One Park Road [2005] QBCCMCmr 730 (23 December 2005)

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

I hereby order that, from 28 December 2005, Michael Teys (administrator) of Teys Strata Pty Ltd, Level 3, 345 Ann Street, Brisbane, Queensland is appointed as an administrator of One Park Road for the following purposes:

1. To make decisions reasonably necessary for maintenance of common property in good condition and for the temporary management of the car parks and disabled persons’ lift for the benefit of the owners of lots in the scheme;
2. To make decisions reasonably necessary to ensure that the body corporate holds all insurances required by legislation and takes any action reasonably necessary to ensure that recovery pursuant to those insurance policies is not jeopardised by the action or inaction of the body corporate, any owner within the scheme, or any occupier within the scheme.

I further order that, limited to the above purposes, the administrator is given exclusively all the powers, functions and responsibilities of the committee, each executive member of the committee, and owners in general meeting with the exception of a power to delegate those powers, functions and responsibilities to another. For those purposes only the administrator is specifically given the power to levy a special contribution against owners of lots for liabilities for which inadequate provision has been made in the budget, including for the administrator’s expenses and the administrator’s proper and reasonable remuneration at the rate of $132 per hour (including gst).

I further order that:

1. Any exercise by the administrator of the powers of the committee or body corporate must be by properly minuted resolution with notice of the proposed motions being sent to owners at least 14 clear days before the making of the resolutions (except in an emergency) and a copy of the minutes being sent to owners within 7 days after the making of the resolutions;
2. The administrator must obtain at least two quotations for spending on any single service contract or project in excess of $250 per lot. Further, the administrator must obtain the authority of an ordinary resolution passed by owners in general meeting or an order of an adjudicator to authorise spending of more than $450 per lot on any single service contract or project;
3. The terms of engagement of any service contractor must allow either party to terminate the engagement upon a resolution of the body corporate after the expiry of the administration or upon Edith Dindas Pty Ltd being reappointed as building manager as a result of a court order; and
4. The administrator must keep proper records of all receipts and payments in the course of the administration.

I further order that the appointment of the administrator will terminate in accordance with:

1. An order of an adjudicator terminating the appointment of the administrator;
2. One months’ written notice given by the administrator to the body corporate;
3. One months’ written notice given by the body corporate to the administrator provided that the notice is authorised by a resolution without dissent (at any time) or authorised by an ordinary resolution made at least one year after the commencement of the administration.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0495-2005

"One Park Road" CTS 2114

One Park Road Community Titles Scheme (One Park Road) is a 39 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Commercial Module Regulation (Commercial Module).

This is an application for interim orders. It arises out of an application by Bentonic Pty Ltd (lot 1), Chung-Ming Su & Shu-Chen Lin Su (lot 2), Nunzio La Rosa (lot 3), Kiara Holdings Pty Ltd (lot 4), I-Ying Wang (lot 7), Chi-Chang Chen (lot 8), Audax Australia Pty Ltd (lot 16), Jimmy Lok Kee Ma & Verney Mei Kuen Ma (lot 29), Vanpost Pty Ltd (lot 34) and Werner Friedhelm Sauer (lot 41) (applicants) seeking orders against the body corporate for One Park Road (body corporate), Edith Dindas and Edith Dindas Pty Ltd (Dindas) and Craig Hardy and State Wide Body Corporate Pty Ltd (State Wide).

The applicants seek to have an administrator appointed to perform all the functions of the body corporate. The application is opposed by Dindas who holds majority ownership in the scheme.

The applicants constitute a minority of members of the body corporate. The majority of lots, and voting rights, are controlled by Edith Dindas and her associated company, Edith Dindas Pty Ltd.

There have been a number of disputes at this scheme with apparently entrenched disagreement between the applicants and Edith Dindas. In particular, the applicants allege negligence of Edith Dindas and Edith Dindas Pty Ltd in their prior capacity as building manager for the scheme. Further submissions are made to the effect that a total breakdown of the function of the body corporate has occurred and minority owners are deprived of any role in decision making.

