Aarons [2006] QBCCMCmr 28 (20 January 2006)

Last Updated: 19 July 2006

REFERENCE: 0679-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	11476
Name of Scheme:	Aarons
Address of Scheme:	3355 Gold Coast Highway SURFERS PARADISE QLD 4217

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

Kathleen Clair Young, the co-owner of lot 43

I hereby order that the nominations by Lee Parker Pty Ltd of Margaret Howard, Ron Merrick, Rachael Sparks and Bettina Salarda as ordinary members of the committee, and the subsequent purported election of those persons as ordinary members of the committee of Aarons, at the EGM of the body corporate held on 18 August 2005, are invalid and of no effect. I further order that Margaret Howard, Ron Merrick, Rachael Sparks and Bettina Salarda are hereby declared not to be members of the committee of Aarons Body Corporate and shall take no further involvement whatsoever in the affairs of the committee. I further order that Rod Henderson, Simon Shilling, Talei Towson, Phillip Walford and Kathleen Young are hereby declared to be members of the committee of Aarons Body Corporate and shall immediately take their place as members of the committee. I further order that the members of the committee from the date of this order shall be: • Mark Howard, as chairperson, secretary and treasurer; and • Rod Henderson, Simon Shilling, Talei Towson, Phillip Walford, Kathleen Young and Aaron Thompson, as ordinary members. I further order that the Secretary of the body corporate shall within seven (7) days of the date of this order convene a meeting of the committee so that the committee appointed under the terms of this order can meet, review all or any matters affecting the body corporate and which are within the jurisdiction of the committee, and pass resolutions the committee at the meeting deems fit. I further order that the notice of this committee meeting need not include an agenda.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0679-2005

"Aarons" CTS 11476

The applicant, Kathleen Clair Young, the co-owner of lot 43, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote:

That the body corporate committee be representative of all owners; not controlled by, or constituted from, nominees of one corporate owner and that the current committee be set aside and fresh elections held without multiple nominees from one corporate owner.

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)).

The scheme is a subdivision of 44 lots recorded under a building unit plan (now a building format plan) of subdivision. The regulation module applying to the scheme is the accommodation module.

The applicant alleges that the current committee should be set aside on the ground that it "is representative of one (corporate) owner only and not all owners and as such does not act in the best interests of all owners, or the building".

At a meeting held on 18 August 2005, required to be held pursuant to a previous order, the following committee were elected:

• Mark Howard (continuing) Chairperson, secretary and treasurer;
• Aaron Thompson, Margaret Howard, Ron Merrick, Rachael Sparks and Bettina Salarda (ordinary committee members).

The following persons nominated or were nominated for election to the committee, however based on the votes received, were not elected:

Rod Henderson, Simon Shilling, Talei Towson, Phillip Walford and Kathleen Young

The applicant states that "present at the meeting were several nominees on behalf of Lee Parker Pty Ltd who were nominated in respect of several specified units. ... The result is a committee that is made up of nominees of Lee Parker and therefore votes as it is told to do so by the company. It is not independent, it does not represent all unit owners".

The body corporate has responded in a submission opposing the application. The submission relevantly states:

The appointment of each of the committee members was made pursuant to a properly convened general meeting with the required legal protocols.

If the applicant’s argument is accepted, it would mean that the corporate owner of 28 lots, representing near enough to 75% of the ordinary voting entitlements within the scheme, would only be allowed to have one nominee to the committee. It would follow that the owner with the largest stake in the scheme could effectively be held to ransom (at committee level at least) by the remaining committee members. ...

There is nothing at law which precludes a company which owns several units from nominating different company nominees to represent the company for body corporate purposes. This is a natural right of the company arising from its significant investment in the Scheme. ...

