V Human Space [2006] QBCCMCmr 667 (15 December 2006)

Last Updated: 27 March 2007

REFERENCE: 0906-2006

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	35197
Name of Scheme:	V Human Space
Address of Scheme:	82 Alfred Street FORTITUDE VALLEY QLD 4006

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

Peter James, an Owner of lot 607.

I hereby order that the application for an order that

The committee of V Human Space Body Corporate is not to make any decisions where there is a conflict of interest involving the original owner, Alfred Street Developments, or where any matter is being decided about or relates to the agreement entered into between Hani Salameh representing the original owner (Alfred Street Developments Pty. Ltd. whose directors are Hani Salameh and James Winder) such agreement being for the purpose of providing internet and phone services to residents of V Human Space."

is dismissed.
STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0906-2006

"V Human Space" CTS 35197

The Scheme

V Human Space is a 96 lot scheme registered under the Body Corporate and Community Management Act 1997 and operating under the Body Corporate and Community Management (Accommodation Module) Regulation 1997.

Application

An application has been made by Mr Peter James, a co-owner of lot 607, seeking the following outcome:

"annulment of the election of Hani Salameh as Treasurer and James Winder as Secretary of the committee of the V Human Space Body Corporate. Adjudicator’s direction to call an extraordinary meeting for the purpose of electing members of the committee other than chairperson."

The applicants also seek the following Interim Order:

The committee of V Human Space Body Corporate is not to make any decisions where there is a conflict of interest involving the original owner, Alfred Street Developments, or where any matter is being decided about or relates to the agreement entered into between Hani Salameh representing the original owner (Alfred Street Developments Pty. Ltd. whose directors are Hani Salameh and James Winder) in his role as Chairperson of the committee and sole member of the V Human Space Body Corporate and V Cyber space (whose directors are Salameh and James Winder) such agreement being for the purpose of providing internet and phone services to residents of V Human Space."

In support of the application the applicant states

• The V Human Space Body Corporate annual general meeting was held on 24 August 2006. The owners present at the meeting were Karen Church (lot 603), Peter & Lynne James (lot 607) and Hani Salameh, nominee of the original owner Alfred Street Developments Pty. Ltd., which owned lots 101, 102, 103, 105, 106, 108, 109, 111, 113, 115, 116, 204, 206, 207, 305, 310, 402, 405, 407, 413, 414, 502, 504, 505, 507, 510, 601, 604, 606, 608, 609, 612, 702, 704, and 710 at the time of the meeting.

• The following persons nominated for the committee positions shown:

Chairperson

Hani Salameh (a director of the original owner, Alfred Street Developments Pty. Ltd.)

Secretary

James Winder (a director of the original owner, Alfred Street Developments Pty. Ltd.)

Renee Bolot (lot 302)

Treasurer:

Hani Salameh (a director of the original owner, Alfred Street Developments Pty. Ltd.)

Glancario Tiberi (lots 410 and 713)

Outcome:

Hani Salameh was elected Chairperson

James Winder was elected Secretary

Hani Salameh was elected Treasurer

• The election of James Winder as Secretary and Hani Salameh as Treasurer appears to have been contrary to s11(4) of the BCCM (Accommodation Module) Regulation 1997.

• At the committee meeting held in Melbourne on 24 October 2006 decisions were made affecting the interests of the original owner, Alfred Street Developments Pty. Ltd. without either of the only two voting committee members present (Hani Salameh and James Winder) declaring a conflict of interest under section 32 of the Regulation to the knowledge of Peter and Lynne James (resident managers) who were at Ernst Body Corporate offices in Brisbane, together with David Allen as part of a phone conference.

Submissions

Pursuant to section 243 of the Act, submissions were sought from members of the body corporate and the body corporate.

The Chairman of the body corporate, Mr. Hani Salameh made the following submissions:

• The applicants are the owners/ operators of Menja Pty. Ltd. which acts as the caretaker and resident property manager for the building;
• Menja Pty. Ltd. is involved in legal action against Alfred Street Developments Pty. Ltd. in relation to the amount to be paid to Alfred Street Developments Pty. Ltd. for the Caretaking and Management Rights;
• Menja Pty. Ltd. is also seeking to sell or assign the Caretaking and Management Rights;
• Menja Pty. Ltd. sought to undermine the body corporate’s position by not fulfilling or disputing Menja’s responsibilities under the Caretaking and Management agreement with the body corporate;
• The applicants have falsely represented that Hani Salameh is a director of V Cyber Space;
• At the time of the first AGM on 24 August 2006 Alfred Street Developments Pty. Ltd. owned 36 of the 96 lots in the development representing some 37.5% of the development;
• Alfred Street Developments Pty. Ltd. nominated two representatives - Hani Salameh and James Winder representing different lots owned by Alfred Street Developments Pty. Ltd. i.e. 2 out of the 6 positions representing a lower percentage (33%) than Alfred Street Developments Pty. Ltd.’s ownership of lots in the development;
• The committee is not stacked because representatives of Alfred Street Developments Pty. Ltd. do not represent a majority of the voting members of the committee;
• There is no restriction on a lot owner holding two positions on a committee (section 10(2) Accommodation Module Regulation.
• It is usual for members of the development company to be members of the body corporate committee during its first term;
• the first meeting of the committee on 24 October 2006 was attended by Hani Salameh, James Winder, each holding a proxy for another member, the caretakers and resident managers Peter & Lynne James and David Allen of Ernst Body Corporate management.
• All attendees were aware that Hani Salameh and James Winder are directors of Alfred Street Developments Pty. Ltd and in any event there were no issues considered that gave rise to any direct or indirect conflict of interest;
• Some of the resolutions of the committee meeting on 24 October 2006 resulted in Hani Salameh and James Winder, in their capacity as members of Alfred Street Developments Pty. Ltd., spending time and effort to assist the body corporate, were fair & reasonable and for the benefit of the body corporate;
• If they had been precluded from voting they would not have been able to progress the following:

