The Goodwin [2005] QBCCMCmr 1 (5 January 2005)

Number of Scheme:	18288
Name of Scheme:	The Goodwin
Address of Scheme:	1 Goodwin Street KANGAROO POINT QLD 4169

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

I hereby order that the resolution purported to have been passed in respect of Motion 11 at the annual general meeting held on 26 November 2004, being for the granting of an additional option to extend the management agreement for a five (5) year term, was at all times void.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0779-2004

"The Goodwin" CTS 18288

The applicant has also made application for the following interim order of an adjudicator –

JURISDICTION:
This is a dispute between an owner (the applicant Perkins) and the body corporate (the respondent), concerning the validity of the resolution passed in respect of Motion 11 at the annual general meeting held on 26 November 2004, for the extension of the Management and Letting Agreement ("management agreement") with Blackford Enterprises Pty Ltd ("Blackford") by inclusion of an additional option for a 5 year term. This is a matter falling within the disputes resolution provisions of the legislation (see sections 227(1)(b), 228(1) and 276 of the Act).

While section 279(1) of the Act provides that an adjudicator may make an interim order if satisfied on reasonable grounds that an interim order is warranted because of the nature or urgency of the circumstances, there is nothing in the legislation to prevent an adjudicator, in appropriate circumstances, from making a final determination of the dispute by proceeding directly to a final order.

I consider this course is appropriate in this instance because: the facts of the matter are relatively simple and clear; the relevant parties (see later under heading "Application and Submissions" following) have been given the opportunity to speak to the disputed matter; sufficient information is available to determine the matter; and, in particular, a prompt resolution of the dispute is in the interests of all parties.

Accordingly, this order will be the only order made in respect of the application. The parties, of course, retain their appeal rights against the order made, and my having dispensed with the making of an interim order does not diminish those rights.

General powers of an Adjudicator in making an order:
Section 276(1) provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2) of the Act). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 284(1) of the Act).

APPLICATION AND SUBMISSIONS:
For the reasons given under "Jurisdiction", I have determined to resolve this dispute by this order.

On Tuesday 14 December 2004 I conducted a teleconference with the following parties: the applicant owner Peter Perkins; the respondent body corporate represented by Russell Barrett of Ernst Body Corporate Management, Body Corporate Manager for the body corporate; and a directly affected party, Blackford Enterprises Pty Ltd ("Blackford"), Caretaking Service Contractor, represented by Dan Hannaford (director).

Prior to the teleconference, I faxed a copy of the application to both Barrett and Hannaford so that they had an opportunity to read and understand the application and the grounds relied on by the applicant Perkins.

At the end of the teleconference I asked both the body corporate representative and the Caretaking Service Contractor to make a submission on matters discussed during the conference by 22 December 2004 with a copy to Perkins. A submission was subsequently received from each of the two parties.

The brief facts of the matter, as they appear to me from the application, the submissions and discussions at the teleconference, are as follows.

At the annual general meeting held on 26 November 2004, Motion 11 proposed that an additional option to extend the management agreement (between Blackford and the body corporate) for a five year term be granted by the body corporate, as set out in the Deed of Extension accompanying the motion. The motion was in the form of a "Motion with Alternatives" (see section 42B of the Standard Module) with the following alternatives –

Alternative A was proposed by Blackford and B was proposed by the applicant. In the vote for the primary motion, to have or not have an additional option, there were 29 votes in favour of the motion and 24 votes against. As the vote was successful, the meeting moved to a consideration of the alternatives. There were 19 votes cast for Alternative A and 10 votes for B.

The applicant states that the outcome was not what the majority of owners wanted and submits that the resolution for Alternative A should be declared invalid on the following grounds: the committee’s motion was submitted after the 30 September closing date being the end of the body corporate financial year; the motion was misleading & deceptive leading to the votes being incorrectly counted; and a majority of owners (47 of the 90 owners) have told him the result did not reflect their wishes. These claims will be examined under the heading "Determination".

The deed has not been executed.

DETERMINATION:
"The Goodwin" was registered as a building units plan (now termed a building format plan) on 27 August 1994 and comprises 90 lots. It is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997.

I see no merit in the grounds relied on by the applicant and the resolution has been invalidated on another ground which became obvious in my examination of the material. However, as the application is successful in its aim, I do not intend to provide any lengthy explanation as to why the applicant’s grounds failed.

Firstly, the committee is not limited in the same manner as an owner is in having to submit motions before the financial year-end date. Perkins has not provided any legislation reference in support of his argument.

Secondly, in regard to the motion being "misleading & deceptive and leading to the votes being incorrectly counted", the applicant has submitted a copy of a report signed by a Libby Wort to support his statement. Wort states she was an independent scrutineer at the meeting. She believes that the "No" vote to the primary motion should be added to the vote for Alternative B (ie 24 + 10 = 34). She says "After voting, if the YES option is taken, they are then requested to further vote for Option A or Option B. Option B is a secondary vote with the first motion of NO, and as such the Option B vote should be added to the NO vote."