The extracted statements from the body corporate’s submission are simply wrong in most respects. Moreover, I am of the view that the solicitor who made these representations, and their client, knew or should have known this. The election of the committee which is now under challenge in this application occurred in direct consequence of my order in application 437-2005. The reasons as set out in that order should have left no reasonable person in any doubt of the illegality of the actions of the owner, Lee Parker Pty Ltd, in now seeking to stack the committee. I say "stack" because what other explanation can there be for the sudden interest of the persons now nominated by Lee Parker Pty Ltd and purportedly elected to seek membership of the committee. They certainly were not nominated for the committee at the last AGM when only Mark Howard nominated, and was duly elected. The only explanation of this sudden interest is that, when an order was made to hold an election to elect the legally required number of members to the committee, Lee Parker Pty Ltd realised that, without several more nominations by it, a committee would be elected which included owners other than itself. To prevent this, Lee Parker sought to "stack" the committee by first nominating several persons for committee membership, and secondly, using its majority vote to ensure that those persons nominated by it were elected ahead of other nominees. This scenario is exactly what the amendments to the legislation in 2003 were intended to prevent. I set all this out in my reasons in the order in 0437 of 2005, quote:

The requirements of the legislation

In my view, this body corporate is currently acting outside the specific requirements of the legislation.

I have already referred to the committee (of one, Mark Howard) elected at the last AGM held two months ago, and the fact that other owners failed to nominate for the committee. Further, I have referred to the "required number" of members of the committee. In the case of this body corporate, this means at least 3 members and not more than 7.

Mr Howard is only a single voting member of the committee and has only one vote on the committee, notwithstanding that he holds 3 committee positions (see sections 10(2) and 31(3) of the Accommodation Module). Consequently the committee of this body corporate consists of one voting member. The definition of required number requires a minimum of three and a maximum of seven voting members. Currently, the committee does not consist of the required number. What is the consequence arising from this.

This issue was recognised and addressed in the 2003 amendments to the legislation, specifically the Body Corporate and Community Management Legislation Amendment Regulation (No. 1) 2003 which came into effect on 1 December 2003. In the explanatory notes to that legislation, the following is set out:

Firstly, under the heading Objectives and the sub heading How policy objectives will be achieved and finally the headings Body Corporate Committees – Committee elections:
(bolding is mine for highlighting purposes)

Committee elections
The amendments make additional provisions about the conduct of elections for committees, to address some of the practices that have arisen regarding stacking of committees, to the advantage of a small number of owners or the body corporate manager or resident manager. The amendments include:
• If an owner owes a debt to the body corporate, they cannot be nominated for committee membership, or nominate another person for committee membership. This is to prevent persons
who are not fulfilling their financial obligations to the scheme from becoming committee members.
• An owner can nominate only one person for committee membership. This is to limit stacking of committees.
• However, if there are insufficient nominations to fill all executive or ordinary member positions, the chairperson may call for nominations from the floor of the general meeting. In this case, the restrictions on the number of nominations an owner can make are relaxed.
• If there are insufficient nominations to achieve the minimum number of persons for a committee (three), and one co-owner of a lot has been elected, another co-owner can be nominated. This
does not apply if there are three committee members.
• The minutes must record the number of votes cast for each candidate, and a separate tally sheet must record voting details. This is to ensure that a proper record of the voting is kept, but not
as part of the minutes.
• A process is provided for situations where there are insufficient persons elected to form a committee at an annual general meeting, providing for those persons who have been elected to
call a further general meeting for the purpose of appointing additional members or engaging a body corporate manager to act as the committee.
• A process is provided for the filling of a casual vacancy on the committee. This is to ensure that the committee is not limited in its ability to conduct its business due to the vacancy.

Specifically the Accommodation Module has been amended by the insertion of a new part 3, div 4A. The explanatory note accompanying that new division is as follows:

Insertion of new part 3, div 4A
Clause 20--Although section 23 provides for the filling of casual vacancies, it makes no provision for the situation where an annual general meeting does not appoint sufficient persons to achieve the minimum number required for a committee. If this occurs, or one or more of the executive member positions has not been filled, and the body corporate has not engaged a body corporate manager under division 10, the appointed committee members are required to hold a general meeting for the purpose of appointing additional persons to the committee or, if this fails, engaging a body corporate manager under division 10. ...

I conclude that the provisions of division 4A are directly apposite to the situation applying to this body corporate immediately after the last AGM in relation to the required number of members of the committee. At that AGM:

• 1 person was elected as an executive member of the committee; and
• the total number of voting members of the committee elected was less than 3; and
• the body corporate does not approve the engagement of a body corporate manager under division 10.

