Kamiros [2004] QBCCMCmr 246 (12 May 2004)

Last Updated: 30 September 2005

REFERENCE: 0280-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	10323
Name of Scheme:	Kamiros
Address of Scheme:	15 Burrows Street, BIGGERA WATER QLD 4216

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Gabriel Michael Malouf and Carmel Maria Malouf, the co-owners of lot 6

I hereby order that within 3 months of the date of this order the body corporate shall: • Call and hold a general meeting (ensuring that at least 21 days’ notice of the meeting is given in accordance with section 43 of the Standard Module) to approve the proposed work to repair the concrete paths and driveway in the scheme. • Place a motion with alternatives for the proposed work on the agenda of the meeting in accordance with sections 42B and 104(7) of the Standard Module • Place a motion on the agenda of the meeting to fix a special contribution to be levied on each owner for the unbudgeted cost of the proposed work in accordance with section 95(2) of the Standard Module. • Take interim measures to highlight the hazardous areas as suggested by the body corporate insurer, CHU, on 22 March 2004. I further order that the meeting may deal with any other motion properly before it.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0280-2004

"Kamiros" CTS 10323

The applicants, Gabriel Michael Malouf and Carmel Maria Malouf, have sought an order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) as follows:

Repair/resurface the area of the exposed aggregate paths and driveways identified by our insurance company, CHU, on 6^th. January 2004, as hazardous and likely to cause injury.

The applicants have also sought an interim order of an adjudicator as follows:

To have obstructive owners over-ruled by the Commissioner to enable responsible owners to carry out their "duty of care" and preventative maintenance requirements as pointed out by CHU Insurance.

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)).

While section 279(1) of the Act provides that an adjudicator may make an interim order if satisfied on reasonable grounds that an interim order is warranted because of the nature or urgency of the circumstances, there is nothing in the legislation to prevent an adjudicator, in appropriate circumstances, from making a final determination of the dispute by proceeding directly to a final order. I consider such a course to be appropriate in this matter for reasons which follow.
The applicants provided copies of various relevant documents, correspondence and quotations.

The background to the application can be summarised as follows:

• In approximately December 2003 the body corporate made a claim against its insurer (CHU) in relation to certain fire damage caused at the scheme. Whilst investigating that claim, CHU’s loss adjuster observed some potential hazards which he concluded could contribute to further incidents. His report to the insurance company resulted in CHU writing, on 31 December 2003, to Body Corporate Brokers (BCB) identifying the hazards, and setting out the action required to remedy the problems. BCB wrote to the chairperson on 6 January 2004 enclosing a copy of CHU’s letter.
• On 9 January 2004 BCB wrote again to the chairperson noting that as the body corporate had not advised of the intended course of the rectification CHU had advised that if a response were not received within 14 days the body corporate’s policy would be endorsed to exclude all losses which might arise from the failure to carry out the remedial work.
• On 16 February 2004 the chairperson wrote to BCB advising that he had spoken with CHU’s claims manager, and the chairperson outlined the proposed course of action.
• On 22 March 2004 CHU again contacted BCB expressing concern that some of the remedial work might not be able to be undertaken until the body corporate considered fee increases at its annual general meeting in June 2004, and recommending some interim measures that might be taken to highlight the hazardous areas.
• On 31 March 2004 the chairperson wrote to CHU and confirmed that remedial action had been taken in respect of the boat ramp. He also advised CHU of the proposal in relation to the driveway and paths, and that the matter was to be considered by the body corporate at a specially convened meeting to be held on 4 April 2004.

I note that a general meeting of the body corporate was held on 4 April 2004. The minutes of the meeting reveal that five of the six owners in the scheme were present, with the sixth owner tendering an apology. The minutes further reveal that consensus on the proposed work was not reached, with a number of alternative suggestions being made. The meeting then decided that the treasurer was to investigate those suggestions to determine if any one of them was feasible, but a very tight timeline was imposed given the fact that the problem had been highlighted by the insurer over 3 months beforehand. It was further noted that if the problem could not be resolved, then an interim order would be sought from the Commissioner’s office.

On 21 April 2004 a circular letter was sent to all owners requesting their vote on one proposal selected by the chairperson and the treasurer from a number of quotations obtained by them. The cost of the work to be performed was $10,810.00. The same motion also proposed a special levy of $1,000.00 payable by each owner, with the balance of the cost being paid from the sinking fund. Owners were advised that the proposal had already been accepted by three of the six owners, and the remaining owners were urged to vote in favour of the proposal.

"Kamiros" is a 6 lot scheme, registered as a building format plan (previously known as a building units plan), which is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module).

I understand owners’ concern over this matter, particularly in light of the insurer’s directions, and the potential liability of the body corporate if anyone were to be injured as a result of the hazardous state of the paths and driveway. However, the body corporate has not followed the correct process for approving the proposed work.

Firstly, the cost of the work significantly exceeds the relevant limit for major spending for this scheme (which is defined in the Dictionary Schedule of the Standard Module as an amount calculated by multiplying the number of lots in the scheme by $250.00 – i.e. in this case $1,500.00). Therefore, section 104 of the Standard Module applies. It provides as follows:

104 Quotes for major spending

(1) This section applies if--

(a) a motion to be moved at a general meeting of the body corporate

proposes the carrying out of work or the acquisition of personal

property or services, including the engagement of a body

corporate manager or service contractor, but not including the

engagement of a service contractor who also is, or is to be, a

letting agent; and

(b) the cost of carrying the proposal into effect is more than the

relevant limit for major spending for the scheme.

