Villa Holloway [2004] QBCCMCmr 517 (29 October 2004)

Number of Scheme:	1257
Name of Scheme:	Villa Holloway
Address of Scheme:	21 - 31 Poinciana Street Holloways Beach, Queensland

TAKE NOTICE that pursuant to an application made under the abovementioned Act by
Red Dog International Pty Ltd, the Owner of Lots 15 and 18:

I hereby declare that the purported resolution of the Body Corporate regarding motion 2 (relating to a proposed caretaking agreement and letting authorisation) as considered and carried at an extraordinary general meeting of the Body Corporate held on 28 July 2004, was at all times void.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0536-2004

"Villa Holloway" CTS 1257

The Owner of Lots 15 and 18, Red Dog International Pty Ltd (the Applicant) has 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 Applicant is seeking the following outcome:

Department of Natural Resources, Mines and Energy records show that the "Villa Holloway" community titles scheme was originally created under a building units plan of subdivision (now known as a building format plan) registered on 23 July 1984. The scheme land currently consists of 35 lots and common property.

A new community management statement was recorded for "Villa Holloway" on 24 July 1998 and shows that the Act’s Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Accommodation Module) applies to the scheme.

The Commissioner received this application on 19 August 2004. On 25 August 2004, a staff member of this Office contacted the Applicant to address certain procedural defects in the application as originally submitted. As a result of this contact, on 31 August 2004 the Applicant requested (via facsimile) the Commissioner’s permission to amend certain parts of the application. Pursuant to section 245 of the Act, the Commissioner allowed those amendments which have now been incorporated into the application.

On 2 September 2004, the Commissioner issued the Body Corporate and the purported Caretaking Service Contractors for the scheme (the Caretaker) with formal notice of the application (sections 243(1) and (2) of the Act). The Commissioner also invited the Body Corporate Committee, the Caretakers, and all owners of a lot included in the scheme to make written submissions about the application (sections 243(2) and (4) of the Act).

The following persons made written submissions pursuant to the Commissioner’s invitation:

Each of the submissions opposes the application.

In accordance with section 246 of the Act, the Commissioner provided the Applicant with a copy of the submissions made about the application. The Applicant has provided a written reply to those submissions.

On 21 October 2004, the Commissioner made a dispute resolution recommendation under section 248 of the Act that the application should be resolved by departmental adjudication. The Commissioner has referred the application to me for consideration.

Ms Janes has previously informed this Office that the Caretaker has entered into a contract of sale of the management rights, which is due to settle on 1 November 2004. Clearly, the subject matter of this application has serious consequences for that sale. The Commissioner and I both agree that it is in the interests of all parties that the application be determined prior to 1 November 2004. As a result, this application is being determined ahead of many other longer-standing dispute resolution applications.

After reviewing the material presented by the parties, I became aware of a particular issue which I consider had an important bearing on the application and which had not been substantially addressed in the submissions. Specifically, it seemed to me that material showed a significant contravention of section 51B(1)(e) of the Accommodation Module in that secret ballot papers for the extraordinary general meeting in dispute were returned by owners to the Body Corporate Manager, rather than the returning officer.

While the issue was touched upon by the Applicant, I think it is fair to say that it was not clearly and specifically articulated in the supporting grounds to the application. As a result and in the interests of fairness, I considered that I should allow the Body Corporate, the Caretaker and the Body Corporate Manager an opportunity to be heard on the matter prior to my determination of the issue. Given the urgency of the application, I endeavoured to arrange a teleconference with the parties to discuss the issue. Unfortunately, this Office was unable to contact the Applicant by telephone to arrange a teleconference.

As a result, I invited the Body Corporate Manager and the lawyers for the Body Corporate and Caretaker to provide me with a further written submission specifically addressing my concerns about the apparent contravention of section 51B(1)(e) of the Accommodation Module. I promptly received further submissions from all three of those parties.

