Focus [2004] QBCCMCmr 378 (3 August 2004)

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Nimal Anthony De Silva Ratnasakera and Lakshman Jayasinghe, the Owners of Lot 1:

I hereby order that within 6 weeks of the date of this order, the Secretary (in consultation with the Body Corporate Committee) shall convene an extraordinary general meeting of the Body Corporate (the meeting) to decide the Body Corporate’s future role in defending Supreme Court Claim number 3283 of 2003 as brought by the Owners of Lot 1 and another against the Body Corporate and others (the Supreme Court Claim).

I further order that the Committee shall prepare an agenda for the meeting, including but not necessarily limited to, a motion proposing that the Body Corporate continue to defend the Supreme Court Claim.

I further order that the above motion shall specify an upper limit of the total expenditure (including both expenses incurred up to the time the notice of the meeting is distributed to owners and anticipated future costs) that the Body Corporate is willing to incur for the purposes of defending the Supreme Court Claim.

I further order that the Committee shall include an explanatory schedule with the voting papers for the meeting which separately states:

1. The total costs incurred by the Body Corporate to date in defending the Supreme Court Claim; and
2. An estimate of the anticipated future costs for the Body Corporate in continuing to defend the Supreme Court Claim to its conclusion.

I further declare that the requirements of section 102 of the Accommodation Module do not apply to the motion required and authorised by this order.

I further order that the agenda for the meeting shall include any other motions submitted by owners or the Committee under section 39 of the Accommodation Module.

I further order that from the date of this order until the close of the meeting, the Body Corporate Committee may incur any necessary and reasonable costs to protect the interests of the Body Corporate in regard to the Supreme Court Claim.

I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0767-2003

"Focus" CTS 12996

On 27 November 2003, the Applicants (the owners of Lot 1) filed a dispute resolution application with the Commissioner for Body Corporate and Community Management under the Body Corporate and Community Management Act 1997 (the Act).

The Applicants state that they are seeking the following outcomes:

Department of Natural Resources, Mines and Energy records show that the "Focus" community titles scheme was originally created under a building units plan of subdivision (now known as a building format plan) registered on 2 April 1976. The scheme consists of 125 lots and common property.

A new community management statement was recorded for "Focus" on 16 November 2001. The community management statement shows that the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Accommodation Module) applies to the scheme.

While I understand that the vast majority of lots included in "Focus" are used for residential purposes, I note that the Applicants’ Lot 1 (located on the ground floor of the building), has for some time operated as a restaurant.

As mentioned above, this dispute resolution application was filed with the Commissioner on 27 November 2003. On 4 December 2003, the Commissioner issued the Body Corporate with formal notice of the application in accordance with section 243(1) of the Act. The Commissioner also invited the Body Corporate Committee, and all owners of a lot included in the scheme, to make written submissions about the application (sections 243(2) and (4)). On 14 January 2004, the Commissioner extended the time for the Committee and owners to make written submissions (section 243(3)).

I have before me submissions by, and on behalf of, a number of individual lot owners. Solicitors for the Body Corporate have also provided a written submission about the application.

In accordance with section 246(1) of the Act, the Commissioner provided the Applicants with copies of the written submissions made about the application. The Applicants have provided a written reply to those submissions via their Solicitors, under cover of a letter dated 1 March 2004.

On 4 March 2004, the Commissioner made a dispute resolution recommendation that the application should be determined by departmental adjudication (section 248 of the Act). The Commissioner has referred the application to me for determination.

On 27 July 2004, I conducted a teleconference with the Solicitor for the Applicants and the Solicitor for the Body Corporate for the purposes of clarifying certain aspects of the dispute.

Section 227 of the Act limits the types of dispute that may be resolved under the Act’s dispute resolution provisions to those between particular combinations of people involved in a community titles scheme. This application concerns a dispute between the owners of a lot included in a community titles scheme and the body corporate for that scheme, and as a result, falls into the category of dispute described by section 227(1)(b).

Section 276(1) of the Act authorises adjudicators to make just and equitable orders to resolve disputes in community titles schemes, about-

The Applicants have sought orders that an extraordinary general meeting of the "Focus" Body Corporate, individual resolutions of the meeting, and a special contribution purportedly authorised at the meeting, all be declared void. The Applicants have also sought the appointment of an administrator to carry out the obligations of the Body Corporate and of the Committee, until the next annual general meeting. The Applicants have sought these orders on the basis of, among other things, various alleged breaches of the Act and the Accommodation Module.

Schedule 5 of the Act sets out examples of orders an adjudicator may issue. Examples 7 and 8 contemplate adjudicators making orders declaring general meetings, and resolutions passed at general meetings, void. The appointment of an administrator to carry out obligations of a body corporate, a committee, or a member of the committee, is contemplated in example 23.

