The Surfers Manhattan [2003] QBCCMCmr 399 (27 February 2003)

Last Updated: 7 September 2007

DJ ReardonREFERENCE: 0361-2002

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	7230
Name of Scheme:	The Surfers Manhattan
Address of Scheme:	62 Old Burleigh Road, SURFERS PARADISE QLD 4217

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

Richard Solomon, the Owner of Lot 6

DJ ReardonI hereby order that the application for the following orders of an adjudicator

"1. order that the ordinary resolutions purportedly passed in respect of motions 8 and 28 at the Annual General Meeting of the Body Corporate held on 20^th March, 2002 were at all times invalid.

2.	order the body corporate to forthwith call a general meeting of its owners to consider ratification of the said matters by Special Resolution and if not passed then to determine by Special Resolution how the unauthorised expenditure incurred by the committee is to be managed and finalised.

3.	make such other orders that the Adjudicator considers are just and equitable in the circumstances."

is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0361-2002

"The Surfers Manhattan" CTS 7230

1.	Orders sought

The Applicant, the Owner of Lot 6, has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 ("the Act"), quote-

"(1) order that the ordinary resolutions purportedly passed in respect of motions 8 and 28 at the Annual General Meeting of the Body Corporate held on the 20^th March, 2002 were at all times invalid.

(2) order the body corporate to forthwith call a general meeting of its owners to consider ratification of the said matters by Special Resolution and if not passed then to determine by Special Resolution how the unauthorised expenditure incurred by the committee is to be managed and finalised.

(3) make such further orders that the Adjudicator considers are just and equitable in the circumstances."

Section 223(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 contravention of the terms of, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of, an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

"The Surfers Manhattan" community titles scheme consists of 44 lots and common property. The community management statement for "The Surfers Manhattan", indicates that the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module") applies to the scheme.

2.	Application, submissions, and case management recommendation

This dispute resolution application was made on 19 June 2002. On 24 June 2002, the Commissioner for Body Corporate and Community Management ("the Commissioner") invited the Committee for the Body Corporate, and all owners of a lot included in the scheme, to make a written submission about the application.

The Owners of Lots 24, 34, 42 and 44 have made written submissions about the application, as has the Committee for the Body Corporate. In accordance with section 196 of the Act, the Applicant requested, and was provided with copies of the submissions made about the application. The Applicant has made a written reply to the submissions.

On 5 September 2002, and in accordance with section 198 of the Act, the Commissioner made an initial case management recommendation that the application should be the subject of departmental adjudication.

3.	Background to the application

As stated previously, this application concerns the validity of motions 8 and 28, considered and carried by "The Surfers Manhattan" Body Corporate at an annual general meeting held on 20 March 2002. These motions relate to issues regarding access arrangements to the roof of the building. While I do not intend to set out in detail the history of disputes concerning access to the roof of the building, briefly, I understand that the background to the current application is as follows.

Various components of utility infrastructure servicing "The Surfers Manhattan" are located on the roof of the building. Due to the design of the building, difficulties have arisen in relation to the Body Corporate and authorised tradespeople accessing the roof area for the purposes of servicing, and maintaining the utility infrastructure.

These difficulties arise in that above level 14 of the building, the common property elevator opens onto individual lots, and not common property for the scheme. Lot 44 is located on level 29 of the building, which is the highest level of the building below the roof. While the roof is accessible via common property fire stairs, the Body Corporate’s preferred access is via an elevator to level 29, through Lot 44, and then via stairs to the roof area, rather than via elevator to Level 14, and then stairs to the roof.

In application reference number 0610-2000, the Body Corporate applied for an order of an adjudicator granting the Body Corporate an easement over Lot 44 for the purposes of maintaining common property utility infrastructure located on the roof area. On 19 March 2001, an adjudicator dismissed the application, and indicated that while section 62 of the Act creates an easement for establishing and maintaining utility infrastructure within a lot, it does not allow a lot to be used as a means of access to common property where utility infrastructure is located.

