Teneriffe Hill Apartments [2004] QBCCMCmr 467 (5 October 2004)

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

I hereby order that, should the body corporate pass resolutions pursuant to motions 2, 3, 4, 5, 6, 7 or 8 at the general meeting of 5 October 2004, the body corporate must not implement or otherwise act upon any of these resolutions pending a final determination of this application.

I further authorise the committee of the body corporate to, within 21 days, pass a resolution fixing a special levy to meet any liabilities of the body corporate in relation to the body corporate’s defence of the application brought by Yates Nominees Pty Ltd seeking an adjustment of lot entitlements. These liabilities must be liabilities due and properly payable at the time and for which inadequate provision has been made in the body corporate’s budget. Contributions are to be due at least 30 days after written notice seeking payment of the contribution is given.

This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0602-2004

"Teneriffe Hill Apartments" CTS 24567

Teneriffe Hill Apartments Community Titles Scheme (THA) is a 68 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Accommodation Module Regulation (Accommodation Module). The community management statement indicates that lots 1 and 2 are used for commercial purposes and lots 3 to 68 are used for residential purposes.

This is an application for interim orders. It arises out of an application by Yates Nominees Pty Ltd, owner of lots 1, 2, 51, 53, 54, 59, 65 and 66 (applicant) seeking to declare invalid a resolution by the committee to the effect that all motions before the body corporate in general meeting must be decided by secret ballot.

The applicant seeks an urgent interim order to prevent an extraordinary general meeting scheduled for 5 October 2004 being held until a final determination is made.

The application was only lodged on 30 September 2004, which has left very little time for the body corporate to make any submissions in response prior to the proposed 5 October meeting. A copy of a notice of committee meeting indicates that the applicant should have been aware of the disputed motion in early September. The applicant has not provided any reason for the delay in lodgement of the application and if the delay in lodgement had resulted in the body corporate not having a reasonable time to respond to the application then I would have declined making the interim order sought on that basis. However, this office sent a facsimile copy of the application to the body corporate on Thursday 30 September 2004 and the body corporate was able to provide its response by Monday 4 October 2004.

The applicants have provided submissions to the effect that:

The applicant was the developer of the scheme and continues to have an interest in the scheme as holder of both the commercial lots and a number of residential lots. James and Gayle Yates are directors of the applicant and are members of the committee of the body corporate.

This present dispute arose out of a separate application by the applicant seeking an adjustment of the lot entitlements for the scheme. The lot entitlements for the two commercial lots are 86 and 94 respectively, whereas the entitlements for the residential lots range from 5 to 7 entitlements per unit. The applicant considers that these lot entitlements for the commercial lots are too high resulting in the applicant paying a disproportional amount of any levies. On the other hand, these lot entitlements mean that the applicant has a proportionally higher vote if a poll vote is demanded and votes are counted according to lot entitlements rather than each lot having one vote.

Subsequent to the applicant lodging its application seeking an adjustment of lot entitlements, a motion was proposed seeking the removal of James and Gayle Yates from the committee of the body corporate. The applicant demanded this vote be a poll vote and the motion was defeated. It appears that the motion was defeated because of the applicant’s proportionally higher lot entitlements and that if all owners only had one vote per lot then the motion would have been passed.

The committee has now resolved that all motions at the meeting of 5 October 2004 be held by secret ballot, and that all motions at all future general meetings will also be decided by secret ballot. This will prevent the applicants demanding a poll on ordinary resolutions meaning that owners have one vote per lot irrespective of their lot entitlements. The applicant has brought this application opposing the decision of the committee that all future motions be decided by secret ballot.

An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates (Act, 279). Further, any orders granted must be just and equitable in the circumstances (Act, 276).

The applicant is seeking orders of an injunctive nature to prevent the meeting proceeding pending a determination of whether the committee is entitled to require motions to be determined by secret ballot.

For it to be just and equitable to grant interim relief, before full and final consideration of all the issues raised, I would need to be satisfied that the application raises a serious question to be determined. I would also need to be satisfied that the balance of convenience between the parties justifies the grant of injunctive relief. That is, I would need to balance the inconvenience to the body corporate of preventing the meeting from proceeding when the applicant’s grounds may subsequently be shown to be baseless against the inconvenience to the applicant of allowing the meeting to proceed when the applicant may ultimately be successful in its claims that the body corporate committee has contravened the legislation by requiring all motions to be decided by secret ballot.

A motion is passed by ordinary resolution if the votes in favour of the motion exceed the votes against the motion and owners and normally owners can exercise only one vote for each lot that they own (Act, 108). However, provided the ordinary resolution is not being decided by secret ballot, an owner can request the motion be decided by a poll (Act, 109). In that case, one vote is still exercised for each lot but the motion is passed only if the total of contribution schedule lot entitlements for the lots in favour is greater than the total of contribution schedule lot entitlements for lots against (Act, 110).

Therefore, where contribution schedule lot entitlements are not equal there may be a different result on a vote depending on whether a poll is demanded. In this instance, the applicant is claiming that the committee has acted improperly in requiring a secret ballot that will prevent the applicant from demanding a poll.

The provision allowing the committee to require a secret ballot is as follows:

An initial question is whether the committee can recommend that all motions be decided by secret ballot or can only recommend a particular motion can be decided by secret ballot (Accommodation Module, 51(1)(b)). If this question is decided against the committee then a further question will arise regarding whether the committee properly required the particular motions listed for the general meeting of 5 October 2004 to be decided by secret ballot even though the legislation does not allow the committee to require all future motions to be decided by secret ballot.