For these reasons it seems that this application is one that may be determined by an adjudicator.

Before continuing, I note that the extraordinary general meeting that is a central issue of this dispute was held prior to recent significant amendments to the Accommodation Module which took effect from 1 December 2003. Therefore, unless otherwise indicated, my references to the Accommodation Module are references to the provisions as they applied prior to the 1 December 2003 amendments.

This application primarily concerns an extraordinary general meeting of the "Focus" Body Corporate held on 2 September 2003 ("the EGM"). However, I do note that the Applicants rely on various matters, seemingly unrelated to the EGM, to support their request for the appointment of an administrator.

The minutes of the EGM as provided by the Applicants show that the Body Corporate considered two motions at that meeting. The first motion was simply a procedural motion confirming the minutes of the previous general meeting of the Body Corporate (an extraordinary general meeting held on 10 June 2003).

The second and more contentious motion considered at the EGM proposed that a special contribution be levied on owners to meet certain legal expenses and security costs. Specifically, the minutes of the EGM record the motion in the following terms:

The minutes record that motion 2 was carried, with 39 votes in favour of the motion, and 16 votes against the motion.

In very broad terms, and on the basis of the material before me, I understand that the Supreme Court action primarily concerns the use of particular areas of common property. It appears that a dispute has arisen between the Applicants and the Body Corporate regarding the extent to which the Applicants are entitled to use these areas in the course of operating their restaurant business.

In making this application, the Applicants have sought an assessment of their objections to the EGM, to resolutions purportedly carried by the Body Corporate at the EGM, to a special levy purportedly authorised at the EGM, and to other grounds unrelated to the EGM which they consider justify the appointment of an administrator. In my view, the actual subject matter and the merits of the Supreme Court action are not particularly relevant to an assessment of this application.

Some owners making submissions about the application have raised a significant number of issues, which in my view, are not relevant to the determination of issues raised by the Applicants in their application. For example, owners making submissions have raised matters concerning the performance of the caretaking service contractor, tendering processes adopted by the Body Corporate, and the use of Body Corporate funds in relation to improvements to individual lots. I do not intend to consider these matters in the context of this application. Rather, my consideration of this application will concentrate on the issues raised by the Applicants and the responses and submissions from owners and the Body Corporate regarding those issues.

I am also aware that there was some confusion among owners about the actual amount payable towards the special administrative fund levy as authorised by motion 2. The confusion seemed to arise at least partly as a result of the use of the terms "nett" and "gross" in motion 2. However, I note a letter to owners from the Body Corporate Manager dated 23 September 2003 purporting to clarify the matter. In light of this letter, and as the matter has not been specifically raised by the Applicants, I do not intend to consider the calculation of the special levy payable by each lot owner in the context of this application.

Finally, the Applicants have raised some matters that I do not consider are properly for me to consider. For example, the Applicants allege that the Body Corporate Solicitors have a conflict of interest in acting for a number of parties involved in their Supreme Court claim. I do not consider that it is for me to decide questions on solicitors’ ethical obligations, and I agree with the Body Corporate that this is a matter that would be more appropriately dealt with by the Queensland Law Society.

Before turning to the Applicants’ specific objections to the EGM, I wish to make some general comments about the material submitted to me explaining the Applicants’ grounds for this application.

The material before me suggests that Applicants (and/or their solicitors) have trawled through every aspect of the EGM to identify any possible irregularity in the calling and holding of the meeting for the obvious purpose of disrupting the outcomes of the EGM. It seems to me that on a number of occasions, issues raised by the Applicants are trivial, misconceived, or lacking any significant substance.

In meetings of all kinds, including body corporate meetings, minor irregularities in procedure occur both in the calling of the meeting and in the conduct of the meeting. It is not the practice of adjudicators to void meetings on the grounds of minor irregularities in procedure, provided that members of the meeting group have not been disadvantaged in properly exercising their right to vote on the matters brought before the meeting.

In considering this application, I am mindful of the views expressed by His Honour Judge Boulton DCJ in Chen v Body Corporate for Wishart Village CTS 19482^[1]. In his decision, Judge Boulton considered provisions of the Act’s Body Corporate and Community Management (Standard Module) Regulation 1997 and made the following comments:

(While I acknowledge that "Focus" is regulated by the Act’s Accommodation Module, I consider that Judge Boulton’s comments are equally applicable in this instance.)

In summary, meetings of body corporate committees, and general meetings of body corporate members, will not be declared void on the basis of minor irregularities that do not significantly impact on the ability of members to participate in the decision making processes of their body corporate.

I will now turn to the Applicants’ concerns about procedural aspects of the EGM. I will consider the Applicant’s other objections to the special levy authorised by motion 2 (particularly regarding spending limits) in section 8 of this statement of reasons. In section 9, I will consider the Applicants’ grounds for seeking the appointment of an administrator.

