La Porte D'or [2006] QBCCMCmr 603 (17 November 2006)

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

I hereby order that Motion 4 carried at an extraordinary general meeting of the body corporate on 27^th July 2006 was invalid for the reasons set out herein.

I further order as follows:
(a) that in the forthcoming annual general meeting quotations already submitted by the Applicant Vito Giorgio to the body corporate manager are to be proposed as motions in the alternative for the upgrading of Lifts 1 and 2, if the Applicant so wishes, as well as any further quotations to be provided by the Applicant or the Committee, provided that such quotations are submitted to the body corporate manager by a deadline for drafting of the notice of the annual general meeting as set by the secretary of the scheme or the body corporate manager and notified to the Applicant and the Committee.

(b) Any quotations for lift work must clearly show whether the price is inclusive or exclusive of GST, and if exclusive of GST, the GST component must be shown in brackets beside the price.

I further order that a motion to upgrade lifts 1 and 2 may be passed by ordinary resolution of the body corporate.

I further order that a copy of this order shall be sent to all lot owners with the notice of the annual general meeting.

I further order than an interim order made in this matter on 30^th August 2006 ceases to have effect.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0611-2006

"La Porte D’or" CTS 12681

THE APPLICATION

This is an application made on 1^st August 2006 and amended on 3^rd August 2006 by Vito Giorgio, (the Applicant) co-owner of Lots 153 and 167 in the scheme, against the body corporate for La Porte D’or CTS 12681 (the body corporate) for orders as follows –

The Applicant also sought an interim order that the body corporate not act on Motion 4 until a final order is determined, and on 30^th August 2006, I made an order in those terms.

The interim order also allowed the Applicant to gain access to motor rooms and machinery for the purpose of seeking quotations from suitable suppliers on a "like for like" basis as the quotation from KONE put to the body corporate at Motion 4. The Applicant has now provided two quotations from suppliers Schindler Lifts (Schindler) and ThyssenKrupp Elevator (ThyssenKrupp) to this office and these quotations were given to the body corporate by 20^th September 2006.

Parts 2 and 4 of the final outcomes sought have therefore been achieved.

JURISDICTION

"La Porte D’or" Community Titles Scheme 12681 is a community titles scheme governed by 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 182 lots in the scheme created under 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)).

The application shows that Motion 4 of the Extraordinary General Meeting of 27^th July 2006 (the EGM) was headed "Lift Upgrade" and contained three quotations for upgrading Lifts 1 and 2, the most expensive being $537,900 inclusive of GST and the least expensive being $405,900 also inclusive of GST, all being from the same lift contractors KONE. The difference in price reflected various standards of upgrade and ‘add-ons.’ The motion was stated to be one that required an ordinary resolution.

The vote was 66 – 8 in favour of Motion 4 for the highest priced version.

At interim submissions, chairman Michael Goode (Mr Goode), on behalf of the Committee said that only one company, KONE was asked to quote because KONE is the installer of the original lifts. Silver Stewart King and Burns ( the body corporate manager) advised that three quotations from one company was compliant with the legislative requirements.

The body corporate has received independent advice, from Norman Disney and Young by report dated 22^nd August 2006, ( ie. after the EGM and the lodging of this application) that the offer from KONE was competitive. In that report, Norman Disney and Young say that they interviewed KONE "and requested that they reprice the modernisation to incorporate current world class technology AC motor drives." KONE had quoted on being able to use the existing DC motors, as mentioned in the interim order. The report says-

" the revised price... has been offered at $488,000 + GST excluding liftcar interiors..... If the previously quoted liftcar interiors were to be adopted, the price of $24,200 + GST needs to be added, providing a total cost of $512,400 + GST."

Following the interim order, the Applicant provided by 20^th September 2006 quotations from Schindler for $430,482.80 including GST and ThyssenKrupp for $461,921.00 including GST. Both companies also quoted for additional safety items if required, which the Applicant says were at that time, not part of the KONE quotation. The Applicant had some concerns about the extent of the KONE quotation and the safety items not included.

The Committee, again through Mr Goode, says that these quotes are not comparable with the quotation from KONE for which the body corporate voted at the EGM.

