Raby Bay Harbour Apartments [2005] QBCCMCmr 336 (21 June 2005)

Last Updated: 2 August 2005

REFERENCE: 0377-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30944
Name of Scheme:	Raby Bay Harbour Apartments
Address of Scheme:	152 - 166 Shore Street West CLEVELAND QLD 4163

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

Mr Allan Jones the owner of lot 21 and Mr Warwick Lee the owner of lot 19.

I hereby order that the purported appointment of Mr Bruce Smith as "Finance Manager" by the body corporate for Raby Bay Harbour Apartments was at all times void. I further order that Mr Smith is to return to the body corporate for Raby Bay Harbour Apartments all books and records relating to the Raby Bay Harbour Apartments body corporate and is not to operate the Body Corporate bank account.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0377-2005

"Raby Bay Harbour Apartments" CTS 30944

The scheme

"Raby Bay Harbour Apartments" is a subdivision of 30 lots which is governed by the Standard Regulation Module. The scheme is part of a layered arrangement involving a number of other bodies corporate.

Application

By application received by this Office on 27 May 2005, the applicants have sought the following orders of an adjudicator:

To overturn the decisions made at the Emergency Meeting (of the Committee) held on 18 May 2005 at 12 Noon and to terminate the Administration Agreement between Bruce Smith CPA Administrator of all business and finance management services and the Raby Bay Harbour Apartments.

To retrieve all Raby Bay Harbour Apartments Records from Bruce Smith and to have Bruce Smith removed from the Body Corporate bank account.

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.

Further Section 227(1)(g)of the Body Corporate and Community Management Act 1997 provides that a dispute between a committee member 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

(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)).

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. ...

Background

"Raby Bay Harbour Apartments" is a subdivision of 30 lots which is part of a layered arrangement involving a number of other bodies corporate. From the material provided it would appear that there are a range of problems in this scheme including indebtedness to the principal scheme, non payment and non collection of levies from unit owners, lack of a body corporate manager, incomplete financial records and a serious breakdown of communication between committee members.

The dispute at hand relates to the appointment of a Mr Smith CPA to act as body corporate manager and to "do a full forensic examination of the financial affairs, documents and management since the inception of the body corporate in 2002" . Mr Smith was purportedly appointed by an "emergency committee meeting" attended by the Chairperson Mr Foster and Secretary Ms. Neilson and Treasurer Mr. Jones at 12 Noon on Wednesday 18 May 2005. A one page agreement signed by Mr Foster and Mr Smith states that the appointment is for a period of three months with professional fees of $95 plus GST payable per hour payable weekly on presentation of a tax invoice.

Body corporate records provided to this Office state that the following persons were elected to the committee at the Annual General Meeting held on 21 June 2004:
Chairperson: G Foster
Secretary: P Neilson

Treasurer: A Jones

Committee: (ordinary members)

G. Johnson

D. Weigall

W. Lee

C. Bell

It is claimed that the meeting was convened without notifying all committee members. In particular, Messrs Jones, Lee, Bell and Johnson have stated in writing that the Secretary did not follow the requirements of the Act as they were not given the stipulated 7 days notice.

Mr Jones has also canvassed individual owners to ascertain their personal opinions regarding the appointment of Mr Smith. As at the date of the application, the owners of some 17 units had signed a form letter objecting to the appointment of Mr Smith on the following grounds:

• As the level of spending is not quantified the spending potential under the appointment is unlimited;
• The meeting at which the decision was made, was not called in accordance with the Regulation module and therefore decisions made at the meeting are void; and
• Such an appointment should be made by resolution of a general meeting.

Also in support of the application the applicants have provided a copy of a letter from Mr Jones to Mr Foster dated 17 May 2005 which reads as follows:

I lodge a formal objection to this meeting proceeding as regulation 28 of the Standard Regulation Module has not been complied with.

I request that you call a properly constituted committee meeting for Raby Bay Harbour apartments at a suitable place and time ensuring that all six members of the committee are invited as soon as possible.