The Applicants have raised a large number of issues in this application. While I have not responded in detail to each and every one of the Applicants’ statements, I have attempted to address all of the Applicants’ key issues.

In the supporting grounds to the application, the Applicants claim that the EGM "was not held at least twenty-one (21) days after notice of the meeting was given to lot owners contrary to Section 41 of the Regulation". Section 41 of the Accommodation Module provides that a general meeting of a body corporate "must be held at least 21 days after notice of the meeting is given to lot owners".

I note that the notice of the EGM is dated 7 August 2003. By my calculation, there were 25 clear days between the date of the notice, and the date of the meeting. However, the Applicants appear to consider that the Body Corporate has an onus to prove that each and every owner had actually received their copy of the notice at least 21 days prior to the EGM.

I do not agree that the Body Corporate bears an onus to prove that adequate notice of the meeting was provided to each and every owner. It is the Applicants that have alleged the breach of section 41, therefore I consider that it is the Applicants that bear the onus of proving (on the balance of probabilities) that the required notice of the meeting was not provided to owners. I am not satisfied that the Applicants have demonstrated that a breach of section 41 occurred in this instance.

A number of previous adjudicators have taken the view that the intention of the legislation is that the 21 days stipulated by section 41 (and its equivalents in other regulation modules of the Act) is intended by the legislature to include postage time^[2]. More specifically, those adjudicators considered that that notice is "given" on the date on which the notice is posted to the owners. The reasoning for this position is the fact that the time for notice of meetings is significantly longer under the current legislation than its predecessor, the Building Units and Group Titles Act 1980. The extension of time from 7 days to 21 days appears to have been included to avoid the difficulties in ensuring that each owner, regardless of where they resided, received a specified number of clear days notice of a proposed meeting. If this interpretation is correct, then clearly the Body Corporate has complied with section 41 in respect of the EGM in question.

However, if this view is incorrect, it seems reasonable to have regard to the provisions of the Acts Interpretation Act 1954 (the AIA) to establish the meaning of the time requirement of section 41. Firstly, it seems to me that notwithstanding the use of the word "given" in section 41, the Accommodation Module allows a notice of meeting to be served by post (section 39(1)(a)(ii) and (2) of the AIA). Secondly, I note section 39A(1) of the AIA, which provides that if an Act permits a document to be served by post, service "is taken to have been effected at the time at which the letter would be delivered in the ordinary course of post, unless the contrary is proved".

Assuming that the provisions of the AIA apply to section 41 of the Accommodation Module, and allowing a generous amount of postage time, it is difficult to see that the Applicants can demonstrate a failure of the Body Corporate to comply with section 41 of the Accommodation Module by any more than a day or two. Furthermore, the Applicants have presented nothing to indicate that any owner was unable to properly participate in the EGM due to the alleged lateness of receipt of the notice of the meeting. I would not disrupt the EGM on this basis.

The Applicants state that the notice and agenda of the EGM failed to comply with sections 40 and 57 of the Accommodation Module and "breached the intent and purpose of the legislation". In its submission, the Body Corporate states that "(a) response cannot be provided to an allegation that has no detail. The Applicant should specify what defects existed in the Agenda". In their reply to submissions, the Applicants simply state that they "rely upon the grounds as detailed".

Section 40 of the Accommodation Module sets out the requirements for notices of general meetings. The Applicant has not explained how the notice of the EGM failed to meet the requirements of section 40. Furthermore, I do not understand the Applicants’ reference to section 57 of the Accommodation Module which requires bodies corporate to take and distribute full and accurate minutes of general meetings. It is unclear to me how this provision relates to the validity of a notice of general meeting.

In the circumstances, I see no basis for disrupting the EGM on the basis of the Applicants’ apparent, but largely unexplained concerns about the form of the notice and agenda of that meeting.

The Applicants state that one of the attachments to the notice of the EGM was "EGM Minutes purported to be a true and correct record of the proceedings at an Extraordinary General Meeting on 10 June 2003 which contravened the Act and the (Accommodation Module)".

This matter is largely unexplained by the Applicants in the original application, which is reflected in the inability of the Body Corporate to provide a meaningful response. However, if I understand the Applicant’s response to submissions correctly, the Applicants argue that the minutes of the 10 June 2003 extraordinary general meeting are not a full and accurate record of that meeting, and that the minutes contained false, misleading and unfair information (although I note that the Applicants do not specifically state the information contained in the minutes that they considered to be erroneous). The Applicants also complain about a "preamble" contained in the minutes of the 10 June 2003 meeting.

