Il Villaggio [2005] QBCCMCmr 513 (15 September 2005)

Last Updated: 19 July 2006

REFERENCE: 0570-2005

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	28518
Name of Scheme:	Il Villaggio
Address of Scheme:	24 Radan Street, SUNNYBANK HILLS QLD 4109

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Sharene Abdelrazek, a co-owner of Lot 30

I hereby order that the application for an interim order by Sharene Abdelrazek, a co-owner of Lot 30 against the Body Corporate for Il Villaggio Community Titles Scheme 28518 to: 1. immediately put a halt to all activity and expenditure or commitment to expenditure of the committee and liasions 2. put TEYS Strata in control of running the Body Corporate pending a final determination. is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0570-2005

"Il Villaggio" CTS 28518

APPLICATION

This application is by Sharene Abdelrazek, a co-owner of Lot 30 (applicant) against the body corporate (respondent) seeking the following outcomes.

The final outcome sought is, quote:

To remove the current committee and the individuals appointed to act as liaisons to TEYS and the Body Corporate Lawyers.

The applicant has also sought the following interim order, quote:

1)	immediately put a halt to all activity and expenditure or commitment to expenditure of the committee and liasions
2)	put TEYS Strata in control of running the Body Corporate pending a final determination.

The applicant has provided written confirmation from Michael Teys of TEYS Strata Pty Ltd dated 16 August 2005 consenting to an appointment as administrator for the scheme.

JURISDICTION

"Il Villaggio" Community Titles Scheme 28518 is a scheme under the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation Module).

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)).

In accordance with section 247 of the Act, the Commissioner for Body Corporate and Community Management (Commissioner) has referred the application to me to decide whether the nature or urgency of the circumstances of the application warrant an interim order being issued. The Commissioner has referred the application to me even though affected persons have not been given notice of the application, or afforded an opportunity to make submissions about the application (section 247(3)).

Section 279(1) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances of the application. In any consideration of an application which seeks the making of an interim order, it is necessary to determine at the outset whether, because of the nature or urgency of the circumstances relating to the application, an interim order is in fact necessary or appropriate.
The examples included in the Act under section 279(1) are suggestive of the usual circumstances where an interim order might be made. Both examples are in the nature of injunctive relief. Whilst the range of matters which might be the subject of an interim order is not capable of definition, the applicant does need to establish that the circumstances of the application warrant the making of an interim order.

SUBMISSIONS

The applicant’s main submissions are to the effect that the committee has not acted in the best interests of lot owners and contrary to the Accommodation Module. The applicant submits that the committee has acted in breach of the management agreements, has acted contrary to the dispute resolution provisions of the Act, incurred legal expenses unnecessarily, withheld information from lot owners and incorrectly handled voting. The applicant has also referred to breaches of section 24(1)(f) and (2) of the Accommodation Module by stating that some committee members have incorrectly claimed the payment of individual expenses over the financial year; and breaches of section 92(7), section 101(1) and (2) of the Accommodation Module by:

• Committing the body corporate to legal expenses of $7157.91 without approval and by spending above the relevant limit for committee spending.
• Incurring expenditure above the relevant limit for committee spending such as purchasing a treadmill for $5899.00, installing a watering system for $10,000.00, and miscellaneous expenditure totalling $14181.92 on scheme land. The applicant claims that some expenditure was split at the direction of some committee members.

The applicant states that the committee’s actions has placed the body corporate "in an extremely precarious financial position and will be unable to meet their obligations". The applicant provided a cash flow statement prepared by Teys Strata supported by a statement from the body corporate manager that the body corporate’s financial situation is "dire".