A previous application for the appointment of an administrator was refused on the basis the appointment would not be just and equitable at that time and, in particular, that the appointment of an administrator to make decisions on behalf of the body corporate would deprive all owners of a role in decision making and amount to an additional expense for each owner.^[1] Based on the submissions made in that and associated applications other orders were made. These included an order declaring a resolution that purported to appoint Edith Dindas Pty Ltd as building manager void on the basis it was unreasonable for the body corporate to engage Edith Dindas Pty Ltd as building manager on the terms provided and in the context of other offers for building management services available to the body corporate. These orders are currently subject to an appeal and the applicants are bringing a cross appeal seeking the appointment of an administrator with all powers of the body corporate.

However, the applicants submit that events have evidenced facts since that decision that should now dispel any reluctance to appoint an administrator and I accept the arguments of the applicants to the effect that it is unsatisfactory to wait for the determination of the appeal or cross appeal due to the economic and personal interests of the owners and questions about the safety of the general public.

In contrast, submissions on behalf of Dindas include submissions to the effect that the appointment of an administrator is a drastic removal of rights of Dindas as majority owner. However, a recent decision of the Court of Appeal recognises that "The statutory conferral of power upon the adjudicator to make an order which is ‘just and equitable in the circumstances’ necessarily contemplates a decision by the adjudicator which may be ‘just and equitable in the circumstances’ even though it overrides the exercise of voting rights by a scheme member".^[2]

If the applicants can establish a failure by the body corporate to comply with the legislation and a reasonable probability that the body corporate will continue to fail to meet all its legislative obligations then the circumstances may justify the appointment of an administrator.

The applicants submit that since the order on 12 January 2005 there was a window of opportunity for an independent interim building manager to be appointed. The committee obtained a maintenance and safety review of the building services of the scheme and submit that the review has revealed total negligence on the part of Edith Dindas Pty Ltd in their prior capacity as building manager.

Specific allegations include:

The applicants’ submissions are to the effect that past negligence in maintaining the common property now places each lot owner in danger within their workplace, places each employee, visitor or client to the lots and common areas in danger, and clearly puts at risk whether the insurers would accept an event supposedly covered by insurance.

Submissions on behalf of Dindas are to the effect that the matters requiring attention are relatively minor and the applicants provide no evidence that Dindas has been responsible for those matters.

The allegations by the applicants in terms of past failures and likely consequences of those failures appear to be somewhat overstated. However, I accept the general tenor of these allegations is correct.

Particular issues revealed in a report provided to the body corporate by Star Building Management include issues of subsiding pavers, green mould on pavers, concerns about cracked support for railings and the lack of handrails for some steps, non functioning light fittings, obstructions in the car park fan room, non-fire rated penetrations through the concrete slab, lack of emergency evacuation procedures, and difficulties in opening the fire equipment cabinet door. At an inspection of the scheme concerns were also raised about failures of the body corporate to have appropriate procedures for managing use of the disabled lift and managing use of the car parks for the scheme.

For the purpose of deciding whether to appoint an administrator it is not necessary to make any finding specifically in relation to whether or not Edith Dindas Pty Ltd as building manager was responsible for any of the maintenance failures. However, I do conclude that the common property has not been properly managed as a result of failures of the body corporate to either perform maintenance functions or properly supervise the performance of maintenance functions. The body corporate has also failed to put in place effective procedures for managing use of the disabled lift and the car parks for the scheme. I therefore conclude that the body corporate has failed in its legislative obligation to administer, manage and control the common property reasonably and for the benefit of lot owners (Act, 120(1)). Specifically, the body corporate has failed in its duty to maintain common property in good condition (Commercial Module, 89).

Members of the committee could have done more to prevent the body corporate failing in this duty. In particular, if they thought Edith Dindas Pty Ltd was failing in its obligations then it would not have been a restricted issue for members of the committee to give notices to Edith Dindas Pty Ltd as building manager to require Edith Dindas Pty Ltd to perform any obligations it had under the building management agreement.^[3] However, it must be conceded that the committee did not have any power to act upon or enforce any notice against Edith Dindas Pty Ltd as this would be a restricted issue that would need to be decided by a majority vote of owners in general meeting (Commercial Module, 15).

