L'Colonial Court [2007] QBCCMCmr 153 (14 March 2007)

Number of Scheme:	9169
Name of Scheme:	L’Colonial Court
Address of Scheme:	4 Murlong Crescent PALM BEACH QLD 4221

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Cindy Barker, the owner of Lot 2; Michael Ives, the owner of Lot 5; and Patricia Shaw, the owner of Lot 9

I hereby order that the resolutions passed on Motions 6iv, 6v and 6vi at the Annual General Meeting dated 28 June 2006 are void.

I further order that in all other respects, the application is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0502-2006

"L’Colonial Court" CTS 9169

Application
This application is by Cindy Barker, the owner of Lot 2; Michael Ives, the owner of Lot 5; and Patricia Shaw, the owner of Lot 9 (applicants) against the body corporate (respondent). The applicants have named Elsie Phelps, the owner of Lots 1, 4, 6, 7 and 8 as a person who is affected by the outcome sought. A basis of the application is that Mrs Phelps has taken advantage of being the majority owner to the detriment of the other owners.

The applicants contest Motions 6iv, 6v, 6vi, 6viii, 6ix, 6x passed at the Annual General Meeting dated 28 June 2006 (AGM) and that any reimbursement of expenses be to a maximum of $50 for the year and any request to exceed this be ratified by the committee and supported by invoices based on actual cost without profit.

Jurisdiction
"L’Colonial Court" is a community titles scheme under the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module).

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 claimed or anticipated contravention of the Act or the community management statement; or the exercise of rights or powers, or the performance of duties, under the Act or the community management statement^[1]. An order may require a person to act, or prohibit a person from acting, in a way stated in the order^[2]. An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate^[3].

Submissions
In accordance with the Act, submissions were called and a copy of the application was provided to the committee and to Elsie Phelps. Submissions have been made by Elsie Phelps. Uninvited submissions were made by Cindy Barker and Patricia Shaw as both persons are applicants.

Further Information
By letter dated 2 March 2007 and in accordance with the investigative powers of an adjudicator stated in section 271 of the Act, I required the applicants to provide the following information:

Given that it has been approximately 8 months since these resolutions were made, please provide information about:

Determination
Motion 6iv
The minutes of the AGM indicate that it was resolved by 5 votes to 4 "That the Body Corporate accept the quote of $6,300.00 from Aluminium Window Revamp to apply an etch primer and 2 Pac paint to the external surfaces of the aluminium windows and doors at the front of the building". The minutes indicate that the Motion was amended to include further work to the hallway windows at a cost of $760.00; that Mr Ives objected to the expenditure citing section 104 of the Act; that Mrs Phelps requested that the minutes be noted that two quotes were provided to the secretary who produced the alternative quote at the last meeting and produced it again at this meeting; and that Mrs Phelps noted that Mr Ives did not raise the objection with respect to Motion 6iii where only one quote was produced.

The applicants state that only 1 quote was provided to the AGM in contravention of section 104(2) which requires at least 2 quotations to be given.

The Motion was proposed by Mrs Phelps who submitted that a second quote which had been produced at a committee meeting had lapsed and that there was only 1 quote at the time of the AGM as Mr Ives failed to obtain another quote. Mrs Phelps also states that the applicants have not disputed Motion 6iii where the body corporate accepted a quote totalling $21,978.00 to carry out work and this was the only quote submitted.

Section 104 of the Standard Module relates to where a motion to be moved at a general meeting proposes carrying out work and the cost of carrying out the work is more than an amount determined by multiplying the number of lots by $250. Owners must be given at least 2 quotations for carrying out the work^[4] unless if for exceptional reasons it is not practicable to obtain 2 quotations^[5].

The relevant limit for major spending for this scheme is $2,250.00. As the cost to carry out the work proposed in Motion 6iv exceeds this limit, owners were entitled to be given at least 2 quotations by the person submitting the motion. Only 1 quote was provided and there has not been any exceptional reasons submitted. The body corporate cannot rely on the submission of any alternative quotes at a committee meeting.

Given that the AGM was held some 8 months ago, I sought information from the applicants as to whether the Motion had been implemented. Mr Ives has stated that the work stated in the Motion had not been carried out. It is questionable therefore as to whether the quotation approved at the AGM would still be current.

