Clarex Court [2006] QBCCMCmr 48 (7 February 2006)

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

Egon Karge and Margaret Karge, co-owners of Lots 2, 3 and 5, and Dominic Martinez, owner of Lot 4

I hereby order that the application for an order –
"to declare motion 11 of the Administration Agreement not valid as it is deceiving the way it is worded and cannot be voted on with a plain Yes or No" is dismissed

In lieu I declare that Motion 11 of the Annual General Meeting convened on 17th November 2004 and held on 24th November 2004 was not carried by the body corporate, and is of no effect.

I order that within one month of the date of this order, the body corporate committee holds a meeting to determine whether to seek return of the records of the body corporate and the body corporate seal from The Community Managers;

I further order that at the same committee meeting, the committee determines (at least) the following -

o that the policies of insurance for the scheme are reviewed ;
o that scheme budgets for the year are set;
o that levies for the financial year and interim levies if required, are set;

AND that having made such determinations, and prepared the wording of any other motions, the body corporate committee convene a general meeting so that lot owners can vote on the motions so determined.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0670-2005

"Clarex Court" CTS 1595

APPLICATION

This is the application dated 25^th October 2005 as amended on 1^st November 2005 and 4^th November 2005, of Egon Karge and Margaret Karge co-owners of Lots 2 , 3 and 5 and Dominic Martinez owner of Lot 4 (the applicants) against the body corporate for the scheme (the body corporate) for a declaration that Motion 11 of the "Administration Agreement," (by which they mean Motion 11 of the adjourned annual general meeting held on 24th November 2004), was invalid because the wording was deceptive and ambiguous. The applicants also seek to have the body corporate records and stamp returned to the secretary.

JURISDICTION

"Clarex Court" CTS 1595 is a community title scheme under the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 ( the Standard Module) . There are six lots in the scheme created under a Building Unit Plan of subdivision.

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)).

Section 242(2)(b) of the Act states that an application for an order declaring void a resolution of the body corporate must be made within three months after the meeting at which the resolution was passed, although such time restriction may be waived by an adjudicator " for good reason."

The reason given by the applicants is that Motion 11 (Motion 11) of the Annual General Meeting held on 24th November 2004 (the AGM of 2004) " is deceiving the way it is worded and cannot be voted on with a plain Yes or No." The applicants Egon Karge and Margaret Karge say they thought the motion provided for the services of The Community Managers, as body corporate manager, to end on 16^th August 2005. Therefore, the applicants were not aware of the grounds for dispute until 16^th August 2005, when the body corporate manager continued its service.

In the appeal of Weeks v. Commissioner for Body Corporate (Maroochydore District Court Appeal 13/99), Judge Dodds made the following statement about section 242 at pages 4 and 5 of the judgment:

"... the objects of the Act, for instance section 5(a) and (h) militate against too strict or legalistic a view about good reason for waiving non- compliance with the time limit. What will be required is a balancing of the length of the delay; the reason for the non-compliance; the effect of delay on others who are affected by the matter in dispute and importantly, whether apart from the question of non-compliance with the time requirement, an applicant will be entitled to the relief sought. The applicant, being the person seeking a waiver, will have the task overall of satisfying the adjudicator that the time limit should be waived in all the circumstances."

Given the requirements of section 242, I must deal with the matter of jurisdiction at the outset which entails an examination of the application and submissions against each of the above criteria.

The delay between the passing of Motion 11 and lodgement of the application is approximately one year. Given the time limit imposed by the legislation, this period can only be seen as a period of considerable delay. The applicants submit that they were deceived by the wording of the motion, and had no reason to lodge an application earlier.

A copy of Motion 11, as shown on the voting papers which went out to lot owners, has been provided to me by The Community Managers, (the body corporate manager ) on behalf of the body corporate. It stated -

"That the body corporate for "CLAREX COURT" t in the Community Titles Scheme 1595 engages The Community Managers (herein called ‘the manager’) for the supply of administrative services to the Body Corporate in accordance with the engagement circulated with this notice of meeting for a period of three (3) years commencing on 19/08/2005 and expiring on 16/08/2008 at a rate of $1,157.64 GST inclusive ($192.94 per lot, GST inclusive) , for agreed services and additional disbursements as specified in the engagement for any additional services requested by the Body Corporate. Further the manager is authorised to open and/or operate the administrative and sinking fund bank accounts of the Body Corporate and to have custody of the seal of the Body Corporate and that any of its executive officers be authorised to affix the seal to documents and to sign through the seal on behalf of the Body Corporate"

On the face of it, this motion is neither "deceiving", nor is it impossible to vote on the motion with a " Yes" or "No".

The confusion arose in that, on returning a written voting paper, Mr and Mrs Karge, wrote on the motion "One year to be reviewed yearly as per section 3 CTIQ Ltd" and changed the number "(3)" to "(1)" and crossed the "s" off the word "years". As amended in writing by Mr and Mrs Karge, they circled a vote "YES" to the motion.

