Aarons [2005] QBCCMCmr 507 (9 September 2005)

Last Updated: 19 July 2006

REFERENCE: 0076-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	11476
Name of Scheme:	Aarons
Address of Scheme:	3355 Gold Coast Highway SURFERS PARADISE QLD 4217

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

Simon Shilling, the owner of lot 2

I hereby order that the application by Simon Shilling, the owner of lot 2, for orders that: The Commissioner appoints an administrator to take complete control of Aarons CTS 11476 to replace the body corporate committee; The Commissioner order an investigative audit of Complete Body Corporate Services financial records, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0076-2005

"Aarons" CTS 11476

The applicant, Simon Shilling, the owner of lot 2, has sought the following order of an adjudicator under the Body Corporate and Community management Act 1997 (the Act) quote:

The Commissioner appoints an administrator to take complete control of Aarons CTS 11476 to replace the body corporate committee.
The Commissioner order an investigative audit of Complete Body Corporate Services financial records.

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)).

The scheme is a subdivision of 44 lots recorded under a building unit plan (now a building format plan) of subdivision. The regulation module applying to the scheme is the accommodation module.

Determination

In the circumstances of this application, I am not prepared to order in terms sought by the applicant. Rather, through a series of processes (in particular, the order made in respect of application 437 of 2005 and the consequent body corporate meeting held as required by that order), I have implemented what I consider is, at least at this time, a better resolution of the issues affecting this body corporate.

Essentially, the applicant has complained that Mark Howard, the current chairperson, secretary and treasurer of the body corporate (Howard) controls the body corporate in three ways:

1. By a controlling ownership of a majority of lots in the scheme;
2. By control of the committee;
3. By appointment and control of the body corporate manager, Complete Body Corporate Services (CBCS).

To overcome this, the applicant’s proposed solution was the appointment of an administrator to take complete control of Aarons CTS 11476 to replace the body corporate committee and to have undertaken an investigative audit of Complete Body Corporate Services financial records.

I do not consider that the solution proposed by the applicant is appropriate, and said as much in correspondence to him (and subsequently circulated to all owners with a copy of my order in 437-2005) dated 15 June 2005. I quote relevantly from that correspondence as follows:

... Secondly, I note that you (and other owners for that matter) have been in attendance at the last 3 AGM’s of the body corporate. However, at no time have you evidenced an intention to stand for election to the committee. It seems, given the number of nominees, that your (and other owners) election to the committee would have been assured had you (and / or they) simply nominated. Given this, I conclude that your implications that Mr Howard effectively controls the committee and the body corporate lacks conviction. Surely if owners simply nominated for the committee, and were elected, then those owners would similarly have a say in the body corporate via the committee.

Connected with this aspect is the fact that you seek the appointment of a permanent administrator in place of the current committee. Your proposed nominee is a practicing body corporate manager. My preliminary view is that what this body corporate in fact needs, given the alleged issues or problems affecting it, is an effective and involved committee of owners. I do not consider, given the nature of the problems alleged, that a body corporate manager would have either the requisite skills or time to effectively manage this body corporate on the micro level required (given other professional commitments) in place of an effective committee. This is no reflection whatsoever on the skills of the proposed appointee, but rather a reflection on the nature of the problems alleged and my view of what type of structure which would be required to start to address these problems.

Whilst I am prepared to take further submission on this aspect, my preliminary view is as stated: that the proposed appointment of a practising body corporate manager as permanent administrator of the scheme is not the appropriate solution for the issues or problems alleged to be affecting this scheme. Rather, I conclude a more effective solution would be the election or appointment of an effective and involved committee of owners. This might be achieved if owners were simply prepared to nominate for committee positions. Alternatively, it might be achieved by an order for fresh committee elections, which might be considered, in light of comments made hereafter.

