View Pacific [2006] QBCCMCmr 699 (1 September 2006)

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

Lawrence & Sunny Lucock, owners of lot 8 & Patricia Jeude, as the holder of a power of attorney from Helen Denison, the owner of lot 7

I hereby order that, on an interim basis effective from 16 February 2006, Bob MacKay of Body Corporate Admin Services, PO Box 617 Robina, Queensland 4226 (administrator) is appointed as an administrator of Surf Sound and granted exclusively all the powers, functions and responsibilities of the committee and each executive member of the committee with the exception of a power to delegate those powers, functions and responsibilities to another.

I further order that the administrator is specifically authorised to exercise the powers of the committee, as modified by this order, to:

• Require any changes to common property of a minor or temporary nature that are reasonably necessary to minimise any health and safety concerns;
• Obtain a professional sinking fund forecast regarding the cost of works of a capital/non-recurrent nature that are reasonably necessary to maintain the common property in good condition or otherwise meet the body corporate’s maintenance obligations;
• Notify all owners of the sinking fund forecast and prepare proposed budgets for adoption by the body corporate at its next annual general meeting;
• Call, hold and chair an annual general meeting (meeting) of the body corporate for Surf Sound. This is subject to the administrator, as far as practicable, following the procedures in the Standard Module governing giving notice for and holding an annual general meeting. In particular, a notice requesting nominations for committee positions and submission of motions for consideration at the meeting must give owners at least three weeks to submit their nominations and motions. However, the giving of this notice need not coincide with the end of financial year date of the body corporate;

I further order that the administrator is specifically given the power to levy special contributions, up to a maximum total of $2,500 for liabilities for which inadequate provision has been made in the budget, including the administrator’s expenses of $600 plus reasonable costs.

I further order that:

1. Any exercise by the administrator of the powers of the committee or body corporate must be by properly minuted resolution with notice of the proposed motions being sent to owners at least 7 clear days before the making of the resolutions (except in an emergency) and a copy of the minutes being sent to owners within 7 days after the making of the resolutions;
2. For the purposes of the administration, the administrator may spend an amount equivalent to $250 per lot on any single project but must obtain at least two quotations for any spending above $50 per lot. The administrator must obtain the authority of an order of an adjudicator for any spending outside these requirements; and
3. The administrator must keep proper records of all receipts and payments in the course of the administration.

This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0024-2006A

"Surf Sound" CTS 14546

Surf Sound Community Titles Scheme (Surf Sound) is a 5 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module). The scheme is designed for residential purposes and lot boundaries are designated under a building units plan (now known as a building format plan).

This is a further interim order arising out of an application by Lawrence and Sunny Lucock, owners of lot 8 and by Patricia Jeude as the holder of a power of attorney from Helen Denison, the Owner of lot 7 (applicants) seeking orders against the body corporate for Surf Sound and Kalglen Pty Ltd ACN 010 760 540, owner of lots 1, 2 and 6 (respondent). The application lodged on 19 January 2006 challenged the validity and actions of the committee for Surf Sound and on 27 January 2006 I made an interim order restraining Kalglen Pty Ltd ACN 010 760 540 (respondent) and the committee for Surf Sound from taking any further action on behalf of the body corporate pending a further order of an adjudicator. I attended the scheme on Friday 10 February 2006 and met with representatives of all owners as well as Bob MacKay of Body Corporate Admin Services who had been proposed as a possible administrator for the scheme.

I have concluded that it is appropriate to appoint an administrator for Surf Sound on an interim basis. The reasons for this decision are detailed below.

The application makes a number of allegations to the effect that Surf Sound is not being managed in accordance with the legislation. In particular, there are allegations to the effect that Margaret Collyer, the nominee of the respondent, has unilaterally acted to make a number of changes to the common property. Specifically, questions are raised about the validity of the committee that is claimed to be constituted by Margaret Collyer as chairperson and a co-occupant of her lot, Paul Patty, as secretary and treasurer. It is alleged that decisions about the scheme are being made without agendas or minutes of meeting being forwarded to owners. A specific allegation was that Margaret Collyer has caused a brick barbeque and block wall to be removed from the patio area in front of lot 7 without any proper authority.

Since lodgement of the application a further allegation was made that Margaret Collyer and Paul Patty have supervised the demolition of a 45 centimetre high besser block fence on the beachfront fence line and replaced it with a two metre high wooden fence that restricts the ocean view of the lower level unit.

