Villa Estoril [2005] QBCCMCmr 109 (28 February 2005)

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

Donald Robert Richards & Keith Leong, the Owners of Lots 4 and 1 respectively,

I hereby order that the application for the following orders

1. That voting at the AGM held 18/3/04 be recounted, allowing for the votes of Don Richards and Keith Leong to be included.
2. That the resolution for the body corporate to pay Herdlaw Solicitors $6,623.70 be overturned and that the Owners of Lots 2, 3 and 5 be ordered to pay this account.
3. That an absolute ruling be given on the legality of using previously accumulated sinking fund monies on recurring items re motions 10, 11, 12 and 14.
4. That the body corporate approval for the Owners of Lot 2 to keep a dog on their lot be rescinded, due to approval conditions not being met.

is dismissed

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0229-2004

"Villa Estoril" CTS 16553

The Scheme

"Villa Estoril" was established as a building format plan of subdivision on 14 November 1995, and comprises five residential lots. The applicable regulation module is the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Standard Module).

The Application

This application is brought by the Owners of Lots 1 and 4, Keith Leong and Donald Robert Richards, respectively (the Applicants), against the body corporate seeking the following orders:

Submissions

Submissions in response to the application were sought from all owners (excluding the Applicants) and the committee. Submissions were received from the Owners of two lots and the committee, opposing the application, stating, amongst other things, that it is vexatious in nature. The Applicants (or at least Mr Richards) inspected the submissions made and submitted a reply. In my view, Mr Richard’s reply (said to be endorsed by Mr Leong, but not signed by him) goes beyond the matters raised in the original application and submissions. I have considered Mr Richard’s reply to submissions only in so far as it relates to matters raised in the original application and responded to in the submissions. In addition, the Owners of Lots 2, 3 and 5 inspected Mr Richard’s reply and submitted a reply to it. The Act does not make any provision for people who made submissions to respond to a reply by an Applicant. For this reason, and for the sake of having to determine the matter at some point in time, I have disregarded the further submissions made by the Owners of Lots 2, 3 and 5.

Determination

I will now proceed to consider each of the orders sought by the Applicants in turn.

That voting at the AGM held 18/03/04 be recounted, allowing for the votes of Don Richards and Keith Leong to be included.

In their application, the Applicants state that at the time of the AGM of 18 March 2004, they had paid their administrative and sinking fund levies, but not a special levy (of $3210.66 per lot), which was struck at a general meeting on 22 December 2003 pursuant to Motion 29 and which they were disputing. The Owner of Lot 4 had lodged an application to resolve a dispute with this office (0018-2004) disputing, amongst other things, the imposition of this special levy. Dispute resolution application 0018-2004 was determined by Adjudicator R A Meek on 13 May 2004. While the application was partially successful, the challenge to the imposition of the special levy was not successful. The Applicants lodged an appeal in respect of this order with the District Court at Brisbane on 24 June 2004. The appeal was finalised when a Notice of Agreement to Dismissal of Appeal was filed on 14 February 2005. Given the outcome of the appeal, the decision of Adjudicator R A Meek stands. As the challenge to the imposition of the special levy of $3210.66 per lot was unsuccessful in dispute resolution application 0018-2004 the Applicants were properly regarded as unfinancial at the AGM on 18 March 2004 and their votes were properly excluded from the count in accordance with section 49A(2) of the Standard Module.

I therefore decline to make the first order sought by the Applicants.

Given the structure of the legislation, if an owner disputes the imposition of a particular levy, it would seem prudent for the owner to pay the amount in dispute if they are able to do so in order to avoid the body corporate imposing penalties for late payment (if applicable) and incurring debt recovery costs which can subsequently be recovered from the owner in arrears. Also, by paying the disputed amount the owner avoids losing the right to vote at general meetings on all motions other than those for which a resolution without dissent is required and the right to choose committee members. The owner could then lodge an application seeking reimbursement of the disputed amount. If an owner is unable to pay the disputed amount but can establish grounds why a levy is invalid, in urgent circumstances the owner could seek interim orders that they be allowed to vote pending a determination of the validity of the levy.

That the resolution for the body corporate to pay Herdlaw Solicitors $6,623.70 be overturned and that the Owners of Lots 2, 3 and 5 be ordered to pay this account

At the AGM of 18 March 2004, the body corporate resolved by ordinary resolution in motion 23 to pay "Herdlaw Solicitors for an amount of $6,623.70 as per the enclosed invoice". The applicants object to the passing of this motion on the basis that Herdlaw Solicitors were engaged to act for the body corporate at committee level, have not provided a contract for all body corporate members (specifically the Applicants), and have provided no costs for same.

