Kangaroo Court [2006] QBCCMCmr 110 (10 March 2006)

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

I hereby order that resolutions 8 to 15, inclusive, of the annual general meeting of 10 August 2005 are invalid and that the administrative fund levy for 1 July 2005 to 30 June 2006 be reduced to $300 per contribution lot entitlement with the body corporate to refund any overpayment to the owners.

I further order that all the powers, functions and responsibilities of the body corporate committee and its executive members will vest in two persons being, firstly, the owner or nominee of lot 1 and secondly, the owner or nominee of lot 2. These powers, functions and responsibilities will vest in a nominee of the owner rather than the owner themselves if the owner provides written notice of a person (nominee) who is to serve on the committee in place of the owner, that nominee being a member of the owner’s family or acting under a power of attorney from the owner. This written notice is to be in the form of a letter signed by both the owner and the nominee and posted to the other owner. The letter must include the name of the nominee and their postal address within Australia.

I further order that the two persons who will form the committee and exercise its responsibilities as a result of this order (committee members) will be joint signatories for all financial institution accounts of the body corporate and will jointly hold the positions of the executive members of the committee unless they agree otherwise. Further, if the committee members are unable to agree on administrative fund and sinking fund budgets for consideration at the next annual general meeting then each committee member may submit their own budgets for owners to vote on as alternative motions.

I further order that if no committee meeting for the body corporate of Kangaroo Court has been held and attended by at least one of the committee members between now and the end of July 2006, then this order is to operate as deeming a committee meeting to have been called for 5:00pm on Friday 4 August 2006 on the common property of Kangaroo Court adjacent to the letterbox. The agenda for this committee meeting is deemed to include the preparation of proposed budgets for adoption by the body corporate at its annual general meeting and the preparation of an agenda for the annual general meeting as well as any other matters the committee members wish to raise.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0740-2005

"Kangaroo Court" CTS 13331

Kangaroo Court Community Titles Scheme (Kangaroo Court) is a 4 lot scheme under the Body Corporate and Community Management Act 1997 (Act) and the Act’s Standard Module Regulation (Standard Module). The scheme is designed for residential purposes.

This application is by Beverley Mort, owner of lot 2 (applicant) seeking orders against Samuel Vella, owner of lots 1, 3 and 4 (respondent). The applicant is seeking to invalidate several resolutions passed at the annual general meeting of 10 August 2005.

There have been a number of disputes between the two owners of this scheme. As there are only two owners, both owners are automatically represented on the committee and will have one vote each for committee decisions (Standard Module, 11). However, as the respondent owns three lots, the respondent can dominate decision making at general meetings by exercising his three votes against the applicant’s single vote. Submissions indicate that the applicant appears to believe that the respondent is taking unfair advantage of his greater voting power. Conversely, the respondent appears to believe that he is acting fairly in trying to improve and maintain the scheme but the applicant is unreasonably refusing to pay him for the maintenance work he performs and will not otherwise cooperate with the administration of the scheme.

It has been made clear to both owners in previous applications that the body corporate must act reasonably and administer the common property for the benefit of owners (Act 94, 152). It has also been made clear that the exercise of majority voting rights is not in itself unreasonable and the applicant would need to legally establish that particular decisions of the body corporate are unreasonable, oppressive, or otherwise contrary to the legislation before she would be entitled to have any of those majority decisions overturned.

In the present application the applicant seeks to invalidate several resolutions passed at an annual general meeting on 10 August 2005, primarily on the basis these resolutions are oppressive and unreasonable. The applicant has failed to provide some types of evidence that would assist her in in this claim. For example, the applicant has not provided any advice from a professional that the budget adopted is inappropriate and details of a preferred replacement budget. Similarly, she has opposed proposed caretaking and management contracts without giving details of alternative quotations or contracts from professional persons for the carrying out of necessary duties.

However, the submissions and material raise several technical questions about the validity of the meeting and the resolutions. Non-compliance of a technical nature will not necessarily invalidate a resolution but some significant queries have arisen. In particular, the applicant and respondent are both members of the committee but questions arise about whether the respondent has acted unilaterally to call the annual general meeting without any input from the respondent.

Provisions of the legislation relevant to the formation and operation of a committee include provisions to the effect that:

A decision of the committee is effective as a decision of the body corporate provided it is not an issue that is restricted for decision by owners in general meeting (Act, 101). There are certain obligations for the committee related to the calling of the annual general meeting. Specifically, a committee meeting must be held prior to an annual general meeting to authorise the calling of the annual general meeting (Standard Module, 40), to prepare the agenda for the annual general meeting (Standard Module, 45) and to prepare the proposed budgets for adoption at the annual general meeting (Standard Module, 94(5)).

Upon an enquiry by this office the respondent has confirmed that he did not call any committee meeting at which he and the applicant (or her nominee) agreed on the motions and budgets for the annual general meeting. Rather, the respondent simply drew up the motions and notice of meeting and then exercised his greater voting power to pass all those motions at the meeting.

I am aware that there have been a number of disagreements in the past and further disagreements may arise if both owners attend a committee meeting to endeavour to agree on budgets and similar matters. As each committee member will exercise a single vote there is the possibility of deadlock if both committee members continue to disagree on matters concerning the body corporate. However, it is important that the body corporate for Kangaroo Court does fulfil its legal obligations and is not left inoperable by failure of the committee to meet and perform its functions. Both owners should therefore consider the best way for matters to proceed from here and endeavour to adopt strategies that allow for the smooth conduct of the body corporate’s affairs.