- Seeking assistance from Alfred Street Developments Pty. Ltd to address graffiti problems;

- Seeking assistance from Alfred Street Developments Pty. Ltd to address problems with the lifts and security system;

- Seeking assistance from Alfred Street Developments Pty. Ltd to resolve issues with fire doors and seek rectification by the builder;

- Seeking assistance from Alfred Street Developments Pty. Ltd to resolve issues with external cleaning of windows;

- Entry into an agreement with Readytow;

• There have been no conflict of interest issues for the four other members of the committee ;

•	Re-election of members would involve additional costs to the body corporate which have not been budgeted for;

• The role of the Chairman has not been disputed by the applicant;

•

The applicant is seeking an interim order to prevent the committee from making decisions where voting members have a conflict. This is contrary to section 32 of the Regulation which provides that a committee member must disclose a conflict and not vote on an issue but this does not prevent the rest of the committee voting on an issue.

An individual lot owner made the following submissions:

• An interim order should be issued to prevent the committee making decisions involving Alfred Street Developments Pty. Ltd.
• An interim order should be issued to prevent the committee making decisions involving an agreement entered into between the body corporate and V Cyber Space.
• The appointments of Mr Salameh as Treasurer and Mr Winder as Secretary should be invalidated and an EGM called to elect a new committee;
• If any decisions were made by the committee favouring Alfred Street Developments Pty. Ltd. or V Cyber Space over the interests of the body corporate , the lot owner would support removal of the Chairperson;
• Decisions involving an undeclared conflict of interest should be revoked.

A second submission signed by numerous lot owners supported the application, raised concerns regarding the level of actual expenditure and requested that an independent auditor be appointed.

A third submission raised the following concerns:

• The committee should not make any decisions where there is a conflict of interest involving Alfred Street Developments Pty. Ltd;
• The committee should not make any further decisions regarding agreements entered into with V Cyber Space;
• At an EGM held on 31 May 2006 and attended by Mr Salameh as the sole member and Chairman of the body corporate, a 10 year agreement was entered into with James Winder of V Cyber Space for the supply of phone and internet services to V Apartments.

A number of other submissions supported the application in similar terms.

Jurisdiction

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)).

Section 279(1) of the Act provides as follows:
Interim Orders in Context of Adjudication
(1) The adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the
application relates.
Examples--
1. The adjudicator may stop the body corporate from carrying out work on common property until a dispute about the irregularity of proceedings has been investigated and resolved.
2. The adjudicator may stop a general meeting deciding or acting on a particular issue until it has been investigated and resolved.
(2) An interim order--
(a) has effect for a period (not longer than 1 year) stated in the order; and
(b) may be extended, varied, renewed or cancelled by the adjudicator until a final order is made; &
(c) may be cancelled by a later order made by the adjudicator; and
(d) if it does not lapse or is not cancelled earlier, lapses when--
(i) the application is withdrawn; or
(ii) the commissioner gives the person who made the application a written notice under section 241
rejecting the application; or
(iii) a final order is made by an adjudicator to whom the application is referred.
(3) Despite subsection (2), if an appeal is started against an interim order, the order continues in force until 1 of the following happens--
(a) the order is stayed under section 291;
(b) if the decision on the appeal is to refer the matter of the interim order back to the adjudicator who made the order with directions--the adjudicator makes an order under the directions;
(c) the appeal is decided, but other than in the way mentioned in paragraph (a);
(d) the application is withdrawn;
(e) a final order is made by the adjudicator.
(4) As soon as the adjudicator to whom the commissioner refers an application under section 247 makes an interim order or decides not to make an interim order, the adjudicator must refer the application back to the commissioner.

Determination

At this point in time I am concerned with the applicant’s request for the following Interim Order:

The committee of V Human Space Body Corporate is not to make any decisions where

(1) there is a conflict of interest involving the original owner, Alfred Street Developments, or
(2) where any matter is being decided about or relates to the agreement entered into between Hani Salameh representing the original owner (Alfred Street Developments Pty. Ltd. whose directors are Hani Salameh and James Winder) in his role as Chairperson of the committee and sole member of the V Human Space Body Corporate and V Cyber space (whose directors are Salameh and James Winder) such agreement being for the purpose of providing internet and phone services to residents of V Human Space"

Section 279(1) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances of the application. The examples included in the Act under section 279 are suggestive of the
circumstances where an interim order might be made i.e. an interim order is generally of a temporary nature to maintain the status quo. In general I believe that an interim order should be in the nature of injunctive relief to maintain the status quo until substantive issues can be determined by way of final order after consideration of submissions from all parties.