Motion 23 was worded as follows:

"Motion 23 PAYMENT OF HERDLAW (Ordinary Resolution)

YES 3 NO 2 ABSTAIN 0"

I do not propose to overturn Resolution 23 on the bases suggested by the Applicants for the following reasons:

Firstly, I don’t understand the Applicants challenge to the resolution on the basis that no costs were provided. Motion 23 clearly specifies an amount of $6,623.70.

Secondly, the allegation that the resolution should be declared invalid on the basis that no contract was provided for all body corporate members (specifically the Applicants) is a matter outside the jurisdiction of this office that would need to be determined between the body corporate and its lawyers.

Thirdly, the Applicants do not have the standing of the body corporate to make application against any individuals who have expended body corporate funds in excess of their authority. Similarly, it is not appropriate for me to make an order against persons who are not a party to this application in their individual capacity. However, the Applicants are owners who are required to contribute to the administrative and sinking funds. It may be appropriate to grant the Applicants a declaration regarding whether or not the body corporate has passed a valid resolution authorising spending on legal fees. Further, if there is no valid resolution authorising proposed spending but individual committee members appear likely to continue to incur spending in excess of their authority then the Applicants may be entitled to an order against the body corporate requiring it to take all reasonable steps to ensure that no further unauthorised spending of its funds occurs.

There is no prohibition on the committee engaging solicitors to act for the body corporate, provided the amount involved does not exceed the relevant limit for committee spending, which in this case is $625^[1]. In this case, the costs ultimately payable by the body corporate pursuant to the original engagement by the committee have amounted to in excess of ten times the relevant limit for committee spending in this scheme. In addition, the relevant limit for major spending for a community titles scheme ($1,250 in this case) has also been grossly exceeded. Further, there is no evidence that lot owners were given copies of at least two quotations for supplying the services, as required by section 104 of the Standard Module.

The spending limit provisions effectively require that the total spending required for a project be authorised before any spending commences on the first steps of that project^[2]. This raises difficulties for the committee if they are not able to get a fixed quote for a particular project. Lawyers can typically only give a rough estimate of legal costs. If the body corporate commences litigation but a settlement agreement is reached at the early stages then actual spending will be far below this estimate. On the other hand, counter-claims, interlocutory applications, or extensive evidence may double or triple that initial estimate.

Therefore, to properly authorise spending when an exact quote cannot reasonably be obtained, a resolution should be passed authorising commencement of the project and authorising spending up to a specified amount. That specified amount may be the amount of the estimate provided or some higher figure put forward by the committee. However, if a revised estimate is later obtained and that estimate is higher than the amount authorised by resolution then another resolution will need to be passed authorising spending to cover that higher estimate.

I find that the provisions of section 103 and 104 of the Standard Module were breached in this case. However, I decline to make an order against the body corporate requiring it to take all reasonable steps to ensure that no further unauthorised spending of its funds occurs for the following reasons:

That an absolute ruling be given on the legality of using previously accumulated sinking fund monies on recurring items re motions 10, 11, 12 and 14.

The Applicants state in this regard that the above motions authorise work to be paid from the sinking fund when they are recurring items of expenditure. They state further that "while the new committee have commissioned a new sinking fund forecast to include these expenses which are not sinking fund items (lopping trees, washing building) we feel that this is still illegal and is taking previously accumulated and allocated money from the sinking fund".

Section 101 of the Standard Module makes provision for the application of administrative and sinking funds as follows:

It appears that the Applicants only basis of objection to sinking fund monies being used to fund the items approved in motions 10, 11, 12 and 14 at the AGM on 18 March 2004 is that the items in question are "recurring items of expenditure". I don’t consider this to be sufficient reason for them not to be paid for from the sinking fund. The items in question include the cutting back of overhanging trees and the cleaning of the building’s exterior. Section 101(a) of the Standard Module does not limit application of sinking fund monies to items that are of a non-recurrent nature. It expressly states that the sinking fund may be applied towards spending of a capital nature and the periodic replacement of major items of a capital nature and other spending that should reasonably be met from capital (bolding my emphasis). Further, whether the expenditure in question is met from the sinking fund or the administrative fund is irrelevant in terms of the end result - in either case, each lot owner will be required to contribute to the expense in question in proportion to their contribution schedule lot entitlement.

In circumstances where the Applicants have supplied no evidence to substantiate their claim that the expenditure on the items in question was in fact "recurrent", or that it should not otherwise reasonably be met from the sinking fund, I decline to make the order sought.

That the body corporate approval for the Owners of Lot 2 to keep a dog on their lot be rescinded, due to approval conditions not being met.

