Paloma [2003] QBCCMCmr 41 (1 August 2003)

Last Updated: 17 May 2005

REFERENCE: 0727-2002

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	9524
Name of Scheme:	Paloma
Address of Scheme:	93 - 97 Albatross Avenue, Mermaid Beach

TAKE NOTICE that pursuant to an application made under the abovementioned Act by I J Holdings Pty Ltd, the Owner of Lot 5

I hereby order that the resolutions of the Body Corporate made in relation to motions 3, 4, and 5, as considered and carried at an extraordinary general meeting held on 13 December 2002, are void.


STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0727-2002

"Paloma" CTS 9524

1.	Order sought

The Applicant, the Owner of Lot 5, has sought the following adjudicator’s order under the Body Corporate and Community Management Act 1997 ("the Act"), quote-

"As Directors of I.J. Holdings Pty. Ltd we wish to apply for an interim order, to declare Motions 3, 4, 5 & 6 of the EGM 13^th December, 2002, for the Paloma Body Corporate out of order.

We contend that as Motion 3 involves elements of maintenance and elements of improvements then the type of resolution required for improvements should be voted on, and Motions 3,4,5 & 6 contravene Sections 104(2) & (3) and 113(a) & (b) of the Standard Module."

The Applicant has sought the above as both an interim and final 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 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)).

2.	Scheme details

The "Paloma" community titles scheme was originally created under a building units plan of subdivision (now known as a building format plan) registered on 17 June 1983. The scheme consists of 12 lots and common property.

The community management statement for "Paloma" indicates that the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module") applies to the scheme.

3.	Application details

This dispute resolution application was made on 29 November 2002. On 13 December 2002, I issued the following interim orders in respect of the application:

"DJ ReardonI hereby order that the application for an interim order 2nto declare motions 3, 4, 5 and 6 on the agenda for an extraordinary general meeting scheduled for 3.00pm, 13 December 2002 is dismissed.

I further order that pending a final determination of this application, the Body Corporate shall not carry out any resolutions it makes regarding motions 3, 4, 5 and 6 set out on the agenda for the extraordinary general meeting scheduled for 3.00pm, 13 December 2002."

On 17 December 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 Body Corporate Committee, Owners of Lots 3 and 6 and the then Owner of Lot 7 have made written submissions about the application. In accordance with the then section 196 of the Act (recently renumbered as section 246), the Applicant requested and was provided with copies of the submissions. The Applicant has made a written reply to the submissions.

On 15 January 2003, the Commissioner made an initial case management recommendation that the application should be the subject of departmental adjudication. The Commissioner has referred the matter to me for final determination.

4.	Matters in dispute

As stated above, this application concerns four motions considered by the "Paloma" Body Corporate at an extraordinary general meeting held on 13 December 2002 ("the meeting"). The motions concern work to areas of common property for the scheme, including areas surrounding the pool. I note that the voting paper and minutes of the meeting indicate that each of the motions in question were to be decided by ordinary resolution. I also note that according to the minutes of the meeting, motions 3, 4 and 5 were purportedly carried at the meeting, with 8 votes in favour of, and 4 votes against the respective motions. The minutes of the meeting record that votes for motion 6 were not counted at the meeting. I will describe the subject matter of the motions in more detail below in Determination.

The Applicant objects to these motions, and the resolutions of the Body Corporate made in relation to motions 3, 4 and 5. The Applicant’s key objections appear to be that the motions breach sections 104 and 113 of the Standard Module. In general terms, section 104 of the Standard Module provides that owners must be provided with at least two quotations for the carrying out of work or the acquisition of personal property or services, if the cost of the work, property or services exceeds the relevant limit for major spending for the scheme.

Section 113 of the Standard Module provides for the type of resolution required for bodies corporate to authorise improvements to the common property. For example, if the cost of proposed improvements exceeds an amount worked out by multiplying the number of lots included in the scheme by $250, the Body Corporate can only authorise the improvements by special resolution (section 113(b)).

