Pacific Keys Central [2005] QBCCMCmr 95 (18 February 2005)

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

I hereby order that the application by:

• Mark Thomas Hayward and Heather Whitehurst Hayward, the co-owners of lot 1;
• John Ratner and Katrina Anne Ratner, the co-owners of lot 12; and
• Dean Anthony Cowley, the owner of lot 60

for orders quote –

1. A declaration that motion 10 at the AGM on 20 September 2004 is invalid and an order preventing the body corporate for PKC CST 10021 from actioning such a motion;
2. A declaration that motion 12 of the AGM held on 20 September 2004 was validly passed and an order requiring the body corporate to action such motion;
3. A declaration waiving any penalty payment on unit 60 until the issue has been resolved,

is dismissed.

I further order that within two (2) months of the date of this order, the body corporate of Pacific Keys Central shall convene and hold a general meeting of the body corporate at which it will re-consider and determine motion 12 headed Variation of Caretaking and Letting Agreements submitted to the AGM of the body corporate on 20 September 2004.

I further order that if the owners of lot 1, Mark Thomas Hayward and Heather Whitehurst Hayward (Hayward) require changes to the motion previously submitted, then the body coprorate secretary shall accept changes to the motion as submitted by Hayward, provided such changes are submitted to the secretary, in writing and in their full form, within 2 weeks of the date of this order.

I further order that at the meeting ordered to be convened, the body corporate may consider any other motion validly included on the agenda of the meeting.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0700-2004

"Pacific Keys Central" CTS 10021

have sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote –

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)).

The scheme is a subdivision of 63 lots recorded under a building unit plan of subdivision (now a building format plan). The regulation module applying to the scheme is the standard module.

This dispute concerns the validity of two motions (10 and 12) both proposing variations to the manager’s caretaking agreement considered at the AGM on 20 September 2004 (the meeting).
Motion 10 was a motion submitted by the committee proposing a variation to clause 20 of the caretaking and letting agreement dealing with the manager obtaining professional indemnity insurance. Motion 10 was carried by a substantial majority. The applicants seek in the invalidation of this motion for technical reasons.

Motion 12 was a motion submitted by the applicants Hayward, who are the building managers and holders of the Caretaking and Letting Agreement (the agreement). The motion proposes three (3) variations to the agreement dealing with options for renewal, the persons who might exercise the relevant right, and finally, the inclusion of a clause whereby the manager indemnifies the body corporate in a particular scenario. Whilst it has not been stated specifically, it seems to me that the third proposed variation is a variation which the managers are agreeable to regarding indemnity insurance, rather than that proposed by the body corporate in motion 10. Also, I do not appreciate how in respect of the first proposed variation in the motion, the deletion of the relevant clause will affect the agreement between the parties. However nothing turns on this aspect, and I assume that the proposed variation, if implemented, will achieve the manager’s purpose.

More relevantly, determined by secret ballot, motion 12 was narrowly defeated: 22 Yes, 23 No and 2 abstentions.

This office sought submissions from the body corporate and all owners regarding the application. I have the benefit of some submissions, though not a great number, from individual owners. I also have the benefit of a submission from the committee and the body corporate manager. In their reply, the applicants’ Hayward have noted that the body corporate manager’s submission was unsolicitored. I acknowledge this, however a submission from a body corporate manager is often of significant relevance in a dispute, and in this instance given that the dispute concerned meeting procedures in respect of which the manager was closely involved, is specifically relevant if only as a tool for me to consider the sufficiency of evidence provided by the applicants. The applicants have been able to make a reply to all submissions including that of the manager, and I conclude that no denial of natural justice (procedural fairness) has occurred. For completeness, it is correct that the applicants Hayward are owners, who as they state in their reply are:

Nevertheless, I don’t think it is lost on anyone involved in this dispute that the application more concerns the Haywards in their capacity as the scheme’s resident manager, and that one of the motions in question (12) was proposed by them, and presumably if the variations are implemented as proposed in that motion, will be of benefit to them as managers. Whilst this point will not in any way impact on my determination, I do consider that it should be acknowledged.

Motion 10

I intend to dismiss the application in respect of motion 10. The principal basis of the objection to the motion is a technical one; namely the committee not having resolved to submit the motion for inclusion on the agenda. Whilst this basis might be arguable, I also acknowledge the counter arguments raised in opposition to this objection. In my view the wider issue is that the motion is of very limited significance in any event. This point is known to the parties, but just to clarify, the proposal contained in the motion could only ever be regarded as a resolution of the body corporate’s intention or position.

It has been argued to me that the motion should have been ruled out of order by the chairperson under section 47 of the standard module on the basis that it is unenforceable. However, in my view, this is not correct. As a statement of the body corporate’s position, it is enforceable. However, it is not enforceable against the Haywards as the holders of the management agreement. That is, the body corporate cannot insist on the terms of the variation being included in the agreement. This is so on the basis of privity of contract – only by mutual agreement between all parties to an agreement can the terms of an agreement be varied.

In the circumstances, I am prepared to allow the resolution to stand as a statement of the body corporate’s position. Perhaps the applicant’s concern with this motion is that it is in conflict with their own proposal regarding profession indemnity insurance. However, I consider that the seeming issue of conflict is resolved simply by the carrying of a subsequent resolution; that is, a body corporate can amend or revoke an early resolution by passing a further resolution (see section 58 of the standard module).