I accept that two of the applicants, Mr and Mrs Karge, have mistaken or misread the date of the commencement of the engagement of the body corporate manager. As I shall set out in my reasons, I find that they continue to err in their interpretation and/or understanding of Motion 11 as amended. Their mistake is not sufficient grounds to invalidate the motion.

With regard to the third criterion, the effect on others in invalidating the motion, I find in the circumstances that to invalidate the motion would have little practical effect on others affected by the dispute, that is the remaining lot owners and the body corporate manager. To invalidate the appointment of the body corporate manager is meaningless in the circumstances where the body corporate manager has in fact been acting since August 2005, presumably to date.

With regard to the last of the criteria set out in the Weeks case, that is, whether the applicants’ claim has merit and would be successful if it were not for the time limit, on this matter I have several concerns about the validity of Motion 11, regardless of the applicants’ error of interpretation, as set out in my reasons below. On balancing these criteria, I am satisfied that I have jurisdiction to make an order in this matter, and shall waive the non-compliance with the time limit imposed by section 242.
With regard to the second order sought in the application, only the body corporate ( ie the committee) can request that books and records are returned from a body corporate manager. I note the applicants’ request to have documents returned to the secretary for the scheme.

SUBMISSIONS

The applicants have, with their application, sent copies of the minutes for the AGM of 2004, edited in pen as to the year, in that they have changed " 19^th August 2005" to " 19^th August 2004" and "16^th August 2006" to "16^th August 2005" as if the minutes contained an error in the stated year.

They say that they -

" were convinced our contract with ‘ Strata’ would end on August 18th 2005 and there would be no need for a dispute resolution. When we objected to a 3 year extension, ‘Strata’ inserted 1 in brackets behind three years as stated in Motion 11..."

The body corporate manager says that the minutes of the AGM of 2004 show a small clerical error. They explain that, at the AGM of 2004, "it was requested", ( it is not clear by whom) that the engagement of the body corporate manager be for one year in lieu of three. The motion was therefore amended to show that the engagement was for one year from 19th August 2005, until 16^th August 2006 (in lieu of 16th August 2008 as the original motion was worded.) The minutes of the meeting sent to all lot owners showed that their engagement was " for a period of three (1) years commencing on 19/08/2005 and expiring on 16/08/2006 at a rate of $1,157.64 GST inclusive " etc... They say that the fact that the word "three" remained was just a clerical error, and that the dates clearly show the one year intended.

In reply the applicants say that there was no quorum achieved on 17^th November 2004, the convened date of the AGM of 2004, nor at the adjourned meeting on 24^th November 2004. The minutes of the AGM of 2004 also refer at Motion 1 to a meeting held on 23rd December 2004, which is clearly wrong, and the administrative fund budget ending on 30^th September 2005, which the applicants detail to demonstrate the body corporate manager’s inaccuracies in record keeping.

DETERMINATION

The applicants appear to think that their dispute with the body corporate is that the body corporate manager was engaged for three years instead of the one year, for which they voted. However, the body corporate manager was only engaged for one year, but a year which commenced on 18th August 2005, as stated clearly in Motion 11.

The body corporate manager has been associated with this scheme since 1999, and had a signed contract for 3 years running from 18^th August 2002 until 17^th August 2005. The contract engaging the body corporate manager from August 2002 was signed on behalf of the body corporate by K. Emmel as chairman/secretary on 10^th December 2001.

No doubt because of the financial year of the scheme, the annual general meeting is held in November or December although the period of engagement of the body corporate manager commences in mid August for the following year. That has been the pattern since 1999. From this pattern, and from a perusal of the original motion and the unedited minutes, I am satisfied that the dates of "19^th August 2005" and "16^th August 2006" are correct.

If the body corporate managers are properly engaged, then the term agreed to is until 16th August 2006.

From the minutes it appears that only Kathy Emmel attended the AGM of 2004. Mr and Mrs Karge, owners of Lots 2, 3 and 5, the only other voters, sent in a written vote. However, either Mr Karge or Mrs Karge wrote on motion 11, "One year to be reviewed yearly as per section 3 CTIQ Ltd." and altered the period of the engagement from "(3)" to "(1)", although he or she did not change the termination date, or the written word " three." Whilst they voted "Yes" on the motion as amended by them, the result in fact was to vote against the motion as originally proposed, and this should have been recorded as a "no" vote.

The proposal to amend arose at the meeting. Section 57 of the Standard Module concerns amendments of motions at meetings and states -

(Words in brackets added by the adjudicator and underlined to clarify meaning)

Where a motion to amend a motion is proposed, a person who is not at the meeting but has cast a vote on the original motion, must be counted as voting against the proposal to amend.(Section 57(3)(b)).

