Upolo [2005] QBCCMCmr 578 (19 October 2005)

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

I hereby order that the application for an order

"to invalidate the outcome of the general meting held on 21^st May 2004 which elected Cairns Body Corporate Management Pty Ltd as our body corporate manager. All fees deducted from our account by them (not fees payable to contractors etc) to be reimbursed and all Upolo CTS 894 cheque and deposit books, etc to be sent back to us." is dismissed

In lieu I declare-

1. that Motion 10 of the annual general meeting of 21^st May 2004 was not carried, and that Cairns Body Corporate Management Pty Ltd was not validly appointed as a body corporate manager for Upolo CTS 894 on 21^st May 2004;
2. that the adjourned annual general meeting of 31^st January 2005 was not validly convened since there was not a quorum of lot owners present in accordance with section 48(4)(b) of the Body Corporate and Community Management (Standard Module) Regulation 1997;

And I further order as follows -

3. that within six weeks of the date of this order, the body corporate convenes its annual general meeting to decide, amongst other things, whether Cairns Body Corporate Management Pty Ltd should act on behalf of the body corporate and/or whether the body corporate should seek reimbursement of fees paid to Cairns Body Corporate Management Pty Ltd, and if Cairns Body Corporate Management Pty Ltd is not engaged, to request the return of all scheme records to the body corporate secretary.
4. that a copy of this order is circulated by the secretary of the scheme, at the expense of the body corporate, to all lot owners, which may if convenient and to save costs, be done at the same time as the notice of the said annual general meeting is sent out.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0224-2005

"Upolo" CTS 894

APPLICATION

This is an application dated 20th March 2005 and amended on 18^th May 2005, by Stephen Gibbs and Brenda Smith (the applicants) co-owners of Lot 3 for an order against the body corporate of Upolo CTS 894 (the body corporate) that a general meeting held on 21st May 2004 (the AGM) be invalidated, and that all fees deducted from the body corporate account by Cairns Body Corporate Management Pty Ltd (the body corporate manager) in respect of management fees to the body corporate manager be reimbursed to the body corporate; and books and records held by the body corporate manager be returned to the body corporate.

The dispute concerns the appointment of the body corporate manager at an annual general meeting on 21^st May 2004. The applicants say that the body corporate did not follow correct procedure in that the required number of written votes were not received from lot owners to carry the motion for the appointment of the body corporate manager.

JURISDICTION

"Upolo" CTS 894 is a community title scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Standard Module.) There are only 3 lots in the scheme created under a building unit plan of sub-division

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 242 of the Act requires that an application to invalidate a meeting ( or a motion) of the body corporate is made within three months of the date of that meeting, but if the application is made outside that time an adjudicator can waive the time for compliance "for good reason." (Section 242(3)(b) Act).

The dispute is between the body corporate and a lot owner concerning the validity of a general meeting, which impinges on the engagement of the body corporate manager. There is no jurisdiction to resolve a dispute between a lot owner and a body corporate manager.

SUBMISSIONS

Submissions were invited from all lot owners in August 2005 in accordance with section 243(2)(b) of the Act. Neither of the two other lot owners, both of whom are new owners since 2004, made submissions.

The applicants say that at the time of the annual general meeting held on 21^st May 2004, (the AGM of 2004) the three lot owners were Rodney Cook, owner of Lot 2, (Mr Cook) David Best, owner of Lot 1 (Mr Best), and the applicants, co-owners of Lot 3. The AGM was convened by the body corporate manager. Motion 10 on the agenda was the engagement of the body corporate manager for the term of one year commencing 14^th May 2004 and ending 13^th May 2005 at a figure of $550 inclusive of GST for agreed services " as specified in the engagement." None of the members of the body corporate attended the AGM.

When the minutes of the AGM of 2004 were produced by the body corporate manager, the votes on Motion 10 were recorded as 2 votes in favour and 1 against. The applicants queried this result.

The applicants contacted by telephone Mr Cook who was then living in South Australia. Mr Cook told the applicants that he had not returned a voting paper for the AGM, but had received a telephone call prior to the AGM of 2004 from the body corporate manager about his voting intentions and had given a "verbal go-ahead" on the understanding that it would cost him $300 a year.

At the end of December 2004, the applicants received from the body corporate manager a notice of another "annual general meeting" proposed for 24^th January 2005. The notice contained the agenda and a copy of a proposed administration agreement between Upolo CTS and the body corporate manager. The term proposed was from 14^th May 2005 to 13th May 2006. The motion for the engagement of Cairns Body Corporate Management Pty Ltd as body corporate manager was again Motion 10, stating that the services proposed would cost $566.50 a year inclusive of GST.

On 12^th January 2005, the applicant Stephen Gibbs, as secretary for the scheme, wrote to the body corporate manager asking to see the three voting papers in respect of Motion 10 of the AGM of 2004. He stated- " we can’t recognise Cairns Body Corporate Management as our body corp manager ..." and requesting, inter alia, that all fees deducted be reimbursed.

