Redlands Centrepoint [2003] QBCCMCmr 124 (18 September 2003)

Number of Scheme:	21596
Name of Scheme:	Redlands Centrepoint
Address of Scheme:	8-16 Redland Bay Road CAPALABA QLD 4157

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Terence Lee, the co-owner of lot 8, Po Kit Lee and Annie Yeung, the owners of lot 10, and Hanifi Arslan, the co-owner of lot 11

I hereby order that the application by Terence Lee, the co-owner of lot 8, Po Kit Lee and Annie Yeung, the owners of lot 10, and Hanifi Arslan, the co-owner of lot 11, for an order that the adoption of sinking fund and fixing of contribution as outlined in no. 6 of the minutes of AGM dated 11 November 2002 be revoked and amended to $150, is approved.

I further order that the proported amendment of motion 6 at the AGM was invalid and of no effect, and that in consequence, sinking fund contributions are as originally proposed in the motion, namely $150 per lot for the financial year.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0082-2003

"Redlands Centrepoint" CTS 21596

The applicants, Terence Lee, the co-owner of lot 8, Po Kit Lee and Annie Yeung, the owners of lot 10, and Hanifi Arslan, the co-owner of lot 11, have sought an order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote –

Section 276(1) of the Act 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 the Act or the community management statement; or

(i) the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or

(ii) the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

The applicants have sought that motion 6 headed Adoption of Sinking Fund Budget and Fixing of Contributions carried at the AGM of the body corporate held on 11 November 2002, "be revoked and amended to $150".

The motion initially proposed and included on the agenda of the AGM was for an annual sinking fund contribution of $150. At the AGM, this motion was amended, and then subsequently carried so as to approve an annual sinking fund contribution of $550. The minutes record that the motion, after amendment at the meeting, was carried by a vote of 7 in favour to 3 against. I assume the three "no" votes were in fact the three applicants to this application. In a subsequent telephone discussion with the secretary to clarify who the three "no" voters were, the secretary advised that in fact there had been four "no" voters. These being lots 7, 8, 10 and 11. The secretary acknowledged that the outcome of the motion should have been recorded in the minutes as 6 in favour with 4 against.

The applicants state in their grounds that the sinking fund contribution last year was $50 per lot and that the proposed increase to $150 was "already a 300% increase" but that –

This office sought submissions from the body corporate committee and all owners. The two submissions received on behalf of owners, whilst indicative of their views, did not address the issue the subject of the dispute. The committee failed to provide a submission initially. After the closing date for submissions, I wrote to the secretary indicating that I required a submission from the committee address aspects of the dispute. In response to this requirement, a submission was received.

The first matter I wish to address potentially affecting the validity of the resolution in question is the requirements for amendment of a motion at a general meeting. Clearly the motion carried was not in accordance with that notified to owners in the notice of meeting. Section 57 of the Standard Module headed Amendment of motions at general meetings provides –

57 Amendment of motions at general meetings
(1) A motion may be amended at a general meeting by the persons present, and having the right to vote, at the meeting.
(2) However, an amendment cannot be made that changes the subject matter of the motion.
(3) In counting the votes cast for and against a motion to amend a motion, or an amended motion, all persons who are not present personally or by proxy at the meeting, but would, if present, have the right to vote, must be taken to have voted against the motion.

Relevantly (3) provides that the votes of all persons who are not present personally or by proxy at the meeting, but who would, if present, have the right to vote, must be taken to have voted against the motion. I have reviewed the minutes of meeting and find that lots 7, 8 and 11 were represented by voting paper only. The effect of the motions is that these lots are deemed to have voted "no" to the amendment. As these lots had already voted "no", the effect is that the "no" vote would not increase.