Unfortunately, due to the time constraints I am unable to allow the Applicant an opportunity to inspect or reply to the further submissions. For obvious reasons of procedural fairness, I am concerned that the Applicant has not been afforded this right. However, as will be outlined below, the further material has not adversely impacted on the relief sought by the Applicant. As a result, and in all of the circumstances, I have decided to determine the application without further reference to the Applicant.

Section 227 of the Act limits the disputes that may be resolved under the Act’s dispute resolution provisions to those between particular combinations of people involved in community titles schemes. This application describes a dispute between the owner of lots included in a community titles scheme and the body corporate for the scheme. As a result, the matter is a "dispute" within the meaning of section 227(1)(b) of the Act.

Section 276(1) of the Act provides that adjudicators may make just and equitable orders to resolve disputes in community titles schemes about a range of matters, including claimed or anticipated contraventions of the Act or a scheme’s community management statement.

The Applicant in this matter claims that a resolution purportedly passed at an extraordinary general meeting of the Body Corporate should be declared void on the basis of alleged contraventions of the legislation, and other irregularities. I note that the examples of orders an adjudicator may issue set out in schedule 5 of the Act include an order declaring that a resolution purportedly passed at a general meeting of a body corporate was at all times void (example 8).

For all of these reasons, the application is one that may be determined by an adjudicator.

At an extraordinary general meeting of the Body Corporate held on 28 July 2004 (the EGM), the "Villa Holloway" Body Corporate purportedly carried a motion (motion 2) which proposed that the Body Corporate enter into a Caretaking Agreement and a Letting Authority. The Applicant is seeking a declaration that the resolution of the Body Corporate regarding motion 2 is void.

I have before me a copy of the minutes of the EGM. The minutes show that motion 2 was the only substantive motion considered at the meeting. The other motion considered was simply a motion to confirm the minutes of the previous general meeting of the Body Corporate.

Motion 2 is recorded in the minutes in the following terms:

The minutes show that the motion was carried with 13 votes in favour of the motion, no votes against the motion, 1 voter abstaining from voting on the motion and 10 votes declared invalid.

The Applicant has presented a range of objections and concerns about the above resolution, the calling of the EGM, and various events leading up to the EGM. In broad terms, the submissions opposing the application argue that the application is without merit and should be dismissed.

General comments about disputes concerning meeting procedure

Before turning to specific issues in dispute, I would like to make some brief, general comments about disputes concerning procedural irregularities in the calling and holding of meetings.

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. In considering any application about procedures in the calling and holding of body corporate meetings, 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 (the Standard Module) and made the following comments:

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

In summary, it seems to me that meetings of body corporate committees, and general meetings of body corporate members, should 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.

In this instance, the Applicant has raised a number of concerns about the conduct of the EGM and other matters. In my view, the Applicant’s concerns about the secret ballot process adopted by the Body Corporate for the EGM are particularly important and warrant further consideration.

Secret ballots

The Accommodation Module was the subject of significant amendment as a result of the Body Corporate and Community Management Legislation Amendment Regulation (No.1) 2003^[2]. A number of those amendments, which commenced on 1 December 2003, directly impact on this dispute resolution application.

A body corporate is able to engage a person as a body corporate manager or service contractor for the scheme, or authorise a person as a letting agent for the scheme (section 85(1) of the Accommodation Module). A person who is a service contractor and letting agent is known as a "caretaking service contractor"^[3].

Section 85(2) of the Accommodation Module stipulates how a body corporate may engage a person as a body corporate manager or service contractor, or authorise a person as a letting agent. Following amendments to the Accommodation Module, a motion approving the engagement and authorisation of a person as a caretaking service contractor must be decided by the body corporate by secret ballot (section 85(2)(b)(ii)). Importantly, section 52(1) of the Accommodation Module requires that a body corporate "must appoint a returning officer for each general meeting at which a motion is to be decided by secret ballot".