(2) The lot owners must be given copies of at least 2 quotations for

carrying out the work or supplying the personal property or services.

(3) If the motion is proposed by the committee, the committee must

obtain the quotations.

(4) If the motion is not proposed by the committee, the person proposing

the motion must obtain the quotations and give them to the secretary.

(5) Copies of the quotations or, if voluminous, summaries of the

quotations and advice about where the complete documents may be

inspected, must accompany the notice of the meeting at which the motion

is to be considered.

(6) If, for exceptional reasons, it is not practicable to obtain 2 quotations,

a single quotation must be obtained and must accompany the notice of

meeting.

Example--

If goods to be acquired by the body corporate are obtainable from only 1 source, a

quotation for supplying the goods must be obtained from the source and circulated with

the notice of meeting. The fact that goods with the necessary characteristics are only

obtainable from a single source would be an exceptional reason for not obtaining

2 quotations for the supply of the goods.

(7) Unless subsection (6) applies, the motion must be stated as a motion

with alternatives in the agenda and on a voting paper for the meeting.

(8) Each quotation obtained under this section must be retained as an

attachment to the minutes of the meeting at which the quotation is

considered.

(9) For this section--

(a) the cost of engaging a body corporate manager or a service

contractor includes any payment for the body corporate

manager’s or the service contractor’s services, provided for under

the engagement, for the term of any right or option of extension

or renewal of the engagement; and

(b) if a series of proposals forms a single project, the cost of carrying

out any 1 of the proposals is taken to be more than the relevant

limit for major spending for the scheme if the cost of the project,

as a whole, is more than the relevant limit.

Secondly, the work has obviously not been budgeted for. Section 95 of the Standard Module provides the basis by which contributions are to be levied on owners:

95

(1) The body corporate must, by ordinary resolution--

(a) fix, on the basis of its budgets for a financial year, the

contributions to be levied on the owner of each lot for the

financial year; and

(b) decide the number of instalments in which the contributions are

to be paid; and

(c) fix the date on or before which payment of each instalment is

required.

(2) If a liability arises for which no provision, or inadequate provision,

has been made in the budget, the body corporate must, by ordinary

resolution--

(a) fix a special contribution to be levied on the owner of each lot

towards the liability; and

(b) decide whether the contribution is to be paid in a single amount

or in instalments and, if in instalments, the number of

instalments; and

(c) fix the date on or before which payment of the single amount or

each instalment is required. (adjudicator’s emphasis)

(3) Also, the committee may fix an interim contribution to be levied on

the owner of each lot before the owner is levied contributions fixed on the

basis of the body corporate’s budgets for a financial year.

(4) The amount of a contribution mentioned in subsection (3)--

(a) must subsequently be set off against the liability to pay

contributions mentioned in subsection (1); and

(b) must be calculated on the basis of the level of contributions

applying for the scheme for the previous financial year; and

(c) must relate, as closely as practicable, to the period from the end

of the previous financial year to 2 months after the proposed date

of the annual general meeting.

(5) The contributions levied on the owner of each lot (other than

contributions payable for insurance and any other matter for which, under

the Act or this regulation,39 the liability attaching to each lot is calculated

other than on the basis of the lot’s contribution schedule lot entitlement)

must be proportionate to the contribution schedule lot entitlement of the

lot.

Thirdly, although section 111 of the Act provides for voting other than at a general meeting, under certain strictly defined circumstances, such a method of voting only applies to a scheme if the regulation module applying to the scheme says that it applies. The Standard Module does not allow for voting other than at a general meeting, so the attempt to obtain a vote on the proposed work by forwarding the voting paper dated 21 April 2004 to all owners would be invalid in any event.

The body corporate must therefore do the following:

• Call and hold a general meeting (ensuring that at least 21 days’ notice of the meeting is given in accordance with section 43 of the Standard Module) to approve the proposed work
• Place a motion with alternatives for the proposed work on the agenda of the meeting in accordance with sections 42B and 104(7) of the Standard Module
• Place a motion on the agenda of the meeting to fix a special contribution to be levied on each owner for the unbudgeted cost of the proposed work

I also note that the insurer, in its facsimile letter dated 22 March 2004 to BCB, suggested certain interim measures (yellow paint, witches hats and signs) that could be taken by the body corporate to highlight the hazardous areas, until the body corporate was in a position to undertake the remedial work.

I do not propose to make the orders as sought by the applicant, but have instead made appropriate orders to facilitate the consideration and approval of the proposed work, and the implementation of the interim measures suggested by CHU. These orders have disposed of the application in its entirety. The parties, of course, retain their appeal rights against the order made, and my having dispensed with the making of an interim order does not diminish those rights.

I note that one of the owners in this scheme suggested in a letter dated 25 March 2004 to the chairperson that the financial dealings of the body corporate should be handled by an outside body. Perhaps owners might like to consider the possibility of engaging a body corporate manager at the same meeting as the proposed work is considered. The requirements of the Act and the Standard Module are numerous and very detailed. Although owners in smaller schemes are usually reluctant to spend money engaging a body corporate manager, the benefits of doing so may outweigh the additional financial commitment, particularly where it is clear that, despite the best of intentions, the body corporate is simply not complying with the Act, as is the case here.