Whether or not the Applicants concerns about the minutes of the 10 June 2003 meeting are valid, the Applicants have failed to convince me that the matter impacts on the validity of the 2 September 2003 EGM. In my view the Applicants have not established in a meaningful way that the minutes of the previous meeting unfairly or improperly influenced the way owners voted at the 2 September EGM. Furthermore, owners were free to reject the minutes of the 10 June 2003 meeting if they believed that they were not a fair and true record of that meeting. Owners largely chose not to do so.

In the circumstances I am not satisfied that the Applicants concerns about the minutes of a previous general meeting warrant an order disrupting the EGM of 2 September 2003.

In the supporting grounds to the application, the Applicants express concern about the quorum for the EGM. However, if I understand them correctly, the Applicants are not alleging that there was not a quorum for the meeting. Rather the Applicants claim that a quorum was not declared at the appropriate time. In the specific words of the application:

The Body Corporate’s submission states that a quorum was declared within 30 minutes of the time scheduled to start the EGM, and that the Body Corporate Manager noted that the meeting commenced at 8:59 am. In their reply the Applicants state that the submission is inconsistent with the minutes of the meeting and that "investigations by the Commissioner shall disclose that the submission is inaccurate".

The Applicants’ actual concern on this issue is vague. It seems as though the Applicants consider that the meeting commenced after more than 30 minutes had elapsed for the scheduled commencement time for the meeting and that the meeting should have been adjourned. However, the Applicants do not disclose the time at which they believe the meeting actually commenced, or how any alleged delay of commencement impacted on the ability of owners to properly participate in the meeting. Further, the Applicants provide no details of the alleged concerns raised by "a lot owner", who I note is not identified by the Applicants. I note that the Applicants also take issue that the minutes state that the meeting commenced at 9:00am whereas the Body Corporate states in its submission that the meeting started at 8:59am.

Again, it is the responsibility of the Applicants to make out their case. I do not intend to waste the resources of this Office by undertaking an investigation to determine whether the meeting commenced at 8:59am, 9:00am, or a few minutes thereafter. If the Applicants consider that the EGM commenced significantly after 30 minutes had elapsed from the scheduled commencement time, or that owners suffered some disadvantage due to delay in the commencement of the meeting, then this should have been properly articulated in their application. I do not intend to consider this issue further.

The minutes of the EGM include 5 paragraphs of commentary under the title "Preamble to EGM 2 September 2003". The parties are well aware of the statements made in the preamble, so I do not propose to repeat them in full in this statement of reasons. The Applicants object to the preamble, and consider that its presence in the minutes invalidates the EGM.

The Applicants present various reasons for their objection to the preamble, none of which I have found particularly persuasive. While the Applicants have argued that the preamble was intended to mislead owners, they have not articulated the particular statements made in the preamble that were incorrect. It is my view that the Applicants bear the onus of showing that the preamble comments somehow unfairly influenced the outcome of the EGM. I do not consider that they have done so in this instance.

The minutes of the EGM show that a number of the lots were represented at the meeting by proxy to Mr R Spencer. In the supporting grounds, the Applicants state that:

It is true that the section of the minutes listing the names of people in attendance at the EGM does not include Mr Spencer.

However, in its submission the Body Corporate explains that:

The response of the Applicants to the Body Corporate’s explanation is (somewhat unhelpfully) that the Body Corporate "seeks to admit and avoid the irregularity identified". If I understand this response correctly, the Applicants have not set out to prove that Mr Spencer was not actually in attendance at the meeting, but that the Body Corporate’s omission of his name in the attendance list in the minutes puts the validity of the EGM in doubt.

If I have understood it correctly I consider that the Applicants’ objection to the list of attendees (as recorded in the original minutes) is trivial. The Body Corporate has provided what I consider to be a reasonable explanation regarding this issue, and has indicated that the matter has been rectified by amended minutes. If the Applicants are continuing to allege that Mr Spencer was not actually present at the meeting, they should have made a clear statement to this effect in their reply to submissions.

The Applicants allege that the exercise of proxies given to Mr D Linnet and Mr R Spencer contravene section 73(4) of the Accommodation Module.

The then section 73(4) provided the following:

There were no motions at the EGM for the engagement of a person as a body corporate manager or service contractor, or the authorisation of a person as a letting agent, or for the amendment of such an engagement or authorisation. Section 73(4) clearly does not apply to the use of proxies for motions at the EGM in question. The Applicants have endeavoured to persist with this issue by arguing that while the above provision may not have actually been contravened, the use of proxies in the manner adopted by Mr Linnet and Mr Spencer was "not within the intent of the legislation". The Applicants have provided no substance to this argument and I do not intend to consider it further.

Throughout the supporting grounds, the Applicants argue that the Body Corporate Committee (and various committee members) failed to make pertinent and required disclosures to owners voting on motions determined at the EGM, and that the Committee and committee members have acted in their own interests at the expense of the Body Corporate.

