Sailz Whitsunday [2005] QBCCMCmr 355 (29 June 2005)

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

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 those parts of the application seeking the following orders:

1. The activation in the appropriate statutory manner, of the motion passed at the meeting of the committee of the Body Corporate on 5^th August 2005 showing a no confidence vote in the Caretaker as evidenced by the minutes of that meeting;

2. Overturning of the payment approval to the Caretaker for claimed "back pay";

3. Removal of an ineligible member of the committee; and

4. Invalidation of a Committee meeting purportedly held on 2 December 2004

is dismissed.

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

"Sailz Whitsunday" CTS 16912

ORDERS SOUGHT

By application dated 5 March 2005 and subsequently amended on 15 March 2005, the applicants have sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) :

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)).

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 submitted that at the date of the application, the purported committee was comprised of two lot owners, and the caretaking and letting manager, who is a non-voting member. The applicants expressed concern that one of the lot owners had a conflict of interest because he has acted as caretaking manager from time to time. The applicants believed that the committee could not form a quorum, and that an extraordinary general meeting should therefore be held to elect replacement committee members.

On 14 March 2005 Adjudicator Hanly conducted a teleconference with one of the committee members, Ms Pip Runciman, and one of the applicants, Mr Peter Lane. Ms Runciman advised her that she was 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 also referred to the committee’s decision to pay the caretaking manager approximately $11,000.00 in "back pay", which he believed exceeded the limit for committee spending.

Submissions were received from Mr Hillary and from Mr Hollingworth.

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.

However, Ms Hanly found that Mr Hollingworth had not been properly appointed as body corporate manager and therefore ordered that until such time as he is so engaged, was not to operate as a signatory of the body corporate accounts, nor to receive any remuneration from the body corporate. Further, any payments to him would need to be ratified at the next general meeting, or otherwise refunded to the body corporate.

Hs Hanly also found that Mr Lawn, Ms Aucott and Mr Moore resigned from the Committee in November 2004 and although Messrs Gnezdiloff, Langston and Percy were variously stated to have accepted appointments to the committee, none of those appointments was ever considered by the committee either at a formal committee meeting or by flying minute and were therefore invalid. In the absence of a quorum it was necessary for an extraordinary general meeting to be called so that a number of persons can be chosen to fill the vacancies. Ms Hanly therefore ordered the body corporate to call a general meeting to fill the casual vacancies on the committee.

On 18 May a staff member from this Office contacted Mr Lane and Ms Foreman to determine whether there were any outstanding issues following the Extraordinary General Meeting which was convened pursuant to Ms Hanly’s interim order. In response, a facsimile was received from Mr & Mrs Foreman and Mr & Mrs Lane on 15 June 2005 in which they advised as follows:

"We would like to further amend our application to remove the following requests for outcomes sought as we believe that these matters have been resolved at the extraordinary general meeting:

• Removal of the current "Manager" of the Body Corporate, Harry Hollingworth...;

All other requests for resolution with "outcomes sought" remain as there were in the original application and letter requesting amendment".

DETERMINATION

Having regard to the original application and amending letter, the unresolved matters are as follows:

3. Invalidation of a committee meeting purportedly held on 2 December 2004.

4. Removal of an ineligible member of the committee

Vote of no confidence in the Caretaker

In relation to 1 above, the following motion was proposed and carried at the Committee meeting on 5 August 2004:

"Due to various problems associated with the running of the complex together an ongoing conflict over the payment of accounts which are Faye Davis’ responsibility, I have no option but to move a motion of no confidence in the caretaker as the manager of Sailz."

This is a broad statement and in my view the only conclusion which can be drawn from this statement is that at 5 August 2004, four of the seven committee members were unhappy with the resident caretaker/ letting agent for reasons which were not specified in any detail. It does not indicate an intention to take any particular action against the caretaker/ letting agent.

