Sanctuary Pines [2002] QBCCMCmr 80 (15 February 2002)

RA MeekREFERENCE: 0034-2002

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	22961
Name of Scheme:	Sanctuary Pines
Address of Scheme:	Santa Barbara Road, Hope Island QLD 4217

TAKE NOTICE that pursuant to an application made under the abovementioned Act by the Body Corporate for Sanctuary Pines

RA MeekI hereby order that by 5 pm on Monday 18 February 2002, Ernst Body Corporate Management Pty Ltd, the former body corporate manager, shall make available in electronic form to the body corporate chairman, Eric Bunter, or its authorized agent Herd & Janes, Solicitors, all books and records of the body corporate which it currently holds in electronic form.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0034-2002

“Sanctuary Pines” CTS 22961

The applicant, the Body Corporate for Sanctuary Pines, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

That Ernst Body Corporate Management Pty Ltd deliver up the books and records of the body corporate to Mr Eric Bunter, a member of the committee of the body corporate, by 25 January 2002, or such other date as the adjudicator may order.

The body corporate has also sought an interim order in the above terms. The order sought is not an appropriate matter for an interim order. Rather, the body corporate is seeking a final determination of this matter on an urgent basis.

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 application seeks the return of the body corporate’s books and records from the former body corporate manager, Ernst Body Corporate Management Pty Ltd (Ernst). Ernst resigned as body corporate manager effective 24 December 2001. The body corporate sought return of its books and records, and Ernst sought payment of all outstanding amounts it alleged were owing to it, prior to delivery of the books and records. Whilst there are other allegations, this is the central issue. The body corporate seeks return of its books and records. Ernst is apparently not prepared to return the records until it receives full payment if its outstanding charges, which it alleges was $12,621.11 at 25 January 2002.

The body corporate claims that formal notice was given on January 7, 2002 to Ernst to deliver up the books and records. In its correspondence of 7 January 2002, the body corporate claims return of its books and records on the basis of both sections 152 and 153 of the Standard Module. Those sections are as follows -

ÿ
Return of body corporate property—Act, s 268
152.(1) This section applies if—
(a) a person has possession or control of a body corporate asset for a community titles scheme (other than a body corporate asset in the lawful possession or control of the person under a body corporate manager or service contractor engagement); and
(b) the person took possession or control of the body corporate asset in the person’s capacity, or purportedly in the person’s capacity, as—
(i) a member, or an associate of a member, of the body corporate or of the committee; or
(ii) a body corporate manager or service contractor; and
(c) the person is served with a notice of a resolution of the committee requiring the person to deliver the body corporate asset to a committee member named in the notice within 7 days after the
person is served with the notice.
(2) The person must comply with the notice.
Maximum penalty for subsection (2)—20 penalty units.

ÿ
Documents in custody of body corporate manager—Act, s 268
153.(1) This section applies if—
(a) a person (the “person”) engaged as a body corporate manager for a community titles scheme has custody of a document of the body corporate; and
(b) the person holds the document in photographic or electronic image form; and
(c) the person’s engagement as body corporate manager expires and is not renewed, or is otherwise brought to an end.
(2) The body corporate may—
(a) accept custody of the document in photographic or electronic image form; or
(b) require the person to reproduce, and give to the body corporate, the document in paper form.
(3) The person must, at the person’s cost, comply with a requirement of the body corporate under subsection (2)(b).
Maximum penalty for subsection (3)—20 penalty units.

Ernst claims not to have received this correspondence, but states that it had received other correspondence from Herd & Janes dated the same day (and referring to proceedings in the Small Claims Tribunal) twice.

The applicant concludes it grounds with –

The body corporate is entitled to its books and records. The newly appointed body corporate manager cannot do anything without its books and records. The body corporate is “in limbo”. Levy notices have not been issued for the current quarter, the body corporate is suffering difficult financial circumstances, purchasers are having difficulty obtaining section 162 certificates and the body corporate is unable to function.

The situation has become intolerable and it is imperative that the body corporate obtain its books and records as a matter of urgency.

Ernst has responded that –

The body corporate is not yet entitled to its books and records. The body corporate ... entered into a contract with Ernst Body Corporate Management Pty Ltd that specifically provides all monies owing must be paid before the body corporate manager is obliged to hand over the books and records.

The committee of the body corporate is exceeding its authority in attempting to contravene a contract entered into by the body corporate in general meeting. ...

Ernst ... advised (the body corporate’s solicitor) in December that while the records were at its Office pending payments being received the books and records were available for the use of the Solicitor’s and new Body Corporate Manager. As the new body corporate manager is close ... this is not a problem.

The committee has failed to honor a contract entered into by the body corporate in general meeting and pay invoices when due.

