V Human Space [2007] QBCCMCmr 105 (27 February 2007)

Last Updated: 5 March 2007

REFERENCE: 0906-2006

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 under the abovementioned Act by

Peter James, a co-Owner of lot 607

I hereby order that the application for the following orders: 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. Revocation of any decisions by the committee of V Human Space Body Corporate where there was an undeclared conflict of interest by any member of the committee. is dismissed

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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

Application has been made by Mr Peter James, a co-owner of lot 607, seeking the following outcomes:

• 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.

• Revocation of any decisions by the committee of V Human Space Body Corporate where there was an undeclared conflict of interest by any member of the committee.

The applicant also previously sought 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."

On 15 December 2006 I declined to make the interim orders sought by the applicant. In my view section 32 of the Regulation requires a committee member to disclose a conflict of interest and refrain from voting on an issue involving a potential conflict of interest, but does not prevent the rest of the committee voting on such an issue. Accordingly, It is legitimate for committee members to vote in favour of a proposal in which a particular committee member has an interest, provided that committee member makes disclosure and refrains from voting.

However I did point out that 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.

Background

An annual general meeting for 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

It is alleged that the election of James Winder as Secretary and Hani Salameh as Treasurer were contrary to s11(4) of the BCCM (Accommodation Module) Regulation 1997.

The applicants state that a committee meeting held in Melbourne on 24 October 2006 at which 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.

Submissions

Pursuant to section 243 of the Act, submissions were sought from members of the body corporate and the body committee prior to the making of the Interim Order and prior to the making of Final orders.

A number of lot owners made submissions complaining about the level of fees payable under the management agreement as well as expenses incurred in the first year of operation which went well over the budgeted amounts. In addition, some of lot owners raised questions regarding the ten year agreement entered into on 31 May 2006 between the Body Corporate and Go Big Venture Pty. Ltd. (T/A V Cyber Space ) for the provision of telecommunications services (including internet and telephone services). While I acknowledge these concerns, they have limited relevance to the subject matter of the application. In passing however, I would mention that management agreements are binding on the body corporate and the fees payable can only be altered in accordance with the agreement.

In response to the application, the Chairman of the body corporate, Mr. Hani Salameh has made the following submissions in respect of both the application for Interim Orders and the application for Final Orders:

• 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 under the 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.

In response, the applicant submitted a number of comments including the following:

• The minutes incorrectly state that "the building manager notes" instead of saying

"the building manager recommends";

• No conflict of interest was recorded in the minutes of the committee meeting held on 24 October 2006;
• Contrary to section 32(2) decisions were made to ignore the recommendations of the Caretaker which appears to conflict with the appropriate performance of the committee members’ duties;
• Hani Salameh was a director of Go Big Ventures Pty. Ltd. which trades as V Cyber Space up until 10 August 2006;
• He was a director of Go Big Ventures Pty. Ltd. at the time that he , as Chairman of the body corporate signed the original agreement between V Cyber Space and the Body Corporate on 31 May 2006 ;
• He was a director of IPG Investments (Aust) Pty. Ltd., the sole shareholder of Go Big Ventures Pty. Ltd. at the time of the committee meeting held on 24 October 2006;
• The recommendations by the Caretaker to the committee about V Cyber space included the following – " Recommend the body corporate employ an entity to fulfil those obligations under the V Cyber Space agreement not deemed to be duties of the caretaker, subject to the outcome of the dispute between the Caretaker and Body Corporate" ;
• at their meeting on 24 October 2006, the committee considered the caretakers report referred to above, and Mr Salameh stated "this wont be dealt with now";
• it is alleged that a conflict of interest arose regarding the V Cyber Space agreement because Messrs Salameh and Winder attempted to cause the caretaker to perform work for V Cyber Space and the body corporate when the caretaker considered this was not part of the caretaking duties under the caretaking agreement.
• Hani Salameh was a director of Go Big Ventures Pty. Ltd. (which trades as V Cyber Space) until 10 August 2006;
• Hani Salameh was a director of Go Big Ventures Pty. Ltd. at the time he as Chairman of the body corporate committee signed the original agreement between V Cyber Space and the body corporate on 31 May 2006;
• Hani Salameh was a director of Go Big Ventures Pty. Ltd. at the time he as Chairman of the body corporate committee signed the original agreement between V Cyber Space and the body corporate on 31 May 2006;
• Hani Salameh was a director of IPG Investments (Aust) Pty. Ltd., the sole shareholder of Go Big Ventures Pty. Ltd. at the time of the committee meeting held on 24 October 2006;
• James Winder became the sole director of Go Big Ventures Pty. Ltd. on 10 August 2006;
• a complaint was made regarding water dripping from the balcony of apartment 609 and allegedly causing a noise nuisance to the apartment below. Both the builder and developer denied responsibility and suggested that the lot owner was responsible for rectification. However the body corporate committee, including Hani Salameh and James Winder decided that the body corporate should take responsibility for this matter when they were both directors of Alfred Street Developments Pty. Ltd., the owner of apartment 609.
• He denies trying to undermine the position of the body corporate but is acting in the interests of the body corporate.

