Isle of Palms Resort [2005] QBCCMCmr 143 (11 March 2005)

Last Updated: 5 July 2005

REFERENCE: 0180-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	20860
Name of Scheme:	Isle of Palms Resort
Address of Scheme:	21 Coolgardie Street ELANORA QLD 4221

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

the Body Corporate

I hereby order that the Body Corporate be authorised to expend funds, up to a maximum amount of $50,000 to employ Hynes Lawyers and a Barrister-at-Law to represent the Body Corporate at the hearing of the matter on 14 March 2005 through to 18 March 2005 in prosecuting application 0163 of 2004 and defending Application 0610 of 2004.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0180-2005

"Isle of Palms Resort" CTS 20860

Application

The applicant has requested an order that

The Body Corporate be authorised to expend funds necessary to employ Hynes Lawyers and a Barrister-at-Law to represent the Body Corporate at the hearing of the matter on 14 March 2005 through to 18 March 2005 in prosecuting application 0163 of 2004 and defending Application 0610 of 2004.

The Scheme

Isle of Palms Resort is a subdivision of 176 lots registered as a Group Title Plan (now known as a Standard Format plan). The regulation module applying to the scheme is the Accommodation Module.

Jurisdiction

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

(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.

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)).

Background

Application 0163-2004 relates to a request for orders regarding obligations of the resident caretaker under the Caretaking Agreement, while application 0610 – 2004 was made by the resident caretaker, covering much of the same subject matter. Accordingly, the specialist adjudicator ordered that these matters be heard together in the week beginning 14 March 2005.

These matters were set down for hearing on 14 March 2005, after the AGM on 28 February 2005 so that representation and funding of that representation could be approved by lot owners. The applicant submits that as settlement negotiations were proceeding well during February, it was anticipated that the dispute would be resolved without adjudication. Accordingly the AGM scheduled for 28 February was postponed until 21 March 2005 so that a settlement deed could be presented for approval. However settlement negotiations have broken down and it is now evident that the adjudication is to go ahead on 14 March.

At the hearing before the Specialist Adjudicator, the Body Corporate will be seeking orders that:

(i)	The Caretaker will be available onsite at all times 24 hours a day 7 days per week and respond to residents’ calls within a reasonable period of time; and
(ii)	In accordance with clause 3(m) of the Caretaking Agreement, the Caretaker undertake the permanent policies and the procedures in the Annexure to the Agreement.

On the other hand, by application 610-2004 the Caretaker is seeking orders as to the validity of Remedial Action Notices previously issued by the Body Corporate notwithstanding concessions previously made by the Body Corporate. It is submitted that this part of the hearing will take some considerable period of time.

The other party to the Adjudication is represented by the firm Short, Punch and Greatorix and Mr. Carrigan of Counsel. It is submitted that approval of funding for legal representation is required as a matter of urgency to ensure a suitable level of representation is provided to the Body Corporate.

In response to an inquiry by this Office the Solicitor for the applicants has nominated an upper estimate of $50,000 for legal costs.

Determination

This is an unusual application as requests for approval of "emergency expenditure" usually relate to emergency repairs or measures to protect the health and safety of owners and occupiers. Given that this matter has been scheduled for hearing for some time, one would expect that a contingency such as this would have been anticipated notwithstanding the parties’ attempts at settlement.

Having said that however, I must consider whether in the circumstances, it would be just and equitable to make an order permitting the Body Corporate to commit funds for the engagement of Solicitors and Counsel to defend the position of the Body Corporate. In effect, this involves a question of whether it would be reasonable to expect that members of the Body Corporate would approve such expenditure in General Meeting.

Members of the Body Corporate are paying hefty levies for caretaking services and it is clearly in their interests to ensure that the Service Contractor performs its obligations under the Caretaking Agreement. It is therefore important that the Body Corporate has adequate legal representation to protect the interests of its members. Failure to make the order could result in the adjudication proceeding without the Body Corporate having the benefit of legal representation or alternatively, if the matter is adjourned to enable the matter to be considered by a general meeting, a hefty costs order could be made against the Body Corporate.

A further consideration that I have taken into account is that given the size of this scheme, approval of expenditure on legal fees of up to $50,000 at most, would not place an unduly onerous cost burden on individual lot owners i.e the individual cost to each lot owner would be less than $300. As most lot owners would be aware of this dispute, I doubt that expenditure on legal fees would be unexpected.

On balance, I am of the view that it would be just and equitable to order that the Body Corporate be authorised to expend funds, up to a maximum amount of $50,000, to employ Hynes Lawyers and a Barrister-at-Law to represent the Body Corporate at the hearing of the matter on 14 March 2005 through to 18 March 2005 in prosecuting application 0163 of 2004 and defending application 0610 of 2004.