Alternatively, members of the committee could have acted to personally perform all obligations of the body corporate to administer and maintain the common property. However, the applicants have submitted that this function should be performed by a professional building manager rather than individual committee members who have their own businesses to run. That submission is persuasive for a commercial scheme of the size of One Park Road. In fact, submissions on behalf of Dindas refer to common ground between the applicants and Dindas that a building manager should be appointed.

In light of the above, it is arguable that it was unreasonable for Edith Dindas Pty Ltd to propose and carry motions to terminate the appointment of a temporary building managers appointed by the committee. Firstly, on 14 June 2005, a motion was passed to terminate the appointment of Property & Management People who had been appointed as temporary building managers by the committee. Secondly, on 29 September 2005, a motion was passed to terminate the appointment of Star Building Management who had been appointed as temporary building manager by the committee after the termination of Property & Management People.

In submissions, Dindas in fact expressed consent to the appointment of any qualified building manager apart from Star Building Management on the basis that costs be divided among the applicants only. However, subsequent submissions on behalf of Dindas are to the effect that the only reasonable solution for the body corporate is that Edith Dindas herself should be appointed to the building manager function.

In summary, despite common ground that a building manager should be appointed there is a position of deadlock in that Dindas has voted to overturn committee appointments of building managers and all other owners refuse to vote in general meeting to reappoint Dindas as the building manager.

The body corporate has failed in its legislative obligation to administer, manage and control the common property reasonably and for the benefit of lot owners. Specifically, there is entrenched disagreement between the applicants and Dindas resulting in a failure by the parties to agree on the appointment of any particular temporary building manager notwithstanding common ground that a building manager should be appointed. In these circumstances, I am satisfied that it is appropriate to order the appointment of an administrator with sufficient powers to make decisions necessary for maintenance of common property and temporary management of the car parks and disabled lift.

The applicants express concern that the building and public liability insurance is seriously compromised. Firstly, it is submitted that the failures to maintain the common property could cause the owners and body corporate to be found uninsured due to the failure of the body corporate to properly ensure all necessary maintenance was undertaken on emergency fire and lighting systems, storm water pumps and workplace health and safety obligations over a number of years.

The applicants have not provided a copy of the terms of the insurance policy or any specific details of the effect on the insurance policy of a failure to maintain these systems. However, I do accept that there is at least a possibility that failure to maintain infrastructure could result in a reduction of any amounts payable in the event of an insurable event on the basis of contributory negligence.

Secondly, the applicants say that Dindas has built an extra level of offices in what would otherwise merely be the roof void. It is alleged that this building work, including use of some areas of common property, was done without body corporate approval and no action has been taken to resurvey the lots, reallocate lot entitlements, amend the community management statement, or compensate the remaining owners. In particular, it is alleged that the extra level has been built without building or fire department approvals and this would vitiate the insurance polices if an event was caused in, or happened from, this area of the building.

The applicants allege a failure by Dindas to notify the body corporate of improvements to give the body corporate the opportunity to adjust the premium payable (Standard Module 110, 111). More importantly, alleged failures to obtain fire and building approvals raise concerns about the validity of insurance taken out pursuant to legislative obligations (Standard Module 106-117).

Submissions on behalf of Dindas do not adequately address these concerns. There is also an inherent conflict of interest in Dindas being a majority owner in the body corporate when that body corporate may need to take action to require Dindas as owner to obtain approvals for improvements or make alterations to remedy issues that compromise the body corporate’s insurance. In these circumstances it does seem appropriate to appoint an independent administrator to ensure that the insurances required by the legislation are not jeopardised and with powers to take legal action if necessary to require owners to obtain approvals and make any necessary alterations.

The submissions also raise other concerns that indicate owners may benefit from making decisions concerning possible changes to the community management statement, the installation of letter boxes and directory boards, and possible changes to electrical supply arrangements.

Decisions on these matters may indeed benefit all owners. However, I am not satisfied that it is appropriate for an administrator, in their absolute discretion, to make decisions that are binding on all owners in this respect. These matters are not as clear cut as requirements for the body corporate to maintain effective insurances, maintain the common property in good condition, or temporarily administer the lift and car parks.

