Surfers Hawaiian [2004] QBCCMCmr 5 (7 January 2004)

Number of Scheme:	5682
Name of Scheme:	Surfers Hawaiian
Address of Scheme:	2890 Gold Coast Highway SURFERS PARADISE QLD 4217

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Ken Williams, Pierre Motteroz, and Phyllis Nemeth, the Owners of lots 9, 57 and 64 respectively

I hereby order that if two or more motions proposing alternative ways of dealing with the same issue are submitted for consideration at a general meeting then the body corporate committee must ensure the voting paper lists the motions as a single motion with alternatives pursuant to section 42B of the Body Corporate and Community Management (Standard Module) Regulation 1997, for as long as that provision applies to the body corporate.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0373-2003

"Surfers Hawaiian" CTS 5682

Surfers Hawaiian Community Titles Scheme (Surfers Hawaiian) is a 64 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module). The scheme is designed for residential purposes.

This application is by Kenneth Williams, Pierre Motteroz, and Phyllis Nemeth, being owners of lots 9, 57 and 64 respectively (applicants) seeking orders against the body corporate (respondent). The applicants are seeking that all resolutions passed at the extraordinary general meeting of 8 April 2003 be invalidated. The main claim is that a resolution setting the contribution levy amount was invalidly passed. The applicants are seeking that owners should be credited any overpaid amount and that those owners in arrears should not be penalised.

This dispute arose out of the setting of contribution levies at an extraordinary general meeting held on 8 April 2003.

When the voting papers for this meeting were first distributed the voting papers contained three motions submitted by the committee dealing with the setting of the administration fund levies. These three motions were alternative motions that allowed owners to vote on differing levy amounts. However, the motions were put on the voting paper as three separate motions. The first of these motions proposed the smallest levy with the third of these motions proposing the highest levy.

A few days after distributing the voting papers, a replacement voting paper was issued. This replacement voting paper contained the same motions but reversed the order so that the first of the levy motions proposed the highest levy and the third motion proposed the lowest levy.

At that time, two owners claimed that the redistribution of voting papers was improper. These owners brought an application before this office seeking to invalidate these voting papers and reschedule the extraordinary general meeting (Application 217-2003). The adjudicator considered that there was some merit in the application but that the meeting should be allowed to proceed. Reasons given included the cost and inconvenience of rescheduling the meeting at a late stage and potential financial consequences to the body corporate if the meeting did not proceed and the body corporate ran out of funds.

After determining this application, the adjudicator issued an order requiring votes from the first voting paper to be accepted if the owner in question did not provide a replacement vote. In his reasons for decision the adjudicator stated:

At the extraordinary general meeting the chairperson did not comply with this warning. The first resolution voted on, adopting the highest levy, was passed. The chairperson then ruled the alternative levy motions out of order.

The applicant claims that, by doing this, the chairperson have deliberately refused to comply with the adjudicator’s order and has subverted the will of the majority. This is supported by a review of the voting papers that indicate that more people voted in favour of the resolution adopting the lowest levy than in favour of the resolution adopting the highest levy.

The chairperson, Richard Springer, claims that he acted on advice from The Body Corporate Headquarters (the body corporate manager) who had obtained a legal opinion from Ros Janes, Lawyer. The chairperson also submits that, once the highest levy was passed, a number of owners would have changed their votes from the floor to vote against the lowest levy. He claims that it was according to the will of the majority that the highest levy was passed.

Where a meeting is to vote on alternative motions dealing with the same issue then these motions should be set out as a single motion with a number of alternatives rather than as separate motions. This is necessary to promote a democratic outcome.

This can be illustrated by an example. Assume that a body corporate of thirty owners needs to set their next levy in order to avoid the body corporate becoming insolvent. All thirty owners are in favour of a levy being set but twelve owners want the levy set at $3,000, eight owners want the levy set at $2,000, and ten owners want the levy set at $1,000.

If owners were given an opportunity to vote on a single motion with three alternatives then the motion as a whole would receive 30 votes in favour, the $3,000 alternative would receive twelve votes, the $2,000 alternative would receive eight votes and the $1,000 alternative would receive ten votes. Because a clear majority voted to pass the motion as a whole the motion would be passed. The alternative selected would be $3,000 as receiving the most votes and it would not matter that less than a clear majority have selected this alternative because all owners voted to pass the motion as a whole.

On the other hand, if three separate motions were provided and all owners only voted for the motion that stated their preferred amount then none of the motions would be passed and the body corporate would become insolvent. Owners who anticipated this problem would therefore need to vote in favour of all motions and would lose the opportunity to demonstrate which alternative they actually prefer.

Listing alternatives as separate motions encourages some owners to vote in favour of all motions to avoid the risk that the vote in favour will be split and all motions will be lost. These owners therefore lose the opportunity to state their preferred alternative and the will of the majority can be subverted. Using the above example, twenty owners may be unable to attend the meeting and may decide to vote for all motions to avoid the risk that votes in favour of setting the levy would be split between the different alternatives and all motions would fail. The remaining ten owners who attended the meeting would then be able to influence the outcome.

On the other hand, providing alternatives as separate motions can allow the chairperson to influence the outcome. The chairperson can arrange for a preferred alternative to be voted on first and, provided that it is passed by a majority, refuse to allow a vote on any of the other alternatives.

