Surfers Hawaiian [2003] QBCCMCmr 393 (20 February 2003)

Last Updated: 7 September 2007

P J HANLYREFERENCE: 0080-2003

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	5682
Name of Scheme:	Surfers Hawaiian
Address of Scheme:	2890 Gold Coast Highway SURFERS PARADISE QLD 4217

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Imre Nemeth and Phyllis Power, the co-owners of lot 64



I hereby order that motion 2 on the agenda of the extraordinary general meeting scheduled for 21 February 2003, dealing with the termination of the present body corporate manager and the appointment of a new body corporate manager, is an invalid motion.

I further order that motion 2 shall not be put to the meeting.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0080-2003

"Surfers Hawaiian" CMS 5682

The applicants, Imre Nemeth and Phyllis Power, have sought the following interim order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

1. That the extraordinary general meeting for the body corporate Surfers Hawaiian to be held on 21^st February 2003 be invalidated.

2. That all positions of the committee of Surfers Hawaiian including the Chairman, Secretary and Treasurer be declared vacant.

3. That Queensland Strata Administration be appointed as administrator to hold an extraordinary general meeting for the purposes of electing a new committee and that this administrator appoint an investigating auditor to examine the reason why the chairman and committee have presented the second budget and terminated the current body corporate manager.

4. That the adjudicator confirm who is the rightful body corporate manager.

Section 225(1) of the Act provides that an adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates. An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

In the supporting grounds, the applicants state that the motions proposed at the forthcoming extraordinary general meeting have not been proposed or mentioned at any committee meeting prior to the extraordinary general meeting. The applicants further state that motion 2 proposes to terminate the present body corporate manager and appoint a new body corporate manager in the same motion. The applicants also note that owners at the last annual general meeting have already passed budgets and if further budgets are adopted at the extraordinary general meeting, without the previous budgets being rescinded, then owners may be confused if faced with 4 budgets.

The applicants also object to the notice of meeting having been signed on behalf of the secretary, when the duly elected secretary denies giving any other person authority to sign the notice. In the applicants’ opinion this renders the notice misleading and therefore invalid. The applicants also seek to have all committee positions spilled because the committee is failing to act in accordance with the law.

The applicants seek the appointment of an administrator because they contend that the scheme is in complete disarray both financially and administratively. The applicants also wish to know who is the rightful body corporate manager. They express concern that the body corporate may be forced into paying two body corporate managers or become involved in expensive court action.

The present body corporate manager and the body corporate committee were invited to respond to the application. A submission opposing the application was received from the chairperson. A further, unsolicited, submission was received from an owner. Notwithstanding that submissions were not specifically sought from owners, because of the time constraints associated with an interim order, I consider that owners will obviously have views on such a subject, and I have therefore decided to accept the unsolicited submission. That submission supported the application, and expressed similar misgivings about the extraordinary general meeting and the committee’s actions. The submission also concluded that it was unfair to blame the present body corporate manager for the levy error, when the other committee members had an opportunity to discover the error when the budgets were presented.

The applicants firstly challenge the validity of the meeting notice. It is apparent that the elected secretary, Nicholas Taktikos, has not signed the notice. Section 40 of the Standard Module provides that a general meeting may be called by the secretary, or another member of the committee authorised by the committee to call a meeting. In this instance, the committee resolved by flying minute, dated 13 January 2003, to give notice of termination to The Body Corporate Headquarters (BCHQ) and to approach Active Body Corporate Management (Active) to take over the management and to produce an agreement for owners to consider at an extraordinary general meeting as soon as possible. Active then wrote to owners on 31 January 2003 enclosing the notice of meeting. The requisite time was allowed after the giving of the notice (section 43 of the Standard Module). I am satisfied that the committee authorised the notice and the proposed agenda and motions, even though the person giving the notice was not a member of the committee. In my view it would have been prudent in the circumstances for the committee to have authorised one of its members to sign the notice, so as not to unsettle owners, but the fact that this did not occur is not a reason to invalidate the notice, and thereby, the meeting.

I consider that the chairperson’s explanation of motions 3 and 4 is adequate, and that owners are unlikely to be confused. I further consider that the chairperson’s explanation as to the need for motion 5 is also adequate. I do not propose to invalidate the notice of meeting. I propose to allow motions 3, 4 and 5 to be put to the meeting as scheduled. However, I do not propose to allow motion 2 to be put to the meeting, for the following reasons.

The present body corporate manager, (BCHQ), was appointed at the annual general meeting held on 21 October 2002.