The Applicant has also raised a number of concerns and objections regarding a letter dated 6 October 2002 prepared by the Body Corporate Chairperson and distributed to lot owners. This letter presents information concerning work to the pool area and surrounds. The Applicant has presented almost three pages of grounds detailing its concerns about this letter. I must say that I have found this part of the application somewhat difficult to follow, and in some instances I consider the Applicant’s purported concerns to be fairly trivial. My consideration of this application will focus on what I consider to be the key issues raised in the application, that being, whether or not the motions in question comply with sections 104 and 113 of the Standard Module.

5.	Determination

5.1 Motion 3

The notice of the meeting describes motion 3 in the following terms:

"That the Body Corporate approves the expenditure in the amount of $40,920 in accordance with the contract with G Parnell Landscaping & Carpentry, dated 7/11/02. Costs to be debited to the Sinking Fund.

Contract previously supplied to owners."

The notice of the meeting also indicates that the motion was to be decided by ordinary resolution. The minutes of the meeting record that the motion was carried with 8 votes in favour of the motion, and 4 votes against.

I have before me what appears to be the contract with GB Parnell Building and Landscaping ("Mr Parnell") referred to in the terms of motion 3 ("the contract"). However, I note that the contract is dated 6 November 2002, rather than 7 November 2002 as specified in the motion. I also note that the contract is simply a signed copy of a quotation for various works provided by Mr Parnell.

The contract is divided into 5 main sections. Section A, describes the removal of a pergola, relocation of a pool pump, and other associated works at a cost of $3,000. Section B describes the supply and application of brushed concrete over pool surrounds, a pathway, and patio area, and other associated works, at a cost of $10,460. Mr Parnell notes in section C of the document that the Body Corporate Chairperson will organise tiling of the relevant areas. The rebuilding of a BBQ Hut is described in section D of the contract, at a cost of $24,860. Finally, section E of the contract proposes landscaping work at a cost of $2,600.

From the material, I understand that the Applicant is primarily concerned with the work outlined in Section B of the contract. However, before turning to the Applicant’s objections to this part of motion 3, I note that the work described in motion 3 had been carried out, and paid for, prior to the extraordinary general meeting of 13 December 2002, and my interim order of the same date. In one of the Committee’s submissions, the Chairperson explains that the Committee proceeded with the work without the proper approval of the Body Corporate to ensure that the work was completed by Christmas 2002. The Chairperson indicates that the Committee intended to seek the Body Corporate’s ratification of the expenditure after the work was completed.

In my view, and apart from cases of exceptional and genuine emergencies, I consider that this is an entirely improper approach to the administration of a body corporate. It is contrary to both the terms, and spirit of the legislation. It should go without saying that if the legislation requires a particular proposal to be approved by a body corporate by way of a resolution of a general meeting, then this approval should be sought, and properly obtained, prior to the decision being carried out. An obvious result of committees or committee members not following this logical process is that the committee or committee member may commit the body corporate to significant expenditure which is not ultimately ratified by the body corporate. In such an instance it would be for interested members of the body corporate to investigate any legal rights and remedies available to them in relation to the conduct of the relevant committee members.

In this instance, the work proposed in Section B of the contract is well above the relevant limit for committee spending for the "Paloma" Body Corporate. I have been presented with no convincing reasons why the work described in motion 3 could not have been considered by the Body Corporate in a properly convened general meeting prior to the work being carried out. Further, I am not satisfied that informal discussions and polls regarding the proposed work displace the Body Corporate’s clear statutory obligation to properly convene a general meeting so that owners can exercise their rights to vote and decide on whether to authorise the proposed work.

Notwithstanding that the work described in motion 3 has been completed, I do not consider that I am precluded from considering the validity of the Body Corporate’s resolution regarding motion 3. In my view, an otherwise defective resolution of a body corporate does not become valid simply because the subject matter of the motion is carried out.

The Applicant’s first objection to motion 3 is that contrary to the note included in the motion, the relevant contract had not been supplied to all owners. From the material, it appears that this statement is correct, and that at the date of the meeting at least some owners had not been provided with a copy of the proposed contract.

I am not satisfied that the failure to provide the proposed contract to each owner was anything more than an administrative oversight. However, in my view, this has little relevance to the effect of the error on the validity of the motion, and the subsequent resolution of the Body Corporate in relation to the motion.