Firstly, the Applicants claim that individual committee members failed to disclose their interest in motion 2 "and any vote by those individuals personally or by exercising a proxy should be ruled invalid". The individual committee members named are those named as third defendants in the Applicants’ claim in the Supreme Court.

I accept that the Accommodation Module requires committee members to disclose conflicts of interest regarding matters being considered at meetings of the committee, and to abstain from voting on those matters. However, no similar provision is included for general meetings. It seems to me that the reason for this distinction is that at a committee meeting, committee members are representing the interests of other members of the Body Corporate.

At a general meeting however, committee members vote on motions in their own right (as lot owners) and not as representatives of other owners. Therefore, even if I accepted that committee members had a conflict of interest with the interests of the Body Corporate concerning the matters decided at the EGM, I see no statutory basis for requiring those committee member owners to abstain from voting.

In addition the Applicants claim that the committee failed to disclose that it had breached sections 101 (regulating committee spending) and 103 (requiring quotations for major spending) of the Accommodation Module when submitting motion 2 to be considered at the EGM. I will consider these alleged breaches below in section 8 of this statement of reasons.

The Applicants also make more general statements that committee members "have preferred their own interests" and "have acted in a manner contrary to the best interests of all lot owners". The manner in which the Applicants consider committee members have acted in this way is not entirely clear to me from the material, and as a result, I do not intend to make any detailed assessment of the allegation.

However, as the Applicants have made these considerably serious and sweeping statements about the motivations of the committee, I feel compelled to make some comment about the apparent motivations of the Applicants in making this application. I accept that the Applicants may have been perfectly entitled to commence their action in the Supreme Court. As mentioned previously I have no view on the merits or otherwise of the action. However, it is difficult for me to accept an argument from persons suing the Body Corporate that decisions and actions taken by the Committee to defend the Body Corporate against that action is inherently contrary to the interests of owners generally. While it may suit the Applicants’ purposes for their Supreme Court action to go unchallenged by the Body Corporate, I am not so easily convinced that it is in the interests of owners generally. More important than my view on this issue is the fact that a majority of owners that voted at the EGM have indicated (by voting in favour of motion 2) that they want the Body Corporate to be defended against the Applicants’ claim.

In the circumstances, I see no grounds for the Applicants’ allegation that committee members have acted in a manner that benefits their own interests at the expense of the interests of the Body Corporate.

Apart from objections to procedural aspects of the EGM, the Applicants also object to the substance of motion 2 considered and carried at the meeting. Motion 2 (outlined in full in section 5 of this statement of reasons) sought the Body Corporate’s approval of a special administrative fund levy for the purposes of defending the Applicants’ claim in the Supreme Court, and for additional security services.

It seems to me that the Applicants object to the special levy for two main reasons. Firstly, the Applicants consider that the special levy is a result of the Committee unlawfully exceeding its statutory spending limit. Secondly, the Applicants consider that the motion to raise the special levy should have been accompanied by at least two quotations for the services that were the subject of the special levy.

Section 101(1) of the Accommodation Module imposes spending limits on body corporate committees. Generally, a committee cannot spend above its relevant limit for committee spending unless the circumstances outlined in sections 101(a), (b), (c) or (d) apply. The relevant limit for committee spending is defined in the Schedule of the Accommodation Module. At the time of the EGM, the relevant limit for committee was an amount worked out by multiplying the number of lots included in the scheme by $100, unless the Body Corporate had by special resolution decided on an amount greater than $100 but no more than $400 multiplied by the number of lots included in the scheme.^[3] There is nothing before me to suggest that the Body Corporate had resolved to increase the relevant limit for committee spending, therefore, it appears that at the time of the EGM the relevant limit for committee spending for "Focus" was $12,500 (125 lots multiplied by $100).

The minutes of the extraordinary general meeting of 10 June 2003 indicate that the committee was considering an estimated expense of $100,000 to defend the Applicants’ Supreme Court claim, an amount significantly above the committee’s spending limit. It is clear that if the Committee expended or committed the Body Corporate to expend this amount of money to defend the Supreme Court claim, then it would have breached section 101(1) of the Accommodation Module unless the circumstances outlined in sections 101(1)(a), (b), (c) or (d) applied.

There is no suggestion that the circumstances in sections 101(b), (c) or (d) apply in this instance. Section 101(1)(a) provides that a committee may carry out spending above its spending limit if:

If I understand it correctly, the Body Corporate’s submission argues that the Committee has not breached its spending limit because the expenditure was authorised by the Body Corporate at the EGM which is the subject of this application. I will consider this matter, and the Applicants claim that the Body Corporate breached section 102 of the Accommodation Module which requires the provision of quotations in certain circumstances, in the following sections of this statement of reasons.