On 22^nd February 2005, Mr Gibbs, as secretary, again wrote to the body corporate manager, asking to see the voting papers for the AGM of 2004 but received no reply.

The body corporate manager submits that the application is out of time and refers to an adjudicator’s order of 23^rd April 2004 in relation to Crown Towers, citing it as a precedent in relation to the ‘passing of time" rule. It makes no reference to its engagement but states that its employee at the time of the AGM of 2004 acted in good faith in contacting Mr Cook by telephone to record his vote.

In response to further information sought by me from the applicants on 16^th September 2005, and in reply to the submission of the body corporate manager, the applicants say they do not know why the "annual general meeting" proposed for 24^th January 2005 was convened or whether it was held. They have not received any minutes of it. They had again contacted Mr Cook who was at that time was still owner of Lot 2, although he sold in February 2005, and Mr Cook said that he did not return voting papers for the 24^th January 2005 meeting. The applicants likewise, returned no voting papers for this meeting.
On 30^th September 2005, I asked the body corporate manager to provide to me by close of business on 7^th October 2005, the minutes of the meeting of 24^th January 2005; a copy of the signed engagement appointing them to Upolo CTS; the names of committee members for the scheme; the date of the financial year for the scheme; and a statement of accounts for the years 2003-2004 and 2004-2005. This information was provided on 18^th October 2005.

DETERMINATION

The applicants give as their good reason for seeking to invalidate a meeting outside the 3 months time period, that Mr Cook had moved to South Australia, and that the applicants have taken "quite some time" to track him down to ask him about his voting paper for the AGM of 2004. Further, that Mr Cook was away on business for part of the time.

In the appeal of Weeks v. Commissioner for Body Corporate (Maroochydore District Court Appeal 13/99), Judge Dodds made the following statement about this time limitation at pages 4 and 5 of the judgment:

"... the objects of the Act, for instance section 5(a) and (h) militate against too strict or legalistic a view about good reason for waiving non- compliance with the time limit. What will be required is a balancing of the length of the delay; the reason for the non-compliance; the effect of delay on others who are affected by the matter in dispute and importantly, whether apart from the question of non-compliance with the time requirement, an applicant will be entitled to the relief sought. The applicant, being the person seeking a waiver, will have the task overall of satisfying the adjudicator that the time limit should be waived in all the circumstances."

With regard to the first test, the length of delay is long. The AGM of 2004 was held on 21^st May 2004. The applicants did not write the first letter of concern to the body corporate manager until 12^th January 2005, some eight months later. However, the applicants, who are one of only three lot owners in a body corporate which is clearly not very active, had reason to believe that there was no majority voting at the AGM of 2004. They did not do anything because they did not think there was anything to do.

It was not until they received papers for another general meeting, called also " annual general meeting" that they queried the business of the AGM of 2004. They contacted Mr Cook and found out that he had never voted at the AGM of 2004, so that the body corporate manager, now convening the "annual general meeting" for 24^th January 2005, was not validly appointed. At best, the votes would have been one for, one against, and Motion 10 of the AGM of 2004 would not have been carried.

I am not aware when the applicants received the minutes of the AGM of 2004, which should have alerted them to the fact that the AGM of 2004 purportedly went ahead and that Motion 10 was carried. However, there is clearly a lack of communication between the body corporate manager and the applicants. The body corporate manager has not replied to their letters of 12^th January 2005 and 22^nd February 2005. It appears further, that it has not circulated to lot owners the minutes of the "annual general meeting" for 24^th January 2005 at which it was proposed that the body corporate manager act for another year between 14^th May 2005 and 13^th May 2006.

With respect to Dodds J’s third reason, I find that there is no effect on the remaining two lot owners in respect of the delay in making the application, nor with respect to the body corporate manager. The body corporate manager continues to act in the same way and under the same engagement or otherwise, as it did prior to the application being made and since the application was made.
The fourth test is probably the most important in that, apart from the delay in time, would the applicants be entitled to the relief sought? A prima facie assessment of the issue shows that it is agreed that no voting paper was received from Mr Cook and therefore Motion 10 of the AGM of 2004 could not have been carried in accordance with the legislation. For these reasons I have waived the limitation.

The "Crown Towers" matter referred to by the body corporate manager relates to a dispute decided by specialist adjudication wherein the body corporate concerned sought to invalidate a validly passed motion of a general meeting of the body corporate after three years. I do not consider that matter is in any way analogous to the current circumstances. Orders of an adjudicator are not binding in as much as they do not create legal precedent. In any event, precedent cannot create a definition where the reasonableness of actions or circumstances must be assessed.

The application is therefore properly made. From the facts supplied to me, I must now consider the applicants’ sought outcomes, the first of which is that the AGM of 2004 is declared invalid.

I am not advised if Mr Cook returned his voting papers in respect of some of the other motions, or whether all his voting preferences were dictated to the employee of the body corporate manager prior to the AGM of 2004. I do know however, that his vote in respect of motion 10 was invalid, as has been admitted by the body corporate manager.

