Sailz Whitsunday [2005] QBCCMCmr 187 (6 April 2005)

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

Graeme Peter Foreman & Ann Louise Foreman the co-owners of lots 1 and 7, & Peter James Lane & Josephine Pauline Lane, the co-owners of lot 31

I hereby order that the application for an order that the financial accounts of the body corporate be frozen until such time as a resolution regarding the appointment of committee members has been reached, is dismissed.

I further order that Mr Harry Hollingworth of Body Corporate Services Whitsunday shall not operate as a signatory on the body corporate accounts unless and until his appointment as body corporate manager has been authorised by the body corporate at a properly convened general meeting.

I further order that pending any such appointment of Mr Hollingworth as body corporate manager he shall not be entitled to receive any remuneration from the body corporate.

I further order that the body corporate shall within 1 month of the date of this order call a general meeting under section 23C of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 to fill casual vacancies on the committee. The body corporate may at that meeting consider any other motion that has been included on the agenda of the meeting.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0170-2005

"Sailz Whitsunday" CTS 16912

ORDERS SOUGHT

The applicants have sought orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) as follows:

The applicants have also sought an interim order of an adjudicator to freeze the financial accounts of the body corporate until such time as resolution regarding the appointment of committee members has been reached.

JURISDICTION

The application evidences a dispute between owners of lots included in a community titles scheme and the body corporate for the scheme (section 227(1)(b) 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) provides that an 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. An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

In any consideration of an application which seeks the making of an interim order, it is necessary to determine at the outset 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(1) 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 which 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.

An interim order will not be made in circumstances where the only urgency relates to the applicant’s desire to resolve or expedite the matters in dispute, or where the nature of the circumstances are such that the matter is not capable of being dealt with in the context of an interim order. Again, it is not possible to define these circumstances. However, given that an interim order may be made ex parte (ie. without reference to, or submission from the respondent named in the matter), then as a guide, where the circumstances or matters in dispute include matters or allegations not capable of objective consideration, or ready determination, or relate to issues of credibility or character, for example, where an interim order would be inappropriate, then the request for an interim order will be dismissed. It is a matter for an adjudicator to determine in respect of each application.

SCHEME DETAILS

Sailz Whitsunday registered as a building unit plan (now described as a building format plan) on 14 July 1995. It comprises 32 lots and common property, and is regulated by the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation Module).

BACKGROUND

The applicants explained that the current purported committee is comprised of two lot owners, and the current caretaking and letting manager, who is a non-voting member. The applicants expressed concern that one of the lot owners has a conflict of interest because he has acted as caretaking manager from time to time. The applicants believe that the committee cannot form a quorum, and that an extraordinary general meeting should therefore be held to elect replacement committee members.

On 14 March 2005 I conducted a teleconference with one of the committee members, Ms Pip Runciman, and one of the applicants, Mr Peter Lane.

Ms Runciman advised me that she will shortly be listing her lot for sale and once she sells she will also have to resign form the committee. She also advised me that she is unaware of any committee meetings having been held since the purported meeting on 2 December 2004. She stated that once the committee membership fell to two in late November 2004, the other committee member, Mr Hillary, decided that as an interim measure a body corporate manager (Mr Hollingworth) should be appointed to "run things" until a proper committee could be elected again. She further stated that she has been waiting for a general meeting to be called but so far nothing has happened.

Mr Lane advised me that his major concern was the committee’s decision to pay the caretaking manager approximately $11,000.00 in "back pay", which exceeds the limit for committee spending.

I explained to both parties that, in the absence of fraudulent activity, I would be most reluctant to freeze a body corporate’s accounts because everyday administration would be brought to a standstill, and accounts such as electricity and pool and grounds maintenance could not be paid. However, I noted that there is a formal procedure required for the appointment of a body corporate manager, and that had clearly not been followed in this case. Furthermore there is a process for the filling of casual vacancies on the committee, and it appeared that that process had also not been followed.

The body corporate committee and Mr Hollingworth were invited to respond to the application.

Submissions were received from Mr Hillary and from Mr Hollingworth.

In relation to the interim order, Mr Hillary requested that the body corporate accounts not be frozen as such action would jeopardise the body corporate’s use of local service providers. Mr Hillary also requested that the interim administrator be permitted to continue in his role, and to call an extraordinary general meeting within 14 days.