It appears that the Body Corporate is relying on motion 2 as carried by the Body Corporate at the EGM as authority for the spending of funds to defend the Applicants’ Supreme Court claim. In our teleconference, the Solicitor for the Body Corporate indicated that he was unaware of any other general meeting resolutions that purported to authorise the expenditure of money to defend the Supreme Court claim.

While I do agree that by passing motion 2, the Body Corporate gave some indication that it wished to resist the Applicants’ Supreme Court claim, I do not consider that the terms of the motion actually authorise the spending of money.

Motion 2 is outlined in full in section 5 of this statement of reasons. It seems to me that the terms of motion 2 simply authorise a special contribution to be levied on owners for particular purposes, including legal costs. The motion does not specifically authorise the committee to actually expend or otherwise commit the funds raised as a result of the special levy. While the distinction may appear to be fine, I consider that it is an important one. To my mind, it is similar to the principle that the adoption of a budget at an annual general meeting of a body corporate does not automatically authorise the expenditure of funds on items that are foreseen as expenses and included in the budget. Rather, when the time comes, those expenses must be specifically considered and authorised by the committee (or if above the committee’s spending limit, by the body corporate at a general meeting) prior to the expenses being incurred.

Section 101(1)(a) allows a committee to expend money above its spending limit when that spending is specifically authorised by ordinary resolution of the body corporate. Motion 2, in my view, does not provide this specific authorisation. The terms of the motion simply authorise a special levy.

It appears therefore that by incurring expense in the course of defending the Applicants’ claim in the Supreme Court without proper authority, the Committee has contravened section 101(1) of the Accommodation Module. However, before turning to the outcome of this apparent breach, I wish to make some comments about the Applicants’ concerns regarding section 102 of the Accommodation Module.

If a body corporate is considering a motion at a general meeting which proposes the carrying out of work, or the acquisition of personal property or services, and the cost of the proposal is above the relevant limit for major spending for the scheme, section 102 of the Accommodation Module requires the party proposing the motion to present at least two quotations for the work or the personal property or services. At the time of the EGM, the relevant limit for major spending for the "Focus" Body Corporate was $25,000 (125 lots multiplied by $200; see Schedule of the Accommodation Module).^[4]

The estimated costs of defending the Applicants’ Supreme Court claim is clearly well above the relevant limit for major spending for "Focus". As a result, the Applicants’ argue that owners should have been presented with at least two quotations for legal services in defending their Supreme Court claim.

In my view, section 102 does not apply to motions proposing that a body corporate adopt a budget, or to motions that propose that a body corporate strike a special levy. Rather, I consider that section 102 applies to motions specifically proposing that a body corporate carry out work or acquire personal property or services. For the reasons outlined above, I have found that motion 2 is the former type of motion, and as a result, section 102 does not apply. However, and while not strictly necessary, I wish to make some comments about section 102.

In my view, there is nothing in the terms of section 102 to indicate that the section does not apply to proposals for bodies corporate to engage professionals to provide legal services. However, it is important to note that the requirements of section 102 may be avoided if "for exceptional reasons, it is not practicable to obtain 2 quotations" (section 102(6)).

In its submission the Body Corporate argues that it was not practicable to obtain two quotations for legal services in defending the Applicants’ Supreme Court claim. Briefly, the Body Corporate argues that:

There is some merit in these arguments. However, I am not satisfied that they are sufficiently "exceptional reasons" for the Body Corporate to avoid the requirements of section 102. Firstly, there is no question that legal services for this matter could only be acquired from one source. Clearly, there are many practitioners that would be able to provide legal services to the "Focus" Body Corporate.

Secondly, while I accept that the nature of litigation makes it extremely difficult for practitioners to provide precise quotations, it seems to me that providing owners with an estimated range of costs and a schedule of fees from at least two practitioners goes a long way to satisfying the spirit and obvious intentions of section 102.

Finally, I also accept that the Committee had to act promptly to file a defence to the Applicants’ Supreme Court claim, and that it would be very difficult to obtain comprehensive quotations and to convene a general meeting to consider the quotations within the prescribed time for filing a defence. However, I see no reason why the Committee could not authorise the filing of the defence, but at the same time, seek a number of quotations for the remainder of the legal services involved in the litigation which owners could consider before the action had significantly progressed.

For the reasons outlined earlier, I do not consider that it is necessary for me to make an order on this issue at this time. However, the Committee should consider these comments regarding section 102 and ensure compliance with that section in the future, including with respect to the Body Corporate acquiring legal services.

It appears that the Committee has embarked on the defence of the Applicants’ Supreme Court claim at a cost exceeding its spending limit, and that it has done so without the specific authority of the Body Corporate.

