Villa Estoril [2003] QBCCMCmr 581 (18 June 2003)

Last Updated: 12 September 2007

REFERENCE: 0281-2003

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	16553
Name of Scheme:	Villa Estoril
Address of Scheme:	102 Indooroopilly Road TARINGA QLD 4068

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Donald Robert RICHARDS, as the owner of Lot 4,

I hereby order that the body corporate general meetings held on 9 April, 16 April and 14 May 2003 are invalid and all resolutions passed at those meetings are void.

I further order that, as a consequence of the above order, the body corporate committee comprises those same members in office immediately prior to 9 April 2003 and who hold the same committee positions as before.

I further order that the body corporate must convene a meeting which shall be deemed to be the annual general meeting required to have been held between 1 December 2002 and 28 February 2003, and that adequate provision is made to meet the various timing requirements for the seeking of committee nominations and motions, the service of the notice of meeting (including agenda and voting paper) and the date of the meeting, such that no owner is disadvantaged in either seeking a position on the committee, submitting a motion for inclusion on the agenda, or from returning their voting paper or attending the meeting.

I further order that any owner may be accompanied to the meeting by a person to act as their adviser on the conduct and substance of the meeting, and that person must be allowed to attend throughout the meeting to advise their principal, but cannot take part in the meeting unless the chairperson, or the meeting, agree.


STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0281-2003

"Villa Estoril" CTS 16553

The applicant, Donald Richards of Lot 4, has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 ("the Act") -

"To have the adjourned annual general meeting held 16/4/03 declared invalid, and allow the meeting set down for 14/5/03 to proceed.

That the motions on the original agenda related to unbudgeted expenditure from the administrative and sinking funds be allowed ruled out of order and dismissed in accordance with the appropriate sections of the legislation."

JURISDICTION:
This is a dispute between an owner (the applicant Richards) and other owners (the respondents: Robert James Douglas and Gail Gene Mazur, the co-owners of Lot 2; Daniele Rae and Ramon Guy Saunders, the co-owners of Lot 3; and Catherine Jane Mary Fitzgerald, the owner of Lot 5), concerning the validity of the meeting of 16 April 2003 and the validity of certain motions being ruled out of order. These are matters falling within the disputes resolution provisions of the legislation (see sections 227, 228 and 276 of the Act).

General powers of an Adjudicator in making an order:

Section 276(1) 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 this 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) of the Act). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 284(1) of the Act).

APPLICATION AND SUBMISSIONS:

In accordance with section 243 of the Act, a copy of the application was provided to the respondents Mazur/Douglas, Saunders and Fitzgerald, and to affected persons, Keith and Richard Leong as the co-owners of Lot 1, with an invitation to respond to the matter of dispute raised in the application. All of the respondents and Leong made a submission. The applicant Richards viewed the submissions and subsequently lodged a written reply (see sections 246 and 244 of the Act respectively).

This is one of two applications that concern: the validity of the annual general meeting of 9 April 2003 and of the decisions of the chairperson to rule certain motions out of order at that meeting; and the validity of the (adjourned) annual general meeting held on 16 April 2003, including the resolution appointing a Body Corporate Manager, AD Body Corporate Managers & Consultants Pty Ltd ("ADBCM") and that it may hold the body corporate records. The other application, Application 289-2003, was lodged by the body corporate which seeks to have Richards hand over the body corporate records and any assets to ADBCM.

Because of the commonality of the dispute for each application, I intend to deal with them together. Accordingly, because this was the first application lodged for adjudication, as is practice for such dual applications I intend to deal with all of the issues in these reasons by taking into account the information contained in both applications and the submissions to both applications. The reasons to my order to Application 289-2003 will therefore largely be a mere adoption of the reasons to this order.

The brief facts of the matter are as follows.

The annual general meeting for 2003 was convened on 9 April 2003, with an agenda of 21 items (it should have been held between 1 December 2002 and 28 February 2003 under section 60 of the Standard Module). It included a number of motions proposed by Saunders for work to the building (including washing and painting of building) to be met out of the sinking fund, and appointment of a Body Corporate Manager. There is some conflict between the parties as to why the meeting was closed down, however it appears common ground is that Motions 9 to 15, and 17 to 19 were not dealt with at the meeting. Richards, as chairperson, states that he told the meeting that if it were to proceed to consider any of these motions, then he would rule them "out of order" on the basis that either they were for matters to be funded out of the sinking fund when they were not properly sinking fund expenses within the meaning of the legislation, or the matters were not funded in the budget (eg engagement of a Body Corporate Manager). He states that the meeting generally agreed to a proposal by Saunders that the matter of dealing with the remaining motions (mostly his) should be referred to an adjudicator for decision.