The Owners of Lot 44 made a further dispute resolution application (reference 0485-2001) seeking a number of orders, basically endeavouring to restrain the Body Corporate from pursuing access to the roof via Lot 44 in the future. On 28 November 2001, an adjudicator dismissed the application for the orders sought by the Owners of Lot 44.

The Owners of Lot 44 appealed the latter adjudicator’s order (0485-2001). I have been provided with a copy of the Court’s orders (dated 30 September 2002), allowing the appeal.

4.	Matters in dispute

This dispute resolution application primarily concerns the validity of motions 8 and 28, considered and carried by the Body Corporate, at the annual general meeting held on 20 March 2002. I intend to consider each of these motions and the Applicants objections to the motions below.

4.1 Motion 8

The minutes of the annual general meeting of 20 March 2002 record motion 8 in the following terms:

"8. Appeal of Adjudicator’s Decision

That the Body Corporate continue to oppose the appeal to an Adjudicator’s decision of 28/11/01 through Solicitors Mallesons Stephen Jacques at an estimated cost of $25,000 such cost to be recovered by means of a Special Levy"

The motion goes on to propose the particulars of the special levy. The minutes record that the motion was carried with 29 votes in favour of the motion, 8 votes against the motion and 1 voter abstaining from voting on the motion. I note that in the supporting grounds to the application, the Applicant states that "the "No" vote on motion 8 was claimed to be 9 instead of 8", however the Applicant does not provide further detail on this purported error in the minutes of the meeting. In any event, whether the votes against the motion were 9, or 8 it is clear that a significant majority of lot owners voted in favour of the motion.

From the material before me, I understand that the Applicant’s main issue with motion 8 is that he does not consider that the terms of the motion provided owners with sufficient and accurate information with which to make an informed decision.

The first key aspect of the Applicant’s position regarding the information provided to owners about motion 8 concerns the potential costs of resisting the appeal. The Applicant asserts that owners should have been specifically informed of two matters in either the terms of the motion itself, or the explanatory notes accompanying the motion; firstly, that the $25,000 described in the terms of the motion as the approximate cost of resisting the appeal did not include barrister’s fees, and secondly, that if the appeal was successful, the Appellants may obtain a cost order against the Body Corporate. If I understand the material before me correctly, the Applicant considers that the absence of this information in the terms of the motion and the explanatory notes renders the motion, and the Body Corporate’s decision regarding the motion, invalid.

In terms of the proposed cost of the appeal, I do agree that the original proposed cost did not include barrister’s fees. This is clear from the Client Fee Agreement prepared by Mallesons Stephen Jacques Solicitors ("Mallesons") and dated 5 February 2002, a copy of which has been provided by the Owners of Lot 44. However, it is also clear that the absence of barrister’s fees from the estimated cost of $25,000 was raised as an issue at the annual general meeting of 20 March 2002, and clarification was sought with Mallesons. In a letter dated 10 April 2002, Mallesons up dated their assessment of the approximate costs of resisting the appeal, and indicated that in light of work done to date, the cost was likely to be less than the $25,000 originally estimated, inclusive of barrister’s fees.

In his reply to submissions, the Applicant states that the letter of 10 April 2002 only confirms that barrister’s fees were not included with the original estimate of costs of resisting the appeal as presented to owners for consideration at the 20 March 2002 annual general meeting. I agree, and in my view this could potentially be a significant omission. However, I also consider it is important to consider the broader circumstances. I note the Committee’s preparedness to clarify the matter with Mallesons, and that upon clarification the Committee was informed that the original estimate was still accurate, including likely barrister’s fees.
It seems to me that notwithstanding the original omission, and in light of the subsequent advice, owners were given a reasonable approximation of the cost of resisting the appeal, and I do not see that owners were misinformed about potential costs when making their decision.