I do not intend to make any specific orders regarding the monies already spent by the Committee to date defending the Supreme Court action. I have a number of reasons for this decision. Firstly, I recognise that while not strictly authorising the spending of funds to defend the Supreme Court claim, the Body Corporate has given a clear indication by carrying motion 2 at the EGM that it wished to resist the action. Therefore, there is a strong argument that the Committee has acted in good faith and in a manner it considered was consistent with the wishes of owners.

Secondly, it would be unrealistic and impractical for me to order that funds collected from owners to date be refunded. It is clear that significant costs have already been incurred. Regardless of disputes within the Body Corporate, it seems likely that providers of services utilised to date are entitled to be paid.

Thirdly, it seems appropriate to me that if the Body Corporate is genuinely aggrieved by persons spending its funds without proper authority, then it is the Body Corporate (and not an individual lot owner) that has proper standing to take action against the persons who it believes have acted improperly or unlawfully.

The Committee could consider presenting a motion to the Body Corporate at a general meeting seeking formal ratification of its spending to date. While a breach of the Act cannot necessarily be remedied after the event, it seems to me that a committee’s decision to spend above its spending limit in contravention of the legislation is somewhat mitigated if the Body Corporate ratifies the spending at a general meeting. However, I hasten to add, that I do not consider that making decisions beyond their authority and then seeking ratification at a general meeting is a desirable way for committees to conduct their affairs. For obvious reasons, difficulties and potential liabilities arise if the Body Corporate refuses to ratify the decision, particularly if that decision (for example to spend significant amounts of money) has already been carried out.

This still leaves the issue of future spending for the purposes of defending the Applicants’ Supreme Court claim. I have decided to require the Secretary (in consultation with the Committee) to call a general meeting of the Body Corporate to decide the future of the Body Corporate’s role in the Supreme Court claim. Specifically, I have required the Committee to present owners with a motion to be decided at the meeting proposing that the Body Corporate continue defending the Supreme Court action.

I have also required that the motion include an upper limit of the total expenditure that the Body Corporate is willing to incur in defending the Supreme Court action. This limit of total expenditure is intended to include both expenses already incurred by the Committee up to the date the notice of the meeting is distributed to owners, as well as anticipated future costs of defending the action. The inclusion of the total proposed expenditure is not intended to be a ratification of spending to date, but is simply aimed at providing owners with sufficient information with which to make an informed decision about continuing with the defence. In this regard, I have also required the Committee to individually state (in an explanatory schedule) the total of costs already incurred (up to the date of the notice of the meeting) defending the action, as well as an estimate of future costs likely to be incurred in defending the action. It will then be for owners to decide whether to continue with the matter.

If the Body Corporate decides to continue with the defence of the Applicants’ Supreme Court action, and at a later time it becomes apparent that the cost is likely to exceed the cost presented to owners in the above motion, then the Committee will need to call a further general meeting to authorise any additional expenditure.

In the meantime, I have decided not to require the Body Corporate to desist from defending the Applicants’ Supreme Court claim. While I have made a finding that motion 2 as carried at the EGM did not specifically authorise expenditure in defending the legal action, as mentioned above, it seems clear that by approving a special levy primarily for that purpose owners gave an indication that they wished to resist the action. As a result, I do not consider that it would be just and equitable for me to issue an order jeopardising the ability of the Body Corporate to defend itself at this time.

As a result and pending the meeting required by this order, I have authorised the Committee to incur any reasonable and necessary costs to protect the Body Corporate’s interests regarding the Applicants’ Supreme Court claim.

In terms of the requirements of section 102 of the Accommodation Module, I do not propose to require the Committee to obtain quotations for legal services provided to date. It seems difficult and of little benefit to obtain quotations for work already completed.

In addition, I do not intend to require the Body Corporate to obtain quotations for the remainder of legal work required to defend the Supreme Court action. Given that this complex claim is well underway and various processes have already taken place, it would be impractical at this point for the Body Corporate to obtain a second quotation for the work. I consider that the matter now falls into the exception described by section 102(6) of the Accommodation Module.

In my view, with reference to costs already incurred as well as a current estimation of likely future costs for the remainder of the defence, owners will be in a position to make a reasonably informed decision on whether to continue defending the action.

The Applicants have sought an order that an administrator be appointed (until the next annual general meeting) to carry out the roles and functions of the Body Corporate and the Body Corporate Committee.

Orders appointing administrators to carry out the roles and functions of bodies corporate and/or committees are not made lightly. It is clear that the legislature intended for lot owners to take an active role in the operation of their body corporate, either directly by voting at general meetings, or through their democratically elected committee representatives. This is supported by one of the secondary objects of the Act which is the balancing of the rights of individuals "with the responsibility for self-management as an inherent aspect of community titles schemes" (section 4(a)).

In my view, before an order should be issued appointing an administrator to carry out the general operations of a body corporate or a committee, an applicant must show that the day-to-day administration of the body corporate has substantially broken down and/or the affairs of the body corporate are in such significant disarray that an administrator is necessary.