Mr Hollingworth stated that he had at all times acted in the best interests of the body corporate, and although he conceded that his appointment should have been ratified at an extraordinary general meeting he believed that this could still occur. He pointed out that freezing the body corporate accounts would be costly to the body corporate, both in terms of bank fees if cheques were "bounced" and also to the body corporate’s reputation.

On 6 April 2005 a member of the Commissioner’s staff, Ms Holly Burgess, telephoned Mr Hillary and enquired whether any of the purported appointments to fill the casual vacancies on the committee had been decided at a formal committee meeting. Mr Hillary advised that they had not. Ms Burgess also requested details of the date of the chairperson’s resignation from the committee. Mr Hillary advised that he was not sure of the exact date, but thought it was around 23 or 24 November 2004.

DETERMINATION

I am solely concerned with the application for an interim order in this determination. Having perused all of the material provided to me, I am not satisfied that the body corporate accounts should be frozen. The matter about which Mr Lane expressed major concern, namely the payment to the caretaking manager, has already been made. If I ultimately determine that such a payment was unwarranted, that matter can be addressed in my final order. As already indicated in the teleconference on 14 March 2005, it is not the usual practice of this office to suspend activity on body corporate accounts, as the disruption to the day to day administration of the body corporate could be catastrophic. An exception would of course be made if there were evidence of fraudulent activity, but no such suggestion has been made in this case, and I therefore do not propose to make the order sought by the applicants.

However, I am concerned about several matters relating to the present administration of the body corporate in relation to the purported appointment of Mr Hollingworth as an interim administrator, and the purported appointments of three members of the committee to fill casual vacancies.

Section 85 of the Accommodation Module provides:

(3) However, subsection (2)(b) does not apply if all the lots included in

the scheme have identical ownership.

Mr Hollingworth has obviously not been engaged under these provisions. Whilst he may have been acting in the interests of the body corporate, he ought to have known that his appointment was not valid, and advised the body corporate of the appropriate steps to be taken to obtain proper authorisation for his engagement. It is unacceptable that four months after the purported engagement no such action had been taken.

I have therefore ordered that until such time as he has been so engaged, he shall not operate as a signatory of the body corporate accounts, nor shall he be entitled to receive any remuneration from the body corporate. If payments have already been made to him, the body corporate must have those payments ratified by owners at the next general meeting, otherwise the amounts so paid must be refunded by Mr Hollingworth to the body corporate.

As to the casual vacancies on the committee, it appears that the following persons were elected to the committee at the annual general meeting held on 2 September 2004:

Chairperson Mr Trevor Moore
Secretary/Treasurer Ms Tiffany Aucott
Committee: Mr Terry Lawn
Ms Pip Runciman
Ms Ronnie Meredith
Mr Doug Hillary

The records reveal that Ms Meredith subsequently sold her lot with the transfer being lodged in the Titles Office on 15 October 2004. Whilst I do not have evidence of her having submitted a formal resignation to the secretary prior to this date, and assuming that her eligibility for membership of the committee was on the basis that she was a member of the body corporate and not under any other category detailed in section 11 of the Accommodation Module, then as at the date of lodgement of the transfer she was no longer eligible to be a member of the committee.

Sections 23C and 23D of the Accommodation Module provide:

The material before me also reveals that Mr Lawn resigned from the committee on 2 November 2004, that Ms Aucott resigned on 20 November 2004 and that Mr Moore resigned on either 23 or 24 November 2004. Although Mr Robert Gnezdiloff, Mr Kenneth Langston and Mr Arnold Percy were variously stated to have accepted appointments to the committee on 18 November 2004, 22 November 2004 and 24 November 2004 respectively, none of those appointments was ever considered by the committee either at a formal committee meeting or by flying minute. Accordingly, those appointments were not valid, and therefore the number of committee members has now fallen below the number required for a quorum, and it is necessary for an extraordinary general meeting to be called so that a number of persons can be chosen to fill the vacancies.

I have therefore also ordered that the body corporate shall within 1 month of the date of my order, call a general meeting to fill the casual vacancies on the committee. The body corporate may at the same time also consider any other motions placed on the agenda of the meeting.

The body corporate should also have regard to sections 23E and 23F of the Accommodation Module.

This matter will now be investigated in accordance with the usual processes undertaken by this office so that a final order regarding the application may be made in due course.

Number of Scheme:	16912
Name of Scheme:	Sailz Whitsunday
Address of Scheme:	24 Panadanus Drive CANNONVALE QLD 4802

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Sailz Whitsunday [2005] QBCCMCmr 187 (6 April 2005)