Rather, it seems that owners need to make a decision on these issues themselves. If these matters can be resolved by some form of compromise then that may be to the benefit of all owners. Otherwise, various owners may wish to place motions before the general meeting and bring an application if it was felt that it was appropriate for an adjudicator to overturn the opposition to the motion on the basis that opposition is unreasonable (Act – Schedule 5, item 10). This would allow for the proposed solution to be considered in light of submissions made by owners under the dispute resolution process rather than simply leaving this type of issue to the discretion of an administrator without that administrator necessarily having the benefit of submissions from affected persons.

Similarly, claims that Dindas has committed a fraud on the minority by using common property without compensating the applicants would be better determined by negotiated agreement or specific legal relief rather than by the appointment of an administrator with general powers that deprive all owners of any real decision making power in relation to their scheme.

Specific issues raised in Dindas’ submissions are that the owners of lots 1 and 2 have subsequently sold their lots and that one other owner in the scheme, Guy Dunstan, was not an applicant so is therefore effectively a respondent. It would perhaps have been preferable if these issues had been raised earlier to give the applicants an opportunity to amend the application to reflect these issues. However, dispute resolution procedures pursuant to the Act are relatively low cost and informal and designed to provide an efficient and effective dispute resolution process (Act, 4(g)). Prospective owners have a statutory right to search records of the body corporate and all owners were presumably aware of the application and their opportunity to seek to make or inspect submissions (Act, 246). I am not satisfied that these issues justify my refraining from making an order. For the avoidance of doubt this office contacted Guy Dunstan who confirmed that he was aware of the application but did not want to make any submission.

As the majority owner of lots in the scheme, Dindas opposes the appointment of an administrator in any form, but in particular with all the powers of the body corporate. The legislation allows for the appointment of an administrator to perform obligations of the body corporate, the committee for the body corporate or a member of the committee (Act, 278). However, I accept submissions on behalf of Dindas to the effect that appointment of an administrator with all powers of the body corporate is a drastic removal of rights of Dindas as majority owner. I also accept that the applicants have not shown that Dindas will always exercise its vote unreasonably.

The legislation envisages self management as an inherent aspect of community titles scheme and Dindas has a significant investment in the scheme approximating 70% ownership of the entire scheme. In the circumstances of Dindas opposing the appointment of an administrator and seeking to remain active in administration of the scheme I will only appoint an administrator with the minimum powers necessary to reasonably address the specific concerns that the applicants have established as justifying appointment of an administrator.

I have concluded that it is appropriate to order the appointment of an administrator with sufficient powers to make decisions necessary for maintenance of common property and temporary management of the car parks and disabled lift. It would seem likely that the administrator will need to engage a building manager and supervise that contract. Associated powers would need to include the power to issue notices of breach and terminate the contract if necessary.

The administrator would also need to consider what arrangements would be necessary for administration of the disabled lift and car parking services. For example, the administrator may need to spend body corporate funds to be able to provide each occupier of a lot with a key to the disabled lift and training in the use of that lift. The administrator may also need to employ a service contractor to supervise car parking at certain times of the day.

Submissions on behalf of Dindas express concern about the appointment of any person other than Edith Dindas Pty Ltd pending the upcoming appeal. I consider it appropriate to require that any service contracts be subject to a condition that the contracts can be terminated by either party if Edith Dindas Pty Ltd is reappointed as building manager as a result of a court order. I also consider that service contracts entered into by the administrator should be able to be terminated by the body corporate after expiry of the administration. However, I do not propose to require that the administrator appoint Edith Dindas Pty Ltd as building manager. In choosing to appoint any service contractors the administrator should consider the qualifications of proposed service contractors and make a decision in the best interests of all owners.

I have also concluded that the administrator should have powers to ensure that the insurances required by the legislation are not jeopardised and have powers to take legal action if necessary to require Dindas to obtain approvals for improvements and make any necessary alterations. I will make an order giving the administrator powers to do this. In fact, I consider the powers should be broad enough to allow the administrator to take out or modify the terms of insurances required by the legislation as well as take legal action, if necessary, against any owner who has made unapproved alterations or is otherwise acting in a way that jeopardises the ability of the body corporate to claim under insurance policies required by the legislation.

