One Park Road [2005] QBCCMCmr 534 (28 September 2005)

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

I hereby order that the application for an order restraining the holding of the annual general meeting scheduled to be held at 5.00pm on Thursday 29 September 2005, is dismissed.

I further order that the application for an order restraining the annual general meeting to be held at 5.00pm on Thursday 29 September 2005 from deciding or acting on motions 8, 9, 10, 11, 13 and 15 is dismissed.

I further order that pending a final determination of the dispute, the body corporate must not implement any resolution passed pursuant to motions 18 or 19 of the annual general meeting that is to be held at 5.00pm on Thursday 29 September 2005.

This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0687-2005

"One Park Road" CTS 2114

INTERIM ORDERS SOUGHT

The applicants have sought the following interim orders of an adjudicator:

JURISDICTION

The application evidences a dispute between various 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)).

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.

BACKGROUND

To say that this scheme has a troubled history would be a significant understatement. This dispute resolution application (application) is the eleventh such application lodged in the Commissioner’s office in the past two years. Only one of the applications was uncontentious in that it sought to change the body corporate’s financial year end date. The remainder have revealed an entrenched level of disputation between a minority group of owners and the owner of more than half of the lots, Edith Dindas Pty Ltd (ED). Orders were made by Adjudicator Toohey in Applications 0266-2003, 0361-2003, 0682-2003, 0703-2003 and 0521-2004 on 12 January 2005, and have been appealed to the District Court. Those appeals have not yet been determined.

The most recent application apart from this present application seeks the appointment of an administrator, and is awaiting adjudication.

The orders sought in this application relate to an annual general meeting scheduled to be held on Thursday 29 September 2005. The applicants seek to stop the meeting entirely, or alternatively to prevent certain motions from being considered. The applicants contend that those motions deal with matters which are the same or substantially the same as the issues contained in Application 0495-2005 and before the Court in the appeals.

The application was received in the Commissioner’s office at 3.00pm on Tuesday 27 September 2005. At my request a member of the Commissioner’s staff, Ms Amy Ah Ben, telephoned the applicants’ solicitor, Ms Bree Coupland, at 4.34pm on 27 September 2005 to enquire why the application had been lodged so close to the date of the proposed meeting. Ms Coupland advised that although the meeting material had been received earlier, the solicitors had been preparing a Certificate of Readiness in relation to the appeal and in any event their clients’ instructions to proceed in this matter were only received that day.

A copy of the application was faxed to Herdlaw Solicitors (for ED) at 4.55pm on 27 September 2005, after Ms Ah Ben telephoned that office at my request to advise that although I was not formally seeking submissions because of the short notice, I was prepared to accept any submission that was received by midday on 28 September 2005.

Herdlaw’s submission on behalf of ED was emailed to the Commissioner’s office at 3.51am on 28 September 2005.

It is clearly most unsatisfactory for applications to be made on very short notice in relation to the holding of body corporate meetings, when the regulations require that at least 21 days’ notice of the meeting must be given to all owners. I note that Adjudicator Toohey criticised the applicants for having lodged the last interim order application before the extraordinary general meeting held on 14 June 2005 only two business days before that meeting. Apart from any other consideration, regard must be had to the additional cost to a respondent to have a legal advisor prepare an urgent submission.

DETERMINATION

Herdlaw submitted that the applicants have no clear grounds for stopping the annual general meeting, and that the application is merely an attempt to disrupt the meeting. I do not propose to stop the meeting, as the body corporate is required to hold its annual general meeting within 3 months of the end of its financial year (now changed to 30 June) and there are obviously matters to which the body corporate must give its consideration in relation to budgets, levies and insurance, amongst other things, before that time expires on 30 September 2005.

Herdlaw further submitted that the first 6 motions (although I note that motion 15 is a duplicate of motion 13) which the applicants have sought not to be considered by the body corporate at the meeting are not currently the subject of any restraint, order or declaration of invalidity, nor are they likely to be as a result of Application 0495-2005. I accept that submission for reasons which follow.

Herdlaw further submitted that the last two motions which the applicants have sought not to be considered by the body corporate were in fact proposed by the committee, which is largely comprised of owners from amongst the group of applicants. Herdlaw noted that this demonstrates the absurdity of the situation faced by ED in relation to these applicants.