Saunders submits that the meeting on 9 April was abandoned and that it was the duty of Bronwyn Richards to reconvene it as per section 48(3) of the Standard Module. The submissions do not disclose who determined that the meeting should be reconvened on 16 April, but it was with all owners other than Richards and Keong being present – Richards (including Bronwyn as secretary) states he was unaware of it being held and Keong states he agrees with the submission of Richards. In whatever manner it was called, a meeting did take place on 16 April at which all of the motions on the agenda (including those determined at the initial meeting) were determined, including the appointment of ADBCM, with some motions being amended (eg both fund budgets). Additionally, another election of committee members (an election took place on 9 April) took place with persons from amongst those present being elected – it is this committee which lodged Application 289-2003 as the body corporate.

On 14 May, Bronwyn Richards (the secretary elected on 9 April) reconvened the annual general meeting with herself, Donald Richards and K Leong being present.

DETERMINATION:

"Villa Estoril" was established as a building format plan on 21 December 2001, and comprises five residential lots. It was established under the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module"). Under the legislation, the financial year-end for the body corporate is therefore 30 November each year (see "financial year" definition in Schedule 6 Dictionary to the Act).

The current situation for "Villa Estoril" is that there are two committees, each claiming legitimacy, and two different budgets for each fund, and a polarisation of owners into two factions.

Providing the legislation is adhered to, and since contribution schedule lot entitlements are equal, the faction of Mazur/Douglas, Saunders and Fitzgerald ("Saunders group") will out-vote the Richards, Leong ("Richards group") on an ordinary resolution (eg appointing a Body Corporate Manager, passing a valid budget). However, the Richards group will be able to prevent any special resolution, or of course resolution without dissent, from passing. As a special resolution is necessary to approve lot improvements over $200, common property improvements over $1,250, change of by-laws and various other matters, then factional voting can be detrimental to the good government of the body corporate. And of course where decisions are made, or allegedly made, in contravention of the legislation or the by-laws, an owner may bring the matter before an adjudicator for determination.

The point being that it is in the interests of all owners if personal differences and past arguments are put aside, and owners proceed according to both the law and its own by-laws.

Both groups/factions have made errors and it for this reason that I have invalidated all three relevant meetings and ordered a fresh meeting be called. To allay the fears of the Saunders group (see comment at para 16 in Saunders submission that "the owners of units 2, 3 and 5 would be reluctant to have the meeting (another AGM) without the presence of an appropriate third party to control the meeting."), I have made certain provisions in my order to allay that concern.

The errors are as follows.

Firstly, the Saunders group have incorrectly relied on section 48(3) of the Standard Module as its authority to reconvene the annual general meeting of 9 April a week later. This provision only relates to meetings that cannot proceed because of a lack of a quorum, and that was not the circumstance of the 9 April meeting. The persons present who were in dissent with the chairperson’s declared intention to rule certain motions out of order, had power under section 47 of the Standard Module (which merely reflects the common law on the point) to reverse the ruling and proceed with the meeting. That opportunity was lost, but it does not mean that the meeting could be reconvened under an inappropriate legislative provision.

It seems to me that, after the non-contentious motions were voted on at the 9 April meeting, the balance of the business of the meeting (namely the motions that Richards said he was going to rule out of order) was deferred sine die, that is, to a date to be fixed for the meeting to be reconvened and the matters dealt with one way or another. The manner of reconvening that meeting would be in accordance with section 40 of the Standard Module, where the committee would meet, choose a day, and the secretary would serve a notice of meeting on owners (or another committee member if authorised under section 40(b) to do so).

The meeting of 16 April was not convened in accordance with the legislation and apart from the illegality, both owners Richards and Keong were unaware of it and therefore did not have an opportunity to vote on the motions put. The Saunders group may wish to argue that their presence would have made no difference as they would have been out-voted. However, that does not right the wrong and, in any case, their presence may have altered the voting on some matters by pointing out errors. For example, Motion 11 at the 16 April meeting purports to allow the committee to spend up to $1,500 for the completion of painting, however where a proposal for work exceeds $1,000 (5 lots x $100 per lot) section 103(3) provides that the requirements of section 104 must be met (at least two tenders set in alternative motions). Also, the point by Richards that moneys are accumulated in a sinking fund for particular purposes is correct. I have described the process for sinking fund elsewhere (Order 613-1998) as follows –