In other words, Mr and Mrs Karge, not being at the meeting, and having cast a vote on the original motion, had to have a vote against the proposed amendment recorded. The result should have been, presuming that Kathy Emmel voted in favour of amending the motion, that the proposal to amend failed by 1 vote to 3 against. The amended motion should never therefore have been put to the meeting. The original motion stood which was the motion that the body corporate manager be appointed for three years. Mr and Mrs Karge voted "no" to this. The final vote on this motion is unknown, but would have been at best 3 -1 against, ( since Mr and Mrs Karge have three lots) or possibly 3 – 0, or 4 - 0 against, since I am not advised how Kathy Emmel voted on the original motion of the three year appointment, or whether she voted on it at all.

A proxy vote cannot be used for the engagement of a body corporate manager. (section 74(3)(f)(i) Standard Module.)

Motion 11 therefore cannot be relied upon as having been passed. Since the body corporate manager has been acting for the body corporate however, it is entitled to be paid for work done to date.

In addition to the status of Motion 11, the body corporate manager does not seem to have a signed contract at present. They have been unable to supply me with a copy, on request. This is perhaps all the applicants need to ask the body corporate to effect a "termination" of the body corporate manager’s services. The form of engagement of a body corporate manager must be in writing and state the term of the engagement including when the term begins and when it ends. (Section 78(2) Standard Module). Section 78(1) states –

"The engagement of a person as a body corporate manager ... is void if the engagement does not comply with requirements in subsection (2) "
The body corporate may seek the return of its books and records from the body corporate manager. Section 152 of the Standard Module requires that a body corporate manager who has possession or control of body corporate documents and the seal, must return the property to the body corporate within 14 days after being sent a prescribed notice by the body corporate.
A "prescribed notice" means " a notice of a resolution of the committee."

The notice must give a name of a committee member to whom to return the documents. There is a 20 point penalty for failing to comply with the notice. Further, the body corporate may require a person who has been engaged as a body corporate manager, whose engagement is brought to an end, and who holds body corporate documents in photographic or electronic image form, to give the body corporate the documents in the form of a disc or tape, or to reproduce the document in paper form and give it to the body corporate. This is to be done at the body corporate manager’s own expense and under penalty. (section 153 (3) Standard Module).

Since it appears the body corporate manager has never been "engaged", in that it has no signed contract with the body corporate, nor has there been a motion passed by the body corporate to engage the body corporate manager, the body corporate may seek the return of documents and the seal forthwith without more, if it wishes to do so, or may send the prescribed notice. This is a matter for the committee, and not for individual lot owners to decide.

I note that since the application was lodged, there has been an annual general meeting held on 1st December 2005 adjourned from 24th November 2005. At that meeting, the committee elected was Egon Karge as chairperson, Dominic Martinez as secretary, Margaret Karge as treasurer and Roseanne Quagliata as Committee member. This committee should now meet and decide how this body corporate is to proceed. If a body corporate manager is to be appointed, this can only be done by resolution of the lot owners at a general meeting.

I further note that the annual general meeting of 1st December 2005 contained no concluded resolutions on the motions which are required by law, that is, the approving of past financial statements, insurance and the annual budgets.

The "statutory motions", the minimum which the body corporate must decide each year, are as follows-

The committee should convene a general meeting so that the statutory motions not addressed at the AGM on 1st December 2005, can be finalised. If the body corporate is going to run itself without a body corporate manager, as it has every right to do, it might like to seek oral and/or written information from the Commissioner’s information service on 1800 060 119.

Quorum and alleged inaccuracies in the minutes of the AGM of 2004:
On the question of whether or not a quorum was achieved at the AGM of 2004, a quorum is achieved after the failure of a convened general meeting for want of a quorum, if, seven days later, the chairperson is present personally, or a body corporate manager exercising the powers of the chairperson under authorisation of the body corporate is present personally. (Section 48(4)(a) and (b) Standard Module.) At the time of the AGM of 2004, the body corporate manager was acting under a signed contract dated on 10^th December 2001, and a representative of the body corporate manager would have been permitted by the body corporate to chair a meeting.

Clearly, there was a quorum at the adjourned meeting on 24^th November 2004. The errors in the minutes of the AGM of 24^th November 2004, whilst regrettable, do not invalidate the AGM, that is, Motion 1 in the minutes should have referred to the previous year’s AGM held on 23^rd December 2003 (and not 2004) and " No quorum was achieved" should have been changed to " A quorum was achieved."

I have been sent a letter from Stevens Lawyers on behalf of the estate of Mr Flehr, the former owner of Lot 1. The letter "notes that the dispute in question appears to relate to the validity of some levies that were struck in relation to work on the swimming pool." This dispute does not concern the payment of levies directly, but only the question of the validity of Motion 11 of the AGM of 2004. The body corporate may like to correspond with Glen Stevens of Stevens Lawyers P.O.Box 1073 Port Macquarie NSW 2444 if the matter of readjustment of levies which have been paid by the estate becomes relevant.

Number of Scheme:	1595
Name of Scheme:	Clarex Court
Address of Scheme:	282 Lake Street CAIRNS QLD 4870

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Clarex Court [2006] QBCCMCmr 48 (7 February 2006)