Focus [2005] QBCCMCmr 123 (2 March 2005)

Number of Scheme:	12996
Name of Scheme:	Focus
Address of Scheme:	114 The Esplanade, SURFERS PARADISE Q 4217

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

I hereby order that the application for an interim order directing the body corporate to
(i) remove the alleged unsubstantiated civil debt from the levy notice & the disclosure statement; and

(ii) to issue a new Levy Notice and Disclosure Statement without these "alleged civil debts".

is refused at this point in time so as to allow affected parties to make detailed submissions responding to the application before the matter is finally determined.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0125-2005

"Focus" CTS 12996

"Focus" is a subdivision of 125 lots registered as a building unit plan ( now known as a building format plan). The regulation module applying to the scheme is the Accommodation Module.

Application

By application received by this Office on 21 February, the applicants Mr and Mrs Linnett, the owners of lot 26, have sought the following orders of an adjudicator:

1. A direction to remove an alleged unsubstantiated civil debt from the levy notice and the disclosure statement.

2. A direction to the body corporate to issue a new Levy Notice and Disclosure Statement without these "alleged civil debts".

Jurisdiction

Section 227(1)(b) of the Body Corporate and Community Management Act 1997 provides that a dispute between an owner or occupier of a lot and the body corporate, is a dispute which may be resolved under the dispute resolution provisions of the Act.

Section 276(1) of the Act 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-

(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 the Act or the community management statement; or

(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.

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

Section 279(1) & (2) provide that -
(1) The adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates.
Examples
1. The adjudicator may stop the body corporate from carrying out work on common property until a dispute about the irregularity of proceedings has been investigated and resolved.
2. The adjudicator may stop a general meeting deciding or acting on a particular issue until it has been investigated and resolved.
(2) An interim order
(a) has effect for a period (not longer than 1 year) stated in the order; and
(b) may be extended, varied, renewed or cancelled by the adjudicator until a final order is made; and
(c) may be cancelled by a later order made by the adjudicator; and
(d) if it does not lapse or is not cancelled earlier, lapses when
(i) the application is withdrawn; or
(ii) the commissioner gives the person who made the application a written notice under section 241 rejecting the application; or
(iii) a final order is made by an adjudicator to whom the application is referred. ...

Interim Orders

This dispute resolution application was made on 21 February 2005. The Commissioner has referred the application to me pursuant to section 267 of the Act for consideration for an interim order. At this time, I am solely concerned with the threshold issue of whether an interim order is warranted. In any consideration of an application that seeks the making of an interim order, it is necessary to determine whether, because of the nature or urgency of the circumstances relating to the application, an interim order is in fact necessary or appropriate. The examples included in the Act under section 279 are suggestive of the usual circumstances where an interim order might be made. Both examples are in the nature of injunctive relief. Whilst the range of matters that might be the subject of an interim order is not capable of definition, the applicant does need to establish that the circumstances of the application warrant the making of an interim order.

During the 1970’s the developer of this complex sold the "management rights" on the open market. However, owing to dissatisfaction with two manager/ caretakers, the body corporate established a unit trust with a corporate trustee, Focus Owners Ltd. (FOL) for the purposes of purchasing the management rights for the Focus building. This was funded by obtaining a contribution of $2,000 from each lot owner. Since that time, FOL has employed staff to attend to the letting business and common property maintenance.

In order to comply with requirements that a manager/ letting agent live on site, FOL has either owned or permanently rented a unit for a resident manager. Until the year 2000, unit 31 was owned by FOL and used to provide accommodation to the resident manager employed by FOL. For reasons which are not totally clear, but presumably pursuant to an agreement between FOL and the Body Corporate, the Body Corporate was invoiced for half of the rent payable for unit 31. In 2001 unit 31 was sold in order to reduce the indebtedness of FOL. After the disposal of unit 31, the applicant’s unit, unit 26, was rented by FOL to accommodate the resident manager and again, a half share of the rent was paid by the Body Corporate.

It is evident from minutes of a meeting of the Body Corporate Committee, held on 10July 2004, that the Body Corporate Committee was investigating allegations of unauthorised expenditure of Body Corporate funds. It is alleged that an audit of Body Corporate accounts by KPMG prior to the meeting of 10 July 2004, revealed "various unauthorised payments for excessive travel by (one of the applicants) and increased rental payments for the former manager’s accommodation". The minutes refer to alleged unauthorised payments of $12,246 for travel expenses claimed by the applicant to attend to body corporate business during his time as chairman of the Body Corporate. It is further claimed that these payments were used to offset levies payable by the applicant.

The minutes also contain the allegation that the Body Corporate’s agreement to pay for the manager’s accommodation in unit 26 on a 50/50 basis involved a weekly increase in rental payments of $245 per week without Body Corporate approval. According to the Minutes, the alleged unauthorised increase in rental payments to the owners of unit 26 is approximately $15,388.

The following resolutions were made at this meeting of the Committee:

A Notice of Contributions/ Tax Invoice 12996/1776 dated 21 December 2004 was subsequently issued to the owners of lot 26 advising that the arrears/ pre-payments owing by them to the Body Corporate for Focus was $68,730.01.