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)).

Determination

As stated above, I previously dismissed the application for Interim Orders but gave the parties an opportunity to submit further material in support of the application for final orders.

The first final outcome sought by the applicant relates to annulment of the election of Hani Salameh as Treasurer and James Winder as Secretary. 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 co-owner of a lot can be a voting member of the committee, on the basis of ownership of the lot, at a time."

As I pointed out at the interim stage, 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 lots in the scheme. For example, Hani Salameh may be nominated for election to the committee on the basis of the company’s ownership of Lot 101 and if Mr. 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 another Lot.

Further, as pointed out previously, special nomination procedures contained in section 15 of the Accommodation Module Regulation apply to the first AGM of the body corporate.

The second outcome sought by the applicant relates to a perceived conflict of interest on the part of the committee chairman/ treasurer, Mr. Hani Salameh, and on the part of the committee secretary Mr. James Winder.

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..........

In the present case there is little doubt that the committee members were aware that Messrs Salameh and Winder are associated with Alfred Street Developments Pty. Ltd . Similarly, I believe it is evident that the committee members were aware of the existence of the agreement entered into on 31 May 2006 between the Body Corporate and Go Big Venture Pty. Ltd.

Nevertheless, the question remains as to whether Messrs Salameh and Winder voted upon any issue giving rise to a conflict of interest. The term "conflict of interest" is a broad term, not specifically defined in the Act, but is generally used in the context of a person voting upon a motion to obtain a material benefit that they would not otherwise be entitled to - for example, a commission or an interest in a service contract. The purpose of the above provision is to prevent a committee member from voting on an issue if the member’s personal interest in an issue could conflict with the appropriate performance of the member’s duties to consider the issue in the interests of the body corporate.

In the present case it is alleged that at the relevant committee meeting, decisions were made which appear to conflict with the appropriate performance of the committee members’ duties. The alleged conflicts relate firstly to negotiations between the caretaking service contractor and body corporate committee regarding the obligation of the caretaking service contractor to perform functions for the benefit of V Cyber Space (Go Big Ventures Pty. Ltd.). Secondly, it is suggested that a conflict of interest arises regarding the question of responsibility for certain minor building rectification work to remedy drainage of water from lot 609 so that it no longer drips onto the lot below.

It is alleged that the first conflict of interest arose when the committee considered the following agenda item – " Recommend the body corporate employ an entity to fulfil those obligations under the V Cyber Space agreement not deemed to be duties of the caretaker, subject to the outcome of the dispute between the Caretaker and Body Corporate Contrary to section 32(2)".