I am also somewhat unconvinced by the Applicants arguments that owners should have been specifically warned that the Appellants may seek, and be awarded, a costs order against the Body Corporate in the event that the appeal was successful. Firstly, I note that in a circular distributed to owners prior to the meeting, the Appellants indicated that they could be entitled to costs. Furthermore, it seems to me that the potential of costs orders in litigation could reasonably be considered as common knowledge which owners would be likely be aware of without the necessity of being specifically advised. In light of these two considerations, I do not consider that owners were misinformed about the motion on the basis that they were not specifically advised about a potential costs order in the terms of motion 8 or the accompanying explanatory notes.

The second aspect of the Applicant’s position concerning motion 8 relates to access to a barrister’s opinion. If I understand his arguments correctly, the Applicant considers that in order to make an informed decision about motion 8, owners were entitled to access a copy of a legal opinion provided to the Body Corporate. The Body Corporate Committee has been advised that the opinion is the subject of legal professional privilege, and has to date, declined to allow the opinion to be made available to owners generally. I consider the Committee’s position on this point to be perfectly reasonable. In my view, the Body Corporate, as a separate legal entity from the owners, is entitled to obtain advice, and rely on legal professional privilege. While I accept that owners contribute to the cost of obtaining the advice, I am not satisfied that the confidentiality of this type of legal advice can be properly ensured if it is made available generally to owners. Of course if owners are sufficiently concerned about a particular motion, they are always free to obtain and act on their own independent advice.

In summary, I do not agree with the Applicants argument that the inability of owners to peruse the full legal advice invalidates motion 8, or the Body Corporate’s resolution in regard to the motion.

Looking at the matter more broadly, I do not consider that the Applicant has demonstrated with any certainty that owners were actually misled, or misunderstood the meaning of motion 8. In my opinion the wording of motion 8, and the explanatory notes accompanying motion 8 are straightforward and plain. I certainly have considerable difficulty with the statement made in one of the submissions that the motion is "incomprehensible" and "incapable of any reasonable objective interpretation".

I would not disrupt the clear decision of the Body Corporate on the basis of the Applicant’s arguments as presented to me.

There is one further matter I wish to address concerning motion 8, that being, the question of whether or not the Committee has complied with section 104 of the Standard Module in regards to motion 8. In general terms, section 104 of the Standard Module provides that owners must be provided with at least two quotations in relation to proposals for carrying out work, or acquiring personal property or services, if the cost of the proposal is more than the "relevant limit for major spending" for the scheme. The relevant limit for major spending for "The Surfers Manhattan" is $8,800 (refer Schedule of the Standard Module).

In this instance, it does not appear that owners were provided with two quotations in relation to the proposal to resist the appeal of the adjudicator’s order. Given that the estimated cost of opposing the appeal was $25,000, well above the relevant limit for major spending for the scheme, I consider that the Committee had an obligation to provide owners with at least two quotations for this work.

Generally, a failure to comply with section 104 of the Standard Module is sufficient basis to rule a motion, and subsequent resolution, invalid. However, I intend to waive the breach for a combination of three main reasons. Firstly, the appeal has now been completed, and the expenditure has been incurred. While this does not validate a breach of the legislation, I do consider that it is proper for me to consider whether there are any realistic remedies available to rectify the breach. In my view, the solution offered by the Applicant, that is, that the Body Corporate considers the matter again at a further general meeting, will not in any significant way remedy the fact that owners were not provided with two quotations for the proposed expense.

Secondly, I consider that it is relevant that the members of the Body Corporate agreed to the expense by a convincing resolution. Again, while this of itself does not remedy a breach of the legislation, I do consider that it is relevant that a significant number of owners effectively and seemingly willingly, waived their entitlement to be presented with two quotations. Thirdly, I have given weight to the fact that I consider that it was entirely appropriate for the Body Corporate to properly participate in a legal process that it had been drawn into by another party.

However, notwithstanding this, the Committee should now be on notice that they must ensure that section 104 of the Standard Module is complied with for any proposals concerning spending over the relevant limit for major spending for the scheme.