Under section 84C of the Accommodation Module Regulation, the body corporate may initiate action to terminate a person’s engagement as a service contractor on the following grounds:

However the body corporate may only do so after the following steps have been complied with:

None of the above grounds for termination have been established and none of the preliminary steps provided for by section 84C have been taken. Should the applicants believe that there are grounds for terminating the engagement of the caretaker/ letting agent, their concerns should firstly be raised with the committee which may take action to issue a remedial action notice. In the event that the notice is not complied with, the matter may be dealt with by way of a motion put to a general meeting.

Payment of "back pay" under Caretaking Agreement

In relation to item 2 above, I am of the view that the payment of outstanding remuneration to the caretaker/ letting agent did not involve a payment "in excess of the limit to which the BCC can authorise payments without consent from all Body Corporate members" as claimed by the applicants.

In this regard section 101(1) of the Accommodation Module Regulation provides
The Committee may only carry out a proposal involving spending above the relevant limit ($300) for committee spending for the scheme if-
(a) the spending is specifically authorised by ordinary resolution of the body corporate;...

From the evidence provided to me, I note that the Caretaking Agreement was entered into by the body corporate in August 1995. The Agreement was assigned on a number of occasions before being assigned to Ms Davis who also sought a renewal of the Agreement , which is common industry practice. The agreement provided for an annual management fee set at $41,328 in 1997 to be increased annually by the higher of either the CPI index or 5%.

During 2004 Ms Davis realised that she had been underpaid and claimed the amount of $29,229.64 from the body corporate. This claim was referred to the body corporate’s solicitor who initially believed that the outstanding amount was quite small, although subsequent calculations and a detailed report obtained from the body corporate’s auditors, CE Smith & Co revealed that the underpaid amount was $11,141.25 plus applicable GST of $1,114.12 giving a total amount owing of $12,255.37. At the Committee meeting convened on 14 October 2004, it was resolved that the sum of $11,280.06 be paid to Ms Davis as arrears owing under the terms of her contract. I have reviewed the "underpayment profile" prepared by CE Smith & Co and note that detailed projections have been prepared regarding the 5% increase per annum and additional GST payable.

I am of the view that in approving the back payment , the committee was merely ensuring that the body corporate was complying with its contractual obligations pursuant to an agreement validly entered into between a Service Contractor and the Body Corporate, pursuant to an ordinary resolution of the body corporate. The material provided to me indicates that the committee has acted properly by referring the matter to their solicitor and obtaining appropriate evidence of the Body Corporate’s indebtedness in the form of a detailed analysis from an accountancy firm.

Removal of an ineligible member of the committee

The applicants also seek "the removal from the committee of a unit holder that is not eligible to be a member as they are also sub contractor and or part time manager acting on behalf of the caretaker".

The basis of the applicant’s argument would appear to be that they believe Mr Hillary is an associate (as defined) of the caretaking service contractor. Section 11 of the Accommodation Module provides that an otherwise eligible person such as a lot owner is not eligible to be a voting member of the committee if the person is an associate of a service contractor or letting agent

The Schedule 6 Dictionary of the Act defines an associate of a person to mean "someone else with whom the person is associated under section 309". Section 309 of the Act states:
"(1) For this Act, a person is associated with someone else if
(a) a relationship of a type to which this section applies exists between them; or
(b) a series of relationships of a type to which this section applies can be traced between them through another person or other persons.
(2) This section applies to relationships of the following types
(a) marriage or de facto relationship;
(b) the relationship of ascendant and descendant (including the relationship of parent and child) or the relationship of persons who have a parent or grandparent in common;
(c) partnership;
(d) the relationship of employer and employee;
(e) a fiduciary relationship;
(f) the relationship of persons, 1 of whom is accustomed, or under an obligation (whether formal or informal), to act in accordance with the directions, instructions or wishes of the other;
(g) the relationship of a corporation and executive officer of the corporation;
(h) the relationship of a corporation and a person who is in a position to control or substantially influence the corporation’s conduct.
(3) Despite subsection (2)(e) and (f), the owner of a lot in a community titles scheme and a letting agent for the scheme are not associated merely because of their relationship as owner and letting agent.
(4) In subsection (2)

de facto relationship means the relationship between 2 individuals who, although not married to each other, live in a relationship like the relationship between a married couple"

The applicant has not relied on a specific provision of section 309 in making the claim that the Mr Hillary may be an associate of the caretaking service contractor and has only made general statements without proving any real argument to support the claim.