The Committee says it has now returned to Norman Disney and Young for an independent report on the two new quotations. The "report" appears to consist of "tender comparisons." It is undated and unsigned, and does not allude to Norman Disney and Young’s credentials. It concludes :

"Given the unequal price comparisons, the Body Corporate should delay modernisation works until 6 months from the Kone contract expiry and secure a marketplace tender call to specified scope of works at that time and avoid any service contract penalties."

The Committee is concerned that tender comparisons show that the scope of works is not comparable between the three quotations now obtained and that lot owners are going to need technical specifications in order to compare the three. This will incur further expense. The lifts are in need of replacement having failed twice recently trapping people using them. The Committee does not believe that incomparable quotes should be put to a general meeting, and there is now no time for the Committee to seek an alternative, and another comparable quotation with that of the KONE quotation.

The Committee again points out that when the Applicant was chairman the lifts were in need of replacement and as chairperson, the Applicant did not get on with the job. He is now intentionally delaying urgent maintenance work because he does not like KONE, whilst the body corporate under the current Committee is doing its best to rectify past mistakes, get the scheme working well and bring down fees.

The Applicant exercised his right of reply. He points out that Norman Disney and Young were employed after the vote on Motion 4 at the EGM. Further, that Greg Smith who signed the letter dated 22^nd August 2006 from Norman Disney and Young was a former employee of KONE, although no evidence of this is provided. He refers to the history of budgeting for the lift upgrades, and his involvement in the various motions as chairman of the committee, denying that he has ever impeded work on the lifts.

Whilst acknowledging that the lifts urgently need work, he denies that they are "unsafe" as if that was the case, he believes that KONE, who have a maintenance contract, would have prohibited their use.

In respect of the Committee’s submission on the final order sought, the Applicant says that the body corporate Committee and the body corporate manager should not have sought only a sole tenderer for the lift upgrade from the current lift maintenance contract holder, and had a duty to cast the net wider. It would have been prudent to formulate a scope of works for potential tenderers and if necessary engage an expert company to do this prior to putting the motion to a general meeting. Such an act would have indemnified the Committee and owners.

With regard to persons getting trapped in the lifts, he says this is an attempt by the Committee to sensationalise the position. Such occurrences are the reason for a maintenance contract.

He denies that he has any objection to KONE but thinks more competitive quotations would be obtained by seeking tenders for the work. He says that he was not aware of the Norman Disney and Young report dated 22^nd August 2006 which was not shown to lot owners. That report showed that KONE had been asked to change the specification. Since the interim order asked him to seek alternative quotations on a " like for like" basis, the change to the specification as suggested by Norman Disney and Young should have been made known to him and to this Office, since the report was available before the making of the interim order.

He complains that " the whole process has been done back to front." Both ThyssenKrupp and Schindler have in their covering letters confirmed that the quotations provided by them including safety upgrades, are on a like-for-like basis with the KONE quotation put to the EGM. He claims that the comparison table now provided by the Committee or Norman Disney and Young is incorrect in its detail of the KONE quotation in that, for example, counterweight modifications and roller guide shoes were not in the original quotation although the comparison table shows these items now to be included. He also states that the author of the comparison table has failed to read thoroughly the quotations from ThyssenKrupp in respect of the maintenance agreement proposed which is for two lifts, and not 4 as proposed by KONE, when describing the ThyssenKrupp quote as " economically unsustainable."

He says that counterweight modification, a rope gripper and lift car roller guides were all quoted for by ThyssenKrupp and Schindler but were not in the original quotation from KONE although they now appear to be included in the KONE quotation in the comparison table. In Schindler’s quotation, Schindler says that repair work is necessary to the counterweights to correct design faults. Both ThyssenKrupp and Schindler also quoted for a rope gripper which would not be necessary if new AC motors are to be installed. KONE’s original quotation, which intended to use the existing DC motors, did not include a rope gripper.

He notes that the revisions of KONE’s quotation now appearing in the comparison table, have not been put to the body corporate by KONE in writing, and as yet do not form part of any quotation accepted or otherwise.

Since KONE have been asked to review their original quotation and fit AC motors, the price increase on the comparison table between the base price with existing motors and the base price with new motors is $2,900. This revision should also have been put to ThyssenKrupp and Schindler in order to make the quotations comparable. The Applicant has now asked both companies to do this. Schindler only wishes to run with the proposal as submitted; but the Applicant is expecting a revised quotation from ThyssenKrupp. He will pass that on directly to the body corporate manager for inclusion in the motions for the annual general meeting.