Herdlaw submitted that this application should be dismissed on the basis of its being misconceived. Herdlaw further submitted that the respondent should be entitled to costs of the application on the grounds that the applicants have not raised any serious question for consideration as an interim order, particularly as this application is based on almost identical grounds as Application 0419-2005, in respect of which interim orders were made by Adjudicator Toohey on 14 June 2005.

The following orders were made by Adjudicator Toohey on 14 June 2005:

I hereby order that, pending a final determination of the dispute, the body corporate must not implement any resolution passed pursuant to motions 8, 9 or 10 of the extraordinary general meeting that is to be held later today.

I further order that the application for interim orders is otherwise dismissed. In particular, the dispute is dismissed under section 270(1)(b) of the Body Corporate and Community Management Act 1997 to the extent that the dispute solely concerns whether the extraordinary general meeting amounts to contempt of court or prejudices issues the subject of determination by appeal.

This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

Adjudicator Toohey’s Statement of Reasons for Decision read, in part, as follows:

I fail to see any significant weight in any argument from the applicants strictly to the effect that the it would be unreasonable for the body corporate to deal with matters in general meeting that are substantially the same subject matter as issues before the District Court. I accept the submissions on behalf of ED to the effect that the mere fact of an appeal does not operate as a stay against ED submitting motions for a general meeting. If matters affecting the body corporate can be resolved by the body corporate’s normal management processes rather than in the courts then that is surely something that should be encouraged.

However, intervention of an adjudicator may be appropriate to the extent that a serious question is raised about whether adoption of a motion will seriously prejudice the body corporate. For example, if adoption of the motion would create rights for a third party but the District Court may subsequently make an order that extinguishes those rights and gives the third party a basis on which to seek compensation against the body corporate. In those circumstances a serious question will arise concerning whether adoption of the motion is unreasonable and contrary to the Act (Act 94, 152).

In an order of 12 January 2005,^[1] I made a declaration that a resolution that purported to limit the committee to making decision involving spending of no more than $500 was void on the basis it was unreasonable and effectively deprived the committee of a substantial part of its function.

ED has now proposed a motion that would limit committee expenditure to spending in the amount of $125 per lot. This would be a total of $4,875 and decisions involving spending above that amount will be required to go before a general meeting.

The applicants’ submissions fail to raise any serious questions about the validity of this motion. I cannot see how this motion, even if adopted, would significantly prejudice the appeals or issues currently in dispute. Further, the applicants have not provided any evidence to show that this proposed monetary limit on committee spending is unreasonably low in its own right.

It appears from the submissions that the committee passed a resolution that the body corporate seek legal advice on the right to recover money paid to ED subject to the building management agreement that was declared void. ED has now proposed a motion for consideration by owners in general meeting to reverse this committee resolution.

Again, it is not clear how this motion would prejudice the issues currently in dispute even if the motion is adopted. In fact, the majority of owners may consider it preferable to delay any legal advice pending the outcome of the appeal. The submissions do not satisfy me that adoption of this motion would be contrary to the legislation or would unreasonably prejudice the body corporate in terms of the appeal.

Motions 4, 5 & 6 – Termination of temporary building manager and appointment of ED

In the order of 12 January 2005, I made a declaration that a resolution which purported to appoint ED as building manager at a significantly higher cost to the body corporate than other proposed managers was void. This was on the basis that, in the context of other offers for building management services, the vote to appoint ED was contrary to the requirement that the body corporate act reasonably in carrying out its functions (Act 94(1)(c), 94(2)) and contrary to the requirement that the body corporate administer body corporate assets reasonably and for the benefit of owners (Act, 152(1)(a)).

The applicants’ submissions had further sought an order that an independent building manager be appointed instead of ED. These submissions also led to a concern that any proposals to appoint a replacement building manager at reasonable remuneration could be thwarted by ED using its majority voting power to simply vote again for itself or its associate as the replacement building manager. While I did not consider it necessary to make an order that any replacement building manager be independent of the scheme, I did make an order preventing any owner voting for themselves the benefit of a building management contract. Any appointment of a replacement building manager should therefore have been on the basis of votes cast by persons voting as owners desiring the best contract for the scheme rather than voting themselves a financial benefit under a building management agreement.