Similarly, the applicants have failed to show what "conflict of interest exists" and in any event a "conflict of interest" is not a ground for disqualification from committee membership. Rather, a committee member is merely required to abstain from voting upon a matter which involves a potential conflict of interest.

Accordingly, that part of the application seeking "the removal from the committee of a unit holder that is not eligible to be a member as they are also sub contractor and or part time manager acting on behalf of the caretaker" is also dismissed.

Invalidation of a Committee meeting purportedly held on 2 December 2004

As outlined in the Interim Order, it appears that the following persons were elected to the committee at the annual general meeting 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 therefore as at the date of lodgement of the transfer she was no longer eligible to be a member of the committee.

The material submitted to this office also reveals that Mr Lawn resigned from the committee on 2 November 2004, that Ms Aucott resigned on 20 November 2004 and Mr Moore resigned on either 23 or 24 November 2004.

In addition to Ms Davis who is a non-voting member, as at 2 December 2004 the voting members of the Committee would have been Ms Pip Runciman and Mr Doug Hillary.

Section 30 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation Module) provides that a quorum is at least half the voting members of the committee. I believe that a quorum was not present as only two voting members attended the meeting, whereas at the last annual general meeting, five voting members were appointed to the committee.

However, the Act imposes a time limit of 3 months within which to bring an application relating to meetings of the committee or body corporate. This application is dated 5 March 2005 and was not received by this Office until 9 March 2005.

Section 242 of the Act provides as follows:

242 Time limit on certain applications
(1) This section applies to an application for an order declaring void--
(a) a meeting of the committee for the body corporate, or a general meeting of the body corporate;
(b) a resolution of the committee or body corporate; or
(c) the election of an executive or other member of the committee.
(2) The application must be made within 3 months after--
(a) if subsection (1)(a) applies--the meeting; or
(b) if subsection (1)(b) applies--the meeting at which the resolution was passed or purported to be passed; or
(c) if subsection (1)(c) applies--the meeting at which the executive or other member was elected.
(3) However, if the making of the application does not comply with subsection (2)--
(a) the commissioner must deal with the application (including making a dispute resolution recommendation) as if the making of the application complied with subsection 2); and
(b) an adjudicator to whom the application is referred for specialist or department adjudication may, for good reason, waive the non-compliance.

I note that business considered at the committee meeting held on 2 December 2004 was in the main routine business regarding maintenance of the common property, and see no good reason to intervene.

ORDER
Most of the issues in dispute were subsequently resolved at a general meeting of the body corporate, although a number of residual issues have not been resolved.

As outlined above, I propose to dismiss the application for the following orders:

The activation in the appropriate statutory manner, of the motion passed at the meeting of the committee of the Body Corporate on 5^th August 2005 showing a no confidence vote in the Caretaker as evidenced by the minutes of that meeting;

Overturning of the payment approval to the Caretaker for claimed "back pay" on the grounds that payment was approved by the BCC when it did not have authority to do so as the amount paid was in excess of the limit to which the BCC can authorise payments without consent from all Body Corporate members; and

Removal of an ineligible member of the committee

Invalidation of a Committee meeting purportedly held on 2 December 2004

•	The body corporate has given the person a remedial action notice;
•	The person fails to comply with the remedial action notice within the period stated in the notice; and
•	Termination is approved by ordinary resolution of the body corporate.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Sailz Whitsunday [2005] QBCCMCmr 355 (29 June 2005)