One Park Road [2005] QBCCMCmr 324 (14 June 2005)

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

I hereby order that, pending a final determination of the dispute, the body corporate must not implement any resolution passed pursuant to motions 8, 9 or 10 of the extraordinary general meeting that is to be held later today.

I further order that the application for interim orders is otherwise dismissed. In particular, the dispute is dismissed under section 270(1)(b) of the Body Corporate and Community Management Act 1997 to the extent that the dispute solely concerns whether the extraordinary general meeting amounts to contempt of court or prejudices issues the subject of determination by appeal.

This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0419-2005

"One Park Road" CTS 2114

One Park Road Community Titles Scheme (One Park Road) is a 39 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Commercial Module Regulation (Commercial Module).

This is an application for interim orders. It arises out of an application by Bentonic Pty Ltd (lot 1), Chung-Ming Su & Shu-Chen Lin Su (lot 2), Nunzio La Rosa (lot 3), Kiara Holdings Pty Ltd (lot 4), I-Ying Wang (lot 7), Chi-Chang Chen (lot 8), Audax Australia Pty Ltd (lot 16), Jimmy Lok Kee Ma & Verney Mei Kuen Ma (lot 29), Vanpost Pty Ltd (lot 34) and Werner Friedhelm Sauer (lot 41) (applicants) seeking orders against the body corporate (respondent).

The applicants seek an order to prevent an extraordinary general meeting being held later today or, alternatively, an order to prevent the body corporate deciding or acting on motions 2, 3, 4, 5, 6, 7, 8, 9, 10, 16, 17, and 18 in the notice of meeting.

Submissions on behalf of ED include individual submissions in respect of particular motions as well as more general submissions to the effect that:

The submissions raise questions concerning whether the present dispute about whether a vote should be allowed to proceed on the relevant motions is a dispute appropriate for determination by the District Court in relation to the appeals or whether the dispute is about a claimed or anticipated contravention of the Body Corporate and Community Title Act 1997 and appropriate for determination by an adjudicator (Act, 276).

To the extent that the dispute solely concerns whether the extraordinary general meeting amounts to contempt of court or prejudices issues the subject of determination by appeal, I will dismiss the application on the basis it should be dealt with in a court or tribunal of competent jurisdiction (Act, 270(1)(b)).

However, the submissions also raise questions about whether the motions contravene sections 94 and 152 of the Body Corporate and Community Title Act 1997 simply because it would be unreasonable for the body corporate to adopt those motions given the extent to which those motions would prejudice the outcome of the appeals. This seems a roundabout basis upon which to attack a potential action alleged to raise issues of contempt of court or prejudice an appeal outcome. It does, however, seem to provide an appropriate basis for an interim order of an adjudicator in terms of timely intervention in respect of the body corporate’s decision making processes. Any interim order as sought would appear to be of the nature of managerial intervention in these decision making processes rather than determination of any question of, for example, contempt of court itself.^[1]

Further, an adjudicator must investigate the application to decide whether it is appropriate to make an order on the application (Act, 269). I recognise the short timeframe before the meeting and the inability to give all affected persons a proper opportunity to make detailed submissions (Act, 247). However, to the extent that my review of the application raises any additional questions about contraventions of the Act, it may be appropriate to grant an interim order based on that possible contravention and seek detailed submissions at a later stage.

Submissions on behalf of ED are to the effect that this application is misconceived, frivolous or vexatious. It is alleged that the eight applications brought within the past two years is an unreasonable number and calculated to put ED to an extraordinary expense. At this interim stage I am not satisfied that it is appropriate to dismiss the application on the grounds it is frivolous, vexatious, misconceived or without substance (Act, 270(1)(c)). However, a subsequent determination to this effect is possible and should be the subject of further submissions by the parties.

In particular, despite the notice of the extraordinary general meeting being dated 17 May 2005, the applicants did not lodge this application until 9 June 2005. This has left only two business days before the date of the meeting for distribution of the application to other owners and receipt of submissions from those owners. This is a fact that could potentially lead to inferences being drawn against the applicants, at least in respect of any allegations that the applicants are attempting to use the dispute resolution processes to disrupt the meeting without having any clear grounds for stopping the meeting.

However, in this instance, submissions were sought from other owners and required by 9:00am this morning. The solicitors for ED sought an extension and submissions were in fact received at around 1:00pm today. I will endeavour to provide this interim order to parties prior to the extraordinary general meeting to be held at 5:30pm today.

An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates (Act, 279). Further, any orders granted must be just and equitable in the circumstances (Act, 276).

The applicant is seeking an interim order to stop the body corporate conducting an extraordinary general meeting. To assist me in determining whether it is just and equitable to grant relief at this stage, before full and final consideration of all the issues raised, I consider it relevant for me to briefly consider whether the application raises any serious legal question.