The submissions indicate that the financial year of Kangaroo Court runs from 1 July to 30 June. This means that the next annual general meeting for Kangaroo Court will need to be held by 30 September 2006. To facilitate the proper calling of this meeting I will make orders to facilitate each owner delivering notice of any nominee for committee membership and delivering a notice for the calling of a committee meeting. I will provide a period of two weeks in which both owners have an opportunity to provide a written letter to the other owner nominating the name and postal address of a person who is to serve on the committee in their place. Provided this nominee is a member of the owner’s family or acting under a power of attorney from the owner then the nominee will be a committee member. If no written notice of a valid nominee is given then the owner will be the committee member.

I will further order that if no committee meeting has been held by the end of July then a committee meeting for the body corporate for Kangaroo Court is deemed to have been called for 5.00pm on Friday 4 August 2006 on the common property adjacent to the letterbox. In case of deadlock at the committee meeting I will provide that if both committee members cannot agree on a particular budget then each committee member can propose an alternative budget on the agenda for the next annual general meeting. Presumably the budget preferred by the respondent will be adopted at the general meeting because of his greater voting power. However, if the applicant is able to establish that this budget is unreasonable then an adjudicator may order that the budget proposed by the applicant should be adopted instead provided that budget is reasonable.

Similarly, it would be beneficial if both committee members could engage in discussion and agree on appropriate motions that both owners would support. This would save time and inconvenience for both owners in minimising future disputes.

The applicant has sought that resolutions 5, 8, 9, 10, 11, 12, 13, 14 and 15 of the annual general meeting on 10 August 2005 be set aside and that administration levy be reduced to $300 per unit for the year rather than two instalments of $300 each.

Resolution 5 was a decision to invest the body corporate’s sinking fund moneys to an interest bearing deposit with Suncorp Bank. The applicant has subsequently said that she does not oppose this investment in principle provided she is cosignatory to the account. In the circumstances I do not consider it appropriate to invalidate this resolution despite the irregularity in the calling of the annual general meeting. However, a body corporate account must provide that it is to be operated jointly by the authorised members (Act, 151). I will therefore make an order that requires this provision of the legislation is complied with.

Obviously any taxation legislation requiring the body corporate to pay income tax on interest earned will also need to be complied with. However, I am not satisfied that any order is required in this respect as the applicant can contact the taxation office, complete a taxation return and then propose at a committee meeting that the body corporate adopt that taxation return and forward it to the taxation office.

In particular, I note the submissions of the respondent to the effect that he sent a form to the applicant for her to sign in order to be cosignatory for the investment account and that he had contacted the tax office in previous years and no tax return was required given no interest had been earned in those years and no other income had been generated.

Resolution 8 was a decision of the body corporate to pay the respondent $3,650 for the caretaking and secretarial services he rendered for three years from 2002 to 2005. Resolutions 9 and 10 proposed the body corporate enter into caretaking agreement with the respondent for a term of 10 years at $900 per annum and body corporate management agreement at $500 per annum for a term of three years.

An adjudicator has already determined that caretaking and secretarial agreements purported to be entered into between the body corporate and the respondent at the 2002 annual general meeting were invalid. The adjudicator also determined that resolutions proposing reimbursement to the respondent pursuant to those agreements from 2003 to 2004 were invalid.^[1]

The adjudicator did say that the total amount of $1,200 per annum for the caretaking and secretarial services outlined in the agreement did not appear unreasonable and the applicant was in fact being unreasonable in expecting the services to be provided for nothing. However, the adjudicator held the adoption of the agreements to be invalid and stated that the applicant was not legally bound to recompense the respondent for his services even though failure on her part to do so might be considered unreasonable by most persons.

Against this background, I will order that resolutions 8, 9 and 10 are invalid. Presumably the respondent may again propose entry into similar agreements at the next annual general meeting. If the applicant wishes to ensure these appointments are valid then it may be prudent for him to ensure all requirements of the legislation are complied with and the terms of the agreement are appropriate and reasonable. On the other hand, if the applicant wishes to be able to subsequently challenge agreements of this nature as unreasonable then it may be prudent for her to obtain quotations from persons she says could appropriately provide all maintenance and secretarial services required by the body corporate and propose the appointment of those persons.

Resolutions 11 to 15 concern significant proposals for the scheme relating to the proposed erections of fences and a front gate, the prohibition of car parking within the scheme and the prohibition of proxy votes.

These resolutions all deal with significant matters and I am unwilling, in the circumstances, to overlook the failures to comply with the legislation in the calling of the annual general meeting. Again, I would encourage both committee members to endeavour to discuss these matters and propose a mutually acceptable solution. In particular, at least two alternative quotations may be required for the proposed gate and fencing and the by-laws may need to be altered to prohibit parking on common property. Questions also may arise about the reasonableness of resolutions of this nature depending on the particular circumstances of the owners and occupiers.

The applicant has sought that the administrative fund budget be reduced to $300 per lot rather than be set at $600 per lot as adopted at the annual general meeting. Given there was no committee meeting to set the proposed budget there are strong reasons to invalidate the adopted budget. In particular, the administrative fund budget amount appears too high given the opening balance of the fund and the invalidation of resolutions pursuant to this order resulting in a reduction of anticipated expenditure. I therefore accept the applicant’s submission that the budget should be reduced to $300 per lot and will order that the body corporate refund any overpayments.

Number of Scheme:	13331
Name of Scheme:	Kangaroo Court
Address of Scheme:	30 Leonard Avenue SURFERS PARADISE QLD 4217

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Kangaroo Court [2006] QBCCMCmr 110 (10 March 2006)