This declaration and order is currently subject to appeal. However, I do not accept that ED is acting unreasonably by putting forward a motion that the body corporate re-appoints ED as building manager on a temporary basis pending the outcome of the appeal. I note that the original declaration was made because ED exercised its own voting power to appoint itself as building manager at a significantly higher remuneration than other offers that were before the meeting. The present motion provides for no payment to be made to ED unless the appeal brought by ED is successful. I further note that this is not a situation where the body corporate would be entering into a binding contract with a third party that may bind the body corporate beyond the time at which the District Court makes its determination.

In itself, there seems to be nothing wrong in ED putting this motion to owners in general meeting. ED’s submissions indicate that ED will be abstaining from voting on this motion and it will be for other owners to vote on whether to adopt this motion. Interestingly, the notice of cross-appeal indicates that the applicants agree that the order preventing owners from voting to appoint themselves as the replacement building manager should be overturned. However, technically, speaking, the applicants could presumably still take enforcement action in respect of this order pending the outcome of the appeal. A complication is that minutes of meeting indicate that the committee acted on 31 March 2005 to appoint Property and Management People Pty Ltd to perform certain duties until a new building manager is appointed. It may therefore be arguable that ED has been replaced as building manager and the order restricting owners from voting for themselves on replacement of ED as building manager no longer has effect.

If ED does abstain from voting on this motion than it will avoid any allegations that the adoption of the motion was unreasonable because of a conflict of interest in ED voting in its financial interests as prospective manager rather than in its interests as an owner desiring the best possible management contract for the scheme. Alternatively, if ED does vote in favour of its own appointment then the applicants can make further application providing grounds upon which the resolution should be invalidated.

In any event, the present motion would not appear to unreasonably prejudice the body corporate in respect of any order that could be made in respect of the appeal. Further, any argument that a resolution may be unreasonable due to ED voting in its own interests rather than the interests of the body corporate is premature.

It may be unreasonable for a party to legal proceedings with the body corporate to vote in its own interests to deprive the body corporate of legal representation.^[2] However, the present circumstances seem unusual in that the body corporate is co-respondent in both an appeal and cross-appeals where the dispute is primarily between two different factions of owners.

The issue of separate legal representation for the body corporate and whether the court wishes to order payment of costs of representation be paid by owners in proportions fixed by the court appears to be a question for the court hearing the appeal rather than this office (Act, 314). However, on balance, I am satisfied that there are serious questions to be determined about this motion that may properly be the subject of further submissions and a final determination.

Motions 8, 9, and 10 – Grant of car parking licences for 2, 5, or 10 years

Submissions on behalf of ED are to the effect that these motions deal with matters that are not the subject of restraint of any order. This submission is technically correct. However, car parking on the scheme was the subject of applications brought before this office, which applications are now the subject of appeal.

These motions purport to grant up to a ten year licence to persons to park motor vehicles in particular spaces. This does seem to be a matter where the body corporate may, pursuant to the motions, grant rights to other persons that may prejudice issues in dispute between the parties. It may be unreasonable to do this as subsequent orders on appeal concerning the car parking issue may deprive persons of the benefit of these licences and could give rise to claims against the body corporate by those persons. Further, I have questions about whether any resolution in the form proposed would contravene the provisions of the legislation concerning the power of the body corporate to lease or licence common property (Act 154, Standard Module 111). This would be the proper subject for further submissions.

It is difficult to see that any decision of the body corporate to carpet common property areas and perform maintenance could prejudice the outcome of the appeal or issues currently in dispute. These issues were not the subject of the applications brought before this office and the subsequent appeals.

The cross-appeal seeks an order that an administrator be appointed to perform the obligations of the body corporate and its committee. However, pending any appointment of an administrator, I would expect that owners should continue to administer the body corporate. The applicants have not raised any serious question about the proposed motions.

In considering whether to grant the interim order sought, it is relevant to balance the inconvenience caused by an interim order against inconvenience caused by waiting until a final determination to grant any necessary orders.