It seems to me that the meaning of the motion 3 is entirely dependent on the terms of the contract mentioned in the motion. The motion and contract must be read together to establish the particulars of the proposed work. In the absence of the terms of the contract, I fail to see how owners could be expected to make a properly informed decision about whether or not to support motion 3. The seriousness of the failure to provide all owners with a copy of the contract is emphasised by the significant cost attached motion 3.

In my view, each and every owner was entitled to full details of the work proposed by the motion prior to being asked to vote on the matter. In my view, full particulars of a motion should be ascertainable by the terms of the motion, and if necessary, properly referenced attachments included as part of the notice of meeting material. I do not consider that the Committee’s references to previous formal and informal meetings and discussions are sufficient to show that owners were fully aware of the details of motion 3.

In the circumstances, I am not satisfied that all owners were presented with full and complete information regarding motion 3 prior to the meeting, and I consider the resolution regarding motion 3 is void.

The Applicant’s second key objection to the work proposed in Section B of the contract is that in conjunction with the supply and installation of tiles proposed in motions 4, 5 and 6, the work described in Section B forms part of a project of improvement, which should be decided by special resolution rather than ordinary resolution of the Body Corporate.

The question of whether work is properly described as maintenance or an improvement has been addressed in several previous adjudicators’ orders concerning disputes at "Paloma". As I outlined in order 0005-2002, the distinction is important because the legislation distinguishes between maintenance of common property and improvements to common property for the purposes of determining the type of resolution required for the relevant body corporate to authorise the maintenance or improvements (refer section 109 and 113 of the Standard Module, and order 0005-2002).

Very briefly, maintenance of common property may be authorised by either committee resolution (subject to the committee’s spending limit, and section 26 of the Standard Module), or ordinary resolution of the body corporate. In accordance with section 113 of the Standard Module, improvements to common property costing more than an amount worked out by multiplying $250 by the number of lots included in the scheme, may only be made if authorised by special resolution of the body corporate.

In this instance, it seems that the concreting and associated work described in Section B of the contract was carried out in preparation for tiling the pool surrounds, a pathway and a patio area. As I understand it, these areas were previously covered by exposed aggregate, otherwise known as "pebblecrete". Mr Parnell had previously quoted for the replacement of this pebblecrete with new pebblecrete (refer quotation of 31 August 2002). Reading the two quotations together, it is evident that further concreting work was required to level the area to prepare for tiling. It seems that this levelling would not have been necessary to the same extent if the Body Corporate proceeded to simply replace the pebblecrete with a similar pebblecrete material. Therefore, I consider that the work described in Section B was an inherent part of the tiling project.

Even if the existing pebblecrete had deteriorated and required some form of maintenance, I do not consider that replacing the pebblecrete with terracotta tiles can properly be described as maintenance. In my view, replacing the pebblecrete with tiles goes beyond the simple replacement of something already in place that has become dilapidated, worn, or otherwise in need of repair. It seems to me that replacing the pebblecrete with tiles will provide something new for the users of the area, with significantly different features and benefits when compared to the pebblecrete. I do not consider that the replacement of pebblecrete with tiles can be described as replacing something old and outdated with its modern equivalent. It appears that pebblecrete is still available if the Body Corporate chose to utilise it.

For these reasons, I consider that the proposal to replace the pebblecrete with tiles is properly described as an improvement.

Given that the cost of replacing the pebblecrete with tiles is well above $3000 (indeed the preparatory work, purchase of tiles, and laying of tiles are all individually above this amount), I agree with the Applicant that the project can only properly be authorised by special resolution of the Body Corporate. As the Body Corporate purported to authorise the work by ordinary resolution, I consider that this is further grounds for declaring the resolution concerning motion 3 to be void.

Finally, the Applicant argues that a second quotation should have been obtained for the work described in section B of the quotation.

With a limited exception that is not relevant in this instance, section 104 of the Standard Module applies to motions to be considered by a body corporate proposing the carrying out of work, or the acquisition of personal property or services, if the cost of the proposal is more than the relevant limit for major spending for the body corporate. In these circumstances, and in accordance with section 104(2), lot owners must be given at least two quotations for carrying out the work, or supplying the personal property or services.