Under section 243 of the Act, a copy of the application was provided to the committee to make a submission. Submissions on behalf of the body corporate committee can be generally summarised as:

• TEYS Strata has a clear or apparent conflict of interest and an actual or ostensible bias against the committee and should not be appointed.
• The committee has sought financial information from the body corporate manager on a continual basis, and has not been provided with accurate records or accurate financial reports since the engagement of TEYS Strata.
• A large proportion of the legal expenses have been incurred in responding to two applications made under the dispute resolution provisions of the Act. The committee has informed lot owners regarding these applications and the associated legal advice.
• The treadmill cost $5400.00 with the delivery and installation cost being $499.00.
• The sprinkler system was repaired by McCracken Water Services in two stages after the committee obtained two quotations, sought advice from the previous body corporate manager and passed a resolution.
• Denies some of the expenses identified by the applicant as being incurred by committee members and submits that the body corporate costs were minimised while the body corporate had not engaged a body corporate manager.
• The body corporate is not in "an extremely precarious financial position", but there will not "be enough to cover expenses by the time the next levies are raised in March 2006".
• That an alternative administrator, Peter Lucas and Graham Starkey of PA Lucas & Co be appointed due to the failure of lot owners to ratify fixing special contributions to meet ongoing legal proceedings and other expenses. The respondent submits that the administrator should be appointed on a limited basis with respect to these issues.

DETERMINATION

The applicant has sought an interim order that all activity and expenditure of the committee and the liaisons be stopped and that an administrator be appointed to administer the body corporate pending a final determination. The applicant claims that the committee has not acted in the best interests of lot owners and contrary to the Accommodation Module. The primary objection to the actions of the committee appears to relate to disputes with the caretaking service contractor and expenditure incurred by the committee. The body corporate committee’s submission has, to a large extent, disputed many of the claims made by the applicant. However, it would seem there is a degree of consensus regarding the body corporate’s ability to meet its current or near future expenses.

The interim order sought would, in my opinion, have a significant effect on the management and administration of the body corporate. The applicant has provided some examples of committee actions to support the order sought. It is possible that this is not an exhaustive list of the applicant’s concerns. However, the applicant has provided her grounds to support the order sought, the respondent has made a submission based on the stated grounds and the interim order must be made on the material presented by the parties. In my view, an interim order of the nature being sought may only be made where the applicant has categorically demonstrated that the committee has continually and repeatedly acted in a manner contrary to the interests of lot owners and to the requirements of the Act and Accommodation Module. I consider that there would need to be evidence of systemic and repetitive contrary actions by the committee. In my opinion, an administrator may be appointed on an interim basis if the administration of the body corporate has completely broken down, or the affairs of the body corporate are in complete disarray.

The applicant has provided four examples of committee spending which she considers contravenes the requirements of the Accommodation Module. While the purchase of the treadmill, the installation of the sprinkler system, and the gardening expenses involve spending which could be claimed to be above the relevant limit for committee spending, given the submissions made to the application, I am not satisfied (for the purposes of making an interim order) that this spending demonstrates that the committee has acted with unjustifiable disregard for the legislation and the interests of lot owners. While the total of the legal expenses incurred is above the relevant limit for committee spending, there is no material to suggest that this expense was incurred for one particular action, indeed it is submitted by the committee that in fact the expense was incurred to respond to at least two actions initiated against the body corporate. While the individual actions may be within the relevant limit for committee spending, it is apparent that the actual expenditure for ‘Legals’ exceed the budget for the 2004-2005 financial year of $5000.00. However, the committee has demonstrated that it has kept records of relevant decisions and has disclosed information regarding obtaining legal advice to lot owners.

The applicant has also referred to other management issues. In my view, I do not consider that the totality of these identified concerns and the expenditure issues mentioned above warrant the making of the interim order sought. Further, the body corporate may be in a financially insecure position and I am not convinced that the benefit derived from incurring additional expense for an administrator to manage the scheme on an interim basis would outweigh the inconvenience to the scheme should the interim order not be made. For these reasons, I have dismissed the application for an interim order.

In my opinion, the body corporate could develop reasonable strategies to remedy the financial situation. For example, it would appear (based on the financial documentation presented in the application) that the 2004-2005 financial year has recently ended. In this regard, the committee could consider fixing an interim contribution in accordance with section 93 of the Accommodation Module. In seeking to resolve the financial management issues, the committee must recognise that it is chosen to manage the day-to-day administration of the body corporate within the scope of the Act and the Accommodation Module, and that in a community titles environment, the body corporate in general meeting is the paramount decision making body and the committee is chosen to manage and implement its decisions.

Nevertheless, the matters raised by the applicant require examination in accordance with the usual processes of this office. The application will be finally determined in due course.