Belle Maison [2005] QBCCMCmr 23 (13 January 2005)

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

I hereby order that within 6 weeks of the date of this order, the body corporate of Belle Maison shall prepare a sinking fund budget for the current financial year, and once prepared and approved by the committee, a copy of this budget must be send to all owners whose name appears on the body corporate roll.

I further order that at all future AGM’s of this body corporate, a proposed sinking fund budget must be included with the notice of meeting.

I further order that resolution 17 headed reimbursement of expenses purportedly carried at the AGM of the body corporate held on 30 August 2004, is invalid and of no effect.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0593-2004

"Belle Maison" CTS 3862

The applicants, William Geoffrey Allen and Veronica Ethel Allen, the co-owners of lot 43 have sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote –

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)).

The scheme is a subdivision of 129 lots recorded under a building unit plan (now a building format plan) of subdivision. The regulation module applying to the scheme is the Standard Module.

Submissions in respect of the application were sought by this office from the body corporate and all owners. In response, submissions were received on behalf of the body corporate, prepared by the body corporate’s solicitor, Short Punch & Greatorix (SPG), and from the chairperson, on behalf of the committee, but "without consultation with Mr Allen".

The submission of the chairperson on behalf of the committee does not seek to address the specifics of the dispute, acknowledging that this will be done in the body corporate submission prepared by SPG. Rather, the submission by the chairperson seeks to make several observations in respect of the application including, but not limited to:

I will consider the validity of each of the three motions in question, in turn.

Resolution 7

The resolution is headed Administration fund contribution – next financial year and proposed two instalments of contributions "for the first two periods of the following financial year"; namely June to August inclusive and September to November inclusive.

I am not clear on the applicants specific grounds for objection to the validity of this motion. The applicants refer to section 150 of the Act and 95 of the Standard Module. The applicants state "as motion 7 appeared to contravene Section 95" it should have been disallowed, and the applicant moved a motion to this effect. The grounds then state –

This appears to be a reference to section 95(3) under which the committee is specifically empowered to "fix an interim contribution". Is the applicant seriously suggesting that the committee is, under the legislation, empowered to do something which a body corporate in general meeting is not empowered to do. I suggest that the better interpretation would be that the reference to the power of the committee to act in this way would be in addition to the assumed power of a body corporate in general meeting to so act. There is simply no logical argument I can contemplate, and the applicants have not sought to raise or argue one, which would result in such a restrictive interpretation of the section being applied.

In my view, section 95(3) is not even relevant to this scenario. Subsection (3) refers to the power of the committee to raise "an interim contribution" whereas the scenario here is that it is the body corporate in general meeting seeking to raise the contribution. Section 150 of the Act specifically authorises a regulation module to include "financial arrangements" about "levying lot owners for contribution, including contributions of an interim nature for the period from the end of a financial year to 30 days after the AGM for the next financial year" (see section 150(2)(b)).

The practicalities of the application of the legislation requires that a body corporate must be able to raise interim contributions into the next financial year. An AGM must be held each year "within 3 months after the end of the scheme’s financial year" (section 60). Section 96 of the standard module provides that a body corporate must give to owners "at least 30 days" written notice that a payment of a contribution is required. Practically, this means that a body corporate might be forced to operate for a up to a minimum of 4 months without funds. Practically, this is impossible, particularly in a large building, with ongoing monthly outgoings (eg. manager’s monthly management fee is simply one ongoing expense which must be met). The question then becomes one of not whether the body corporate in general meeting is empowered to raised interim contributions (in my view, a body corporate is so empowered) but rather the extent or reasonableness of such contributions.

Here the body corporate in general meeting is resolving interim contributions for a period of six months (being two quarters into the next financial year). The reference to the time period specified in section 95(3) is in my view not valid, since it is not the committee raising the interim contribution. Section 95 is otherwise silent on the subject, except that it does provide, in subsection (1), that
The body corporate must, by ordinary resolution, (a) fix, on the basis of its budgets for a financial year, the contributions to be levied on the owner of each lot for the financial year.

This section requires that within reasonable limits, the contributions levied for a financial year should reflect the budget for that financial year. It is arguable that establishing an interim contribution for 2 quarters of a financial year means that the contributions levied do not reflect the budget that financial year. Where section 95(5) is otherwise silent on the issue, section 150(2)(b) does provide some guidance on the reasonableness of the period. That section specifically authorises arrangements for the levying of interim contributions "for the period from the end of a financial year to 30 days after the AGM for the next financial year".