The usual practice of adjudicators is to only appoint an administrator on a permanent basis as you propose (in replacement of a functioning committee) where there is evidence that the body corporate is completely dysfunctional, and that all other avenues of effective management have been exhausted. I consider that whilst there might be some evidence that the body corporate is not functioning effectively, I conclude that all avenues to achieve this have not been exhausted. In particular, it is clear that there are vacant committee positions, and that at successive AGM’s owners are choosing not to nominate for vacant committee positions. ...

(I then went on to outline how the provisions of the legislation prevent an owner, even an owner representing a majority of lots, from dominating or controlling the committee, unless minority owners were simply unwilling to involve themselves on the committee before concluding that)

In my view the solution here is not to remove the committee in favour of a permanently appointed administrator simply to prevent Mr Howard being involved in that committee. Rather it is that other (or minority) owners be prepared to serve on the committee.

On 29 June 2005, I made an order an another application affecting this scheme. That order is numbered 437 of 2005 and is pivotal to my resolution of the ongoing dispute currently affecting this scheme. A copy of that order was required to be circulated to all owners so I do not need to refer to the contents of that order in any detail here. Suffice to say however, that order contained a detailed statement of the law relevant to the then elected committee of this body corporate, and the legality of certain actions taken by the then elected committee. The order went as far as to:

• Invalidate a committee and general meeting of the body corporate; and
• To order that the body corporate convene an EGM "to elect or appoint the "required number" of members to its committee".

The body corporate has now held the meeting required to be held pursuant to that order, and I have been provided with a copy of the minutes of that meeting. It is with some satisfaction that I note that at the meeting, held on 18 August 2005, six (6) additional persons (to Howard as chairperson, secretary and treasurer) were elected as committee members. Aarons now has a duly elected committee of seven (7) members, the maximum number permissible. I can only hope that that committee has now grabbed the batton and is running with it (so to speak) in terms of its responsibility to manage the day to day operations of this scheme. Clearly, this body corporate is beset with a number of significant issues pertaining to maintenance which must now be attended to with some urgency. However, with an elected committee now representative of all owners in the scheme, I consider that it is now in a position to do so.

In respect of voting at committee meetings, section 31 of the Accommodation module is the relevant section, quote:

31 Voting at committee meetings [SM, s 33]
(1) At a meeting of the committee--
(a) a question is decided by a majority of votes of the voting members present (either in person or by proxy) and entitled to vote on the question who are voting; and
(b) each voting member entitled to vote on a question to be decided has 1 vote on the question.
(2) Without limiting subsection (1), if a quorum is present, a decision supported by a majority of the votes of the voting members present and entitled to vote on the decision is a decision of the committee.
(3) To avoid doubt, it is declared that a voting member who is an executive member has only 1 vote, even if the person holds more than 1 of the positions of chairperson, secretary and treasurer.

In short, Howard is simply one member of a committee of seven. He no longer controls the committee, and it is no longer open for minority owners to allege that he does. I consider that this resolves the issue of Howards’ alleged control of the committee, and negates any need to appoint an administrator to manage the affairs of this body corporate.

Generally, two other issues have been raised; namely

1. Howard has a controlling ownership of a majority of lots in the scheme;
2. Howard controls the body corporate manager, Complete Body Corporate Services (CBCS).

On the aspect of there being majority ownership of lots, I have previously had cause (in 437 of 2005) to state the following, quote:

As for general meetings, clearly Mr Howard has or controls ownership of a majority of lots in the scheme and is able to out vote minority owners in the determination of most resolutions. However, again, Mr Howard should not be penalised for this. The applicant appears to believe that simply because Mr Howard can control the outcome of most resolutions, then that this is enough to warrant Mr Howard being denied the benefit of his majority ownership or control of lots. It is not, and minority owners should be under no illusion to this effect. In order for any resolution carried on the majority vote of Mr Howard to be invalidated it must be shown to offend against the principles or requirements of the legislation.