There appears to be little benefit in granting an interim order to stop voting occurring as opposed to an order restraining action on particular motions should they be passed. To minimise inconvenience it is only necessary to restrain action on particular motions for which the implementation of the resolution and potential subsequent reversal would involve greater inconvenience than a delayed implementation pending a final determination of the dispute.

The first serious question for determination is whether it may be contrary to the legislation for owners to vote in favour of motion 7 proposing that the body corporate not engage separate legal representation in relation to the appeal. I have very little information at this stage to determine whether it is appropriate to grant an order preventing implementation of this resolution pending a final determination of the dispute. However, given the submissions on behalf of ED that no party is seeking orders directly against the body corporate and the special circumstances that the appeal and cross-appeal are primarily between the two different factions of owners I see no need for an interim order at this stage. This is not a situation where the applicants have shown the possibility of irreparable harm if the interim order is not granted. Interim relief if therefore declined pending further submissions and a better opportunity to consider the circumstances.

The second serious question involved motions 8, 9, and 10 relating to a proposed grant of licence over car parks within the scheme. In respect of these motions I am satisfied that the balance of convenience favours the granting of an interim order preventing implementation of any resolution passed on those motions pending a final determination of the dispute. This will avoid the body corporate becoming subject to any obligations to third parties pending a final determination.

I will therefore make an interim order that, pending a final determination of the dispute, the body corporate must not implement any resolution passed pursuant to motions 8, 9 or 10 for the extraordinary general meeting to be held later today.

The application will be allowed to proceed to submissions and a final determination in the normal course.

I share Adjudicator Toohey’s view that motions relating to the removal of the temporary manager and the appointment of ED would not appear to unreasonably prejudice the body corporate in respect of any order that could be made in respect of the appeal. ED has not indicated that it will abstain from voting for motion 10, but as the temporary appointment of ED would not involve any remuneration from the body corporate if the appeal by ED is unsuccessful, there does not seem to be any other reason to prevent its consideration at this stage.

Motion 11 requires a resolution without dissent, so it is quite clear that the applicants can protect themselves in respect of this motion.

Motions 13 and 15 (which are identical) merely restate the requirements of section 101(2) of the Act. I can see no reason to prevent the body corporate from considering the motions. However, to the extent that ED considers that passing such a motion will address the non-installation of the letter boxes and directory signs, it should be noted that Adjudicator Toohey made an order on 15 March 2005 staying the operation of his orders made on 12 January 2005 in respect of the mailboxes and directory signs until the outcome of the appeal of the orders is decided.

Motions 18 and 19, although proposed by the committee, do potentially involve obligations to third parties if passed by the body corporate on 29 September 2005. In the event that the appeal lodged by ED is successful, then the body corporate could find itself in the position of having two building managers. I have therefore decided on the balance of convenience that an interim order should be made preventing the implementation of motion 18 or 19 until the outcome of the appeal of the orders made on 12 January 2005 is decided.

I do not really understand why motions 18 and 19 were proposed for consideration at the annual general meeting in the first place, given the implications for the body corporate if either of those motions were passed and ED’s appeal is successful. Four of the 6 voting members of the committee are applicants in this application. If they did not want the motions placed on the agenda of the meeting they should have voted accordingly at the committee meeting at which the agenda was being finalised. Perhaps they did not appreciate the ramifications of those motions at the time of the committee meeting. However, if that were the case, then lodging this application is an expensive means by which to remedy the situation. I shall allow the applicants the opportunity to address this issue in their reply to ED’s submission, which I shall then consider in my final order. I shall also investigate whether Edith Dindas voted in favour of motions 18 and 19 being placed on the agenda of the annual general meeting.

The other owners in the scheme will also now have the opportunity to respond to the application before I make any final orders.

^[1] Application 0521-2004, One Park Road, 12 January 2005.
^[2] For example, Application 602-2004, Teneriffe Hill Apartments, 9 February 2005.

Number of Scheme:	2114
Name of Scheme:	One Park Road
Address of Scheme:	1 Park Road MILTON QLD 4064

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

One Park Road [2005] QBCCMCmr 534 (28 September 2005)