Whilst lots 3 and 5 were represented by voting paper, they were also represented by a proxy, personally present at the meeting. This proxy would have been entitled to have voted "yes" to the amended motion. However, the fact of Christine Herron holding two proxies (for lots 3 and 5) raises a further problem. Section 72 of the Standard module provides that –

72 Appointment
(1) A voter for the general meeting may appoint a proxy to act for the person at the general meeting.
(2) However, the body corporate may by special resolution prohibit the use of proxies--
(a) for particular things described in the special resolution; or
(b) altogether.
(3) An appointment under subsection (1) has effect subject to the operation of a special resolution under subsection (2).
(4) A person may not hold--
(a) if there are 20 or more lots included in the scheme--proxies from persons greater in number than 5% of the lots; or
(b) if there are fewer than 20 lots included in the scheme--more than 1 proxy.
(5) The appointment of a proxy is effective only if a properly completed proxy form is given personally, by post or by facsimile, to the secretary before--
(a) the start of the meeting at which the proxy is to be exercised; or
(b) if the body corporate has fixed an earlier time by which proxies must be given (which cannot, however, be earlier than 24 hours before the time fixed for the meeting)--the earlier time.

Clearly, section 72(4)(b) limits the number of proxies a person may exercise on behalf of another at a general meeting of this scheme to one. This means that one of the proxy votes of Christine Herron in favour of the amended motion is invalid and of no effect.
The result is that the vote for the amendment of the motion is reduced to 5 in favour with 4 against. On this outcome, the amended motion is carried by a bare majority.

However, if you then apply the provisions of section 57(3), it provides that all persons who are not present personally or by proxy at the meeting, but would, if present, have the right to vote, must be taken to have voted against the motion. The effect of this provision is that, given that one of the proxy votes held by Herron is invalid, then the owner of the lot, not being present personally at the meeting, is deemed to have voted against the motion. This means that the result of the vote in respect of the amendment becomes 5 in favour and 5 against, and in the case of a tied vote, the motion fails.

Parties should note that I have applied the provisions of the standard module throughout this order as this is the module applying to the scheme as indicated on Department of Natural Resources and Mines records. This is so notwithstanding that the applicants have indicated that the applicable module is the "commercial" module. I suggest that the applicants are confused with the fact that the scheme is of a commercial character. This does not mean that the applicable module is the "commercial module" however, and it is necessary for the body corporate to positively adopt a different module other than the standard one. The secretary confirmed that the scheme was still under the standard module.

I conclude that the purported amendment to the motion fails, and that only the motion as initially proposed (ie. For a sinking fund contribution of $150 per lot) is valid. I propose to order to this effect. If the body corporate has collected sinking fund contributions in excess of $150 from each owner, it will need to refund these additional funds to owners.

Whilst this might appear an overly technical decision, it is the correct outcome based on an application of relevant legislative provisions, which though not raised as the basis for the application, should have been applied to the determination of the outcome of the motion. This avoids any requirement for me to consider whether the considerable increase in contributions was reasonable in the circumstances. I consider that the body corporate will shortly have an opportunity to revisit the issue, since the 2003 AGM is to be held in the near future. I do however suggest that the body corporate should update its sinking fund forecast before considering any increase in sinking fund contributions. On two occasions in its submission the committee does indicate that a new sinking fund forecast will be undertaken. I conclude that this is necessary for the dual reasons that the original forecast undertaken in 1997 is now becoming out of date, and bodies corporate are requirement to maintain a forecast and to make contributions on a continuing 10 year period. The second reason to update the forecast is that some of the major projects now being considered by the body corporate are not even included as items in the original forecast. For example, clause 9.03 specifically excludes an allowance for the electrical switchboard or concrete paving.

On the more general issue of whether sinking fund contributions should rise at all, I will only comment that the level of contribution prior to this past year ($50 per lot) does appear abnormally low. Over 10 lots, this would only raise a contribution of $500 per annum, or $5000 over a 10 year period. In any ten year period, it is easy to contemplate even minor items of capital expenditure consuming this amount. I conclude that realistically sinking fund contributions must rise; the question is how much. This is for the body corporate in general meeting to determine, on the basis of an up to date sinking fund forecast.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Redlands Centrepoint [2003] QBCCMCmr 124 (18 September 2003)