The simple fact of majority ownership is not contrary to the principles of the legislation. Rather it is a fact which other owners must accept as part of ownership in this particular scheme. What I am saying is that there is nothing illegal in majority ownership of lots. With majority ownership comes the ability to control the outcome of perhaps most resolutions considered by the body corporate. The invalidation of resolutions carried on the basis of majority ownership is not a matter taken or considered lightly by adjudicators. It is not sufficient to allege the simple fact of majority ownership. Rather, what is required is to show that any resolution carried by the body corporate on the basis of a majority vote is not reasonable and for the benefit of owners of the lots included in the scheme. The onus of establishing this is not an easy one; whilst the interests of the minority owners are a relevant consider, so to are the interests of the majority owner. There have been several pronouncements by adjudicators of what might be required to establish this onus. Suffice to say that it will depend on the circumstances of each individual resolution carried.

I conclude this point by saying to minority owners in this scheme that they will need to make a far more compelling case for invalidation of resolutions carried on the basis of majority ownership (based on considerations of reasonableness and the resolution not being for the benefit of owners generally) than simply alleging the fact of majority ownership. ...

There is nothing further I intend to state on this aspect.

Finally, there is the alleged issue of Howard controlling the body corporate manager, Complete Body Corporate Services (CBCS). I consider that in consequence of the election of a committee representative of all owners, this aspect will no longer be an issue. This is so for the reason that a body corporate manager is engaged by the body corporate. Consequently, the manager should act exclusively at the direction of the body corporate (usually via its committee), and not that of any particular owner.

In a previous order (775 of 2004), I had cause to make the following observations regarding the respective positions of the committee and a body corporate manager engaged by the scheme, quote:

Certain sections of the Act establish the precedence or power of the committee over the body corporate manager, quote –

97 No delegation of body corporate’s powers
A body corporate can not delegate its powers.

100 Power of committee to act for body corporate
(1) A decision of the committee is a decision of the body corporate.
(2) Subsection (1) does not apply to a decision that, under the regulation module, is a decision on a restricted issue for the committee.
(3) Despite anything in a contract with the body corporate (including the engagement of a body corporate manager), a decision of the body corporate manager is void to the extent that it is inconsistent with a decision of the body corporate’s committee.
(4) If persons, honestly and reasonably believing that they are the committee for the body corporate, make a decision while purportedly acting as the committee, the decision is taken to be a decision of the committee despite a defect in the election of 1 or more of the persons.

Division 2--Performance of powers of body corporate committee and executive members by body corporate manager
119 Schemes for which there is a committee for the body corporate
(1) This section applies if there is a committee for the body corporate.
(2) The body corporate, in writing, may authorise the body corporate manager to exercise some or all of the powers ("authorised powers") of an executive member of the committee.
(3) However, the body corporate must not prevent the executive member from--
(a) exercising an authorised power; or
(b) directing the body corporate manager about how an authorised power is to be exercised.
(4) The body corporate, in writing, may revoke the authorisation at any time.

These sections confirm that the committee has power to direct the body corporate manager in the role of the manager, and in particular a committee may revoke an authorisation given to a manager at any time. Moreover, a body corporate cannot delegate its powers to a manager, and a decision of the body corporate manager is void to the extent that it is inconsistent with a decision of the body corporate’s committee.

The effect of all these provisions is to allow a committee to direct the manager in the performance of their role, to authorise the manager to exercise some or all of the powers of an executive member of the committee, and to revoke the authorisation at any time. Finally, a manager can’t make decisions inconsistent with decisions of the committee.

Given all these provisions, I consider that the committee have ample powers to "conduct its own affairs". Clearly, the manager cannot prevent a committee from doing so. I suggest that the committee here appear to not understand the extent of their powers. I suggest that it is within their powers to direct the manager in the performance of his role. Given this, I consider that the terms of the second interim orders sought are unnecessary.

I consider the above comments are relevant to the interaction which should now occur between the newly elected committee for Aarons and the body corporate manager, CBCS.

It cannot be more clear than that CBCS must act in accordance with the directions of the committee. The only body which can override the committee’s directions to the manager is the body corporate itself in general meeting. I have nothing further to add on this aspect, and conclude that this aspect of the application has now been resolved.