Outrigger Beach II [2003] QBCCMCmr 17 (10 July 2003)

Last Updated: 17 May 2005

REFERENCE: 0453-2003

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	15253
Name of Scheme:	Outrigger Beach II
Address of Scheme:	275 Gympie Terrace NOOSAVILLE QLD 4566

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Merie Heather Lowenstein, the owner of lot 5

I hereby order that motion 11, entitled Appointment of Body Corporate Manager, scheduled for consideration by the body corporate at its annual general meeting to be held on 25 July 2003 shall be amended prior to its consideration by deleting the words "plus 2 further annual options". I further order that, in the event motion 11 is carried at the meeting, the Administration Agreement thereby approved shall be amended, before it is executed by the body corporate and by Body Corporate Services, by deleting Clauses 2(b) and 2(c) on page 2, thereby placing beyond any doubt that the agreement is for a term of one year only. I further order that a copy of this order, and the accompanying statement of reasons for decision, shall be provided by the secretary to each owner present in person at the annual general meeting, and shall be posted by the secretary with the minutes of the annual general meeting to any owner not present in person at the annual general meeting.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0453-2003

"Outrigger Beach II" CTS 15253

The applicant, Merie Heather Lowenstein, has sought an interim order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) as follows:

To have motion 11 ruled out of order or amended to read ‘a one year agreement only’ and a further motion or motions to be added to include additional quotations from body corporate managers.

The applicant also sought a final order in similar terms.

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

(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)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

Section 279(1) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances of the application.

In her supporting grounds the applicant stated that a committee meeting was held on 18 June 2003, at which the budget and agenda for the annual general meeting was considered. The applicant further stated that one of the committee members proposed to the meeting that two quotations for body corporate manager should be submitted, but that this proposal was rejected by the present body corporate manager, on the basis that the quotations should have been submitted by the end of the body corporate’s financial year. The applicant expressed the view that the body corporate manager was incorrect, and that the committee was acting responsibly and endeavouring to comply with sections 103 and 104 of the Act (this should in fact be a reference to sections 101 and 102 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Accommodation Module) by which this scheme is regulated). The applicant explained that her understanding of section 103 was that the committee’s expenditure is limited to $100.00 per lot, in this case being $1400.00, and as the quotation from Body Corporate Services exceeded that limit, it could not be accepted without further quotations.

The body corporate committee and the body corporate manager were invited to respond to the application. Submissions were received from the body corporate manager, and from two of the committee members, Mrs Norma Letton, and Mr Peter Stirling.

The body corporate manager, Mrs Vivienne Hooper, stated that at the committee meeting on 18 June 2003, there were no other quotes for body corporate management tabled for discussion or inclusion on the agenda by committee members. Mrs Hooper further stated that a committee member, Mr Morgan, "did verbally advise the writer that Mrs Lowenstein had obtained other quotations for body corporate management and my comment was that she was too late to include any motions as lot owners had to include them by the end of the financial year. At no time were these quotations expressed to be submitted by the committee as obviously my answer would have been very different."

On 10 July 2003, a member of the Commissioner’s staff contacted Mr Morgan by telephone in relation to this statement. Mr Morgan confirmed Mrs Hooper’s version of events.

Mrs Hooper went on to explain in her submission that although the motion relating to the reappointment of Body Corporate Services proposed for the annual general meeting included the words "for a term of 1 year plus 2 further annual options" this wording was only included to make it clear to owners that the agreement provided for such options, whereas the dates in the agreement reflect a one year term only. In these circumstances, Mrs Hooper argued that the agreement did not offend against section 102 of the Accommodation Module. Mrs Hooper should have been aware that any engagement which provides for options for renewal should have those options included in the total term, given the provisions of section 78(1).

Mrs Letton supported the application, and expressed the view that quotations from other body corporate managers should be allowed to be submitted for consideration by owners.

Mr Stirling stated that the information contained in the application was incorrect, in that Mr Morgan did not have any quotations with him at the committee meeting.