To cast a vote at a general meeting, a voter must be present personally, cast a written vote, cast an electronic vote if this has been pre-arranged by ordinary resolution of a general meeting, or give a proxy to another person. (section 51(1) Standard Module). A proxy may only be appointed by a properly completed proxy form given to the secretary before the meeting (section 72(5) Standard Module). Even if Mr Cook had given the employee a properly completed proxy form, which is not claimed, a proxy vote may not be used for a motion approving the engagement of a person as a body corporate manager. (section 74(3)(f)(i) Standard Module).

I find that Motion 10 of the AGM of 2004 was not validly carried. The effect is that the body corporate manager was not engaged by the body corporate to act on its behalf on 21^st May 2004.

On 18^th October 2005, I received from the body corporate manager, a copy the minutes of the meeting of 24^th January 2005, a copy of an Administration Agreement signed by the body corporate manager and Mr Best as treasurer, a statement of accounts for the years sought, and the current office bearers report detailing current members of the committee. I am advised that the financial year for the scheme is 1^st November to 31^st October.

I have perused this information and note as follows-

It follows that Mr Best’s single written vote would be sufficient to pass a motion to appoint a body corporate manager on 31^st January 2005. However, because of the invalidity of motion 10 at the AGM of 2004, I am not satisfied that the person chairing the meeting on 31st January 2005 was a " body corporate manager, exercising the powers of the chairperson under an authorisation given by the body corporate. "

Indeed, by 31^st January 2005, the body corporate manager had received a letter from the secretary of the scheme challenging its appointment, detailing the reasons why the appointment was invalid, and requesting return of fees paid and the body corporate records. The body corporate manager knew, or ought to have known, that it had no authority from the body corporate to exercise the powers of chairperson at the meeting of 31^st January 2005. I also find it doubtful in the circumstances that motion 10 of the meeting of 31^st January was in fact submitted by the committee.

The result is that there was no quorum for the adjourned meeting, and it throws open to challenge the validity of the agreement signed by Mr Best as treasurer, clearly without the consent (and possibly without the knowledge) of the remainder of the committee. I also find the fact that the date of the agreement is prior to the date of the meeting opens up the agreement to challenge. However, I do not have jurisdiction to decide questions concerning the validity of contracts. By virtue of section 265 of the Act, a dispute about a claimed or anticipated contractual matter about the engagement of a person as a body corporate manager must be resolved by "specialist adjudication", which is a process by which a person with particular expertise, approved by the Commissioner, is engaged at commercial rates to settle the dispute. The cost is borne by the parties to the dispute.

The applicants seek the reimbursement of "all fees deducted from our account...." There has been no evidence of the amount claimed by the applicants but I note that the basic fee was $550 inclusive of GST in 2004-2005 and $566.50 inclusive of GST for 2005-2006. From the accounts summaries now provided to me by the body corporate manager, I note that supplementary expenses have been incurred for services for example, printing and archiving fees.

The applicants have not been paying certain fees. It appears from a perusal of the accounts that the greatest expense in the administrative fund budget is the management fees of the body corporate manager. I do not know why this body corporate is paying BAS return fees.

The body corporate manager has not challenged the applicants’ request for return of funds to the body corporate account. However, I could only make such an order, firstly, at the request of the body corporate, and secondly, on a finding that the body corporate manager has been acting without the authorisation of the body corporate. I understand that in a scheme of only 3 lots, that it may sometimes be necessary for lot-owners to wear two hats. Here, the body corporate, which holds the alleged agreement with the body corporate manager must if it wishes, make the decision to seek return of monies from the body corporate manager.

I note that the annual general meeting should be held before the end of January 2006. That meeting should be brought forward. Motions should be submitted by the committee or by lot owners to decide on the position of the body corporate manager, and in particular, whether fees paid to the body corporate manager should be reimbursed to the body corporate account, because the body corporate manager has acted without the authority of the body corporate. The lot owners may of course convene the general meeting if they wish without the services of the body corporate manager.

If the body corporate committee decides not to retain the services of the body corporate manager, it should request the return of the books and records for the scheme to the secretary of the scheme.

I understand that in February 2005, Mr Cook sold his unit to Mr Wicks. I also understand that Mr Best’s lot has been sold in July 2005 to Mr Chisholm. In the past, it is clear that the lot owners have not been active in the scheme, which has led to the intervention by the body corporate manager, who no doubt was acting as it submits " in good faith" in May 2004. As the process under which the body corporate manager was appointed was fatally flawed, it follows that now the body corporate manager is performing duties which it has no authority to perform, although it may well argue that it has expended time and care in performing those duties, and should be remunerated. This situation needs to be addressed as a body corporate. Whether this situation continues until 13^th May 2006; is extended thereafter; or is terminated at a sooner date is up to the body corporate and not any individual lot owner.

I must therefore dismiss the second and third part of this application.

Number of Scheme:	894
Name of Scheme:	Upolo
Address of Scheme:	509 Varley Street YORKEYS KNOB QLD 4878

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Upolo [2005] QBCCMCmr 578 (19 October 2005)