If the application raises a serious legal question then it may be appropriate to preserve the existing state of affairs pending the final determination. It is relevant to consider whether the likely inconvenience should no interim order be granted outweighs any inconvenience likely to result from the interim order. In particular, it is relevant to consider whether an interim order is necessary to prevent something occurring that cannot be adequately redressed by final orders.

I fail to see any significant weight in any argument from the applicants strictly to the effect that the it would be unreasonable for the body corporate to deal with matters in general meeting that are substantially the same subject matter as issues before the District Court. I accept the submissions on behalf of ED to the effect that the mere fact of an appeal does not operate as a stay against ED submitting motions for a general meeting. If matters affecting the body corporate can be resolved by the body corporate’s normal management processes rather than in the courts then that is surely something that should be encouraged.

However, intervention of an adjudicator may be appropriate to the extent that a serious question is raised about whether adoption of a motion will seriously prejudice the body corporate. For example, if adoption of the motion would create rights for a third party but the District Court may subsequently make an order that extinguishes those rights and gives the third party a basis on which to seek compensation against the body corporate. In those circumstances a serious question will arise concerning whether adoption of the motion is unreasonable and contrary to the Act (Act 94, 152).

In an order of 12 January 2005,^[2] I made a declaration that a resolution that purported to limit the committee to making decision involving spending of no more than $500 was void on the basis it was unreasonable and effectively deprived the committee of a substantial part of its function.

ED has now proposed a motion that would limit committee expenditure to spending in the amount of $125 per lot. This would be a total of $4,875 and decisions involving spending above that amount will be required to go before a general meeting.

The applicants’ submissions fail to raise any serious questions about the validity of this motion. I cannot see how this motion, even if adopted, would significantly prejudice the appeals or issues currently in dispute. Further, the applicants have not provided any evidence to show that this proposed monetary limit on committee spending is unreasonably low in its own right.

It appears from the submissions that the committee passed a resolution that the body corporate seek legal advice on the right to recover money paid to ED subject to the building management agreement that was declared void. ED has now proposed a motion for consideration by owners in general meeting to reverse this committee resolution.

Again, it is not clear how this motion would prejudice the issues currently in dispute even if the motion is adopted. In fact, the majority of owners may consider it preferable to delay any legal advice pending the outcome of the appeal. The submissions do not satisfy me that adoption of this motion would be contrary to the legislation or would unreasonably prejudice the body corporate in terms of the appeal.

Motions 4, 5 & 6 – Termination of temporary building manager and appointment of ED

In the order of 12 January 2005, I made a declaration that a resolution which purported to appoint ED as building manager at a significantly higher cost to the body corporate than other proposed managers was void. This was on the basis that, in the context of other offers for building management services, the vote to appoint ED was contrary to the requirement that the body corporate act reasonably in carrying out its functions (Act 94(1)(c), 94(2)) and contrary to the requirement that the body corporate administer body corporate assets reasonably and for the benefit of owners (Act, 152(1)(a)).

The applicants’ submissions had further sought an order that an independent building manager be appointed instead of ED. These submissions also led to a concern that any proposals to appoint a replacement building manager at reasonable remuneration could be thwarted by ED using its majority voting power to simply vote again for itself or its associate as the replacement building manager. While I did not consider it necessary to make an order that any replacement building manager be independent of the scheme, I did make an order preventing any owner voting for themselves the benefit of a building management contract. Any appointment of a replacement building manager should therefore have been on the basis of votes cast by persons voting as owners desiring the best contract for the scheme rather than voting themselves a financial benefit under a building management agreement.

This declaration and order is currently subject to appeal. However, I do not accept that ED is acting unreasonably by putting forward a motion that the body corporate re-appoints ED as building manager on a temporary basis pending the outcome of the appeal. I note that the original declaration was made because ED exercised its own voting power to appoint itself as building manager at a significantly higher remuneration than other offers that were before the meeting. The present motion provides for no payment to be made to ED unless the appeal brought by ED is successful. I further note that this is not a situation where the body corporate would be entering into a binding contract with a third party that may bind the body corporate beyond the time at which the District Court makes its determination.

In itself, there seems to be nothing wrong in ED putting this motion to owners in general meeting. ED’s submissions indicate that ED will be abstaining from voting on this motion and it will be for other owners to vote on whether to adopt this motion. Interestingly, the notice of cross-appeal indicates that the applicants agree that the order preventing owners from voting to appoint themselves as the replacement building manager should be overturned. However, technically, speaking, the applicants could presumably still take enforcement action in respect of this order pending the outcome of the appeal. A complication is that minutes of meeting indicate that the committee acted on 31 March 2005 to appoint Property and Management People Pty Ltd to perform certain duties until a new building manager is appointed. It may therefore be arguable that ED has been replaced as building manager and the order restricting owners from voting for themselves on replacement of ED as building manager no longer has effect.

