No. 9 Port Douglas Road [2003] QBCCMCmr 445 (28 March 2003)

Last Updated: 10 September 2007

P J HANLYREFERENCE: 0182-2003

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	24368
Name of Scheme:	No. 9 Port Douglas Road
Address of Scheme:	9 Port Douglas Road PORT DOUGLAS QLD 4871

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

Tecelec (Qld) Pty Ltd the owner of lot 4, and Myles Ian Forsyth and Deborah Anne Forsyth, the co-owners of lot 5



I hereby order that motions 6 (sinking fund budget and refund to owners) and 8 (appointment of caretaker and letting agent) considered by the body corporate at the annual general meeting held on 28 March 2003 were at all times void.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0182-2003

"No. 9 Port Douglas Road" CMS 24368

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

Declare motion 6 of the agenda of the AGM invalid

Declare motion 8 of the agenda of the AGM invalid

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 levies, which have been collected under the sinking fund budget approved at last year’s annual general meeting, have been accumulating in the sinking fund, and should be used for outstanding water ingress and structural problems at the scheme. The applicants further state that some lots have changed ownership, and question whether any refund of monies should be apportioned between the old and the new owners. In relation to motion 8, the applicants state that they have not received committee meeting minutes relating to the proposed appointment. They further state that no interviews have been carried out to asses the suitability of the proposed appointee, and no confirmation has been received that the company holds a restricted real estate agent’s licence.

The body corporate committee was invited to respond to the application. A submission was received from Ros Janes Lawyer, who had been instructed through the body corporate manager to respond on behalf of the committee. Ms Janes contended that the application should be dismissed because there is no basis for declaring a motion invalid before a meeting simply because an owner does not agree with the motion. Ms Janes had also been engaged by the committee to provide an opinion on the caretaking and letting agreements, which had been drawn up by another firm of solicitors, acting on behalf of Famestock Pty Ltd (Famestock). Ms Janes stated:

"You will see from the writer’s independent advice given to lot owners that it was the writer’s opinion that the provisions of the Accommodation Module had been complied with concerning the entry into the proposed agreements, however it was up to lot owners as to whether or not they wished to accept the commercial terms of the proposed agreements."

The comments made by Ms Janes are, on their face, quite correct. However, the background to this dispute, which may not have been known to Ms Janes, is as follows:

• The previous management and letting agreement between the body corporate and Famestock was terminated by the body corporate on 7 February 2002.

• Famestock and/or Mr McEvoy have lodged numerous applications to have that purported termination overturned.

• On 28 May 2002 one such application (0168-2002) was dismissed by the Commisioner under s201 of the Act, on the basis that it was a matter which should be dealt with in a Court of competent jurisdiction.

• A subsequent attempt by Famestock to "reinstate" the previous agreement by proposing a motion to that effect at an extraordinary general meeting resulted in a further application to this office.

• An order declaring the motion to reinstate as being void was made on 5 February 2002 (0576-2002).

• Famestock and the McEvoys legitimately control 10 votes out of a possible 18 (and 30 lot entitlements out of a possible 54 lot entitlements) as stated in a committee submission lodged in respect of application 0576-2002.

I shall deal firstly with motion 6. There is no provision under the Act or the Accommodation Module for a refund to be made from a sinking fund. The application of sinking fund monies is prescribed in section 99(1) of the Accommodation Module. Sinking funds by their very nature accumulate relatively large sums of money, and it is often tempting for owners to see the accumulated funds as a potential pot of gold. It has not been possible in the short time available to me to fully investigate the claims made by the applicants as to the water ingress and the structural problems existing at the scheme. However, given that the McEvoys and Famestock own such a large number of lots in the scheme, and given that any motion to be carried by ordinary resolution will be carried by their votes alone, I consider that this motion, proposed as it is by a committee controlled by the McEvoys, is not in the interests of the owners as a whole. It seems to me that it is designed to provide the McEvoys with a speedy injection of funds ($21,000), and if the applicants’ claims of water ingress and structural problems are correct, any monies remaining in the sinking fund after the refund may well be speedily depleted. The accepted way for owners to avoid accumulating funds in the sinking fund which are excess to the requirements of a properly researched sinking fund forecast is to reduce the contributions to the sinking fund over a period of time, until the fund holds an amount which is "on target", and then the contributions can be increased to the correct level again.

I am aware that if I declare motion 6 void, the body corporate will be without a sinking fund budget. I considered only ordering that the refund of $700 per lot entitlement was void, but then decided that owners may prefer to have a new sinking fund budget drawn up if it is their desire to reduce the amount being held in the sinking fund. This will necessitate a further meeting, but as the levies have already been issued for the quarter 01.03.03-31.05.03, there is sufficient time for a new sinking fund budget to be drawn up and presented to a meeting before the next levies are due. I therefore propose to order that motion 6 is void.

I have also decided to declare motion 8 void. The background to this dispute is well known to all parties. The motion purports to authorise the body corporate to enter into a new caretaking and letting agreement, however, as noted by Ms Janes in her advice to owners, the agreements are intended to operate retrospectively from 7 February 2002, the date on which the previous agreement was purportedly terminated by the body corporate. The explanatory note to the motion states "the current managers have asked to extend the term of the caretaking and letting agreements." Firstly, Famestock is not the current manager as matters presently stand. Whilst Famestock challenges the purported termination, a Court has nonetheless not determined the question. Secondly, by making the date of commencement the same date as the purported date of termination, it is abundantly clear that the intention is to circumvent the purported termination. The Commissioner saw fit to dismiss application 0168-2002 under section 201, to enable the validity of the termination to be tested in a Court of competent jurisdiction. As I stated in my order dated 5 February 2003, it would be entirely inappropriate for an adjudicator to sanction the overturning of the purported termination by allowing a motion which simply continued the agreement, albeit for a longer term, to stand. I consider that motion 8 does exactly that. I therefore propose to order that motion 8 is void.

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 applicant, is final in its determination of this matter. If any party considers that an appeal of this decision is warranted, then they should appeal the interim order.2y