However, subsequent to the meeting on 18 May 2005, a letter was distributed to all members of RBH Apartments which included the following statements:

I wish to inform you that Pamela Neilson (Secretary) and I have appointed Bruce Smith CPA as Finance Manager of our Body Corporate for an initial period of three months from 17 May 2005 in accordance with s.310 Body and Community Management act 1997. ....

Mr Smith’s responsibility will be to manage all the affairs of RBH Apartments for three months and examine all documents, financial records and actions of all concerned since the inception of the body corporate.

At a teleconference convened with the parties to this dispute on 16 June 2005, I expressed concern that proper notice of the committee meeting had not been given as required by section 28 of the Body Corporate and Community Management (Standard Module) Regulation 1997. I also expressed concern that under the terms of the engagement, Mr. Smith is appointed for a period of 3 months at a rate of $95 per hour when the spending limit of the committee is $125 per lot i.e. $3,750 in total.

The respondents were not able to confirm that at least 7 days written notice of the meeting had been provided to the members of the committee and were not able to provide an indication of the total amount payable to Mr Smith.

Mr Foster expressed the view that Carolyn Bell and Greg Johnson were no longer members of the committee presumably pursuant to section 25(2)(d) of the Body Corporate and Community Management (Standard Module) Regulation 1997, as they had each missed two consecutive committee meetings This is disputed by Mr Johnson and by Ms Bell who has advised that she did not attend the meetings as she did not receive notice of meetings, did not receive minutes and had attended meetings as recently as April 2005 with the acquiescence of the Chairman.

Ms Bell has also raised the following concerns:

• Not all committee members were advised of the May 18 meeting;
• Only the chairperson, secretary, treasurer and Mr Lee were informed about the meeting and were not advised that it was a committee meeting;
• In any event 7 days notice was not given to the above;
• Proxies were not called for and therefore not taken into account;
• The terms of reference, responsibilities and role of Mr Smith were not detailed and therefore there is significant scope for him to do more than was originally intended. Potentially, his fees could exceed the relevant Committee spending limit of $125 x 30 (no. of lots).

Determination

Without being fully appraised of the circumstances of this scheme, it is obvious that it is facing serious financial and managerial problems in addition to the matter currently in dispute. Sooner or later there will need to be a competent review, and perhaps a reconstruction of the accounts of the


various schemes forming part of the layered arrangement. On the evidence provided, it would appear that Mr. Foster and Ms. Neilson have seen a need to act decisively in this regard by appointing Mr Smith, who is also undertaking an analysis of the accounts of the Principal Scheme.

However, the appointment of suitable professionals to undertake this work needs to be done in accordance with the legislation and if necessary, by way of a resolution passed at a general meeting. I am of the view that the appointment of Mr Smith is invalid and propose to order that the appointment of Mr Bruce Smith as "Finance Manager" by Raby Bay Harbour Apartments was at all times void. I am of the view that the relevant notices were not given to committee menmbers as required by section 28 of the Body Corporate and Community Management (Standard Module) Regulation 1997. I am also concerned that as Mr. Smith is appointed for a period of 3 months at a rate of $95 per his fees could easily exceed the relevant Committee spending limit of $125 x 30 i.e. $3,750 in total.

Further, the body corporate may wish to consider whether an extraordinary general meeting should be convened so that a committee can be elected and there is some certainty as to who is a member of the committee and therefore entitled to vote upon resolutions submitted to meetings of the body corporate committee.

Finally, I would point out that this determination is not a reflection on the intentions or abilities of either the committee members or Mr Smith, but rather the need for compliance with statutory requirements.


Order

The purported appointment of Mr Bruce Smith as "Finance Manager" by the body corporate for Raby Bay Harbour Apartments was at all times void.

Mr Smith is to return to the body corporate for Raby Bay Harbour Apartments all books and records relating to the Raby Bay Harbour Apartments body corporate and is not to operate the Body Corporate bank account.

Although an interim order has been sought by the applicant, this order is to have effect as a final order.