The present application concerns the chairperson deliberately influencing the outcome in this manner. The reason given by the chairperson for issuing the second voting paper was to change the order of the motions so that if the first and highest was passed then the others could be ruled out of order. Because of this, and the possibility that some owners may seek to avoid all motions failing by voting in favour of more than just their preferred alternative, an adjudicator allowed the meeting to go ahead but stated "votes on all alternative motions should always be counted as it is possible that a later alternative motion can also be passed, and, though unlikely, with a higher number of positive votes".

Despite this, the chairperson decided not to allow a count on the alternative motions once the first and highest was passed. The reason he gives for this is that he was afraid an alternative would be passed with an equal number of votes in favour and this would result in no motion being considered passed. The chairperson states "This was a difficult decision in light of the Adjudicators comments but I considered that I had a ‘Duty of Care’ to ensure funding for the Body Corporate".

I have no hesitation in concluding that the chairperson failed to conduct the meeting properly. The voting papers indicate that the resolution in favour of the lowest levy would have been passed with a greater majority and this resolution should in fact have been implemented. The chairperson claims that he conducted the meeting in accordance with the will of the majority because several owners had voted yes to all motions and would have changed their vote from the floor to ensure the resolution in favour of the lowest levy did not receive a greater majority. However, as the chairperson did not allow the vote on the alternative motions to proceed there is at least a perception that the chairperson failed to act democratically.

In effect, the chairperson favoured the motion adopting the highest levy by listing the alternatives as separate motions, arranging for the highest levy motion to be first, and by ruling the alternative motions out of order without allowing a count of votes on those alternatives.

The adjudicator had brought to the chairperson’s attention that it was possible for the first resolution to be passed but a subsequent resolution could also be passed with a greater majority. The chairperson should have allowed this vote to occur. If a greater number of votes were for the lowest levy this alternative should have been adopted. If a number of owners changed their vote from the floor and the highest levy received more affirmative votes then the highest levy should have been adopted. If both alternatives were passed with an equal majority then a call for a poll may have given a different result or the applicable alternative could have been chosen by the toss of a coin. This would have reassured owners that the chairperson was not acting to favour his own views over that of the majority of owners.

The applicants claim that the chairperson has contravened the adjudicators order by refusing to allow votes on each alternative motion to be counted.

Technically speaking, the chairperson may argue that the requirement to allow a count of votes on each alternative was only part of the adjudicator’s reasons for decisions rather than the adjudicator’s order. However, it may be viewed as implicit in the order that the chairperson was required to allow a count of votes on each alternative.

Given that the chairperson had the benefit of comments from the adjudicator relating to the specific motions in question it seems imprudent of the chairperson to rely instead on advice from the body corporate manager and a solicitor. In particular, it is surprising that a solicitor would provide the advice given in light of the adjudicator’s specific comments above in the reasons for decision. The solicitor’s advice is of a brief and general nature. It is advice given to the body corporate manager rather than the chairperson himself. Further, the advice refers to a telephone conversation with the body corporate manger without giving the content of that conversation and it is unclear what background information the solicitor was actually given.

Having said this, enforcement of an adjudicator’s order is a matter for the Magistrates Court rather than an adjudicator. I have no power to impose any penalties and if the applicants consider the previous adjudicator’s order has been breached then an appropriate application would need to be brought before the Magistrates Court (Act, 288).

While I do not have jurisdiction to impose penalties, I am able to invalidate the resolution setting the levy if I am satisfied that this is just and equitable in the circumstances.

After consideration of the matter, I am reluctant to invalidate the resolution. Firstly, if the chairperson had allowed the alternative motions to be voted upon it is possible that a number of owners who preferred the highest levy would have changed their votes from the floor. This would have resulted in the highest levy being adopted regardless. Secondly, the body corporate has since passed another resolution adopting levies for subsequent periods. There would be additional expense and inconvenience to all owners if the earlier levy was invalidated, money was refunded to owners, and an additional levy resolution was required to be passed.

I will therefore allow the resolution to stand. On the other hand, if any owners have suffered a penalty or lost a discount due to arrears in an amount less than the difference between the highest levy and the lowest levy then those owners should apply to the committee for waiver of this penalty or allowance of the discount (Standard Module, 99(6)). The above circumstances would appear to justify the committee looking favourably on any application of this type.

The applicants have alleged a number of other irregularities in relation to the meeting. Again, the applicants have not provided any satisfactory evidence of continuing inconvenience to owners that would justify overturning these resolutions. However, it may be of assistance to the parties to make some brief comments.

The applicants claim that a special levy for $20,000 in legal expenses was passed but no quotes were given identifying how the fee was estimated and which solicitor would be chosen. This amount exceeds the relevant amount for major spending and two quotes should have been provided (Standard Module, 104).

The applicants also have complaints about the manner of counting votes. In this respect, the body corporate should ensure it complies with the procedures in the Standard Module. In particular, procedures related to the appointment of a returning officer may be relevant (Standard Module, 54).

Finally, there appears to have been a dispute about access to body corporate records. The evidence suggests that this dispute has been resolved to the satisfaction of all parties.

For the reasons above, I am not prepared to grant the orders sought. However, to avoid a similar problem occurring again, the body corporate should ensure that any alternative motions are included on the voting paper as a single alternative motion rather than as separate motions. Since 1 December 2003, the Standard Module has been amended to require the body corporate to deal with alternative motions in this manner.

I have therefore made an order requiring the secretary to present any future alternative motions in the manner now required by the Standard Module. If the secretary fails to comply with this order then the appropriate action for enforcement of the order is an application before the Magistrates Court seeking imposition of a monetary penalty (Act, 288).

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Surfers Hawaiian [2004] QBCCMCmr 5 (7 January 2004)