a) is invalid and of no effect. The effect of this is that the applicant is not liable to contribute to the cost of the refurbishment undertaken by Foldvary. This presumably will mean that the cost of the refurbishment will be borne solely by Foldvary, who presumably gained the benefit of the refurbishment when it sold the lots.

I note that Foldvary has now sold its five lots in the scheme. The applicant seeks that he be granted relief from the recurring maintenance costs. I consider that this would not be practical, in that issues will arise as to whether the maintenance is attributable to the refurbishment or would have been required in any event. Further, it would not be just and equitable in my view to the five new owners to exempt the applicant indefinitely from future maintenance costs. As well as being unfair to other owners, it would simply create a basis for future disputes and ill-feeling between the owner of lot 4 and the other owners.

Whilst the applicant might not consider the refurbishment a benefit (and I have noted the applicant’s comments in this regard) I conclude that whilst it is just and equitable to exempt the applicant from contribution towards the cost of the refurbishment, it is not just and equitable to go further and to exempt the applicant from future maintenance costs of the building generally. Therefore I decline to do so. Moreover, the fact that Foldvary was able to sell 5 lots in quick succession suggests that there is a market for refurbished units, and that Foldvary was presumably able to make a profit on resale. Given this, I suggest that notwithstanding the concerns raised by the applicant, that objectively he has benefited from the refurbishment of the complex in terms of increased value of his lot, which by this order he has been exempted from contributing towards the cost of. I consider this sufficient recompense to the applicant.

The applicant further sought an order that the “costs of an applied finish to the external surfaces of the building shall not be paid from Body Corporate funds. Any payment already made from Body Corporate funds shall be repaid by T&S Foldvary Pty Ltd”. The applicant has provided no evidence that there was an amount of body corporate funds (accumulated) which were used by Foldvary towards the cost of the refurbishment. Further it seems to me that this was not the case as the special levy raised in motion 3(b) is $7350 per lot, which multiplied by 6 is the contracted amount.

In any event, as Foldvary is no longer an owner, I could not order it to reimburse any monies so appropriated to the body corporate. If any amounts have been so appropriated, then it will be for the body corporate to determine whether it takes civil action to recover the amount (if any) from Foldvary, on the basis that the resolution approving the refurbishment has been invalidated by this order, and that any payment by the body corporate to Foldvary in respect of the refurbishment would be invalid.
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