Practically, in respect of this body corporate, it would authorise the body corporate in general meeting to raise interim contributions for the period of 4 months of the next financial year. That is, the period from 1 June to 30 September. The body corporate submission suggests in another context that a 4 month period is outside the usually 3 month levy or contributions periods, and hence two quarterly interim levies are required. I consider the merit of this is not strong. There are means by which a body corporate could ensure that only 1 interim contribution of 3 months is necessary to be resolved. In particular:

The body corporate submits that, in the alternative, motion 7 is "a special levy and accordingly not affected by section 95 ...". "Special contribution" is referred to in section 95(2). That subsection is directed to if "a liability arises for which no provision, or inadequate provision, has been made in the budget". I consider that the present scenario is outside the terms of this section. The situation is that no provision has been made in the budget as the period in question (ie. after the end of the financial year) is outside the period of contemplation.

In my view, section 95(2) is intended to cover a situation where an expense arises which was outside the contemplation of the body corporate. For example, major repairs are required to a lift after 5 years operation, when the sinking fund forecast contemplated that no such repairs would be required until after year 10. Consequently, if a body corporate had only raised approximately half the cost of repairs via contributions to the sinking fund, then it might reasonably rely on subsection 95(2) to raise sufficient further contribution as "no provision, or inadequate, provision had been made".

In conclusion, I consider that a body corporate is able to resolve in general meeting to set an interim contribution for the first period of the next financial year (say a three month period), but that to resolve two such interim contributions is excessive, unreasonable and unnecessary, for the reasons I have set out above. However, I do not propose to invalidate the resolution in question. Rather, I consider that the body corporate should review its future practice in this regard based on the above comments. Accordingly, the order as sought is dismissed. Further, I am not prepared to acknowledge that the applicants arguments were, notwithstanding the dismissal, correct; since they were not, in my view.

Resolution 8

The resolution is headed Sinking fund budget and proposed approval of the sinking fund budget. However, the applicants argue that the owners have not been provided with a sinking fund budget as required by section 94 as "there are no amounts stated" in the budget provided. I have considered the documentation provided as part of the body corporate. There is a "proposed annual budget" for both the administrative and the sinking funds. However the budget for the sinking fund contains no amounts. Rather, the budget is specified to be "0.00" for the 8 listed entries.

The body corporate submission states –

I disagree completely with the view expressed in the body corporate submission. A sinking fund analysis does not supersede the need for a budget. The need for a body corporate to resolve an annual budget for both its sinking and administrative fund is absolutely clear in the legislation (see section 94(1-3) of the standard module). Moreover, (6) provides that "copies of the proposed budgets must accompany the notice of an AGM".

A sinking fund analysis is not the budget. It is a fundamentally different document. The analysis is intended to identify the anticipated capital amounts needed to be raised over a certain period. The budget is a more specific document. The budget operates on a year to year basis, whereas the analysis is a more general document in that its scope or term is a ten year period. The budget takes the information from the analysis, and adapts it to a specific yearly format. Specifically, the sinking fund budget will show the items which the body corporate anticipates expenditure from the sinking fund for the forthcoming financial year, and the amounts of those expenditures. Moreover, the budget would allow the body corporate to make up any shortfall, or take into account any surplus, based on previous year’s expenditure. A sinking fund forecast or analysis cannot do this, unless a new one is commissioned each year.

A further reason for the requirement of a sinking fund budget, distinct from the sinking fund forecast or analysis, is that it is on the basis of the budget that contributions are set (see section 95(1)).

The body corporate are simply wrong on this aspect. To the extent that the body corporate is being advised by its manager that this is in compliance with the legislation, then it is being mislead. I note that the body corporate’s management is up for renewal, and that under the terms of the agreement submitted by Stewart Silver King and Burns, Clause 5(vi) provides that the manager will maintain the statutory body corporate records, prepare ... the statutory budgets ... .