The consequence of this outcome is that sections 22B, C and D operate and within one month of the AGM being held, the committee member elected (ie. Mark Howard) was required ("must") call an EGM of the body corporate, which EGM is to be held within two months of the AGM. At that EGM, the body corporate may appoint, without conducting an election, a person who is eligible to be a member of the committee to fill a vacancy on the committee.

The intent of these provisions is as stated in the explanatory note for the sections: where an annual general meeting does not appoint sufficient persons to achieve the minimum number required for a committee and the body corporate has not engaged a body corporate manager under division 10, then appointed committee member(s) are required to hold a general meeting for the purpose of appointing additional persons to the committee or, if this fails, engaging a body corporate manager under division 10.

This is a clear and unambiguous statement to all bodies corporate which do not elect a committee with the required number. In my view, the committee elected (in this case, Mark Howard) is not a true committee but rather is a caretaker committee who’s immediate responsibility is to convene a further EGM in order to attempt to form a legal committee (that is, a committee with the required number of members).

Its seems from the submission of the body corporate, that both Mr Howard, the body corporate manager and the body corporate solicitors who made the submission are unaware of the requirements of these provisions. The submission states at page 3.

The body corporate committee can do nothing if nominations are not received and have not been received for the last number of AGM.

This statement is clearly wrong in light of the requirements of Division 4A. Mr Howard was required to convene a further EGM in accordance with the requirements of that section. He failed to do so, or at least to call a meeting which complied with the requirements of the division. In the circumstances, I conclude that both the committee meeting of 20 May 2005 and the EGM of 24 June 2005 are out of order, and are invalid. This body corporate was under a legislative obligation to first resolve issues regarding its committee before it embarked on any other issue. I consider that any other issue, excepting perhaps an emergency, cannot be considered by the committee unless and until the committee has first complied with the requirements of the division.

For these reasons, I intend to invalidate both the committee meeting and the EGM, and to order that the body corporate must, within six weeks of the date of this order, hold a further EGM in accordance with the legislative requirements set out in Division 4A (sections 22A-D) of the Accommodation Module. I accept that the positions of chairperson, secretary and treasurer are already filled by Mark Howard, and that presumably Mr Howard will wish to continue in these positions. However, this still means that there are a minimum of two (2) and a maximum of six (6) vacant ordinary member positions on the committee capable of being filled. I further intend to order that the provisions of sections 23D and 23E of the Accommodation Module shall apply to the meeting ordered to be convened and that the secretary and chairperson (ie. Mr Howard) shall fully comply with the requirements of those sections in relation to the contents of the notice of meeting and the procedures at the meeting for the election of additional committee members. If 2 and not more than 6 eligible persons are nominated for the committee, than the meeting shall appoint these persons to be on the committee in accordance with section 22C(1) of the Accommodation Module. Only if more that 6 eligible persons are nominated for ordinary member positions on the committee need an election be conducted in the way decided by the body corporate under section 23E(2). ...

I further intend to order that with the notice of meeting required to be given in respect of the meeting to be held in accordance with the terms of this order, the secretary shall forward to all owners a copy of this order which includes as an annexure a copy of my letter to S Shilling of 15 June 2005 explaining my views that owners have a responsibility to participate in the management of their schemes, by for example, being prepared to become members of the committee of such scheme. From the terms of this letter, all owners will have a better understanding of my expectation that they have a responsibility to participate in the management of their scheme. Through the terms of this order, there will be an immediate opportunity to do this, namely by nominating for or being willing to be appointed as a committee member at the forthcoming meeting to be convened.

Annexure A

Your Ref:
Our Ref: RAM:0076-2005


15 June 2005

Mr S Shilling
2/3355 GOLD COAST HIGHWAY
SURFERS PARADISE QLD 4217

Dear Mr Shilling

RE : APPLICATION 0076-2005 "AARONS" BODY CORPORATE

I refer to the grounds of your application. At various times, those grounds canvass alleged failures of the body corporate or committee over a thirteen year period. Many of those alleged failures are directed towards the current committee (Mr Mark Howard) and current body corporate manager. However, Mr Howard has not been a committee member for this entire period (ie. 13 years) and in fact appears to have been an owner and committee member for a much shorter period. Given this general observation, I require a further statement from you more specifically directed and focused towards the following specific matters or issues.