Motion 12

I intend to order that the body corporate shall resubmit the motion to an EGM within 2 months of the date of this order. Whilst this is an outcome that neither party (the applicants nor the body corporate) has sought, I conclude that in the circumstances it is just and equitable that such an order be made.

In respect of the applicants’ submission, I consider that the evidence submitted is insufficient to warrant the validation of the motion. Shortly I will outline my reasons for this. However, I also conclude that it would be unreasonable to allow the status quo to prevail, the reasons for which I will also outline.

In their initial grounds, the applicants alleged that "two unit owners who had voted in favour of the motion (units 12 and 60) were declared unfinancial ... and their votes were disallowed". The applicants further state that the body corporate "on two separate occasions" stated it would "write to owners in arrears", but "neither of the owners of units 12 and 60 were contacted and both believed that they were financial at the time of the AGM".

Clearly, in their initial grounds, the applicants are relying on the votes of lots 12 and 60 to reverse the voting motion from the declared 22 Yes to 24, thus changing to outcome of voting on the motion from lost by one vote to pass by one vote.

However this aspect is specifically challenged in submissions. The body corporate manager provides the returning officer’s tally sheet. The manager notes "that lot 60 is recorded as unfinancial, however the lots represented section also indicated lot 60 vote has been counted" and concludes "We cannot now verify if lot 60 was or was not counted as this was a secret vote" although the manager does acknowledge that lot 12 was in fact financial and consequently there vote should have been counted. The manager states that this would have resulted in a tied vote on the motion (23 yes and no votes) and on this basis the motion would not have been carried.

What is clear is that the outcome of the motion was extremely close. Whilst it is clear that the vote for lot 12 should have been counted, I agree that this results in a tied vote. To succeed, the applicants would still require one other vote in favour of the motion. Initially, they relied on the vote of lot 60. However, following their review of submissions, the applicant’s reply contains the further allegation:

I consider that the holding of a secret ballot and the appointment of a returning officer are measures specifically intended to avoid the very situation which has now arisen; uncertainty in the outcome and doubt regarding the integrity of the vote. It is unfortunate this was not achieved.

Referring to the tally sheet, I note that lot 60 is recorded as both financial and unfinancial. The number of lots recorded as being financial (50) accords with the number of lots recorded as having voted (50). I conclude that the evidence of the tally sheet suggests that the vote of lot 60 was included in the "yes" vote, notwithstanding its inclusion as "unfinancial".

I am not prepared to accept the unsupported and belated submission regarding lot 62 for many reasons. It was not raised initially as part of the applicant’s material but only in a reply, wherein it could not be disputed or challenged by other parties in submissions. It is completely unsupported or evidenced. The owner of that lot did not consider it warranted a submission. The fact of a secret ballot make it impossible to now verify whether lot 62 participated in the ballot or not, although the returning officer’s tally sheet suggests that that lot did not so participate.

The second aspect of the applicants grounds is that the body corporate manager undertook to contact unfinancial owners. There is evidence to support this allegation including the manager’s correspondence to the Hayward’s of 9 July 2004 and a statement in the committee meeting minutes of 22 July 2004 under the heading "Financials" at point 3.

I do not accept, as a number of owners have contended, that the body corporate was under any statutory obligation to inform owners that they were in arrears. No such obligation exists. Rather it is for an owner to ensure that their contributions are up to date. However, I further consider that the manager should not have make the written statements which it did regarding unfinancial owners, if it did not in fact intend to honour such commitment. That is, the manager’s actions should have been consistent with their written statements. Moreover, in section 96 of the standard module, there is a requirement that the body corporate when forwarding contribution notices to owners, that if an owner is in arrears in payments of a contribution, the body corporate include in the notice the amount of the arrears.

The body corporate failed in this obligation. This is confirmed in the manager’s submission:

I consider that if this requirement had been observed by the body corporate, the outcome of the motion might (not would) have been different. It may have been that the owners of lot 9 and lot 60 might have taken steps to ensure that they were financial at the meeting.

Given the above considerations, I find that there is insufficient evidence on which I am prepared to rely to satisfy me that the motion would have been carried. Conversely, I am not prepared to simply allow the outcome to stand. There is sufficient uncertainty regarding the motion to require that it again be put to the body corporate in general meeting. I do not consider it appropriate to wait a further 7 or so months till the AGM for the matter to be reconsidered. I further intend to order that the meeting to be convened might include any other motion validly submitted for inclusion on the agenda of a general meeting.

The final order sought is a declaration waiving any penalty payment on unit 60 until the issue has been resolved. Nothing has been put to me in the material regarding this aspect. I consider it is a matter for the owner of lot 60 to bring their contributions account into order, if it is not already so. This aspect is not specifically the subject of this dispute, and I do not see why the status of the account cannot be immediately resolved, and arrears (if any) paid.

Number of Scheme:	10021
Name of Scheme:	Pacific Keys Central
Address of Scheme:	54 Hooker Boulevard, MERMAID WATERS QLD 4218

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Pacific Keys Central [2005] QBCCMCmr 95 (18 February 2005)