Fernleigh Court [2002] QBCCMCmr 498 (13 August 2002)

RA MeekREFERENCE: 0270-2002

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	22667
Name of Scheme:	Fernleigh Court
Address of Scheme:	14 Fernleigh Court CURRUMBIN QLD 4223

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

Dane Glen Murdoch, the owner of lot 1, Joseph Andrew Frew, the owner of lot 2, and Peter Moore, the company nominee of Nauva Pty Ltd, the owner of lot 4



RA MeekI hereby order that the application by Dane Glen Murdoch, the owner of lot 1, Joseph Andrew Frew, the owner of lot 2, and Peter Moore, the company nominee of Nauva Pty Ltd, the owner of lot 4, for orders, quote -

1. To declare the 2002 AGM as unlawful on the grounds that lot owner 1, 2 and 4 were unfinancial;

2. To conduct a new AGM for 2002;

3. To allow motion at the AGM (new) for members to vote on termination of the management agreement with Strata and Community Management Service.

4. To elect new office bearers,

is dismissed.

n
STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0270-2002

“Fernleigh Court” CTS 22667

The applicants, Dane Glen Murdoch, the owner of lot 1, Joseph Andrew Frew, the owner of lot 2, and Peter Moore, the company nominee of Nauva Pty Ltd, the owner of lot 4, have sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

1. To declare the 2002 AGM as unlawful on the grounds that lot owner 1, 2 and 4 were unfinancial;

2. To conduct a new AGM for 2002;

3. To allow motion at the AGM (new) for members to vote on termination of the management agreement with Strata and Community Management Service.

4. To elect new office bearers.

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)).

I note the application is made by three of the four owners in the scheme. At a meeting of the parties held on 8 August 2002, I was advised that the owner of lot 4 had sold that lot. Departmental records indicate that on Friday 9 August 2002, a transfer in respect of lot 4 was lodged for registration. In the circumstances, I do not propose to consider the position of the applicant, Navua Pty Ltd in this application, since that owner has now sold the lot, and therefore will not have voting rights at any meeting which might be held in consequence of this order. I was informed however that all alleged outstanding contributions for lot 4 were paid on settlement, and therefore the new owner of the lot will be entitled to vote at any future meetings in any event, provided contributions remain paid when owing.

On Thursday, 8 August 2002, I undertook a meeting of the parties on site. This meeting was attended by three of the four owners, Peter Moore of lot 4 not being present. This meeting was at times a general discussion and information session regarding a number of issues of concern to the owners. It seems that the concerns of the owners of lots 1 and 2 are wider and more general then those specifically the subject of the application. In particular, those concerns relate to the performance of the current body corporate manager, Strata and Community Management Services Pty Ltd, and the amount of body corporate levies. The specific issue raised by the application is whether or not the owners of lots 1 and 2 were correctly ruled unfinancial at the recent AGM, and if so, whether a new AGM should be held, including a motion for owners to vote on the termination of the management agreement.
Following the meeting with the parties on site, it became clear that an inspection of the books and records would be necessary to ascertain whether the owners in question where correctly ruled unfinancial. This inspection was conducted at the body corporate manager’s office.

The specific allegation is that the owners of lots 1 and 2 were incorrectly ruled unfinancial and therefore not entitled to vote at the recent AGM. At the meeting of the parties, the owners of lots 1 and 2 stated that they had paid their annual levies when due, but that subsequent to this had received a further contribution notice for $125.85 each, which they refused to pay. It was the failure to pay this amount which resulted in the unfinancial ruling at the AGM.

The owner of lot 1 at the inspection stated that when he received his initial (annual) contribution notice and before he paid, he asked the manager whether this was the entire amount due. The answer to this was apparently “yes”. When subsequently, a further notice arrived for the $125.85 amount, the owners of lots 1 and 2 refused to pay, for the reason that they believed they had paid all amounts they were responsible for.

At the inspection of records, it was explained that the amount of $125.85 owing by the owners of lots 1 and 2 related to the building insurance component of the insurance policy which the body corporate was required to effect, given the common dividing wall between lots 1 and 2. Sections 129 of the standard module provides that the body corporate is liable to insure lots in a standard format plan which have a common dividing wall, as is the case with lots 1 and 2. Section 130 of the standard module then relevantly provides (in subsection (1)) –

130 Premium
(1) The owner of each lot that is included in the scheme and is covered by reinstatement insurance required to be taken out by the body corporate is liable to reimburse the body corporate for the proportion of the premium for reinstatement insurance that reflects—
(a) for a lot created under a building or volumetric format plan of subdivision—the interest schedule lot entitlement of the lot; and
(b) for a lot created under a standard format plan of subdivision—the cost of reinstating the buildings on the lot. ...