Firstly, the alleged actions of Mr Howard whilst a committee member. If, as you believe, it is the current committee which is ineffective, then please specify specific actions which you consider warrant this conclusion. Whilst this information is probably available in your material, I consider that it is not set out in concise or specific terms. I consider a more concise statement of these aspects to be a reasonable expectation given the nature of the allegations being made against both Mr Howard and the body corporate manager.

Secondly, I note that you (and other owners for that matter) have been in attendance at the last 3 AGM’s of the body corporate. However, at no time have you evidenced an intention to stand for election to the committee. It seems, given the number of nominees, that your (and other owners) election to the committee would have been assured had you (and / or they) simply nominated. Given this, I conclude that your implications that Mr Howard effectively controls the committee and the body corporate lacks conviction. Surely if owners simply nominated for the committee, and were elected, then those owners would similarly have a say in the body corporate via the committee.

Connected with this aspect is the fact that you seek the appointment of a permanent administrator in place of the current committee. Your proposed nominee is a practicing body corporate manager. My preliminary view is that what this body corporate in fact needs, given the alleged issues or problems affecting it, is an effective and involved committee of owners. I do not consider, given the nature of the problems alleged, that a body corporate manager would have either the requisite skills or time to effectively manage this body corporate on the micro level required (given other professional commitments) in place of an effective committee. This is no reflection whatsoever on the skills of the proposed appointee, but rather a reflection on the nature of the problems alleged and my view of what type of structure which would be required to start to address these problems.

Whilst I am prepared to take further submission on this aspect, my preliminary view is as stated: that the proposed appointment of a practising body corporate manager as permanent administrator of the scheme is not the appropriate solution for the issues or problems alleged to be affecting this scheme. Rather, I conclude a more effective solution would be the election or appointment of an effective and involved committee of owners.
This might be achieved if owners were simply prepared to nominate for committee positions. Alternatively, it might be achieved by an order for fresh committee elections, which might be considered, in light of comments made hereafter.

The usual practice of adjudicators is to only appoint an administrator on a permanent basis as you propose (in replacement of a functioning committee) where there is evidence that the body corporate is completely dysfunctional, and that all other avenues of effective management have been exhausted. I consider that whilst there might be some evidence that the body corporate is not functioning effectively, I conclude that all avenues to achieve this have not been exhausted. In particular, it is clear that there are vacant committee positions, and that at successive AGM’s owners are choosing not to nominate for vacant committee positions.

The legislation is such that an owner, notwithstanding that they (or it, in the case of a corporation owner) own more than one lot in a scheme, is only able to nominate "an individual who is a lot owner or who may be nominated by the lot owner in accordance with section 11(1)(b)(ii) or (iii)" (see section 14(2)(b) of the Accommodation Module regulation). This exact equivalent of this provision in the standard module regulation has been interpreted in order 0521 of 2004 as follows:

Membership of committee
As not all owners can be directly involved in the day-to-day management of the body corporate, owners elect committee members to perform this function on their behalf.

To ensure fair representation on the committee, the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module) contains detailed provisions regarding the nomination and election of committee members. The Standard Module was also amended, effective from 1 December 2003, to improve the transparency of committee decision making and address issues including potential stacking of the committee to the advantage of a small number of owners, a body corporate manager, or the resident manager.^[1] However, the Commercial Module leaves matters of nomination and election to be determined by the body corporate itself in the form of a special resolution (Commercial Module, 13).

And by the adjudicator in order 0780 of 2004 as follows:

The pre 1 December 2003 position allowed an owner to nominate any number of members to the committee. As well, there was essentially no restriction on who the owner could nominate. That is, the nominee need not have any connection or association with the scheme. The legislation was amended to overcome this, and specifically to prevent the committee being "stacked by owners nominating multiple other persons for election to the committee".

Generally, subject to certain specific rules, the effect of this is that an individual owner may nominate only themselves or one other individual who is a lot owner as a member of the committee.

