Portobello By The Sea [2005] QBCCMCmr 51 (31 January 2005)

Last Updated: 5 July 2005

REFERENCE: 0585-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	24682
Name of Scheme:	Portobello By The Sea
Address of Scheme:	6 Beerburrum Street DICKY BEACH QLD 4551

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

C & C Jaques, the Owners of lot 1.

I hereby order that the application for an order to invalidate the AGM of the Body Corporate held on Saturday 4 September 2004 is dismissed. I further order that the purported resolution passed in respect of Motion 13 the AGM of the Body Corporate held on Saturday 4 September 2004 is invalid and of no effect.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0585-2004

"Portobello By The Sea" CTS 24682

Application

The applicant, the occupier of lot 1, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act):

Invalidation of the AGM of the Body Corporate held on Saturday 4 September 2004.
Invalidate of Motion 13 at the AGM held on 4 September 2004.

The Scheme

Portobello By The Sea consists of 60 lots (55 residential and 5 commerecial shop-front lots) registered under a building format plan of subdivision. The regulation module applicable to the scheme is the Accommodation Module.

Jurisdiction

Section 227(1)(b) of the Act 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. As this is a dispute between lot owners and the body corporate, it 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)).

Background

An application for resolution of a dispute has been lodged with this Office by an owner of lot 1 in the above scheme. Essentially, this dispute revolves around a motion 13 submitted to the AGM held on 4 September 2004, and also the giving of notice as required by sections 40 and 41 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997.

Motion 13 read as follows:

MOTION 13: Submitted by Alan and Jennifer Roberts (On-site Managers)
That by special resolution, the body corporate consent to the recording of a new community management statement for the scheme to insert the following new by-law:-

21. Residential and Commercial Use of Lots
(a) Lots 1 to 5 inclusive may be used for any commercial purpose, consistent with planning by-laws, except they may not be used for real estate management or letting purposes: and


(b) Lots 6 to 60 inclusive may be used for residential purposes only except for Lot 12 which may be used for both commercial purposes (including property management, real estate sales and letting purposes) as well as residential purposes.

Explanatory Note
Alan and Jenny’s financier has requested the insertion of the above new by-law so that the complex is brought in line with current council zoning requirements. The new by-law does not change any rights or obligations as are currently in place. It merely clarifies the make up of the complex and removes doubt as to the purposes for which lots may be used for.

This motion was carried with 15 votes in favour of the motion and 4 against.

Sections 40 and 41 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 provide that lot owners must be given at least 21 days written notice of a general meeting and that such notice must be given personally or at the owner’s address for service as noted on the Roll.

The owners of lot 1, a commercial lot currently occupied by a restaurant, advise that they only received notice of the AGM at 5PM on Wednesday 1 September when their mail was delivered by an employee of the resident caretaker/ manager. The applicants opposed motion 13 on the basis that it disadvantages the commercial lot owners, favours the caretaker/ letting agent and was not in force at the time that they applicants purchased their lot. Further, they submit that the short notice period precluded the applicants from obtaining legal advice, and as only 5 lot owners attended the meeting (apart from the resident caretaker/ letting agent) the majority of votes for this motion had already been collected either by postal vote or proxy.

Secondly the explanatory notes accompanying Motion 13 stated that the purpose of the motion was to ensure compliance with council zoning requirements when in fact it was to complement a provision of the Letting Agreement entered into with the body corporate, and was requested by the resident caretakers/ letting agents’ financier as a condition of a loan arrangement

Submissions

The owners of another commercial lot support the applicant on the basis that:

•	they would be disadvantaged if restrictions were placed on them in choosing prospective tenants;
•	the body corporate should not be entitled to impose these restrictions on commercial lots; and
•	the by-law may involve a restraint of trade.

The resident caretakers/ letting agents made the following submissions:

•	at the time when the notices were issued, Australia Post delivered all mail to the resident manager’s office after which time it was distributed to resident mailboxes and mail for lots 1-5 was kept in the reception office for collection however they doubt that the letter was delayed in their Office;
•	finance for purchase of the "management rights" had been approved subject to them putting a motion of this type to the AGM;
•	this motion was to bring the by-laws into agreement with the letting agreement dated 22/9/98 granting the resident caretakers "the sole right to carry on from the manager’s unit..and the office area the business of letting units"; and
•	the body corporate had covenanted in that agreement to "not permit any other person...to carry on or render or be concerned in any business or service (including the letting of units) of the same or similar nature to the business or service conducted or rendered by the manager within the building"..

The Secretary/ Chairman submitted that:

• the notice and papers were despatched as per standing instructions;
• the owners of lot 1 were aware of the date of the meeting which they attended and at which they voiced their concerns;
• the AGM was legally constituted, had the appropriate quorum and adequate discussion was held, following which the motion was carried.