The application for interim orders is primarily concerned with the perceived potential for a conflict of interest to arise when Mr. Hani Salameh and Mr. James Winder attend meetings of the body corporate committee.




In this regard the relevant statutory provision is section 32 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 which provides as follows:

(1) A member of the committee must disclose to a meeting of the committee the member’s direct or indirect interest in an issue being considered, or about to be considered, by the committee

if the interest could conflict with the appropriate performance of the member’s duties about the consideration of the issue.

(2) If a member required under subsection (1) to disclose an issue is a voting member, the member is not entitled to vote on the issue.

(3) A person who holds the proxy of a member of the committee must disclose to a meeting of the committee the proxy holder’s direct or indirect interest in an issue being considered, or about to be considered, by the committee if the interest could conflict with the appropriate performance of the

proxy holder’s duties about the consideration of the issue.

(4) A proxy holder required under subsection (3) to disclose an issue must not vote as the proxy on the issue.

(5) A person who holds the proxy of a member of the committee must disclose to a meeting of the committee the member’s direct or indirect interest in an issue being considered, or about to be considered, by the committee if the proxy holder is aware that the member, if present, would be required under subsection (2) not to vote on the issue.

(6) A proxy holder required under subsection (5) to disclose an issue must not vote as the proxy on the issue.

I believe the respondents are correct in pointing out that the purpose of section 32 of the Regulation is to require a committee member to firstly disclose a conflict of interest in a issue being considered by the committee, and secondly, not to vote on such an issue. However this does not prevent the rest of the committee voting on such a issue. It is legitimate for committee members to vote in favour of a proposal in which a particular committee member has an interest provided that particular committee member makes disclosure to the committee and refrains from voting.

The applicant also seeks an order preventing the committee from deciding any matter regarding the agreement entered into between Hani Salameh representing the original owner in his role as Chairperson and V Cyber space (whose directors are Salameh and James Winder) such agreement being for the purpose of providing internet and phone services to residents of V Human Space.

Clearly, where committee members have a direct or indirect interest in an issue being considered by the committee, those committee members should disclose their conflict of interest and refrain from voting on the issue. However, this does not mean that the remaining committee members cannot vote on the issue.

Next, the applicant has also raised concerns regarding the election of James Winder as Secretary and Hani Salameh as Treasurer and states that these appointments appear to have been contrary to s11(4) of the BCCM (Accommodation Module) Regulation 1997.

Subsection 11(4) of the Regulation states:

"Unless otherwise permitted under this regulation, only 1 no-owner of a
lot can be a voting member of the committee, on the basis of ownership of
the lot, at a time."



Subsection 11(1) limits the persons who are eligible for committee membership while subsection 11(2) prevents a body corporate manager, a service contractor or a letting agent, or an associate of any of these persons from being elected as a voting member of the committee.
Section 11(3) affects a person’s eligibility for committee membership in the circumstance where the person owes a body corporate debt.

However, I do not consider that section 11(4) of the Accommodation Module necessarily restricts both Hani Salameh and James Winder, as nominees of Albert Street Developments Pty. Ltd., from being on the committee at the same time. Section 11(4) restricts committee membership "on the basis of ownership of the lot" which in my view relates to co-ownership of a specific lot in the scheme and not to all lots that the same person (including a company) may own in the scheme. For example, Hani Salameh and James Winder may nominate Hani Salameh for election to
the committee on the basis of the company’s ownership of Lot 101. If Hani Salameh is elected to the committee, section 11(4) does not prevent James Winder from also being elected to the committee provided he was properly nominated on the basis of the company’s ownership of Lot 102.

At first glance one may consider that subsection 14(2) may be of assistance to the applicant on the basis that in response to an invitation for nominations for election to the committee, a lot owner may nominate only one individual. That provision was inserted in the Regulation Module in December 2003 to prevent "stacking" of committees. This clause provides in section 14(2) that a lot owner may, in response to a notice inviting nominations for election of the committee, nominate only one individual The purpose of this provision is to limit the possibility of a committee being stacked by owners forming part of a significant voting bloc, nominating multiple people for election to the committee.

However it should also be noted that subsection 14(2) does not apply to the first Annual General Meeting of a body corporate scheme. Having regard to the unique circumstances which may apply at the time of the first AGM, special nomination procedures contained in section 15 of the Accommodation Module Regulation and these procedures do not specifically state how many nominations may be made by a lot owner.

Accordingly, for the reasons set out above, I am not able to grant the requested Interim Orders. However the application for final orders remain outstanding and members of the body corporate will be afforded the opportunity to make further submissions on the application for final orders.