The explanatory notes for the amendments to the legislation provide as follows, quote:

Replacement of s 13 (Nominations to committee)
Clause 131--This clause provides in section 13(2) that a lot owner may, in response to a notice inviting nominations for election of the committee, nominate only one individual. If the nominating owner is an individual, the individual nominated could be the owner themselves, another lot owner, or a member of the owner’s family or a person acting under a power of attorney given by the owner. If the owner is a corporation, the owner may nominate one individual who is a director, secretary or other nominee of the corporation. If the lot owner is a body corporate for a subsidiary scheme in a layered arrangement of community titles schemes, the owner may nominate a representative of the subsidiary scheme. This amendment, and the amendment in clause 128, limits the possibility of a committee being stacked by owners nominating multiple other people for election to the committee. The amendment does not restrict an owner from nominating the individual for more than one committee position. ... (my bolding for emphasis)

The above provision as to nominations must be read in conjunction with:

the definition of "required number" of members of the committee" in the Schedule headed "Dictionary" quote:

"required number", of members for a committee, means at least 3, but not more than the following number of, voting members--
(a) if the scheme includes 7 or more lots--7;
(b) if the scheme includes fewer than 7 lots--the number equalling the number of lots.

Section 10 headed Composition of Committee, quote:

10 Composition of committee [SM, s 9]
(1) The committee consists of--
(a) the persons chosen to be the executive members of the committee; and
(b) if ordinary members are chosen for the committee--the ordinary members; and
(c) each person who is a non-voting member of the committee.
(2) The one person may hold the positions of chairperson, secretary and treasurer, or any 2 of the positions, in conjunction.
(3) Subject to subsection (4), the committee must consist of the required number of members for the committee.
(4) Subsection (3) does not apply to a committee mentioned in section 12(3) or (4).
(5) There must be a chairperson, secretary and treasurer, whether or not there is a body corporate manager who has been authorised by the body corporate under section 1194 of the Act to exercise some or all of the powers of an executive member of the committee.

And Section 31 headed Voting at committee meeting, subsection (3)

(3) To avoid doubt, it is declared that a voting member who is an executive member has only 1 vote, even if the person holds more than 1 of the positions of chairperson, secretary and treasurer.

Clearly, the consequence of these provisions is that notwithstanding that an owner might own more than one, or even a majority of lots, in the scheme, such ownership does not allow them to stack or control the committee, unless as appears to be the case here, other owners are simply not willing to nominate and to serve on the committee. I do not consider that it is the role of an adjudicator to save owners from their own failure to take some responsible to become involved in their body corporate. (my bolding for emphasis)

...

Yours faithfully

Determination

All the above information was specifically available to all parties in this body corporate, and the body corporate manager, prior to the election being held. Notwithstanding this, Lee Parker Pty Ltd appears to have acted in direct conflict with this information, and contravention of the legislation, and made multiple nominations on behalf of that company. Not only this, Hynes Lawyers, in the body corporate submission to this application, and notwithstanding everything set out in the previous order, still makes submissions in direct conflict with the law. I consider there can be no explanation of this other than that the action is contemptuous.

The nominations made by Lee Parker Pty Ltd are invalid and I intend to invalidate the election of the persons so nominated by Lee Parker Pty Ltd, namely Margaret Howard, Ron Merrick, Rachael Sparks and Bettina Salarda as ordinary members of the committee. In place thereof, I intend to declare that the other persons nominated for election, namely Rod Henderson, Simon Shilling, Talei Towson, Phillip Walford and Kathleen Young, together with Aaron Thompson (who was validly nominated by the owner of lot 13, Casuarina Lifestyle Pty Ltd) are declared to have been elected as ordinary committee members. The final member of the committee is Mark Howard as chairperson, secretary and treasurer.

If Lee Parker Pty Ltd believes I am wrong in my interpretation of the legislation, and its intent, which it so clearly sought to ignore or circumvent in proceedings at the recent meeting and committee election ordered by me, I suggest it avail itself of the appeal mechanism provided for in the Act.

---

^[1] Explanatory Notes - Body Corporate and Community Management
Legislation Amendment Regulation (No. 1) 2003, page 6.