A submission from Margaret Collyer’s solicitor was to the effect that expert advice received required action to be taken to dismantle certain unsafe structures. Copies of two building reports were provided in support of this contention.

I held a teleconference between the applicants and Margaret Collyer’s solicitor at which allegations were raised to the effect that the tenant in lot 7 had provided notice that she intended to vacate the unit as a result of the actions of Margaret Collyer. Letters from this tenant, Barbara Langley, include allegations to the effect that:

Submissions by Margaret Collyer’s solicitor were to the effect that the alleged assault is a police matter and that any interim orders should be confined to the issue of the performance of any further works to the scheme. In particular, it was submitted that the committee is valid and the only further works that are proposed by the committee was the installation of gates. It was submitted that any interim order should allow for the installation of gates as a term of the body corporate’s public liability insurance requires action of this nature as is known that trespassers sometimes walk through the scheme. I gave Margaret Collyer’s solicitor an opportunity to submit any evidence by way of a statement from the insurer that the public liability insurance for the scheme will be void if owners do not install gates to prevent trespasses but I have not received any statement of that nature. Instead, I have subsequently been provided with a letter from the insurer that is of a general nature indicating that it is the responsibility of the body corporate to take reasonable care to prevent damage or injury. This presumably applies to prevention of injury to any persons on the scheme and would require the body corporate to take steps to address the hazards themselves rather than trying to limit trespassers but leaving hazards on the property that may result in injury to owners, occupiers or invitees.

Shortly after the teleconference, and before any interim orders had been issued, the applicants submitted a further facsimile alleging that a neighbour had contacted one of the applicants to say that a new electric gate approximately two metres high had been installed across the driveway.

I attended the scheme on 10 February 2005 and met with representatives of all three owners. It was apparent from discussions and the documentation already provided that the affairs of the body corporate for Surf Sound have not been conducted properly in accordance with the legislation for a number of years.

The respondent raised concerns predominantly about the maintenance of the building including a number of potentially serious issues raised after the conduct of a building inspection. Concerns of the applicants’ included the removal and erection of various structures on common property by the respondent or a committee constituted entirely of nominees of the respondent.

The evidence provided indicates that the committee have spent body corporate funds in excess the relevant spending limit and that all proper procedures have not been complied with. One of the committee members admitted that this is the case but made the point that there are many other occasions in the past when proper procedures have not been followed either. I accept that the failure by any owner to provide body corporate records showing approvals for a number of improvements or alterations leads to an inference that proper procedures have not been followed for a number of years, if at all. However, I consider it important for the body corporate to focus on current issues and note that any owner is entitled to make applications seeking to require compliance with the legislation in respect of current and future issues.

At the inspection I discussed with owners the possibility of an administrator being appointed to facilitate the calling of the next annual general meeting including ensuring a professional sinking fund forecast was obtained and proper budgets were set. This administrator could also carry out other responsibilities including any changes to common property of a minor or temporary nature that are reasonably necessary to minimise any health and safety concerns.

I also discussed with owners the possibility that I could authorise emergency expenditure to carry out any works that need to happen immediately. Initially some concerns were raised about a connection of stormwater to sewerage contrary to local council regulations and possible tripping hazards particularly from uneven concrete. However, owners could not agree on any particular expenditure that would need to be authorised for these purposes. Instead, there seemed to be an opinion that proper rectification would require significant expenditure as part of a project involving work on a retaining wall and the foundations of the building. In the interim, minor expenditure may be sufficient to address these concerns, for example, temporary markings or signage to minimise the risk of injury or alternative temporary connection of stormwater.

Questions were raised about the validity of the committee. In particular, it was alleged that a committee consisting of only the nominees of one owner could not be valid. As this appears to have been the subject of significant dispute, I consider it is important to note that there are circumstances where a valid committee can be composed of only the nominees of one owner. Normally, each lot owner can nominate only one individual for committee membership (Standard Module, 13). This individual can be nominated for multiple positions. For example, an owner can nominate themselves as chairperson, secretary, treasurer and ordinary member. If multiple persons are nominated for a single position then a ballot will be conducted, firstly for chairperson, secondly for secretary, next for treasurer, and finally for ordinary members (Standard Module, 19). These procedures ensure that normally one owner only gets to nominate one individual for the committee and the nominated individual can normally occupy at most one executive position. In this way, the committee membership is representative and stacking of the committee is avoided.^[1]

However, if each lot owner does not nominate someone for each possible position then there may be vacancies that need to be filled from the floor of the meeting. In those circumstances it is possible for one owner to put forward a new nominee for each vacant position (Standard Module 21, 22). Also, if committee members resign then those vacancies may be filled by committee meeting with any persons eligible to be a member of the committee and in that way multiple nominees of a single owner can also be appointed (Standard Module, 25C).