Sections 51A and 51B of the Accommodation Module set out how a secret ballot must be conducted and how a secret vote is cast. Of particular relevance in this case is section 51B(1)(e) of the Accommodation Module, which provides that to cast a written vote on a motion to be decided by secret ballot, a person must:

I have before me parts of the notice of meeting for the EGM that is the subject of this dispute. In a section of the notice titled "Committee Notes", owners are advised of the following:

Elsewhere in the notice of meeting (below the agenda) owners are advised that the Secretary is Ms Judy Gannon (one of the caretaking service contractors that is a party to the proposed agreements), and provides the postal address and facsimile number of the Body Corporate Manager. It seems clear and undisputed that the intention was for owners to return their secret voting papers to the office of the Body Corporate Manager, following which, those voting papers would be passed on to the returning officer.

In my opinion, there are two key questions to be answered regarding this issue. Firstly, it is necessary to consider whether there has been a contravention of section 51B(1)(e) of the Accommodation Module in that secret voting papers were not provided directly to the returning officer. Secondly, if there has been a contravention of that section, it is necessary to consider whether the contravention is one that warrants an order disrupting the outcome of the meeting.

Has there been a breach of section 51B(1)(e) of the Accommodation Module?

In their submissions, Ms Janes and Ms Flaws acknowledge that, apparently at least, section 51B(1)(e) has not been strictly complied with in this instance. However, these submissions also argue that notwithstanding any technical breach, in the circumstances it would not be just or equitable to invalidate the meeting or outcomes of the meeting on this basis. I will consider these arguments in due course.

Unlike Ms Janes and Ms Flaws, Mr Hales (on behalf of the Body Corporate) argues that there has been no contravention of section 51B(1)(e) in this instance. In his submission, Mr Hales’ states the following:

To my mind, a plain reading of section 51B(1)(e) suggests that secret ballot papers must be given or forwarded by a voter directly to the returning officer for the meeting, and not through any intermediary. The opening terms of section 51B(1) specifically refer to the person casting a written vote. Subsection (e) goes on to require that person to give their secret vote to the returning officer, or to forward their secret vote to the returning officer. It is clear that the section does not specifically contemplate voters giving their secret votes to another person who would then give or forward the votes to the returning officer. In my opinion, the terms of the provision do not allow for voters to provide their secret voting papers to the returning officer via third parties.

I consider that this view is supported by the explanatory notes to the relevant amended provisions^[4]. I note that section 14B(1)(c) of the Acts Interpretation Act 1954 allows for consideration to be given to extrinsic material capable of assisting in interpretation of statutory provisions "to confirm the interpretation conveyed by the ordinary meaning of the provision".

It is clear that the legislature recognised that certain decisions (including decisions to engage caretaking service contractors) can be controversial and devisive issues within community titles schemes (explanatory notes pages 4 and 61). The explanatory notes include an acknowledgment that lot owners may be the subject of intense lobbying from persons who have a direct interest in these types of issues, and states that compulsory secret ballot voting "is the most appropriate mechanism for voting on such significant issues" (explanatory notes page 49).

The legislature has also purposefully set out a detailed process for conducting and voting on secret ballots. At page 10 of the explanatory notes, the following comments are made:

The explanatory notes also discuss section 52 of the Accommodation Module, which provides for the appointment of returning officers. I note the following comments on page 50 of the notes:

In light of the above, I consider that the legislature’s purpose in imposing a requirement for a secret ballot about particular matters and a requirement that the secret ballot be conducted by a returning officer, would be largely defeated if owners were allowed or required to present their secret votes to a person other than the returning officer for the meeting. In this instance, the Applicant has raised concerns about at least the possibility of improper interference in the secret ballot voting process. This is precisely the problem (or ‘mischief’) that the legislature attempted to avoid by providing for secret ballot voting on particular matters and requiring that a returning officer be appointed for conducting the ballot.

In his original submission Mr Hales has made reference to section 53A(4) of the Standard Module (which is equivalent to section 51A(4) of the Accommodation Module). Section 51A of the Accommodation Module provides for how a secret ballot must be conducted. Section 51A(4) provides that "all completed written and electronic voting papers received before the votes are counted at the general meeting must be given to the returning officer and held in the returning officer’s custody until the votes have been counted".