The relevant sections of the Accommodation Module provide as follows:

101 Spending by committee [SM, s 103]

(1) The committee may only carry out a proposal involving spending

above the relevant limit for committee spending for the scheme if--

(a) the spending is specifically authorised by ordinary resolution of

the body corporate; or

(b) the owners of all lots included in the scheme have given written

consent; or

(c) an adjudicator is satisfied that the spending is required to meet an

emergency and authorises it under an order made under the

dispute resolution provisions; or

(d) the spending is necessary to comply with--

(i) a statutory order or notice given to the body corporate; or

(ii) the order of an adjudicator; or

(iii) the judgment or order of a court.

(2) For this section, if a series of proposals forms a single project, the

cost of carrying out any 1 of the proposals is taken to be more than the

relevant limit for committee spending if the cost of the project, as a whole,

is more than the relevant limit.

(3) This section has effect subject to the requirements under this division

for spending that is above the relevant limit for major spending.

102 Quotes for major spending decided by body corporate [SM, s 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.

Example--

If goods to be acquired by the body corporate are obtainable from only 1 source, a

quotation for supplying the goods must be obtained from the source and circulated with

the notice of meeting. The fact that goods with the necessary characteristics are only

obtainable from a single source would be an exceptional reason for not obtaining

2 quotations for the supply of the goods.

(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.

The applicant appears to have misunderstood the effect of the committee’s decision to place motion 11 on the agenda of the annual general meeting. That decision did no more than to place motion 11 before owners at a general meeting. Therefore it did not offend against the prohibition on committee spending under section 101 of the Accommodation Module, because the committee did not decide to engage the body corporate manager (as it could not do so, anyway); the committee merely facilitated the means by which owners would make such a decision. In these circumstances, the limit for committee spending was not even a consideration.

However, the applicant’s concern as to the term of the agreement is justified. The term of the agreement must include any options available under the agreement. Mrs Hooper’s view is that the term is only one year because that is what is stated in Item 1 of Schedule A. However, section 78(1) of the Accommodation Module states that the term of the engagement of a person as a body corporate manager (after allowing for any rights or options of extension or renewal) must not be longer than 3 years. Clearly, therefore, options are taken into account in calculating the term of an engagement, and should also be taken into account when calculating the total cost of the agreement. In this instance, that cost certainly exceeds the limit for major spending for this scheme. There should, therefore, have been a second quotation incorporated into a separate motion for body corporate management. That quotation should have been obtained by the committee, as it was ostensibly the committee proposing the motion for the appointment of Body Corporate Services (notwithstanding that Mrs Hooper had in fact placed the proposal on the committee agenda).

Technically, the quotations obtained by Mrs Lowenstein were not proposed by the committee. Mrs Lowenstein acknowledges that she obtained them. Mrs Lowenstein is not a member of the committee. Therefore, as an owner, she should have proposed the motions before the end of the body corporate’s financial year (section 39(2) of the Accommodation Module). However, I can understand that Mrs Lowenstein is concerned that the quotations were rejected by Mrs Hooper, especially when Mr Morgan, who is a member of the committee, raised the issue at the committee meeting, and because Body Corporate Services’ proposal exceeded the limit for major spending. Of course, Mr Morgan may well have been in a stronger position had he actually been in possession of the quotations at the meeting, because that would have given the committee the opportunity of perusing the quotations, accepting them as suitable to be proposed for owners’ consideration, and proposing the alternative motions as committee motions. The committee is not restricted by section 39(2).

Mrs Hooper further stated, by way of defence, that the minutes of the committee meeting were issued to all owners on 20 June 2003, and that to date no objections had been received from owners or the committee members as to the contents of the minutes. I note, however, that there was no mention in the minutes of the fact that the issue of alternative quotations for body corporate management was raised by Mr Morgan, and rejected by Mrs Hooper.

In the circumstances, I propose to order that motion 11 be amended to delete the words "plus 2 further annual options". This amendment will bring the cost of the engagement below the limit for major spending for this scheme, which does not therefore require a second quotation to be incorporated into an alternative motion. I further propose to order that, in the event motion 11 is carried at the meeting, the Administration Agreement thereby approved shall be amended, before it is executed by the body corporate, by deleting Clauses 2(b) and 2(c) on page 2, thereby removing any doubt that the agreement is for a term of one year only.