Waimana Gardens [2003] QBCCMCmr 168 (15 October 2003)

Last Updated: 17 May 2005

REFERENCE: 0485-2003

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	12195
Name of Scheme:	Waimana Gardens
Address of Scheme:	18 Tomewin Street, CURRUMBIN QLD 4223

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Juilia Helen GILL and Marguerite Anne BUCKLEY, as the co-owners of Lot 9,

I hereby order that the resolution purported to have been passed in respect of the resolution for the external rendering of the scheme building at the extraordinary general meeting held on 16 April 2003, was at all times void and of no effect. I further order that any contribution levied on owners in consequence of the purported resolution including any penalty levied on an owner for non-payment of any such contribution, is invalid and any moneys paid must be immediately refunded to the relevant owners.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0485-2003

"Waimana Gardens" CTS 12195

The applicants, Julia Gill and Marguerite Buckley of Lot 9, have sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 ("the Act") -

"To invalidate the resolution of the body corporate committee that approved the external renderings & painting of the building – at the meeting dated 16^th April 2003 of $7,015.80 + per year for seven years.
And to call another meeting to discuss further the issue of external renderings & painting of the building."

The applicants also sought an interim order and on 26 August 2003 I issued the following Interim Order 485-2003 –

"I hereby order that the body corporate must not implement or otherwise act upon any resolution purported to have been passed on 16 April 2003 for a proposal to render and paint the external brickwork and façade of the scheme building, pending determination of this application by final order.

I further order that this order has effect for a period of three months from the date of this order."

JURISDICTION:
This is a dispute between an owner (the applicant co-owners of Lot 9) and the body corporate (the respondent), concerning the validity of a resolution to render and paint the external brickwork of the scheme building by accumulating funds over a 7 year period. This is a matter falling within the disputes resolution provisions of the legislation (see sections 227, 228, 276 and Schedule 5 of the Act).

General powers of an Adjudicator in making an order:
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 this Act or the community management statement; or
c)	a claimed or anticipated contractual matter about –
(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) of the Act). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 284(1) of the Act).


APPLICATION AND SUBMISSIONS:
Under section 243 of the Act, a copy of the application was provided to the respondent body corporate (committee), the Body Corporate Manager, Strata Title Management (Tweed Heads) Pty Ltd ("STM"), and all other owners, with an invitation to each to respond to the matter of dispute raised in the application. Neither the committee itself nor the Body Corporate Manager for the committee, made a submission for the body corporate against the application. Three owners made submissions, namely: the Plumbs of Lot 1; West & Spence-Thomas of Lot 5; and the Cockburns of Lot 3. The application was opposed by Cockburn but supported by the other two. The applicants viewed the submissions and subsequently lodged a reply (see sections 244 and 246 of the Act).

In order to better understand the facts relating to the dispute and the position of the parties, on 13 October 2003 I conducted a teleconference with Marguerite Buckley representing the applicants, and M Purtell of STM representing the body corporate.

The brief facts of the matters are that at an extraordinary general meeting held on 16 April 2003, a motion for the rendering and painting of the scheme building was passed on a vote of 6 votes in favour and 2 votes against. The motion is for a tender by Riley Shelley Qld Pty Ltd for the work at a cost of $7,015.80 a year for 7 years, be accepted.

The applicants state that when they enquired of STM (Purtell) as to the cost for their jointly owned lot and Lot 8 owned by Gill, they were informed that the cost would be around $700 pa for each lot for the 7 years. When they received the accounts, the contribution for their lot was $979.20 and $816 for Lot 8. As their vote in favour of the motion was based on the cost given them upon enquiry, they believe they were mislead and the resolution should be invalidated.

During the teleconference, STM (Purtell) stated that the chairperson (Carter) had negotiated the contract with Riley Shelley Qld Pty Ltd and there had been little input into the process by STM. In fact it was only recently that STM became aware there was an escalation clause in the contract which increased the yearly contribution. It also appears that it is intended that the work is to be carried out not at the end of the 7 years but relatively soon, with the body corporate paying off the balance over the remainder of the 7 years. It appears then that the service provider is either financing the work itself or arranging it through a finance provider. The truth of the matter as regards the contract terms and the financing arrangement is irrelevant for my determination of this matter otherwise I would have made further enquiry of the parties and requested the relevant documents.

In answer to my query, STM did not have the meeting documentation readily available to establish whether the voting paper showed that the motion was being put as a special resolution. For reasons that will become apparent, I did not require they should later provide the answer.


DETERMINATION:
"Waimana Gardens" was registered as a building unit plan (now termed a building format plan) on 11 July 1978, and comprises 9 lots. The scheme is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module").

In the Reasons to my interim order, I speculated that the amounts levied against Lots 8 and 9 represented the proportional share of the total amount according to the respective contribution lot entitlements of the lots. That has proved to be the case, for example, the amount levied on Lot 9 represents a 12/86 share of the total cost.

However, in page 2 of those Reasons I also said in regard to the application of section 104 of the Standard Module –

"I assume that the quotations are to enable the body corporate to comply with the Major Spending provisions of section 104 of the Standard Module. However, it also seems that the rendering is to modernise the building and is therefore an improvement within the meaning of section 113 of the Standard Module, and because the total cost (even the annual cost) is in excess of the threshold cost for an ordinary resolution ($250 times 9 lots = $2,250), then under sub-section 113(b) the proposal can only be authorised by special resolution. Accordingly, if Cockburn’s description of the resolution as a majority vote means that it was put and resolved as an ordinary resolution, there is a conflict with the legislation."