Mr Hales argues (with some merit) that this provision shows that the legislation simply requires that voting papers be given to the returning officer and held by the returning officer until the votes are counted, and does not require votes to be sent directly to the returning officer. I agree that the terms of section 51A(4) are somewhat open to this interpretation. However, in light of the more specific terms of section 51B(1),including subsection (e), and given the legislature’s clear purposes for adopting provisions relating to secret ballots and returning officers, I am convinced that the correct position is that voters must give or forward their secret ballot votes directly to the returning officer.

I also consider that if a returning officer is required, it is necessary for bodies corporate to engage and appoint the returning officer prior to distribution of the notice of the relevant meeting so that owners may give or forward their secret votes directly to the returning officer.

In this case, I am satisfied that there has been a contravention of section 51B(1)(e) of the Accommodation Module.

What is the effect of the breach of section 51B(1)(e)?

Ms Janes, Mr Hales and Ms Flaws have all argued that the results of the EGM should stand, notwithstanding any technical breaches of the legislation. The submissions include arguments that:

I accept that there is some merit in these arguments. However, in my opinion, the breach of section 51B(1)(e) described above is a serious one, which cannot be overlooked as a minor irregularity that should not be allowed to disrupt the outcomes of the meeting.

It seems to me that the legislature has included detailed provisions regulating the conduct of secret ballots to protect and enhance the integrity of the secret ballot process as well as enhancing the confidence of owners that secret ballots are conducted impartially, fairly, and objectively. I accept that it is likely that there was no interference in the process in this case. However, I cannot be entirely sure that owners would have voted in the same way if secret votes were provided directly to a returning officer rather than the Secretary (who is directly affected by the motion in dispute), care of the Body Corporate Manager. It is also clear that the process adopted by the Body Corporate in this instance has resulted in at least one owner having genuine concern about the process and result of the secret ballot.

In the circumstances, I cannot overlook the contravention of section 51B(1)(e). In my opinion, to do so would be to defeat the purpose of the legislature in enacting this provision. As a result, I intend to order that the Body Corporate’s resolution regarding motion 2 (as considered and carried at the EGM) is void. In the circumstances, it is not necessary for me explore the Applicant’s other concerns about the EGM.

In making this decision, I wish to emphasise that I have no reason to doubt either the integrity or honesty of Ms Flaws or Mrs Gannon. Nothing in this statement of reasons should be taken as a suggestion that I believe that either of these persons have deliberately acted improperly or unlawfully. Rather, it seems more likely that the failure to comply with section 51B(1)(e) was an innocent misunderstanding of the relatively new provisions of the legislation relating to secret ballots.

I also wish to acknowledge that this decision may cause some hardship for Mr and Mrs Gannon. While this is certainly regrettable, I consider that I am compelled to apply the legislation as intended by the legislature to the matters raised in this dispute resolution application.

^[2] SL No.263
^[3] Schedule 6 of the Act, "caretaking service contractor"
^[4] Explanatory Notes for SL 2003 No.263 Body Corporate and Community Management Legislation Amendment Regulation (No.1) 2003

•	Ms Susan Loukas (the Owner of Lots 1 and 3);
•	Mrs Alison Flaws of The Community Managers (the Body Corporate Manager for the scheme);
•	Mr Nigel Hales of Miller Harris Lawyers (lawyers for the Body Corporate); and
•	Ms Ros Janes (lawyer for the Caretaker and Kiwi Magic Pty Ltd).

•	There is no evidence of interference or tampering with the votes;
•	If the matter was reconsidered by the Body Corporate it would likely have the same result, therefore a further meeting would be unnecessary and onerous; and
•	In this instance, owners were not disadvantaged by any non-compliance with section 51B(1)(e) of the Accommodation Module.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Villa Holloway [2004] QBCCMCmr 517 (29 October 2004)