In accordance with the Schedule of the Standard Module, the relevant limit for major spending for the "Paloma" Body Corporate is $2400 (12 lots multiplied by $200). The cost of carrying out the work described in Section B of the contract is $10,460, which is well above the relevant limit for major spending for "Paloma". There is no evidence before me that owners were provided with more than one quotation for this work. Therefore, in my view, motion 3 is also void on this basis.

For the reasons outlined above, I consider the Body Corporate’s decision in relation to motion 3 is void, and I have ordered accordingly. It will now be for the Body Corporate to decide, within the framework of the legislation, how to manage the renovation of the pool area and surrounds. In making this determination I am mindful of the complication that a proportion of the work has already been carried out, however, as I mentioned above, I do not consider that a defective resolution is made valid simply because it is carried out before owners have a proper opportunity to vote on the motion.

5.2 Motion 4

The notice of meeting describes motion 4 in the following terms:

"That the Body Corporate agrees to the supply of Marcotta terracotta tiles, to tile the area around the pool and the lower path. Volume required are 100m2 of 300X300 tiles and 371m of ‘step tiles’ for the pool coping together with an allowance of 10 to 15% for waste and replacement. The quoted cost from Marcotta tiles is $25.00 per m2 for the tiles and $8.00 each for the ‘step tiles’, total cost is $3,859 plus delivery. Costs to be debited to the Sinking Fund."

The minutes of the meeting record that Motion 4 was carried with 8 votes in favour of the motion and 4 votes against the motion.

The Applicant objects to Motion 4 on two main grounds. Firstly, the Applicant considers that the purchase of tiles forms part of a project of improvement and as a result, the legislation requires that the purchase be authorised by special resolution of the Body Corporate. Secondly, the Applicant argues that the motion fails to comply with section 104 of the Standard Module in that owners were not provided with at least two quotations for the supply of the tiles.

As mentioned above, I agree with the Applicant that the tiling of the pool surrounds, pathway and patio in place of pebblecrete is properly described as an improvement to common property. As a result, and given the cost of the tiling project, I consider that each part of the tiling project requires the authorisation of the Body Corporate by way of special resolution. I consider that the Body Corporate’s resolution regarding Motion 4 is void on this basis.

The proposed cost of obtaining the tiles pursuant to this motion is well above the relevant limit for major spending for the "Paloma" Body Corporate, which is $2400. In accordance with section 104 of the Standard Module, at least two quotations should have been obtained by the Committee for the supply of tiles and given to owners for consideration at the extraordinary general meeting. The Applicant has demonstrated that quotations for the tiles are available from other suppliers.

I consider that the failure of the Committee to present owners with at least two quotations for the supply of the tiles as required by section 104 of the Standard Module is also sufficient basis to declare the Body Corporate’s purported resolution regarding motion 4 void.

5.3 Motions 5 and 6

Motions 5 and 6 are alternate motions concerning the laying of the tiles described in motion 4. Specifically motion 5 proposes the following:

"That the Body Corporate accepts the quote of L & J Fernandes for the laying of the tiles in Motion 4 at a cost of $5,580.00 (quotation attached). Costs to be debited to the Sinking Fund.

Motion 6 proposes:

"That the Body Corporate accepts the quote of Rizzolo Tiling Contractors for the laying of the tiles in Motion 4 at a cost of $5,889.00 (quotation attached). Costs to be debited to the Sinking Fund."

The minutes of the meeting record that motion 5 was carried with 8 votes in favour of the motion and 4 votes against the motion. It appears that votes were not counted for motion 6 on the basis that motion 5 had been carried.

As mentioned previously, in my view, the Body Corporate’s purported resolution concerning the supply of the tiles pursuant to motion 4 is void. Given that the terms of motions 5 and 6 are dependent on motion 4 being carried, I consider that it follows that the purported resolution of the Body Corporate pursuant to motion 5 is also of no effect.

6.	Conclusion

For the reasons outlined above, it is my view that the resolutions made by the "Paloma" Body Corporate in relation to motions 3, 4 and 5 as considered at the 13 December 2002 annual general meeting are void. I have ordered accordingly.