As I have already stated, I have no information as to whether the motion was put as requiring a special resolution or not – I have also said that it is not necessary I know that to determine this application. That is because, having received a copy of the minutes of the meeting, it is evident that another provision of the same section has not been complied with by the committee placing at least two competing tenders before owners. It may be that quotations were sought from other contractors but were assessed by the committee and only the preferred quotation put to owners for decision, however that is not sufficient.

Section 104 of the Standard Module states –

"Quotes for major spending
104.(1) This section applies if--
(a) a motion to be moved at a general meeting of the body corporate proposes the carrying out of work or the acquisition of personal property or services, including the engagement of a body corporate manager or service contractor, but not including the engagement of a service contractor who also is, or is to be, a letting agent; and

(b) the cost of carrying the proposal into effect is more than the relevant limit for major spending for the scheme.

(2) The lot owners must be given copies of at least 2 quotations for carrying out the work or supplying the personal property or services.
(3) If the motion is proposed by the committee, the committee must obtain the quotations.
(4) If the motion is not proposed by the committee, the person proposing the motion must obtain the quotations and give them to the secretary.
(5) Copies of the quotations or, if voluminous, summaries of the quotations and advice about where the complete documents may be inspected, must accompany the notice of the meeting at which the motion is to be considered.
(6) If, for exceptional reasons, it is not practicable to obtain 2 quotations, a single quotation must be obtained and must accompany the notice of meeting.
(7) Each quotation obtained under this section must be retained as an attachment to the minutes of the meeting at which the quotation is considered.

(NOTE:Adjudicator’s highlighting)

The "relevant limit for major spending" is calculated by multiplying the number of lots in the scheme by $200 (see "Dictionary Schedule" to the Standard Module). Having 9 lots, the threshold limit for "Waimana Gardens" is therefore $1,800, including for a proposal to carry out work such as the rendering of the scheme building.

The cost for rendering is 7 times $7,015.80 (plus an annual escalation) which far exceeds the $1,800 threshold for section 104 to apply, including the requirement under that section that two quotes were necessary. Further, although subsection 104(2) merely states that lot owners "must be given at least 2 quotations", a proper reading of this requirement in the context of the section leads to the conclusion that the quotations must be contained in alternative and competing motions, and copies of the relevant quotations must accompany the motions to owners. Only this interpretation avoids the absurdity that owners are to be merely given copies of alternative quotations but are not able to vote between them according to their choice.

Since the commencement of the Act on 13 July 1997, over six years ago, it has been the consistent interpretation of section 104 by adjudicators in numerous orders, that owners must be provided with alternative tenders included in alternative motions. This interpretation has not been challenged by appeal. I also understand that one of the draft amendments in the impending major set of amendments to the regulations will clarify this as the purpose of this provision.

I would also point out that STM should have been aware of this as the application of section 104 was the basis for a previous order involving STM, being Order 122-2003 for "Kirra Gardens" issued 26 May 2003, which saw the invalidation of its appointment as Body Corporate Manager on the grounds that its fees exceeded the major expenditure threshold amount but no competing motion had been put to owners. As I remarked in my Reasons to that order "It was my belief that all Body Corporate Managers had adopted this interpretation as standard practice..."

For the foregoing reasons, I have ordered that the resolution for the rendering and painting is void. It follows as a consequence that the following resolution concerning the "Colour option", so far as it relates to the rendering, is ineffective.

However, I would also point out other conflicts with the legislation involving this proposal. The legislation allow improvements to be carried out to common property (such as the rendering proposal) with funding to be raised for that specific purpose by either accumulating funds over time in the Sinking Fund, or by levying a special contribution on owners for the cost. The legislation, however, imposes a heavy onus on a body corporate seeking to fund a proposal by a loan, or partly by loan, by requiring approval by a "resolution without dissent", that is, where every owner has a power of veto. This is set out in section 102 of the Standard Module which provides –

102 Power to borrow
(1) The body corporate may, by ordinary resolution, borrow amounts on
security agreed between the body corporate and the person from whom the
amounts are borrowed.22
(2) The body corporate must not at any time, without the authority of a
resolution without dissent, be in debt for a borrowed amount greater than
an amount worked out by multiplying the number of lots included in the
scheme by $250.

The intent of the legislation is to prevent an abuse whereby present owners enjoy the benefits of an improvement but leave future owners to pay off the cost.

As I stated under "Application and Submissions" I understand that it was not the intention of the body corporate to wait the seven years before rendering the building (which because of the length of time would have been a curious exercise) but to have the rendering done relatively soon. That would obviously mean that the bulk of the cost would be paid off over the remaining years of the seven year term.

Regardless of how the work was to be financed and by whom, the financing arrangement would be caught as a "borrowing" within the meaning of section 102 and therefore the proposal would not just have required a special resolution under section 104, but a resolution without dissent under section 102. Accordingly, the purported resolution of 16 April 2003 failed on two counts.

If the body corporate wishes to consider putting this proposal forward again, then it needs to take into account my comments on the relevant legislative requirements.

Because this order will affect every owner, I have ordered that the secretary must provide a copy to each owner for their information.