He believes that at least the exercise of obtaining additional quotations has caused KONE to "maintain its price with a slight increase to cover new AC motors" and also now include additional safety items.

DETERMINATION

The Applicant now has three arguments: firstly that the upgrade to the two lifts is in the nature of "an improvement" and not mere maintenance, and therefore falls under the requirements of section 113 (1)(b) Standard Module and must be authorised by a special resolution of the body corporate and not an ordinary resolution; and secondly that where a body corporate engages in "major spending" then whoever submits the motion must provide two quotations for carrying out the work (Section 104 Standard Module). Because the body corporate failed in both respects at Motion 4 of the EGM, then Motion 4 should be invalidated.

Further, since the vote taken on the motion at the EGM, the goal-posts have moved. It appears that the body corporate has sought advice from Norman Disney and Young which has resulted in KONE revisiting the quotation so that new motors are to be used and the price has changed.

The body corporate is now in the position where it is to hold its annual general meeting on 18^th December 2006 (the AGM) and consequently the status of Motion 4 of the EGM is of concern to those drafting the agenda. The Applicant has requested that his two alternative quotations " form part of a suitable motion with alternatives" as submitted by a lot owner, and that an "explanatory note be considered" at the AGM.

Maintenance –v- improvements
The body corporate is obliged to maintain the common property in good condition. A motion about "maintenance" requires an ordinary resolution of the body corporate. However, a motion about an "improvement" to the common property which costs in excess of $300 per lot, is required to be authorised by a special resolution. (Section 113(1)(a) and (b) Standard Module) An "improvement" is defined in the Act to –

" include - the erection of a building; a structural change; and a non-structural change, including for example, the installation of air conditioning."

It is not disputed in the material before me that the 2 lifts, the subject of this application, are the original lifts installed about 30 years ago. As such, any large scale ‘maintenance’ is likely to take the form of an " upgrade" which is indeed how Motion 4 was put to the EGM.

The body corporate and the Applicant have pointed out that at the time of the EGM, the old motors were to be re-used. However, it seems likely that the proposal has changed and that new motors are to be installed. The body corporate says that the lifts are reaching such a point in their lives whereby they are becoming unreliable if not unsafe. The Applicant rejects this. He referred the body corporate to other adjudicator’s orders about lifts. These were 0312- 2000, 0776-2003 and 0701-2004.

The third of these is relevant to this matter.

In circumstances similar to the circumstances existing at La Porte D’or, the adjudicator in reading the specification of works proposed, found that the "upgrade" to the lift constituted an "improvement" for which a special resolution was required.

He said –

I am not assisted by any of the reports or quotations available to me in this regard. There is no mention by KONE, Norman Disney and Young, ThyssenKrupp or Schindler that the current lifts are in need of repair. Norman Disney and Young call their report " a review of the Kone Elevators Pty Ltd modernisation"; KONE, whilst referring to the body corporate concerns about reliability and safe operation, offer "a proposal to modernise the two high speed high rise lifts as part of an ongoing modernisation plan." (Quotation dated 11^th January 2006). KONE refers to the lifts "experiencing unreliability due to age... and the issue of obsolescence for some of the parts..." To be fair to ThyssenKrupp and Schindler, they were not asked to comment on the current lifts.

In an appeal from an order of the Referee under the Building and Group Titles Act 1980 (the former body corporate legislation) the appeal court found that –

" the term repair may also be interpreted to include replacement, refurbishment and maintenance and I accept that the repairs may invoke an element of improvement, but may still remain within the general concept of repair."^[2]

On the balance of probabilities, I do not consider that a "new for old" replacement constitutes "an improvement" within the meaning of the legislation, in this particular scheme. I acknowledge that the new lifts will incorporate features not currently available in the existing lifts, but in my view just because the new model will incorporate additional features, does not mean that it is not a replacement lift. A replacement need not be (and in this case should not be) identical. The Applicant himself believes that the upgrade is necessary. As such, an ordinary resolution sufficed for Motion 4 at the EGM.

However, as stated in the interim order, this matter is somewhat academic since if Motion 4 had required a special resolution, the 66 - 8 vote achieved the numbers required in any event.