In terms of spending, the administrator should be given powers to spend all amounts reasonably necessary to perform the above functions on behalf of the body corporate, including powers to raise special levies and pursue payment of those levies. I am aware that the Commercial Module does not place any requirements on the body corporate to obtain more than one quotation or to limit body corporate spending outside of a general meeting. However, given the administrator will have the power to engage in spending and raise special levies without any vote by owners in general meeting then I consider it appropriate to apply some safeguards similar to those in the Standard Module and Accommodation Module. For this reason I will require that the administrator obtain at least two quotations for spending on any single service contract or project in excess of $250 per lot^[4]. I will also require that if spending on any single service contract or project proposed by the administrator is to exceed $450 per lot then the administrator must obtain the authority of an ordinary resolution passed by owners in general meeting or an order of an adjudicator authorising the spending.^[5] To maintain accountability of the administrator I will also order that any exercise by the administrator of the powers of the committee or body corporate must be by properly minuted resolution with notice of the proposed motions being sent to owners at least 14 clear days before the making of the resolutions (except in an emergency) and a copy of the minutes being sent to owners within 7 days after the making of the resolutions. Proper records of any payments and receipts should also be kept. I consider these orders to be appropriate on a just and equitable basis even though these orders do not reflect specific requirements of the legislation applicable to One Park Road.^[6]

Submissions on behalf of Dindas are to the effect that if the adjudicator appoints an administrator then the only reasonable and equitable distribution of the cost would not be on a contribution entitlement basis but rather divided equally between each individual owner.

However, I consider the appointment of an administrator to be necessary due to past failures of the body corporate to maintain the common property in good condition and concerns about insurance of the scheme in accordance with the legislation. The legislation provides that the administrator’s remuneration is to be paid out of the funds of the body corporate (Act, 301(5)). This means that all owners will contribute to the administrators’ costs according to contribution lot entitlements. The services provided by the administrator will benefit all owners and I consider it just and equitable that all owners contribute to the costs of the administration.

I understand that the appointment of an administrator will involve a financial imposition on all owners. However, this appointment appears to be the only just and equitable order that can result in proper administration of the body corporate in accordance with the legislation. I will, however, allow for termination of the administration by the owners. I consider that one year is a reasonable base period for the administration and will require that a resolution without dissent is necessary for the administration to be terminated within that period. However, after one year I will provide that the administration can be terminated by one months’ notice pursuant to an ordinary resolution. The administration should also be able to be terminated at any time by the resignation of the administrator or by order of an adjudicator.

Based on the above, I conclude that it is just and equitable to appoint an administrator with all powers of the committee, each executive member, and the body corporate in general meeting but subject to the limited purposes and specific conditions specified above. This office has contacted Michael Teys of Teys Strata Pty Ltd and he has confirmed that he is able to commence the administration from 28 December 2005. I am satisfied that Michael Teys has qualifications, experience and standing appropriate for the appointment.

I note that the committee and body corporate in general meeting must continue to function for all other matters and I would encourage owners to come to negotiated solutions in relation to other outstanding issues and pass the necessary resolutions. If sufficient owners do not agree on a particular proposal then it is open for owners to put forward a motion detailing their proposed solution and bring an application seeking to have any opposition to that motion overruled if that opposition is unreasonable.^[7]

^[1] Application 0682-2003, One Park Road, D Toohey, 12 January 2005.
^[2] Hablethwaite & Anor v Andrijevic & Ors [2005] QCA 336, Jerrard JJA, Keane JJA, Cullinane J, 9 September 2005.
^[3] Dalreign Pty Ltd v Brookchester Manor Community Titles Scheme 9048, District Court (Beenleigh) D92/01, Nase DCJ, 18 October 2002.
^[4] Refer section 104 of the Standard Module and section 102 of the Accommodation Module.
^[5] Refer to the maximum amount allowable as the relevant limit for committee spending under the Accommodation Module.
^[6] Refer to Holloway & Ors v Meek, District Court (Maroochydore), Dodds DCJ, Ap 22 of 1998, 24 December 1998.
^[7] Refer Loos v Commissioner for Body Corporate and Community Management, District Court (Brisbane) D2043 of 1999, Griffin SC ADCJ, 22 December 1999.

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 730 (23 December 2005)