The body corporate is entitled to be reimbursed from owners of affected lots the cost of the building insurance component of the body corporate insurance policy. This is what the $125.85 for lots 1 and 2 relates to. $125.85 is an amount calculated by dividing the building premium of $210.96 (plus the GST and stamp duty payable on this amount) by the two lots involved (lots 1 and 2). I can confirm that the body corporate is entitled to recover this amount from the owners of lots 1 and 2, and that as this amount had not be paid by those owners at or before the meeting, they were correctly ruled unfinancial at that meeting. In the circumstances, I therefore decline to overturn the meeting and to order that a new meeting be held, as the unfinancial ruling was correct.

However I do have some concerns as to the circumstances in which owners of lots 1 and 2 were not entitled to vote at the AGM. It appeared clear at the inspection that these owners had some concerns regarding the fees charged and level of service provided by the current body corporate manager. It further appears that there was a motion on the agenda of the meeting to terminate the services of the manager. However given that three of the four owners were ruled unfinancial, this left only one owner to vote, that owner being satisfied with the current manager.

I consider that the manager could have explained the charge of $125.85 better than it has. The reference on the invoice summary is to “Section 38A(3) Levies – Insurance”. This is not correct. There is no section 38A either in the Act or standard module. I suspect the reference is a reference to that section in the previous legislation, the Building Units and Group Titles Act 1980. This legislation was replaced by the current legislation in July 1997. I would have expected body corporate managers to have upgraded their references by now, almost five years after the event. The reference should be to section 130(1)(b) of the standard module. Moreover, I consider the manager should have explained the reason for the additional charge, and shown how it was calculated, if not before the meeting, then at the meeting, and allowed the owners of lot 1 and 2 to pay the outstanding amount, and then vote at the meeting.

The second reason why I consider this charge would have caused confusion to the owners of lots 1 and 2 is that in the budget, there is an amount for insurance of $450. This amount would have been paid out of the existing body corporate contributions. Given this, these owners thought they had paid for the insurance out of their annual contribution, but then a further account arrives. Whilst I agree the body corporate is technically able to recover the amount from lots 1 and 2 (and in fact should, as it would be unfair to other owners not to), the body corporate is in fact double dipping. The insurance premium was approximately $436. The amount raised in the budget was $450. The body corporate then raises a further $250 approximately from owners. Effectively, the body corporate ends up with $700 to cover an expense of $436. I suggest the original amount for insurance in the budget should have been set at $200 on the basis that the body corporate was entitled to recover the other $250 from the owners of lots 1 and 2.

However these concerns are not reasons to order that a further meeting be convened. The owners of lots 1 and 2 need to pay the outstanding contributions. However, subject to this, these owners are entitled to require a meeting be convened pursuant to section 61 of the standard module, which provides –

61 Requirement for requested extraordinary general meeting
(1) An extraordinary general meeting (a “requested extraordinary general meeting”) of the body corporate must be called if a notice asking for an extraordinary general meeting to consider and decide motions proposed in the notice is—
(a) signed by or for the owners of at least 25% of all the lots included in the scheme; and
(b) given to the secretary or, in the secretary’s absence, the chairperson or, if the committee has not yet been chosen, given to the original owner.
(2) The secretary may be presumed to be absent if a notice is given to the secretary at the address for service of the body corporate, and no reply is received within 7 days.
(3) A requested extraordinary general meeting must be called and held within 6 weeks after the notice asking for the meeting is given.
(4) A requested extraordinary general meeting of the body corporate may be called even though the body corporate’s first annual general meeting has not yet been held.

Owners should note that this section requires that the notice be signed by at least 25% of owners, and that the notice must contain the full text of the motions to be included on the agenda of the meeting. I consider that this section entitles the owners of lots 1 and 2 to require that an EGM be convened to consider any motions they consider need to be determined. Moreover, to remove any doubt, owners do not need to be financial at the time they requisition the meeting, but rather at the time they vote. Consequently, they can pay any outstanding contributions immediately before the requisitioned meeting if they so choose. Owners to not need to be financial at the time of requisitioning the meeting.