After reviewing the material, I am not satisfied that the Applicants have demonstrated that the appointment of an administrator is in the interests of the "Focus" Body Corporate at this time.

Many of the grounds raised by the Applicants supporting their call for the appointment of an administrator relate to personal disputes that they are having with the Body Corporate about a range of matters. For example, the Applicants point to disputes about:

It seems to me that these types of disputes are best resolved on an individual basis in the appropriate forum. I do not see that the existence of disputes between an individual owner and a body corporate necessarily highlights underlying or systemic problems within the body corporate that can only be resolved by the appointment of an administrator.

More broadly, the Applicants claim that the Body Corporate Committee has shown a preference for the interests of committee members and Focus Owners Ltd over the interests of the Applicants and owners generally, particularly in respect of the Supreme Court claim. I am not convinced of this argument. Without considering the merits of the Applicants’ Supreme Court claim, it seems to me that the Applicants are seeking rights to use areas of common property to further their business interests, at the exclusion of other owners and occupiers. The Applicants are also seeking damages from the Body Corporate. I see nothing inherently unreasonable about the Body Corporate defending this action. Surely the Applicants are not suggesting that owners have no interest in the outcome of a dispute about rights to use their common property. While I am not necessarily recommending any particular course of action regarding the matter, it is certainly my view that it is for owners to make their own informed decision about what role (if any) the Body Corporate should take in the proceedings.

The Applicants also state that the Body Corporate Committee has employed and continues to employ undischarged bankrupts as persons with control of financial matters impacting on the Body Corporate. The Applicants’ have been somewhat unclear about this allegation. For example, through the grounds, the Applicants interchangeably refer to these persons controlling the financial affairs of the Body Corporate, and to the persons controlling the financial affairs of a company, Focus Owners Ltd. The Applicants have not explained how a general appointment of an administrator will remedy their concerns regarding this issue. It seems to me that at this time, if the Applicants are concerned with the alleged bankrupts’ role in the Body Corporate, then they should raise their concerns with the Body Corporate either via the Committee or by presenting motions for consideration at a general meeting. If the Applicants are alleging that the involvement of those persons in Focus Owners Ltd breaches corporation laws, then the Applicants should pursue that matter in the appropriate forum.

The Applicants also make references to a number of other matters that are either only vaguely explained, or at best, can be described as minor irregularities. In my view, none of these issues warrants the appointment of an administrator. For example, the Applicants claim that body corporate records contain misleading and deceptive information. However, the Applicants do not articulate what the misleading and deceptive information is, or how it adversely impacts on owners.

I am not satisfied that I should make an order appointing an administrator to displace the rights of owners to be represented by their elected committee representatives. If owners are unhappy with the performance of the committee then they should address the issue at the next annual general meeting by electing a new committee. Alternatively, and in the meantime, there is nothing to prevent owners requiring a general meeting to be called in accordance with section 59 of the Accommodation Module for the purposes of considering motions to declare particular committee positions vacant (section 23(2)(f) of the Accommodation Module) and for appointing new committee members.

Finally, the Applicants have also raised concern that they have been unable to inspect the applicable client care agreement, or any memorandums of costs involved in the Supreme Court proceeding.

As the Applicants have not sought a specific order on this issue, I do not intend to make any orders about access to records at this time. However, I remind the Body Corporate of its obligations under section 205 of the Act concerning access to body corporate information by lot owners and other "interested persons". The Body Corporate should take its own advice as to whether particular records or documents are exempt from disclosure on the basis of legal privilege.

^[2] See for example, RA Meek "Puerto Vallarta", 20 January 2000 (reference 0008-2000) at page 2, and PJ Hanly "Centrepoint Caloundra", 20 July 2000 (reference 0196-2000) at page 2.
^[3] The relevant limit for committee spending under the Accommodation Module was increased as a result of the amendments to the Accommodation Module that commenced on 1 December 2003.
^[4] The relevant limit for major spending under the Accommodation Module was increased as a result of the amendments to the Accommodation Module that commenced on 1 December 2003.

Number of Scheme:	12996
Name of Scheme:	Focus
Address of Scheme:	114 The Esplanade Surfers Paradise, Queensland

*$ per lot entitlement (excl GST)*	*Due Date*
$1,000.67	3/10/2003

(a)	claimed or anticipated contraventions of the Act or a scheme’s community management statement; or
(b)	the exercise of rights or powers, or the performance of duties, under the Act or a scheme’s community management statement; or
(c)	claimed or anticipated contractual matters about the engagement of a person as a body corporate manager or service contractor for a scheme, or the authorisation of a person as a letting agent for a scheme.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Focus [2004] QBCCMCmr 378 (3 August 2004)