4.2 Motion 28

I will now turn to the second part of this application, which concerns the validity of motion 28 as considered and carried by the Body Corporate at the annual general meeting of 20 March 2002.

The minutes of the 20 March 2002 meeting record motion 28, in the following terms:

"28. Approval of Expenditure

That the Body Corporate approve the expenditure effected in respect of the:

1.	The original application by the Body Corporate to the Commissioner in respect of roof top access.
2.	The opposition of the Body Corporate to the further application and the appeal to the order made in respect of this application, relating to the Body Corporate’s right to apply for roof top access.

The expenditure amounts to the sum of $17,781.17 plus GST in respect of legal and ancillary costs."

The minutes record that the motion was carried with 29 votes in favour , 7 votes against the motion and 2 voters abstaining from voting on the motion.

The Applicant states that there are two "legs" to his objections to motion 28, specifically described as, unauthorised action by the Committee, and unauthorised expenditure by the committee.

Resisting the appeal

I understand that the Applicant’s reference to unauthorised action by the Committee is primarily a reference to the question of whether or not the Committee has the authority to defend or resist an appeal of an adjudicator’s order on behalf of the Body Corporate.

Leaving aside the question of expenditure for the moment, if I understand it correctly, the Applicant argues that the Body Corporate should have decided to oppose the appeal of the adjudicator’s order by special resolution. In the absence of a special resolution, it appears that the Applicant considers that the Committee had no authority to take steps to oppose the appeal. In making this argument, the Applicant makes reference to section 259 of the Act, which provides the following:

"259 Proceedings

(1) The body corporate for a community titles scheme may start a

proceeding only if the proceeding is authorised by special resolution of the

body corporate.

(2) However, the body corporate does not need a special resolution to--

(a) bring a proceeding for the recovery of a liquidated debt against

the owner of a lot included in the scheme; or

(b) bring a counterclaim, third-party proceeding or other proceeding,

in a proceeding to which the body corporate is already a party; or

(c) appeal against an adjudicator’s order; or

(d) start a proceeding for an offence under chapter 3, part 5,

division 4."

I do not agree with the Applicant’s interpretation of this provision. From a plain reading of the terms of section 259, it seems to me that the section makes provision for a body corporate commencing, or starting a proceeding. I do not consider that it is applicable in an instance where a body corporate is a defendant or a respondent to a proceeding commenced by another party. For this reason, I do not agree that the Committee acted improperly be responding to the notice of appeal on behalf of the Body Corporate. I will however look at the separate issue of the costs of resisting the appeal below.

Expenditure

It is clear from the explanatory notes that motion 28 seeks the ratification of the Body Corporate for expenditure incurred by the Committee (and exceeding the Committee’s spending limit), in relation to three matters; firstly, costs incurred in relation to the Body Corporate’s application 0610-2000, secondly costs incurred in relation to the Body Corporate’s opposition to application 0485-2001, and thirdly costs incurred resisting the appeal of the order made concerning application 0485-2001.

Section 103 of the Standard Module imposes a limitation on committee spending. However, at the outset, I wish to state that in my view, breaches of this spending limit can generally be remedied by subsequent ratification by the Body Corporate at a general meeting. Indeed, in this case, it is clear that a significant majority of lot owners have ratified the expenditure.

However, this is not to suggest that I am either endorsing or encouraging committees to recklessly breach their spending limits assuming that the Body Corporate will simply carry motions for ratification at a later general meeting. Clearly difficulties will arise if a body corporate refuses to ratify a committee’s decision, if the committee has already purportedly committed the body corporate to particular expenditure. The liability of parties in such a situation would need to be assessed in the context of the facts of each case.

In this instance however, and for the reasons outlined above, I am satisfied that the expenditure was understood by the members of the Body Corporate and properly ratified. I am not satisfied that I should disrupt the clear decision of the Body Corporate on the basis of the reasons presented in this application. My previous comments regarding compliance with section 104 are also relevant in regards to motion 28.

5.	Conclusion

For the reasons outlined above, I intend to dismiss this application.