Two quotations for ‘major spending"
Where the body corporate is proposing to engage in "major spending", defined in the Standard Module to mean where the amount to be spent is in excess of $250 x the number of lots, then lot owners must be given at least two quotations for carrying out the work. If the motion is proposed by the Committee, the Committee must provide the quotations, and if the motion is proposed by a lot owner, the lot owner must provide the quotations and hand them to the secretary. (Section 104)

As stated in the interim order, I was concerned that in a matter proposing that such a large amount of money be spent, the quotations put to lot owners were not from different sources. The fact that one company gave various quotes for different scales of upgrade, is not in the contemplation of the legislation. It is absolutely clear that the intent of the legislation is that at least two quotations be obtained so that the lot owners can compare quotations, as is prudent for any householder. Where the goods or services can only be obtained from one source, the exception to the rule is detailed at section 104(6) Standard Module.

The example set out at section 104(6) to illustrate the exception clearly demonstrates that the norm is to provide quotations from more than one source.

The Explanatory Notes^[3] for section 104 explain that save for in the exceptional case as detailed above, the quotations must be presented to a meeting of the body corporate as " a motion with alternatives." (Section 42B) "This is to ensure that the process followed for making the decision does not favour any particular party."

Despite the repeated statement from the chairman Mr Goode, that the Committee and the body corporate managers "STILL believe [we] were perfectly correct under the Act in only getting quotes and negotiating with one (1) company....." I fear that the committee is misguided here and/or have been poorly advised by the body corporate manager.

I invited the Applicant to see if he could obtain quotations from any other source. It seems that there are several sources available in that there are several companies with expertise in putting in lifts and maintaining lifts in high-rise buildings. Section 104(6) Standard Module, the ‘exception to the rule’, therefore does not apply.

The fact that a large majority of lot owners appear to be happy with the quotation offered by KONE does not save the motion. Motion 4 must be invalid for this reason. It is a serious fault and not a minor irregularity. It has been held by the District Court that because of the prescriptive nature of the Standard Module, from time to time, a body corporate will "get it wrong." Non-compliance of an insubstantial nature is not to be held up to undo a properly made resolution, particularly where a body corporate has acted in good faith.^[4] However, where lot owners have been deprived of a legislative right to choose between two options when they are being asked to spend a significant amount of money, I do not find the non-compliance to be ‘insubstantial.’

The Revision of Motion 4
In submissions by both the body corporate and the Applicant, it transpired that what was voted for by the body corporate at Motion 4 of the EGM has now changed.

By how much it has changed I am not clear. The vote was for Alternative A at a cost if $537,900 inclusive of GST. In the Norman Disney and Young report dated 22^nd August 2006 it is stated –

" the revised price [from KONE]... has been offered at $488,000 plus GST excluding liftcar interiors..... If the previously quoted liftcar interiors were to be adopted, the price of $24,200 + GST needs to be added, providing a total cost of $512,400 + GST."

The sum of $488,000 and $24,200 is in fact $512,200 and not $512,400. $512,200 plus GST at 10% is $563,420.

The difference in the sum voted to be expended by Motion 4 is $25,520. ($563,420 - $537,900 )

The Applicant, who has put his case well and diligently, understands from the unauthenticated "Golden Gate Tender Comparisons" submitted by the body corporate that the difference is in fact only $2,900 since the base price is stated to be either "$509,500" or "$512,400" ( both exclusive of GST.) It is not immediately evident to me where the price of $509,500 has come from ( being a figure of $560,450 if GST is added.) The figure of $512,400 appears to be wrongly calculated as stated above so cannot be used as a base.

No doubt there will be members of the body corporate who will be equally confused. Whether the revisitation of the quotation by KONE envisages an increase of (approximately) $2,900 or (approximately) $25,520 , either way the body corporate is no longer getting what it voted for at the EGM on 27^th July 2006.

I have already determined that Motion 4 was invalid for the failure to provide at least two quotations. Should the motion for KONE as an alternative supplier be put again to the body corporate at a general meeting, these re-worked figures should be carefully checked and provided in writing by KONE as the supplier, (and no-one else on KONE’s behalf), and submitted with the material for the general meeting.