The applicants recently signed a contract for the sale of unit 26 for which the settlement date is 3 March 2005. In response to the purchaser’s request, the Body Corporate issued a Body Corporate Information Certificate on 18 February 2005, stating in the Summary of Amounts Due but Unpaid that the following amounts remain unpaid:

Annual Contributions $4,585.26
Special Contributions $13.20
Other Payments $66,019.61
Penalties $136.20

Total Amount Overdue $70,754.27

The owners of Lot 26 subsequently advised the body corporate that:

Short Punch & Greatorix, solicitors for the purchaser advised the applicant’s solicitor that at settlement, they will require a cheque for all amounts outstanding to the Body Corporate i.e. $70,754.27.

By facsimile dated 22 February 2005, the body corporate advised the applicants’ solicitor that it would rework the lot statement and prepare a new disclosure statement showing the following amounts owing:

Levy 1/1/04 (Discounted amount) $2,169.64
Levy 1/3/04 (Discounted amount) $2,169.64
__________
$4,339.28
Unauthorised travel expenses to be reimbursed $3,825.00

TOTAL $8,164.28

In reply, the applicants’ solicitor advised that the above levies had been paid and that the amount of $8,164.28 relates to matters between the applicants and FOL, not the body corporate.

Submission from Body Corporate

Having regard to the settlement scheduled for 3 March 2005, on 22 February this Office sought an urgent submission from the respondent Body Corporate to be received by close of business on Friday 25 February 2005. HW Litigation, Solicitors for the Body Corporate submitted that an interim order should not be made at this point in time because:

Determination

The applicants are seeking the following orders of a adjudicator:

1. A direction to remove an alleged unsubstantiated civil debt from the levy notice and the disclosure statement.

2. A direction to the body corporate to issue a new Levy Notice and Disclosure Statement without these "alleged civil debts".

The Body Corporate Information Certificate issued pursuant to 205(4) of the Act and Notice of Contributions each refer to an outstanding amount of $68,730.01. On the face of the application and material provided in support, it is clear that the amount of $68,730 does not consist wholly of levies or charges. On the other hand however, it has been alleged that the unauthorised payments were used to offset levies payable by the applicant and consequently the amount of levies and charges owing to the body corporate may be higher than what the applicants claim to be owing.

Having regard to the amount of material and records involved, the respondent claims that it has not had an opportunity to prepare a detailed submission responding to the application. In the absence of further evidence, it is impossible to determine the correct amounts of outstanding levies and charges.

Further, as the purchaser under the contract with the applicants has agreed to settle the contract on 3 March on the basis that the disputed amount will be held on trust, pending an order by the Office of the Commissioner for Body Corporate and Community Management, it is submitted that the applicants’ position will be protected pending the results of the applications.

Given that the matters in dispute are not capable of expeditious and objective consideration, I am unable to issue an interim order at this point in time. I consider that an effective resolution of this application requires further investigation, particularly by allowing affected parties to make written submissions about the application before the matter is finally determined. As the funds will be held in trust, the applicants’ position will be protected pending the results of the final application.

Finally, I would point out that failure to make an interim order should not be taken as any indication of the merits or otherwise of the application or an indication of what final orders will be made.

(i)	that unauthorised travel amounting to $12,246.15 be added to the lot statement for Lot 26 to be reimbursed by the owners on the sale of the unit.
(ii)	All unauthorised payments by the body corporate or FOL be determined and such payments be refunded to the Body Corporate or FOL and an account rendered to the owners of lot 26.
(iii)	All unauthorised body corporate payments by the body corporate or FOL be determined and such payments be refunded to the Body Corporate or FOL and an account rendered to the owners of Lot 26.

(i)	The purchaser under the contract with the applicants has agreed to settle the contract on 3 March on the basis that the disputed amount will be held on trust pending an order by the Office of the Commissioner for Body Corporate and Community Management. As the funds will be held in trust, the applicants’ position will be protected pending the results of the application.
(ii)	The body corporate intends to make application to the Office of the Commissioner for Body Corporate and Community Management regarding the disputed amount and that this matter should be dealt with simultaneously with application 125/2005. it is submitted that there are extensive and voluminous accounting and financial records and determination of this dispute will require a detailed consideration of these records;
(iii)	In the time available, the body corporate has not had an opportunity to prepare a detailed submission responding to the application; and
(iv)	the monies in dispute form the subject of a ongoing police investigation following a complaint by the Body Corporate in October 2004.

(i)	The alleged debt relates to a personal/ civil dispute between them and the Body Corporate and / or FOL.
(ii)	As a civil/ personal dispute, it does not involve a levy or charge and should not therefore be included in any Levies Notices and/or Disclosure Statements.
(iii)	All references to the alleged debt must therefore be removed from all Levies Notices and/ or Disclosure Statements issued in regard to Lot 26.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Focus [2005] QBCCMCmr 123 (2 March 2005)