Crown Towers [2005] QBCCMCmr 9 (7 January 2005)

Last Updated: 5 July 2005

REFERENCE: 0647-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	24386
Name of Scheme:	Crown Towers
Address of Scheme:	5 - 19 Palm Avenue SURFERS PARADISE QLD 4217

TAKE NOTICE that pursuant to an application made under the abovementioned Act by the Body Corporate for Crown Towers community titles scheme 24386

I hereby order that the application for an order seeking confirmation that the nomination for all positions on the committee from Mr Kenneth McKeown, the owner of Lot 157 be deemed invalid, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0647-2004

"Crown Towers" CTS 24386

APPLICATION

This application is by the body corporate (applicant) seeking an order against Kenneth McKeown, the owner of Lot 157 (respondent). The applicant is seeking a decision regarding the respondent’s eligibility for committee membership on the basis that he is an associate of the service contractor and letting agent for the scheme. The applicant’s main submissions were to the effect that:

• The respondent was the building manager, is an employee of S8 Ltd, and is a major shareholder of S8 Limited (S8). The applicant has produced a copy of an Australian Securities & Investments Commission Form 484 for S8 which records (as at the date of the production of this document) the total number of shares issued as 70,619,934, of which 2,325,630 shares were held by Keenhaft Pty Ltd. An ASIC Company Extract dated 14 October 2004 records the respondent as the sole shareholder of Keenhaft Pty Ltd.
• S8 owns Castlegale Pty Ltd, the caretaking service contractor for the scheme.

JURISDICTION

"Crown Towers" Community Titles Scheme 24386 is 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)).

SUBMISSIONS

In accordance with the Act, the respondent was invited to make a submission. The respondent has submitted that he considers his nomination to be valid even though he is a shareholder in S8. Mr McKeown stated that "I am no longer a building manager, licensee or employee of the management company of Crown Towers".

FACTS AND DETERMINATION

The applicant has sought an order regarding the validity of the respondent’s nomination for various committee positions which were chosen at the annual general meeting held on 17 December 2004. A copy of the minutes of the annual general meeting has been provided by the body corporate manager. The minutes indicate that the respondent was included in the ballot for the nominated positions of chairperson, secretary, treasurer and ordinary member, and that he was unsuccessful in being elected to any of these positions. As a consequence of these decisions, there is no dispute requiring resolution. However, I will make the following comments regarding the subject matter of the application.

The basis of the applicant’s argument is that the respondent is an associate of the caretaking service contractor for the scheme. Section 11 of the Accommodation Module provides for eligibility for committee membership. The section provides that an eligible person such as a lot owner is not eligible to be a voting member of the committee if the person is an associate of a service contractor or letting agent The Schedule 6 Dictionary of the Act defines an associate of a person to mean "someone else with whom the person is associated under section 309". Section 309 of the Act states:

"(1) For this Act, a person is associated with someone else if--

(a) a relationship of a type to which this section applies exists between them; or

(b) a series of relationships of a type to which this section applies can be traced between them through another person or other persons.

(2) This section applies to relationships of the following types--

(a) marriage or de facto relationship;

(b) the relationship of ascendant and descendant (including the relationship of parent and child) or the relationship of persons who have a parent or grandparent in common;

(c) partnership;

(d) the relationship of employer and employee;

(e) a fiduciary relationship;

(f) the relationship of persons, 1 of whom is accustomed, or under an obligation (whether formal or informal), to act in accordance with the directions, instructions or wishes of the other;

(g) the relationship of a corporation and executive officer of the corporation;

(h) the relationship of a corporation and a person who is in a position to control or substantially influence the corporation’s conduct.

(3) Despite subsection (2)(e) and (f), the owner of a lot in a community titles scheme and a letting agent for the scheme are not associated merely because of their relationship as owner and letting agent.

(4) In subsection (2)--

de facto relationship means the relationship between 2 individuals who, although not married to each other, live in a relationship like the relationship between a married couple.

executive officer, of a corporation, means a person who is concerned with, or takes part in, the corporation’s management, whether or not the person is a director or the person’s position is given the name of executive officer."

The applicant has not relied on a specific provision of section 309 in making the claim that the respondent may be an associate of the caretaking service contractor. I consider that the body corporate has an obligation to rely on an applicable legislative provision when making this determination. The legislation places a number of restrictions on a candidate’s eligibility for committee membership, and in its evaluation of nominations the body corporate should base a decision on eligibility on the legislative criteria, especially if a candidate’s eligibility is questioned. Committee membership is an important issue, and a nominee who has been determined to be ineligible for membership should have the right to an explanation of the legislative or legal reasoning for the decision.

The body corporate has only made general statements which may impact on the respondent’s right to committee membership. In his submission, the respondent has simply given a general indication of his relationship with the caretaking service contractor for the scheme and with S8. Neither party has given any legislative basis to support or refute the claims being made.

In this matter, it would seem that the only substantiated claim is in relation to the respondent’s interest in S8. As the applicant does not state that the respondent owns shares in S8 through other entities or in any other way has an interest in this company, it can be concluded from the material provided that the respondent’s interest constitutes approximately 3.29% of the total number of issued shares in S8. In the absence of any other information, I do not consider that such an interest satisfies the section 309(2)(h) criteria.

The other issue is the respondent’s alleged employment with S8. There is uncertainty regarding this relationship as the applicant states in the grounds to the application that the respondent is an employee of S8, yet the record of voting outside a committee meeting indicates at Resolution 10 that in deciding to make this application, the respondent is noted as an ex S8 employee. In addition, the applicant makes no statement regarding for example, the position held by the respondent with S8. The respondent has not stated whether he is or isn’t employed by S8. If a relationship does exist, then factors such as the nature and basis of the employment could be relevant in an examination of the application of section 309 to the respondent’s eligibility for committee membership. However, an investigation of this issue is unnecessary as a consequence of the decisions made at the annual general meeting.

Therefore, based on the outcomes of the annual general meeting and the lack of substantive material provided by the applicant, I am not willing to make a decision regarding the respondent’s eligibility for committee membership. For these reasons, I have dismissed the application.