Aloha Lane [2003] QBCCMCmr 199 (4 November 2003)

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Angela Campbell, the owner of lot 29

I hereby order that the application for several orders, quote -

1. That all major spending (new security system) be suspended. A full inquiry to date of the financial accounts of Aloha Lane CTS 7131 prior to an including Audit 2001, disbursements of funds etc. and to confirm our financial situation;
2. A GST audit from July 2000 by ATO if necessary;
3. Recovery of BAS fees 2001 / 02 from The Body Corporate Headquarters (BCHQ) $1520.00 plus GST;
4. Recovery of spear pump expenditure in excess of $8000 plus GST, (if Act permits) from the committee members of Aloha Lane who approved same;
5. BCHQ made accountable for any special levy imposed upon owners;
6. That the Management Agreement with BCHQ be terminated and Active Bodycorp Management Pty Ltd be appointed,

is dismissed.

In respect of the order sought regarding alleged irregularities in "printing, postage and stationary" charges for 2001 / 02 from BCHQ of $1410.00 plus GST, I further order that -

• Before the committee meeting first held after 6 November 2003, the body corporate manager shall provide to the committee a written explanation of the two entries referred to, and in particular, shall address the question of whether the two entries include a double charge for postage etc. If not, then the written explanation of the manager should explain the difference between the two figures.
• At the relevant committee meeting, the committee shall review the explanation provided by the manager (the representative of the manager should absent him or herself from this discussion), and the committee shall determine whether, in the circumstances, the explanation provided by the manager for the two entries is a satisfactory one. If the committee determines that the explanation by the manager is not satisfactory, or if the charge is acknowledged by the manager to be a double charge, then the committee shall be required to take action to recoup the relevant amount from the manager. Alternatively, if the committee conclude that the explanation by the manager is a reasonable and logical one, then the committee may elect to take no further action in respect of this matter.
• Within two weeks of the relevant committee meeting, the committee shall write to the applicant, providing to her a copy of the written explanation provided to the committee by the manager, and further a copy of the committee minutes indicating the committee’s response to this issue.

In respect of the order sought regarding alleged overpayment to building manager 2002/03, I further order that -

• If the audit for the relevant financial period has not been concluded, then that the committee shall instruct the auditor appointed to specifically investigate the alleged discrepancy, and to report back to the committee. Alternatively, if the audit has been concluded, then the committee shall engage an auditor to specifically investigate this alleged aspect.
• In the event that the auditor concludes that there has been no overpayment to the manager, and that in effect there is no discrepancy, then I order that the applicant shall bear one half of the costs of the auditor in investigating this aspect. Alternatively, if there is some basis to the applicant’s allegation, then no part of the auditor’s fee will be payable by the applicant.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0191-2003

"Aloha Lane" CTS 7131

The applicant, Angela Campbell, the owner of lot 29 has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote (my numbering) –

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)).

On Wednesday 29 October 2003, I chaired a meeting with the applicant, two members of the body corporate committee (Keith Purchall and Chris Secondis) and two consultants from the body corporate manager currently engaged by the scheme (Graeme Perkins and Danny Vegter). This meeting was held at the scheme and continued for 2.5 hours (10:30 am to 1 pm). The reason for convening the meeting was my conclusion after reading the material that several of the issues required further explanation and / or detail. I considered that the meeting was very useful in canvassing the issues in dispute. I thank the parties for their attendance and participation at this meeting. I will also add that at relevant points during the meeting, I did outline for the benefit of all parties my views on aspects of the dispute, and the practicalities of what were reasonable outcomes or expectations and what were not. The terms of this order will not repeat these views in any detail.

I intend to deal with the 8 orders sought by the applicant in turn.

That all major spending (new security system) be suspended. A full inquiry to date of the financial accounts of Aloha Lane CTS 7131 prior to an including Audit 2001, disbursements of funds etc. and to confirm our financial situation.

The applicant’s basis of seeking this order was that there were no or insufficient funds to install the security system, and consequently it should not be installed. Particularly, the applicant was concerned that a special levy might need to be raised to fund the proposal. The applicant did not allege any invalidity in the procedure under which the installation of the security system was approved.

The security system was approved at a general meeting held on 31 March 2003. The proposal was carried by a vote of 21 votes to 6, and I am satisfied that a second alternative quotation was provided to owners. I understand that the first phase of the security system has now been installed.