I also order that the quotations supplied by the Applicant from ThyssenKrupp and Schindler must be put to the next general meeting as motions in the alternative if the Applicant wishes to continue to submit such quotations, and I understand that he has done so. Any quotations submitted by the Applicant must stand alongside any motion for the upgrading of Lifts 1 and 2 submitted by the body corporate all as motions in the alternative.

Each quotation must clearly show whether the price is inclusive or exclusive of GST, and if exclusive of GST, the GST component must be shown in brackets beside the price.

All quotations must carry a brief explanatory note stating what is included in the price quoted, so that lot owners can make their own comparisons. Copies of the quotations and any correspondence from the prospective suppliers must be available for inspection by any lot owner or voter in accordance with section 104(5) Standard Module and advice about where the complete documents may be inspected must accompany the notice of the general meeting at which the motion is to be considered.

It should be noted that a "table of comparisons" or similar document, drawn up by either the body corporate or the Applicant is material which is excluded under section 42C(6) and section 46C(8) Standard Module. Any explanatory note by the submitter of the motion, including the Committee may be no longer than 300 words ( section 42C(4)(b) Standard Module).

The Applicant has asked for an adjusted quotation from ThyssenKrupp based on the " revisited proposal" that is, the supply of new motors as opposed to retaining the existing motors. I understand that that quotation may not be available for another 2 weeks, but that the body corporate manager wishes to post out the notice and agenda for the annual general meeting by 22^nd November 2006. I urge the Applicant to see if he can put some pressure on ThyssenKrupp to provide such quotation "in approximately 1 week" as stated in their letter dated 6^th November 2006 to the Applicant.

Alternatively, the body corporate may like to postpone the date of the general meeting for a short while so that it can obtain the formally revised quotation from KONE, and the Applicant can provide his alternative or revised quotation from ThyssenKrupp. I understand that the final date for the annual general meeting is 31^st December and that it has already been mooted for 15^th December and now proposed for 18^th December.
If the Applicant is able to provide the adjusted quotation from ThyssenKrupp in time to be drafted into Agenda, then this must be accepted by the body corporate to be included in such motion with alternatives which the Applicant or the Committee wishes to put to the general meeting. Knowing that it has been sought and promised by ThyssenKrupp, the body corporate secretary or body corporate manager can perhaps provide to the Applicant a cut-off date for inclusion in the drafted agenda. It is matter for the Applicant if he wishes to put both ThyssenKrupp quotations in, showing one using the existing motors ( such as offered now by Schindler) and one with the new motors.

I would emphasise that the provision of several alternative quotations for the installation for something as vital and expensive as a lift is not a question of a "win" for the proponents of either or any of the companies quoting for the work. A comparison of services to be provided, the fittings and finishes, and even the way in which the various companies have laid out their quotations all help lot owners to make an informed choice as to where they would like to spend their money. They may of course make their own investigations of the standards of KONE or ThyssenKrupp or Schindler (or any others on the agenda) and they may bring their own knowledge and prejudices to the meeting. That is the prerogative of the voters.

The Applicant is correct in that at the very least this exercise has enabled further quotations to be obtained and the KONE quotation to be revisited. He has not made himself popular in his efforts but he was right to query the expense undertaken contrary to the legislation, and without more.

It is now a matter for lot owners to vote as they see fit. Debate is to be encouraged. It does not matter if the quotations are not for absolutely identical work as I consider lot owners intelligent enough to be able to work out which are the essential features of interest to them. It is hoped that lot owners with queries will contact the submitters of the motions and try to make informed choices. I further order that a copy of this order be enclosed with the notice of annual general meeting.

^[1] 0701-2004 Galileo Tower CTS 114193 order made 16^th March 2005
^[2] Proprietors of The Rocks Resort –v- Costi, Building Units Appeal Tribunal No 227 of 1997, O’Driscoll SM, 24 September 1997.
^[3] Explanatory Notes for SL 2003 No.263 Body Corporate and Community Management Legislation Amendment Regulation (no.1) 2003
^[4] His Honour Judge Boulton DCJ in Chen v Body Corporate for Wishart Village CTS 19482. District Court Brisbane, 29 May 2001

Number of Scheme:	12681
Name of Scheme:	La Porte D’or
Address of Scheme:	3422 Surfers Paradise Boulevard SURFERS PARADISE QLD 4217

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

La Porte D'or [2006] QBCCMCmr 603 (17 November 2006)