It therefore seems likely that the current committee of William Collyer, Paul Patty and Margaret Collyer is validly constituted. However, due to evidence of past failures to comply with the legislation and the need for an annual general meeting to be called in the near future I consider it appropriate to appoint an administrator for the body corporate for Surf Sound on the terms provided above. After discussion with the representatives of owners I consider an amount worked out by multiplying the number of lots in the scheme by $500 as likely to be sufficient for the entire expenses of the body corporate during the anticipated period of the administration. I have therefore limited the administrator to raising a special levy to a maximum of that amount.

There are a number of other issues raised in the application that will require determination by final orders if they have not been resolved in the meantime. I will not make any determination regarding those issues at this stage but will briefly outline the issues in the hope that some resolution could be reached by owners themselves, possibly by submitting appropriate motions at the upcoming annual general meeting.

The applicants have sough an order that the accounts for the year ending 28 February 2006 be audited and that the auditor take special note as to whether the expenditure for the year has been passed by the committee with notice of the meeting and a copy of the minutes being sent to all owners.

At the annual general meeting on 20 May 2005 owners resolved that the accounts for the year ending 28 February 2006 not be audited. However, owners can still pass an ordinary resolution at the upcoming annual general meeting proposing that the accounts be audited (Standard Module, 106(4)). Otherwise, the matter can be considered as part of any final orders.

The applicants have alleged that Kalglen Pty Ltd has made unauthorised improvements to the common property. Kalglen Pty Ltd has variously submitted that these improvements were made by the committee based on resolutions made at general meeting, or valid committee resolutions, or as an emergency to avoid risk of structures collapsing.

A number of matters are not entirely clear at this stage. One question is whether Margaret Collyer and Paul Patty arranged this work in their capacity as committee members or in their capacity as representatives of Kalglen Pty Ltd. Another question is whether the applicants are seeking to have all this work reversed and the common property returned to as nearly as possible its position before the work was done or whether the applicants are just seeking to have some of the work reversed.

Owners can submit motions at the upcoming annual general meeting to seek to clarify these issues. For example, I note that some improvements have probably never been formally approved by the body corporate but appear to have been acquiesced to by all owners for a significant period of time. If it is the case that a brick barbeque and privacy wall had been built on common property for the benefit of lot 7 and without objection by the body corporate for a number of years then the body corporate would appear to have acquiesced to those improvements. Owners may therefore wish to consider a special resolution at the upcoming annual general meeting to reverse any deemed approval of these improvements and approve the funds spent on removal. If that resolution was passed then that would resolve the dispute in that respect. Similarly, owners may wish to formalise other matters by considering resolutions about placing chairs and tables on common property, having pot plants on common property, storing goods in common property car spaces, and the erection of the new gates and fences.

The applicants have complained that they have not received proper notice of committee meetings or minutes of those meetings.

Notice of committee meetings must be given to individual lot owners and any lot owners wishing to attend the committee meeting must give the secretary at least 24 hours written notice of their intention to attend (Standard Module, 32).

Full and accurate minutes must be given to lot owners within 21 days after the committee meeting (Standard Module, 36). Normally the committee cannot carry out committee resolutions until at least 7 days after notice of the meeting has been given to owners. This gives other owners an opportunity to take action to challenge the proposal or issue a notice of opposition to prevent the committee acting on the resolution (Standard Module, 37).

The application also seeks an order for access to a termite inspection report. It is not clear whether this report was obtained by the committee or by an individual owner. If it was obtained by the committee then it will form part of the body corporate records and any owner can contact the administrator seeking access to that report. However, if it was obtained by an individual owner then that individual can choose whether or not to provide the report.

At the inspection, representatives of owners raised numerous additional issues that may become the subject of future applications if they are not resolved.

Questions were raised about the ownership of the utility room. The registered plan clearly indicates that this room is part of lot 7. The body corporate will be required to treat this room as part of lot 7 unless the plan is changed.