If ED does abstain from voting on this motion than it will avoid any allegations that the adoption of the motion was unreasonable because of a conflict of interest in ED voting in its financial interests as prospective manager rather than in its interests as an owner desiring the best possible management contract for the scheme. Alternatively, if ED does vote in favour of its own appointment then the applicants can make further application providing grounds upon which the resolution should be invalidated.

In any event, the present motion would not appear to unreasonably prejudice the body corporate in respect of any order that could be made in respect of the appeal. Further, any argument that a resolution may be unreasonable due to ED voting in its own interests rather than the interests of the body corporate is premature.

It may be unreasonable for a party to legal proceedings with the body corporate to vote in its own interests to deprive the body corporate of legal representation.^[3] However, the present circumstances seem unusual in that the body corporate is co-respondent in both an appeal and cross-appeals where the dispute is primarily between two different factions of owners.

The issue of separate legal representation for the body corporate and whether the court wishes to order payment of costs of representation be paid by owners in proportions fixed by the court appears to be a question for the court hearing the appeal rather than this office (Act, 314). However, on balance, I am satisfied that there are serious questions to be determined about this motion that may properly be the subject of further submissions and a final determination.

Motions 8, 9, and 10 – Grant of car parking licences for 2, 5, or 10 years

Submissions on behalf of ED are to the effect that these motions deal with matters that are not the subject of restraint of any order. This submission is technically correct. However, car parking on the scheme was the subject of applications brought before this office, which applications are now the subject of appeal.

These motions purport to grant up to a ten year licence to persons to park motor vehicles in particular spaces. This does seem to be a matter where the body corporate may, pursuant to the motions, grant rights to other persons that may prejudice issues in dispute between the parties. It may be unreasonable to do this as subsequent orders on appeal concerning the car parking issue may deprive persons of the benefit of these licences and could give rise to claims against the body corporate by those persons. Further, I have questions about whether any resolution in the form proposed would contravene the provisions of the legislation concerning the power of the body corporate to lease or licence common property (Act 154, Standard Module 111). This would be the proper subject for further submissions.

It is difficult to see that any decision of the body corporate to carpet common property areas and perform maintenance could prejudice the outcome of the appeal or issues currently in dispute. These issues were not the subject of the applications brought before this office and the subsequent appeals.

The cross-appeal seeks an order that an administrator be appointed to perform the obligations of the body corporate and its committee. However, pending any appointment of an administrator, I would expect that owners should continue to administer the body corporate. The applicants have not raised any serious question about the proposed motions.

In considering whether to grant the interim order sought, it is relevant to balance the inconvenience caused by an interim order against inconvenience caused by waiting until a final determination to grant any necessary orders.

There appears to be little benefit in granting an interim order to stop voting occurring as opposed to an order restraining action on particular motions should they be passed. To minimise inconvenience it is only necessary to restrain action on particular motions for which the implementation of the resolution and potential subsequent reversal would involve greater inconvenience than a delayed implementation pending a final determination of the dispute.

The first serious question for determination is whether it may be contrary to the legislation for owners to vote in favour of motion 7 proposing that the body corporate not engage separate legal representation in relation to the appeal. I have very little information at this stage to determine whether it is appropriate to grant an order preventing implementation of this resolution pending a final determination of the dispute. However, given the submissions on behalf of ED that no party is seeking orders directly against the body corporate and the special circumstances that the appeal and cross-appeal are primarily between the two different factions of owners I see no need for an interim order at this stage. This is not a situation where the applicants have shown the possibility of irreparable harm if the interim order is not granted. Interim relief if therefore declined pending further submissions and a better opportunity to consider the circumstances.

The second serious question involved motions 8, 9, and 10 relating to a proposed grant of licence over car parks within the scheme. In respect of these motions I am satisfied that the balance of convenience favours the granting of an interim order preventing implementation of any resolution passed on those motions pending a final determination of the dispute. This will avoid the body corporate becoming subject to any obligations to third parties pending a final determination.

I will therefore make an interim order that, pending a final determination of the dispute, the body corporate must not implement any resolution passed pursuant to motions 8, 9 or 10 for the extraordinary general meeting to be held later today.

For these reasons, I make the interim order above.

The application will be allowed to proceed to submissions and a final determination in the normal course.

^[1] Refer reasoning of Justice Thomas, Independent Finance Group Pty Ltd v Mytan Pty Ltd and the Body Corporate for Welsby Place, [2001] QCA 306 @ paragraph 34.
^[2] Application 0521-2004, One Park Road, 12 January 2005.
^[3] For example, Application 602-2004, Teneriffe Hill Apartments, 9 February 2005.

Number of Scheme:	2114
Name of Scheme:	One Park Road
Address of Scheme:	1 Park Road MILTON QLD 4064

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

One Park Road [2005] QBCCMCmr 324 (14 June 2005)