It is not my role to determine whether or not a body corporate should have a security system, or whether it can afford to install such a system. Bodies corporate are functioning legal entities, entitled to make decisions provided that certain procedures for those decisions are followed correctly. Although a minority of owners might not consider that a proposal is an appropriate one for a body corporate, this will not mean that the minority can overturn a valid resolution, or prevent that proposal being implemented, except in very limited circumstances; namely where it can be shown that a body corporate has not acted "reasonably and for the benefit of lot owners" in administering, managing and controlling the common property (see section 152(1)) of the Act). This question will be determined in all the circumstances relating to the issue in dispute. In circumstances where bodies corporate are functioning entitles making determinations on the basis of majority resolutions (for the most part), then the onus of showing that the body corporate has not acted reasonably is not an easy one for an individual owner, or minority of owners, to displace.

I find no basis to even commence an enquiry into the reasonableness of the proposal to install security. The security system, or part thereof, has been installed, and to date, no special levy has needed to be raised. Further, it is not contemplated that a special levy will need to be raised, as least regarding this item. In the circumstances, this order sought is dismissed.

A GST audit from July 2000 by ATO if necessary.

The applicant alleged that GST had not been "processed correctly". The body corporate manager responded that the records had been audited by an auditor independent of the manager, who had identified an error, and this had been corrected.

I referred the applicant to the fact that she was seeking a "GST audit" by "ATO". I advised that this office has no connection with the Australian Tax Office, and that if the applicant was seeking some investigation or ruling from the Tax Office, then that she should contact that office directly.

I intend to make no order in respect of this order sought.

Recovery of BAS fees 2001/02 from The Body Corporate Headquarters $1520.00 plus GST.

The applicant considers that the figure of $1520 was a fee paid to the body corporate manager for preparation of the BAS statement. The manager explained that this was the error identified by the auditor. That in fact the figure of $1520 included two amounts; $220 being the professional fee of the manager to prepare the BAS statement for four quarters, and $1300 being the amount of GST payable to the Tax Office.

I queried the two committee members present at the meeting if they were satisfied with, and had satisfied themselves of the accuracy of this explanation. The chairperson expressed confidence in the manager and appeared to be satisfied with the explanation of this aspect, as provided by the manager.

In the absence of any evidence contrary to the explanation provided of the amount in dispute, I am prepared to accept this explanation and intend to make no order in respect of this aspect. In doing so, I understand that the amount of $1300 has been paid to the tax office for GST owing, and the balance of $220 retained by the manager by way of a professional fee for preparation of the BAS (statement).

Recovery of printing, postage and stationary 2001 / 02 from BCHQ, $1410.00 plus GST.

The applicant is referring to entries in the "proposed annual budget" for the period 2001 / 02. The two relevant entries are
Printing Postage and stationary $1266.33 and
Secretarial fees $6211.79.

The applicant states that the agreed fee for management is $100 per lot, and $30 per lot for postage etc. (ie. $6110). Given that figure for "secretarial fees" is approximately this amount, the applicant believes that the additional figure for postage of $1266.33 represents a double charge. The body corporate manager was not able to properly explain this aspect. In its written submission in response to the application, the manager stated –

The manager offered to "sit down with Mrs Campbell at any time to bring this matter to a satisfactory conclusion but feel that their (sic) has to be some undertaking on her part to be pro-active in arriving at the conclusion".

Nothing in the body corporate manager’s submission answers the specific question being asked; namely is the manager "double dipping" for postage and stationary. The question is pretty straight forward, and further is a reasonable one given that the two items are shown in a column headed "actual" and then in a list headed "expenditure" with both figures appearing as separate items. Surely, if there is a logical explanation for this, then it should be available.

This is the second occasion recently where, in the process of an adjudication by myself, raising queries of financial irregularities, this body corporate manager has offered the more holistic approach to the effect of "come down to the office and we’ll talk about it", rather than a clear and specific explanation of the alleged irregularity. I indicated to the manager during the meeting that in future I consider he should respond specifically to the alleged irregularity. I consider that the "lets have a talk about it" approach inappropriate in respect of matters of alleged financial irregularities. Given the circumstances, and the lack of any clear explanation forthcoming from the manager, I am concerned that the body corporate manager may have charged an expense twice. The failure to properly respond to the allegation suggests (applying the civil standard of proof – the balance of probabilities) this is more likely than not.

I did indicate at the meeting the lack of regulation in Queensland to make body corporate managers accountable, and that given this, it makes it difficult, if not impossible, for adjudicators to hold managers accountable and responsible for their conduct or activities. I indicated to the committee members present that given lack of regulation to make managers accountable, the role of committee members was in my view enhanced to include that committee members must be diligent and vigilant to ensure the performance and accountability of the body corporate manager in all respects. The committee should not take this responsibility lightly.