The owners of lot 1 replied as follows:

• they only received 2 days notice of the motions put forward by the resident caretakers/ letting agents;
• only 6 of the 60 lot owners attended the meeting and therefore the majority of votes had already been collected by postal vote or proxy before there could be any discussion;
• the explanatory notes accompanying Motion 13 stated that the purpose of the motion was to ensure compliance with council zoning requirements when in fact it was to complement a provision of the Letting Agreement entered into with the body corporate, and was requested by the resident caretakers/ letting agents’ financier as a condition of a loan arrangement

Determination

A combination of matters cause me to have concerns regarding the resolution purported to have been passed in respect of Motion 13 at the AGM for the scheme held on 4 September 2004.

In particular, I have concerns regarding the following:

• The allegation by the owners of lot 1, that they only received notice of the AGM at 5PM on Wednesday 1 September when their mail was delivered by an employee of the resident caretaker/ manager, precluding the applicant from obtaining legal advice and discussing the matter with other lot owners before their votes were cast;
• The explanatory note accompanying motion 13 may have been misleading in that it stated:

(i)	a new by-law was required so that the complex is brought in line with current council zoning requirements
(ii)	The new by-law does not change any rights or obligations as are currently in place.

The relevant provisions of the act regarding by-laws are contained in Part 5 of the Body Corporate and Community Management Act 1997 while sections 40 and 41 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 govern the giving of notice of a general meeting. Of course not every procedural irregularity would operate to cause a general meeting of the body corporate to be void or to invalidate a resolution. However, significant procedural irregularities in calling of the meeting, or voting on a motion could lead to such a result.

It is certainly arguable that by-law 21 impacts adversely on the commercial lot owners. The resident caretaker/ letting agent submits that the purpose of motion 13 was to bring the by-laws into agreement with the letting agreement dated 22/9/98 granting the resident caretakers "the sole right to carry on from the manager’s unit and the office area the business of letting units"; and the body corporate had covenanted in that agreement to "not permit any other person...to carry on or render or be concerned in any business or service (including the letting of units) of the same or similar nature to the business or service conducted or rendered by the manager within the building". Clearly, in the absence of such a by-law, the body corporate has little control over the type of business which may be conducted by the owners/ occupiers of the commercial lots.

While it is not suggested that delivery of voting papers to the applicant was deliberately delayed, the applicants maintain that they only received notice of the AGM at 5PM on Wednesday 1 September when their mail was delivered by an employee of the resident caretaker/ manager.
The by-law restricts the type of business which they may choose to carry on from the premises, and should they wish to sell their lot, by-law 21 restricts the type of business which may be conducted by a lessor or purchaser. Accordingly I am of the view that the owners of the commercial lots should have adequate opportunity to voice any concerns regarding proposed motions well before the AGM, particularly in circumstances where votes are cast by way of postal vote or proxy.

It also arguable that the explanatory note accompanying motion 13 may have been misleading in that it stated:

(i) The new by-law does not change any rights or obligations as are currently in place.
(ii) a new by-law was required so that the complex is brought in line with current council zoning requirements.

The applicants submit that the explanatory notes are inaccurate in stating that the motion was to ensure compliance with council zoning requirements when in fact it was to complement a provision of the Letting Agreement entered into with the body corporate and was requested by the resident caretakers/ letting agents’ financier as a condition of a loan arrangement.

Section 40C of the Body Corporate and Community Management (Accommodation Module) Regulation Act 1997 provides for inclusion of an explanatory schedule to accompany the agenda for an annual general meeting so that voters are able to make an informed decision. In this instance I believe that the wording of the explanatory note could convey the impression that the zoning requirements of the local Council (the Caloundra City Council) required the making of a new by-law restricting the use of the commercial lots. While I do not believe that every procedural irregularity would operate to invalidate a resolution, in this instance I believe that a significant procedural irregularity has occurred in relation to motion 13.

Section 276(3) of the Act empowers an adjudicator to make an order which is just and equitable in the circumstances to resolve a dispute. The range of possible orders in schedule 5 includes an order that a resolution purportedly passed at a general meeting of the body corporate was at all times void.

I do not consider that the irregularities outlined above are of such gravity as to justify an order invalidating the AGM of the Body Corporate held on Saturday 4 September 2004. However, I am of the view that the owners of the commercial lots should have adequate opportunity to voice any concerns regarding proposed motions well before the AGM, particularly in circumstances where votes are cast by way of postal vote or proxy.

For the above reason I am of the view that the purported resolution passed in respect of Motion 13 is invalid. Of course the motion, accompanied by a more precise explanatory note, may be resubmitted to a general meeting properly convened in accordance with the Act.