The body corporate passed a resolution on 9 May 2002 giving approval for the prospective purchasers of Lot 2 to keep a pet, in the following terms:

Mr Richards states that he put up a motion at the AGM on 18 March 2004 to have the dog removed from unit 2 because it barks excessively and not only when it is left alone. He further states that his motion was given no consideration, there was no discussion allowed, and it was ruled out of order immediately and classed as vexatious. It appears as though the issue has been discussed in "General Business" at at least one body corporate meeting because the Applicants have submitted an extract of minutes of a meeting at which the dog’s barking was discussed. During that discussion, Mr Douglas informed Mr Richards that a dog trainer had been engaged to resolve the barking issue. Mr Saunders was reported as having asked if any other residents had issues with Hallie and they did not, although Mr Richards indicated that Mr Leong did have an issue with the dog’s barking.

All three submissions that were made in response to the application address the Applicants’ concerns in this regard in some detail. All three deny that the dog’s barking constitutes a nuisance, the committee having adopted what they perceive to be a fair and reasonable interpretation of the relevant by-law in line with the Brisbane City Council’s definition of Nuisance Barking. Despite alleging that the barking is "excessive" and "continuous" the Applicants, in their application, mention only two incidents of the dog’s barking, both of which were explained in the submissions. I agree with the majority lot owners and the view of Brisbane City Council that it is unreasonable to expect a dog never to bark. I find the approach of the body corporate and the owners of the dog in response to Mr Richard’s concerns to be fair and reasonable in the circumstances and I decline to make the order sought by the Applicants.

Claim that Application is Vexatious

The claim that this application is vexatious was made in two submissions received in response to the application. Those submissions make reference to four previous orders issued by this Office over the last two years. Mr Richards’ actions are quoted as having been "financially and functionally restrictive to the Body Corporate, but more importantly, have wasted the time of the Commissioner’s Office".

Section 270(1)(c) of the Act gives an Adjudicator power to make an order dismissing an application if it appears to the Adjudicator that the application is frivolous, vexatious, misconceived or without substance. If an Adjudicator makes an order under section 270(1)(c), the Adjudicator may order costs against the Applicant to compensate the person against whom the application was made for loss resulting from the application. In ordering such costs, the Adjudicator may have regard to previous applications made by the Applicant. The amount of costs ordered must not be more than $2,000.^[3]

I have given serious consideration to dismissing this application on the basis that it is frivolous, vexatious, misconceived or without substance. It could be argued that the first order sought by the Applicants had already been dealt with in Dispute Resolution Application 0018-2004 and, although the result of that application was unknown at the time this application was lodged, even if the order sought had been granted, the outcome of voting on motions at the AGM held on 18 March 2004 would not have been any different. The second order sought is against the owners of Lots 2, 3 and 5, who are not parties in their individual capacities to this application. Even if the third order sought had been granted, the net result to the body corporate would be no different – owners would still be liable for the expenditure in proportion to their contribution schedule lot entitlements regardless of whether the expenditure was budgeted for in the administrative or sinking fund budget. In relation to the fourth order sought, I consider it frivolous to suggest that approval for an owner to keep a dog be rescinded on the basis of two incidents of the dog’s barking. Further, more generally, I consider the amount of material submitted in support of the Application by the Applicants to have been largely irrelevant and I agree that the limited resources of this office have been wasted, at least to some degree.

I consider that the Applicants have an interest, as owners, in ensuring that body corporate legislation is complied with. But for the fact that a breach of the legislation was discovered in the course of me dismissing the second order sought, I would have dismissed this application for being frivolous, vexatious, misconceived or without substance.

In the circumstances, I therefore decline to dismiss the application on the basis of it being frivolous, vexatious, misconceived or without substance, but have dismissed it in its entirety for the reasons outlined above.

^[1] See section 103 of the Standard Module and the definition of "relevant limit for committee spending" in the Dictionary of the Standard Module.
^[2] See sections103(2), 104(9) of the Standard Module
^[3] Section 270(3) Body Corporate and Community Management Act 1997

Number of Scheme:	16553
Name of Scheme:	Villa Estoril
Address of Scheme:	102 Indooroopilly Road TARINGA QLD 4068

1.	That voting at the AGM held 18/3/04 be recounted, allowing for the votes of Don Richards and Keith Leong to be included.
2.	That the resolution for the body corporate to pay Herdlaw Solicitors $6,623.70 be overturned and that the Owners of Lots 2, 3 and 5 be ordered to pay this account.
3.	That an absolute ruling be given on the legality of using previously accumulated sinking fund monies on recurring items re motions 10, 11, 12 and 14.
4.	That the body corporate approval for the Owners of Lot 2 to keep a dog on their lot be rescinded, due to approval conditions not being met.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Villa Estoril [2005] QBCCMCmr 109 (28 February 2005)