Specifically, I am not satisfied that the body corporate manager has not charged twice for postage etc in this instance. In the circumstances, I intend to order to the following effect –

Recovery of overpayment to building manager 2002 / 03, $4622.89 plus GST.

The applicant is again referring to a discrepancy in accounts. This time it is the "General Ledger Transactions Report" for the period 2002/03. The applicant refers to two debits, namely –

May salary plus wage increase 6 months $4622.89
Fees April / May $7835.45

The applicant stated that the second figure was two times the usual resident unit manager’s fee. The applicant’s grounds simply allege that –

There appears to be an overpayment to the building manager ... $4622.89 in May 2002.

This is not evidence of the fact. It is simply an opinion of the applicant.

The manager states –

None of the above statements provide a clear explanation of the point which the applicant is alleging. I do conclude that the applicant’s material itself is scant. The applicant simply raises the allegation, without any real evidence to support the allegation. The applicant does bear an onus of proving or establishing her allegation on the civil standard – that on the balance of probabilities, the matter alleged is correct or did occur etc.

I am not an accountant. As I explained to all parties at the meeting, the service offered by this office does not include the ability to undertake complex investigation of accounts. I suggested to the applicant that in respect of allegations involving or requiring specialist accounting expertise, then it is the same as with other fields of expertise – namely that it is for an applicant to provide a report by an expert in that field which substantiates or supports the allegation being made. For example, in disputes involving water penetration to buildings, it is usual for this office to require as part of the parties material reports of engineers or the like. It is no different for allegations involving alleged discrepancies in accounts.

I understand that the accounts for the relevant period have been or are to be audited, in accordance with a resolution to this effect passed at the AGM earlier this year. In the circumstances, I intend to order that if this audit has not been concluded, then that the committee shall instruct the auditor appointed to specifically investigate the alleged discrepancy, and report back to the committee. Alternatively, if the audit has been concluded, then the committee shall engage an auditor to specifically investigate this aspect. The outcome of the auditor’s finding on this aspect will determine what future action, if any, is required by the committee.

I do not intend to order as I did in respect of the postage etc issue, as I consider here that the evidence provided by the applicant is more scant. Further, in the event that the auditor concludes that there has been no overpayment to the manager, and that in effect there is no discrepancy, and that there is some explanation for the figures, then I intend to order that the applicant shall bear one half of the costs of the auditor in investigating this aspect. I consider that this outcome is only fair if it transpires that there is no irregularity, given the lack of any real evidence provided by the applicant. If there is some basis to the applicant’s allegation, then no part of the auditor’s fee will be payable by the applicant.

Recovery of spear pump expenditure in excess of $8000 plus GST, (if Act permits) from the committee members of Aloha Lane who approved same

Firstly, the Act does not contemplate personal liability by committee members or permit the recovery of same.

Secondly, I have reviewed the material relating to this aspect and find no irregularity by the committee in approving the two spear pump installations, excepting the possibility that it is arguable that the installation of two spear pumps should be considered a single project, and if considered as such, is above the relevant limit for committee spending.

Even if I concluded that this were the case, this would not lead to a finding that committee members should be personally liable for the expense. At most, I would consider an order to the effect that the body corporate in general meeting be required to ratify the action of the committee in authorising the expenditure beyond its limits. In the circumstances however, I elect not to order to this effect, and rather, will dismiss this aspect of the order sought.

BCHQ made accountable for any special levy imposed upon owners.

At the inspection I made it very clear that I would not be making an order to this effect. Firstly, its terms are simply too wide to be reasonable. On what basis should the body corporate manager be made accountable for any special levy imposed upon owners. This is an unreasonable expectation by the applicant. I would only contemplate an order of this nature in the context of a specific special levy which had been imposed, and were in the circumstances, there were compelling reasons why the manager should be so liable. The circumstances of a manager being so liable are not within my contemplation, and at the very least, I consider the facts supporting this conclusion would need to be compelling.

That the Management Agreement with BCHQ be terminated and Active Bodycorp Management Pty Ltd be appointed.

As I indicated to all parties at the inspection, the termination of a body corporate manager’s contract is a matter for owners in general meeting. Adjudicators do not consider it part of their role to termination contracts entered into by legal competent parties. The right to terminate, and the consequences of termination (eg. potential legal liability for wrongful termination) are all part of the equation to be considered by owners in determining whether or not to termination.

Number of Scheme:	7131
Name of Scheme:	Aloha Lane
Address of Scheme:	11 Breaker Street MAIN BEACH QLD 4217

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Aloha Lane [2003] QBCCMCmr 199 (4 November 2003)