"The Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module"), which regulates the body corporate, provides at Part 7 for the financial management of bodies corporate. It requires, briefly, that an administrative fund budget be compiled according to estimates of reasonable and necessary "recurrent expenditure" to be incurred by the body corporate over the forthcoming financial year (see section 94(2)). The body corporate must also compile a sinking fund budget based on its estimates of reasonable and necessary "non-recurrent/capital" expenditure to both fund its intended expenditure for the financial year ahead, and to proportionately accumulate funds to meet expected expenditure over the following 9 year period. An investigation and analysis of the scheme’s future major maintenance requirements can only achieve this – the legislation gives a simple example of this concept following section 94(3). Basically, it is a system of identifying future major/capital repairs (eg painting, road re-surfacing) and accumulating moneys over the intervening years so that when the repair becomes due, there are earmarked funds available to make the repair."

I do not have information before me which shows for what purposes sinking fund moneys have been accumulated for, and therefore whether the resolutions of 19 April follow the purpose or not, however I very much doubt that they do. I have already determined that this meeting was invalid and therefore do not propose to sift the resolutions to determine whether or not they would otherwise have been valid, though it seems that a number of them are designed to landscape and beautify the scheme for a better presentation. In the forthcoming meeting, the body corporate needs to consider its sinking fund purposes, whether matters are of an administrative fund or sinking fund nature, and where necessary fund appropriately by special contribution.

Richards was also in error when saying that the passing of a budget prevents owners from considering motions for further work, purchases, or services of either an administrative or sinking fund nature. Also, the budget formulated and put forward by the committee does not present owners with a take-it-or- leave-it situation. The budget can be adjusted to include matters decided at the meeting – this is better foreshadowed in the motion itself and it can apply to either fund. Also, motions can state they are to be funded by a special contribution. If the situation were otherwise, then a committee would completely control the spending of a body corporate.

I have noted that at the 9 April meeting, the original administrative and sinking fund budgets ($5,000 and $3,000) were approved on a vote of 5:0 and 4:0 (1 abstention) respectively. This does not accord with the submission of the Saunders group that, speaking of the budget, notification of the proposed amendment was provided to all unit holders prior to the original AGM and it was never advised that the increased budget was not passed by the committee, and this was only discovered by Units 2, 3 & 5 when the minutes of the meeting were sent out 3 days prior to the AGM.


Perhaps the Saunders group passed the original budgets to authorise basic or agreeable expenditures (insurance, power, foyer painting, etc), and relied on it being amended later when it believed the Saunders motions would be put.

It seems to me that apart from invalidating the reconvened meeting of 16 April, which means all of the resolutions at that meeting are void (including the engagement of ADBCM), as fair and equitable solution taking into account the whole of the circumstances, is that I also invalidate both the meeting of 9 April and 14 May, and that a fresh annual general meeting be held.

The invalidation of the meetings means that the previous committee (prior to 9 April) is now the committee, with: Bronwyn Richards as secretary/treasurer; Donald Richards as chairperson; and Robert Douglas and Catherine Fitzgerald as ordinary members. While this may not seem satisfactory to some, it also has the benefit of overcoming an all-Richards group committee as elected on 14 May (Richards, Richards and Leong) and the all-Saunders group committee as elected on 16 April (Fitzgerald, Douglas, Saunders, Mazur and Saunders).

It will be this committee which will consider the budget, set out the statutory and other committee motions, and convene the meeting. I would suggest to the members, and other owners, that the budget should cover agreed items (insurance, electricity, etc) and contentious items should be put as motions with the rider that if successful, the cost is to be included in the relevant budget (or as a special contribution as necessary).

This will require that fresh motions be submitted to the secretary for inclusion on the agenda. The person proposing a motion must be satisfied that the proposal is lawful (i.e. does not breach sections 103 and 104 as explained in regard to Resolution 11), and if the cost is to be met from accumulated sinking fund moneys, that the proposal is for the purpose that the funds have been accumulated to meet. Sinking fund moneys are not a bucket of money to be used by owners at a certain point of time in a scheme’s life, but are moneys accumulated for a future community purpose for which owners over the years all contribute a share towards.

Because the Saunders group may still have concerns over the chairmanship of Richards ( see previous quote, the owners of units 2, 3 and 5 would be reluctant to have the meeting (another AGM) without the presence of an appropriate third party to control the meeting), I have made provision in my order that any owner may arrange for an adviser (including if they wish an employee of ADBCM) to attend the meeting with them. This will allow immediate advice to be sought on any aspect of the conduct of the meeting, and relevant questions put to the chairperson. I have also provided that on request, the chairperson, or the meeting, may allow the person to directly address the chair or the meeting.