The "statutory budgets" include an annual sinking fund budget. There can be no doubt of this. In the circumstances however, I am not prepared to invalidate the resolution, as the applicant has sought. What will be achieved by this other than the body corporate having to prepare a budget, and re-submit a motion for inclusion of a further meeting. The cost of a body corporate of 129 lots holding an EGM to consider possibly one motion simply does not warrant such an order being imposed. I also consider that if the body corporate was ordered to reconsider a budget at an EGM, that the end result (namely the contributions struck in consequence of that budget) would not vary significantly from the level of contributions already struck. However, in the circumstances, I do intend to order that a sinking fund budget must nevertheless be prepared for the current financial year, and that a copy of this budget must be send to all owners whose name appears on the body corporate roll. At all future AGM’s however, the proposed budget must be included with the notice of meeting.

Resolution 17

Resolution 17 headed Reimbursement of expenses provides –

The applicants seek that this resolution be invalidated on the basis that it contravenes section 26(1)(f) of the standard module, quote -

26 Restricted issues for committee--Act, s 100
(1) A decision is a decision on a restricted issue for the committee if it is a decision--
...
(f) To pay remuneration, allowances or expenses to a member of the committee, unless the decision--
(i) is made under the authority of an ordinary resolution of the body corporate; or
(ii) is for the reimbursement of expenses incurred by the member in attending a committee meeting, if--
(A) the amount is not more than $50; and
(B) the reimbursement does not result in the member being reimbursed more than $200 in a 12 month period for committee meeting attendance.
(2) For subsection (1)(f)(i)--
(a) the motion before the body corporate about the payment must state--
(i) the full amount of the remuneration, allowances or expenses; and
(ii) if the payment relates to expenses--the reason the expenses were incurred; and
(b) an explanatory schedule stating full details of the remuneration, allowances or expenses must accompany the voting paper stating the motion.
Example for subsection (2)--
For a payment relating to a mileage allowance, full details would include the distance travelled, the date of travel, the cost per kilometre, and the reason for travel.
...

The applicants outline the basis on which they believe that the resolution does not comply with the requirements of section 26(2) of the standard module; in particular that expenses cannot be sought prospectively, but rather "is restricted to recovery of expenses which were incurred".

The body corporate submission argues that –

The body corporate submission further refers to the requirements of section 13A dealing with committee nominations, quote -

13A Requirements for nominations
(1) For section 13, a nomination must be made by written notice and--
(a) if the nomination is from a lot owner nominating the lot owner--must be signed and dated by the lot owner; or
(b) if the nomination is from a lot owner nominating an individual other than the lot owner--
(i) must be signed and dated by the individual; and
(ii) must be countersigned by the lot owner, or a person acting under the authority of the lot owner; and
(iii) must state the lot owner’s lot number.
(2) A nomination must contain each of the following details--
(a) the surname and either the first given name or other name or abbreviation by which the nominated person (the "candidate") is generally known;
(b) the position or positions the candidate is nominated for;
(c) whether the candidate is a lot owner;
(d) if the candidate is not a lot owner--
(i) the candidate’s residential or business address; and
(ii) the category of person mentioned in section 10(1)(b) to which the candidate belongs;
(e) details of any payment to be made to, or to be sought by, the candidate from the body corporate for the candidate carrying out the duties of a committee member.
Example of a payment for paragraph (e)--
payment of the candidate’s expenses for travelling to committee meetings

I suggest that the resolution can’t be effective or satisfy both the requirements of section 13A and 26(2). If the resolution purports to satisfy the requirements of section 13A, as the body corporate submission suggests, then it simply advises that this particular nominee will be seeking such reimbursement. It does not impose on the body corporate an obligation to so reimburse the nominee.

In contrast, it is clear from the terms of section 26(2) that there are very clear requirements for the payment of remuneration, allowances or expenses to committee members. This is particularly so in the case of expenses, which in effect, can only be claimed or approved after the expense has been incurred and on the basis set out in section 26(2). The body corporate submission acknowledges that the resolution does not comply with the requirements of section 26(2) for the reason that the required information is simply not known at this stage.

Given this, resolution 17 cannot be regarded as effective. It is invalid, for the reason that it does not comply fully with section 26(2). I intend to order to this effect.

Number of Scheme:	3862
Name of Scheme:	Belle Maison
Address of Scheme:	129 Surf Parade BROADBEACH QLD 4218

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Belle Maison [2005] QBCCMCmr 23 (13 January 2005)