I have carefully read her report, and the comments by the applicant, and do not understand their confusion in the matter. The manner of conducting a Motion of Alternatives is set out in section 42B of the regulations and merely follows commonsense: that is, the general question as to whether owners want or do not want a ting is put initially; if a majority vote "no" then that is the end of the motion; if a majority vote "yes", then owners are asked to vote for one of a number of alternatives and the alternative with the highest number of votes is the body corporate selection. This manner of voting is used most often when there is a proposal for the body corporate to, say, paint the building, and the tenders by various painters is listed as the alternatives.

Here the primary question was whether owners wanted to give the manager a further 5 year option or not, and the alternatives were for the option to be given on one of two conditions, being by actioning clause 4.4 (for remuneration to be negotiated) or deleting clause 4.3(b) (an 8% annual increase in remuneration). 29 voted for the primary motion and 29 voted for the alternatives; 19 for A and 10 for B – this is how the vote for such a motion occurs.

Without any clearer explanation of their argument, I do not intend to examine this ground further except to say that during the teleconference I asked Perkins whether he knew of the manner of voting for a Motion with Alternatives in section 42B and he replied that he did not. There was no deception in the way the motion was formed though I consider the alternatives would have been clearer if a short explanation of the clauses were included in the actual wording of the alternatives rather than only in the explanatory notes – many people either do not have the time or inclination to read lumps of explanatory material and a plain language description in the alternatives of the major difference (negotiation over the 8% annual escalation v. removal of the fixed percentage escalation in favour of an annual increase equivalent to the CPI change) would overcome this.

Lastly, there is no proof that 47 owners have or have not told the applicant Perkins the outcome of Motion 11 was not what they wanted; it was a secret vote and of course people may say one thing openly but vote differently when secrecy is available.

That concludes the grounds raised by the applicant.

However, my order is that the motion is invalid for the following reason.

Section 87(2)(c)(ii) of the Standard Module states (adjudicator’s emphasis) –

The form referred to is Form 20, last amended on 26 April 2004. No Form 20 was forwarded to voters. In its submission, the Body Corporate Manager stated that neither Blackford (for alternative A) nor Perkins (for B) forwarded a completed Form 20 for it to be included in the material sent to voters with the notice of meeting as required by section 87(2)(c)(ii).

The section makes clear that a body corporate may act to include an additional option only if a Form 20 is included with the documentation is forwarded to members of the body corporate for the meeting at which the authoritative motion is included.

Section 49 of the Acts Interpretation Act provides that strict compliance with a form prescribed or approved under an Act is not necessary and substantial compliance is sufficient. Form 20 makes provision for certain details that could be identified by voters from the explanatory notes such as the name of the service contractor and letting agent, the expiry date of the current management agreement, length of the proposed option and perhaps the current remuneration from Perkin’s comparative charts. However, there are no details in the explanatory notes or motion that would provide voters with the answers to the following required questions: (for service contract) - Does the service contractor carry out general caretaking and cleaning duties? Does the service contractor supervise employee or contractors? Who pays for the equipment required to carry out general caretaking and cleaning duties? Details of any areas of common property the use of which is granted to the service contractor by way of an occupation authority? (for letting agent authorisation) Any restrictions on the type of letting (eg permanent, short term or holiday) imposed in the letting authorisation? and (again) Details of any areas of common property the use of which is granted to the service contractor by way of an occupation authority?

Accordingly there is no substantial compliance with the form from other information provided voters with the meeting material. Some, including Blackford, may argue that the undisclosed details are of no great importance and if known would not have changed the vote. That argument is irrelevant as parliament has legislated that such details must be provided to owners/voters with the motion so that they may properly consider, in an informed manner, whether to provide a means for extending the term of the current management agreement. The Explanatory Notes to the amending legislation that introduced section 87 from 1 December 2003, Amendment of Body Corporate and Community Management (Standard Module) regulation 1997, states in relation to that provision, "To ensure that the body corporate is appropriately informed in making such a decision, subsection(2)(c) specifies the information that must be provided with the material for the generals meeting at which the motion is to be considered....and later, ...In the particular case where an extension to the term of an agreement or authorisation is sought, an explanatory note must be provided in the approved form."

For the above reason the purported resolution passed in respect of Motion 11 is invalid.

a)	a claimed or anticipated contravention of the Act or the community management statement; or
b)	the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or
c)	a claimed or anticipated contractual matter about –
(i)	the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or
(ii)	the authorisation of a person as a letting agent for a community titles scheme.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

The Goodwin [2005] QBCCMCmr 1 (5 January 2005)