Clause 1 of the agreement, dated 21 October 2002, specifies the term of the agreement as being one year "commencing on the 16^th day of November 2002, and terminating on the 16^th day of November 2003, subject to the body corporate having the right to terminate this agreement by service of thirty (30) days written notice in accordance with provision 78(1)(2) of the Body Corporate and Community Management (Standard Module) Regulation 1997." The reference to section 78(1)(2) of the Standard Module is incorrect, since that section refers to the form of engagement of a body corporate manager or service contractor. I presume that the reference was intended to be to section 86 of the Standard Module, which provides as follows:

86 Termination

(1) The body corporate may terminate a person’s engagement as a body

corporate manager or service contractor, or a person’s authorisation as a

letting agent, if the person (including, if the person is a corporation, a

director of the corporation)--

(a) is convicted (whether or not a conviction is recorded) of an

indictable offence involving fraud or dishonesty; or

(b) is convicted (whether or not a conviction is recorded) on

indictment of an assault or an offence involving an assault; or

(c) engages in misconduct, or is grossly negligent, in carrying out, or

failing to carry out--

(i) functions required under the engagement; or

(ii) obligations (if any) under the authorisation; or

(d) does not carry out duties under the engagement or authorisation,

and persists in not carrying out the duties for 14 days or more

after the body corporate, by written notice, requires the person to

carry out the duties; or

(e) carries on a business involving the supply of services to the body

corporate, or to owners or occupiers of lots, and the carrying on

of the business is contrary to law; or

(f) transfers an interest in the engagement or authorisation without

the body corporate’s approval.

(2) Subsection (1) does not prevent the termination of the engagement or

authorisation--

(a) by agreement; or

(b) under the engagement or authorisation.

Clause 9 of the agreement provides for termination of the agreement by the body corporate in certain specified circumstances, as follows:

9. Within the term:

a) The body corporate may, without prejudice to any other rights it may have, terminate this agreement within the term upon the happening of any one or more of the following events:-

i.	The manager is in breach of the Act, or this agreement and the body corporate has notified the manager in writing of such breach and the breach has continued for a period of one (1) month after this notice;
ii.	The manager is wound up or is presented with a petition for its winding up or resolves to go into liquidation or enters into a scheme of arrangement (other than for the purpose of reconstruction or amalgamation).

It appears from the material before me that the chairperson gave notice of the intention to terminate BCHQ’s agreement on 16 January 2003, when he wrote to BCHQ in the following terms:

"Pursuant to the management agreement dated the 21-10-02 I hereby give notice of termination of 30 days.

Please supply Active Body Corporate Management P/L Tom Harrison with a copy of the roll and any other details he may require to enable an EGM to be called to effect the change of management."

It is not clear from this communication whether the chairperson is giving notice to BCHQ under clause 1 or clause 9 of the agreement. If the notice is being given under clause 1, and the provisions of section 86 of the Standard Module (as above), then it is unclear upon which subsection of section 86(1) the chairperson is relying. If he is relying upon section 86(1)(d), then I do not have any evidence before me that BCHQ was first given written notice requiring it to carry out specified duties.

Similarly, if notice were being given under clause 9 of the agreement, I have no evidence before me that the body corporate had notified the manger in writing of the breach, and that the breach had continued for 1 month after such notice.

In any event, there is a much more fundamental flaw in motion 2. The motion contains two separate subject matters, but does not allow owners to vote on each subject matter. If owners wish to retain the present body corporate manager, then they can register a "no" vote to motion 2, which will achieve their purpose. However, if owners wish to terminate the present body corporate manager, but not appoint the proposed body corporate manager, they cannot register a vote which will achieve that purpose. The motion should have been proposed as two separate motions. Given that it has not been proposed in that fashion, then it is possible that some of the votes cast will not necessarily reflect the true intentions of the voters. I therefore find that the motion is invalid, and I have ordered accordingly. I have further ordered that the motion shall not be put to the meeting, scheduled for 21 February 2003.


BCHQ’s agreement can only be terminated by ordinary resolution of the body corporate, just as any appointment of Active can only be authorised by ordinary resolution of the body corporate. It will therefore be necessary for the body corporate to call a further extraordinary general meeting, at which separate motions addressing these issues can be considered by owners. In the meantime, BCHQ remains the validly appointed body corporate manager, since no argument has been presented to me that the original appointment was flawed.

The applicants also seek an order that all committee positions be spilled and that another body corporate manager be appointed to call an extraordinary general meeting at which a new committee could be elected. The applicants contend that the body corporate is in financial and administrative disarray. I do not accept these assertions. Whilst it is apparent that an error has occurred in the calculation of the levies, that error can, and no doubt will, be remedied at the extraordinary general meeting. The committee is also endeavouring to redress what has obviously been a cash-flow problem by the introduction of penalty interest on overdue levies. It is quite unfair of owners who do not pay their levies on time to place the body corporate in a parlous financial position. I consider that the committee is acting in the best interests of the body corporate by allowing owners to consider this proposal. I do not intend to order that the committee members vacate their positions.

In the circumstances, it is not intended to invite further submissions regarding this matter, or to make a further order, since this decision, though an interim one as sought by the applicants, is final in its determination of this matter. If the applicants consider that an appeal of this decision is warranted, then they should appeal the interim order.