A second question is whether the committee has acted unfairly and unjustly to defeat the applicant’s right to ask for a poll and thwart its rights as a lot owner. This may amount to a contravention of the requirement that the body corporate act reasonably in carrying out its functions under the Act (Act, 94(2)). This question will require further submissions before it can be determined. An adjudicator is required to make an order that is just and equitable to resolve a dispute (Act, 276). It seems necessary to look at the conduct of all parties and the broader circumstances in order to determine whether it is just and equitable to overturn a decision of the body corporate on the basis that it is unreasonable. This will need to be considered prior to making a final determination.

I am therefore satisfied that the applicant has established serious questions to be determined about the validity of the committee recommendation that all motions be determined by secret ballot.

The applicant has also made a submission to the effect that it is a conflict of interest for the three persons who submitted the motion to remove James and Gayle Yates from office to vote on whether this motion should be decided by secret ballot. It is difficult to see how the mere submission of a motion would mean that those people submitting the motion would have a conflict of interest regarding a determination of whether or not that motion should be decided by secret ballot. I do not consider that the applicant has established any serious question to be determined in this regard.

As an initial point, I am not satisfied that the balance of convenience favours preventing the meeting from proceeding. The meeting has already been arranged and the body corporate could be put to significant expense in having to reschedule the meeting. Particularly at this late stage, a rescheduling of the meeting could cause significant inconvenience to owners planning to attend the meeting. Some of the motions may be uncontroversial and the results of voting on other motions may mean that those motions are no longer in dispute. The holding of meetings is critical to the governance of the body corporate in accordance with the legislation and the legislation recognises the importance of self-management as an inherent aspect of community titles schemes. The applicant would have to show it would suffer serious adverse consequences from the holding of the meeting in order to have it stopped.

Therefore, I propose to allow the meeting to continue and merely grant the minimum relief necessary to prevent the body corporate relying on disputed motions where it would be difficult or impossible to reverse the outcome should the applicant ultimately be successful in its claim.

In this regard, I have identified three issues that are controversial. Firstly, the motions to terminate the existing agreement with the body corporate manager and enter into a new body corporate management agreement are disputed. Should these motions be passed, the balance of convenience dictates against allowing the body corporate to rely on these motions to alter its legal position in case the applicant is ultimately successful in overturning the resolutions. I will therefore allow the vote on these motions to proceed but make an interim order preventing the body corporate relying on those resolutions pending a final determination of the dispute.

The second issue involves two motions that seek to make changes to the composition of the committee. Even if one or both of these motions are passed, I am satisfied that the balance of convenience dictates that the composition of the committee remains the same pending a final determination regarding whether those motions are validly passed. I will therefore order that those motions are to be of no effect pending a final determination of the dispute.

The third controversial issue is the raising of a special levy to pay legal and other expenses incurred by the body corporate in defending the applicant’s application for an adjustment of lot entitlements. The complicating factor is that the legislation specifically requires the body corporate to fix a special contribution to be levied on owners if a liability arises for which there is inadequate provision in the budget (Accommodation Module, 93(2)). The applicant has not provided any submissions suggesting that there is no need to raise this levy and I have concerns that the body corporate could have insufficient funds to pay debts that have become due and payable if it does not raise the levy. On the other hand, the motion proposing to strike the levy does not indicate that it is necessary to meeting current liabilities as against estimated future liabilities (Accommodation Module, 93(2)). The committee have not provided me with any submissions that satisfy me that the levy is necessary to meet a current liability of the body corporate or that the body corporate would suffer serious prejudice if the levy were not raised as proposed. I am therefore prepared to grant an order to preserve the status quo by preventing the body corporate from raising the levy pending a final determination of whether the resolution is valid. However, I also propose to authorise the committee to pass a resolution fixing a special contribution to be levied to meet any current liabilities for which inadequate provision has been made in the budget regarding legal or other expenses involved with the body corporate’s defence of the applicant’s application to adjust lot entitlements for the scheme. I will require contributions to be paid in a single amount due at least 30 days after notice seeking the payment is given.

The remaining motions in dispute deal with matters such as confirmation of minutes, a call for tenders regarding management, a call for an internal system to ensure the onsite manager is properly performing their duties and a motion regarding the tape recording of meetings. A number of these motions are submitted by the applicant itself and the applicant has not satisfied me of any significant prejudice if these motions are not suspended pending a final determination of this dispute. I therefore refrain from making any interim order in respect of these motions.

For these reasons, I therefore propose to order that, should the body corporate pass resolutions pursuant to motions 2, 3, 4, 5, 6, 7 or 8 at the general meeting of 5 October 2004, the body corporate must not implement or otherwise act upon any of these resolutions pending a determination of the final order to this application.

I note that this order allows the meeting to proceed but prevents the body corporate relying on particular motions pending a final determination regarding whether those motions were validly passed. This means, for example, that none of those resolutions will be effective to alter the composition of the committee pending resolution of this dispute. However, it does not prevent the body corporate from holding further meetings at which the same or similar matters can be determined according to law.

To protect the body corporate should bills be due and payable regarding its defence of the lot entitlement application, I will grant an order authorising the committee to call a levy to meet any actual liability to pay unbudgeted debts that are due and properly payable for this matter.

In respect of whether the committee acted properly in requiring the motions to be determined by secret ballot, the application will be allowed to proceed to full submissions and a final determination in the normal course.

Number of Scheme:	24567
Name of Scheme:	Teneriffe Hill Apartments
Address of Scheme:	Cnr Florence & Chermside Streets TENERIFFE QLD 4005

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Teneriffe Hill Apartments [2004] QBCCMCmr 467 (5 October 2004)