Questions were also raised about ownership of the car parks. The registered plan shows the enclosed garage to be part of lot 8. However, the car port areas in the basement and between lots 1 and 2 are common property. A registered by-law indicates that the developer would allocate a car space to each proprietor by notice in writing to the committee. It may be assumed that an allocation would have been made for the benefit of each of the original five lots but it would be useful to review the records of these allocations and any alterations to these allocations upon subsequent subdivisions.

For the avoidance of doubt, the grant of exclusive use for car parking purposes does not itself entitle storage of any furniture or other items in the area. Such storage would require the authorisation of the body corporate as an improvement (Standard Module, 124). Further, in addition to the requirement that an owner of the lot keep all observable parts of their lot in a clean and tidy condition, an owner having the benefit of an exclusive use area will also be responsible for the maintenance and operating costs of that area unless the exclusive use by-law provides otherwise (Standard Module, 120, 123).

A number of maintenance issues were also raised at the inspection. Initially there were some suggestions that emergency expenditure should be authorised to minimise tripping hazards and avoid the risk of a fine for a connection of storm water to sewerage contrary to local council requirements. However, it was subsequently suggested that these works should be performed as part of a larger project including fixing of the retaining wall and underpinning the building.

Obviously there may be temporary measures that the administrator can require to minimise any health and safety concerns. Concerns were raised about trespassers being injured but obviously the body corporate needs to also consider possible injuries to occupiers and invitees. Of course, some negligence on the part of the body corporate would need to be shown before the body corporate had any legal liability for such an injury and the public liability insurance would cover the body corporate except in exceptional circumstances. However, the administrator should take reasonable steps to minimise any risk of injury in the interim and owners can consider more permanent action in general meeting.

I note that payment for maintenance may place a financial strain on owners, particularly as proper sinking fund budgets have not been accrued in the past. The sinking fund is designed to facilitate owners, over a period of time, accruing funds for all works of a capital/non-recurrent nature that are anticipated to be required in the next ten years. This fund is not intended to be a general fund to cover any expenses that arise above and beyond the administrative budget. Rather, for the sinking fund, it is important that the body corporate identify the scheme’s predictable major/capital repairs (eg painting, replacement of waterproofing membranes, intercom and security replacements etc). The body corporate must then estimate the likely cost of each repair and how many years away the repair will be. A proportional amount of each expense must then be reserved to ensure there are sufficient funds for each particular expense at the start of the year in which the expense is likely to be incurred. In short, the sinking fund operates like a trust fund where moneys for separate projects are kept separately in an individual ledger even though the funds for the various projects are held in the one bank account. Contributions paid by owners in respect of a particular project, and expenditure for that project, are accounted for by recording the transactions in the relevant ledger.^[2]

Any owner is entitled to insist that the body corporate maintain common property in good condition and comply with its other maintenance obligations (Standard Module, 109). All owners will then need to adopt an appropriate sinking fund budget and contribute the necessary funds in proportion with their contribution lot entitlements.

Other issues raised relate to the use of common property by occupiers. In the absence of by-laws to the contrary there seems no reason why an occupier cannot invite a friend to bring a dog onto the common property or access the beach via the common property.

However, there is a general requirement that an occupier must not use or permit the use of a lot or common property in a way that causes a nuisance or interferes unreasonably with the use or enjoyment of other occupiers (Act, 167). For example, if an occupier of one lot was to sit on the common property immediately in front of another occupier’s doors or windows then that may amount to unreasonable interference with the second occupier’s enjoyment of their own lot and it would be no excuse for the first person to say they were acting within their rights by using common property for their own benefit.

For the reasons above, I have decided to appoint an administrator on a temporary basis and subject to certain conditions.

There are obviously a number of issues that may result in disputes between owners in this scheme. I would encourage owners to take advantage of the opportunity to communicate their concerns with the administrator and draft appropriate motions for consideration by all owners at the upcoming annual general meeting. The present application will proceed to submissions and a final determination in due course.

^[1] Explanatory Notes - Body Corporate and Community Management
Legislation Amendment Regulation (No. 1) 2003, page 6.
^[2] Refer Bayview Shores, Application 0370-2003, CG Young, 28 November 2003.

Number of Scheme:	14546
Name of Scheme:	Surf Sound
Address of Scheme:	12 Darwalla Avenue CURRUMBIN QLD 4223

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

View Pacific [2006] QBCCMCmr 699 (1 September 2006)