There is an on-going dispute as to whether the caretaking service contractor is obliged to "act as agent for V Cyber Space" which is evidenced by correspondence between the body corporate and the caretaking service contractor. A letter dated 17 July 2006 from the body corporate to the caretaking service contractor, contained the following:

We write under instruction from the Body Corporate Committee to advise you of your role and subsequent responsibilities associated with the V Cyber Space (VCS) Building Services Agreement (the Agreement).....the resident manager as contractor or service provider to the body corporate must undertake in accordance with the VCS agreement the following:

• Allow authorized contractors of VCS entry to the premises for the purposes of installation maintenance or replacement et cetera of equipment or systems;
• Notify VCS as soon as –practically possible regarding any equipment problems or in the event that any equipment is damaged, stolen, lost, destroyed or interfered with in any way;
• Understand that the body corporate is responsible for the maintenance of equipment and systems located on common property;
• Promote and encourage owners / occupiers to subscribe to and use VCS services;
• Advise VCS of any major works to infrastructure that may impact on VCS equipment;

.......................................

We note that most of the above duties are covered under Schedule 3, the Caretaking and Letting Agreement in particular Clauses 1.4 "Defects, Breakdowns and Losses" and 1.5 "Arranging and Supervising Service Contractors".

In a subsequent letter to the Solicitors for the caretaking service contractor, dated 7 August 2006, the body corporate wrote:

We refer to your letter dated the 18^th July 2006 regarding the caretaking duties of your client, Menja Pty. Ltd. which is in response to our letter of 17 July 2006. With reference to the numbering used in your letter we respond as follows:

1. we hereby inform your client that we act under instruction from the Body Corporate Committee and they direct your client to perform this duty;
2. we hereby inform your client that we act under instruction from the Body Corporate Committee and they direct your client to perform this duty;
3. we clarify that the responsibility we refer to is the responsibility to maintain the equipment and systems located on the common property which includes the V Cyber Space equipment;
4. The Committee rejects your position that your client is not required to perform this duty. It is believed that there is scope under paragraphs 1.3 and 1.15 of Schedule 3 of the Caretaking and Letting agreement dated 31 May 2006 (the "agreement") pursuant to which your client is required to perform this duty. However, in acknowledgement that the parties do not agree, we reserve our rights in relation to these paragraphs but we refer to clause 3.4 of the agreement which states as follows:

"If reasonably consistent with the terms of this agreement, the caretaker must perform any additional works requested by the body corporate subject to payment of the additional fees in accordance with clause 4.2"

The Committee hereby gives you notice that the Body Corporate requests that your client Manja Pty. Ltd. as Caretaker performs additional works, those being to promote and encourage occupants to subscribe to and use V Cyber Space services .

The respondents contend that the above matter is not an issue in which they have a conflict of interest. Secondly, they point out that the purpose of section 32 of the Regulation is to require a committee member to firstly disclose a conflict of interest in an issue being considered by the committee, and not to vote on such an issue. However 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.

I believe there is substance to the respondents’ argument. Firstly, at this point in time there is no particular decision that has been voted upon as contemplated by section 32. From my reading of the correspondence between the parties, the body corporate committee believes it is entitled to have the caretaker perform functions associated with the V Cyber Space. Secondly, should the dispute escalate further, the possibility of a conflict of interest could arise for the respondents but this would not prevent the other committee members from pursuing a particular course of action.

The other potential conflict of interest raised by the applicant concerns the question of responsibility for certain minor building rectification work to remedy drainage of water from lot 609 so that it no longer drips onto the lot below. As I understand the situation, the balcony wall for lot 609 has an opening to allow water (rain, washing and air conditioning condensation) to run off the balcony via a 15cm spout. Unfortunately the water drips onto the balconies below and given that there is a constant flow of a/c condensation, there is a constant dripping noise. As often happens in such circumstances, all parties are currently denying responsibility. The builder has denied responsibility as it regards the matter as a "design fault". However, I note that it was resolved to raise the matter with an architect, and subsequently, the chairman suggested that if considered necessary, the caretaking service contractor could obtain quotations and obtain body corporate approval for the work. It would seem to me that it is not a foregone conclusion that the body corporate will grant such approval. Of course, if the matter is considered by the body corporate committee, Messrs Salameh and Winder should consider whether they are entitled to vote upon the matter. Should this issue be considered by the body corporate in general meeting, then section 32 has no application.

I therefore believe that the application should be dismissed.