Because of a need to clarify various aspects of this dispute, I convened a teleconference of the parties (Robert Head of Herd & Janes, Solicitors for the Body Corporate and Muriel Ingevics of Ernst Body Corporate Management Pty Ltd) which was held on Wednesday 13^th February 2002 at 9 am.

In the teleconference, I stated my view that a body corporate manager does not have a right, by contract or otherwise, to withhold a body corporate’s books and records, after it has been served with proper notice pursuant to the relevant section or sections of the legislation (sections 152 and 153).

In particular, I indicated that I did not consider that the argument of Ernst (namely that on the basis of the contract (clause 13) between it and the body corporate, that it is entitled to retain the body corporate’s books and records, pending payment of all outstanding invoices owing to it) was sustainable. The provisions of sections 152 and 153 which deal with the return of body corporate property, including books and records, are not subject to the provisions of any contract between the parties. Rather, I conclude that the provisions of any contract are subject to the rights created in sections 152 and 153.

Pursuant to the sections, the body corporate is entitled to the return of its assets and its books and records from a former body corporate manager, notwithstanding that there might be ongoing dispute between the body corporate and the manager regarding the amount of any outstanding charges, and notwithstanding the terms of any contractual agreement between the parties. I indicated in the teleconference with the parties that there is a public policy reason for this being so. It is in the interests of all owners that a body corporate continue to function, notwithstanding that a body corporate might be in dispute with its manager. In order to function, a body corporate must have continuing access and indeed, control of its books and records.

To allow a body corporate manager to retain a body corporate’s books and records, where the engagement has been terminated, might result in a body corporate manager seeking to use the fact of having the books and records as leverage in a dispute. What the legislation intends is that a body corporate be entitled to the return of its books and records, where it has given proper notice of this requirement to the manager.

In the teleconference I did indicate that I did not consider the notice alleged to have been given on behalf of the body corporate to have been effective, for two reasons. Firstly, Ernst denied receiving the notice, and alleged that it had received two copies of other correspondence dated the same day. Secondly, and more fundamentally, I indicated that I was not satisfied on the evidence available, that a valid committee meeting, or resolution pursuant to section 35 of the standard module, had even been held, at which a notice pursuant to sections 152 or 153 had been resolved to be given. I concluded that whilst I was of the view that a body corporate manager had no basis for alleging a lien on body corporate books and records, the return of the same was subject to there being evidence of a valid committee resolution pursuant to section 152 of the standard module.

Robert Herd indicated that he was not in a position to satisfy me of either of these two criteria. He further indicated that in the circumstances, the most expeditious course of action would be for the committee to pass a further resolution, and thereafter for a request for return of body corporate books and records to be made pursuant to that resolution.

On 14 February 2002, I received facsimile correspondence from Herd & Janes attaching various documents including –

1. Copy of flying minute of meeting requiring the delivery up of the books and records;

2. Copy of direction to Ernst.

The material includes a notice to committee members dated 13 February 2002 signed by Eric Bunter, enclosing flying minute and stating that only 3 of 5 committee members were available. There is further attached a “notice of motion to be passed by the committee by written vote”. The notice of motion states that as the engagement of Ernst has come to an end, that the body corporate requires, pursuant to section 153(2)(a), the electronic image form of the records be delivered up to the chairperson within 24 hours of receipt of the notice.

There is a voting slip attached to the notice of motion, and this voting slip has been signed by Peter Jecks, Tarni Fjelistad and Eric Bunter, and dated 13^th February 2002.

Finally there is correspondence from Herd & Janes to Ernst dated 14^th February 2002, advising of “a resolution instructing us to notify you that you are to provide the accounting records of the body corporate to the chairman within 24 hours in their electronic form”. There is evidence of the facsimile transmission of this correspondence of 11:11 am on 14^th February 2002.

I am satisfied that the flying minute procedure employed by the committee to pass the resolution sufficiently complies with the requirements of section 35 of the standard module, and that the committee resolution is valid. It is signed by a majority (3 of 5) of members of the committee.

This office has now contacted Herd & Janes regarding compliance by Ernst with the terms of the resolution, and the direction given to Ernst on behalf of the committee. Mr Herd has advised this office that he had received the paper records from Ernst, but no records in electronic form had been received. He stated that these were still required.

There is no doubt that section 153(2) allows the body corporate to elect to require the former body corporate manager to provide the documentation in electronic image form. The maximum penalty for failure to so provide the information is 20 penalty units.

In the circumstances, I intend to order that Ernst, the former body corporate manager, shall make available in electronic form to the body corporate chairman, Eric Bunter, or its authorized agent Herd & Janes, Solicitors, all books and records of the body corporate which it currently holds in electronic form.