In the circumstances, I have ordered that the resolution passed on Motion 6iv at the AGM is void.

The applicants have not opposed the substance of the work proposed in the Motion. In fact, Mr Ives has also stated that a substantially lower quote has been given to the secretary for the works stated in the Motion 6 since the AGM. The matter should again be referred to a general meeting with up to date quotations for the proposed work. In this regard, it should be noted that the body corporate has numerous obligations under the legislation with regard to the administration and management of common property^[6]. Additionally, section 109(1) of the Standard Module provides that the body corporate must maintain common property in good condition with subsection(2) providing that the body corporate must maintain doors, windows and associated fittings situated in a boundary wall separating a lot from common property in good condition.

Mrs Phelps has raised the point that Motion 6iii also proposed expenditure above the relevant limit for major spending. While it would seem to be the case that only 1 quote was provided for this work, I have not made any order given that the resolution of this Motion has not been disputed by an application made under the Act. Further, it is evident from the minutes that all owners voted for the work.

Motion 6v
The minutes of the AGM indicate that it was resolved by 5 votes to 4 "That the Body Corporate accept the quote of $3,376.00 from Thrifty Home Maintenance to fill cracks in concrete balustrades and repaint all balustrades". The minutes indicate that Mr Ives objected to the expenditure citing section 104 of the Act; that Mrs Phelps requested that the minutes be noted that numerous contractors were approached but none were interested in this type of work; and that Mr Ives has not provided any quote even though he had informed prior meetings that he would get a quote.

The applicants state that only 1 quote was provided to the AGM in contravention of section 104(2) which requires at least 2 quotations to be given.

Mrs Phelps submitted that only quote could be obtained as contractors were not interested in carrying out the repair work. She says that while Mr Ives stated that he would get a quote, it was not forthcoming until after the AGM. Mrs Phelps provided a copy of a quote from Chris Greene for the amount of $2,800.00 on which an envelope is copied showing a processing date of 30 June 2006. Mrs Phelps also provided photographs showing the damage to the balustrades.

The relevant limit for major spending for this scheme is $2,250.00. Given the proposed cost to carry out the work proposed in Motion 6v, owners were entitled to be given at least 2 quotations by the person submitting the motion unless for exceptional reasons, it was not practicable to obtain 2 quotations.

Mrs Phelps has provided an explanation for the submission of only 1 quotation which is supportable if there are no contractors willing to do the work and reasonable attempts have been demonstrated to obtain quotes. However, while there may be frustration about the second quote not being given until after the AGM, it is evident that another comparable quote could be obtained.

Given that the AGM was held some 8 months ago, I sought information from the applicants as to whether the Motion had been implemented. Mr Ives has stated that the work stated in the Motion had not been carried out. It is questionable therefore as to whether the quotation approved at the AGM would still be current.

In the circumstances, I have ordered that the resolution passed on Motion 6v at the AGM is void.

The applicants have not opposed the substance of the work proposed in the Motion. As stated above, the body corporate has numerous obligations under the legislation with regard to the administration and management of common property. Specifically, section 109(2) provides that the body corporate must maintain railings, parapets and balustrades on the boundary of a lot and common property in good condition. It is evident from the photographs provided by Mrs Phelps that balustrades are not in good condition. The body corporate is obligated to maintain them and it should endeavour to do so as soon as possible (for example, a quotation or quotations could be submitted to an extraordinary general meeting).

Motion 6vi
The minutes of the AGM indicate that it was resolved by 5 votes to 4 "That the account of Mrs E.J. Phelps in the sum of $1,392.89, being in reimbursement of telephone, postage, facsimile transmissions, travelling for the year ended 31 March 2006 be paid". The minutes indicate that Mr Ives objected to the expenditure but offered a lump sum of $400.00 in satisfaction of the account; and that Mrs Phelps did not accept this offer.

The applicants state that the Motion called for retrospective approval of expenditures; that Mrs Phelps did not seek any payment when nominating for election to the committee; and that none of these expenditures had been placed before the committee. The applicants question the authenticity of some claimed expenses such as local calls, facsimiles, photographs, travelling allowance, letters and account preparation. The applicants are also concerned that Mrs Phelps is using her controlling vote to pay herself these expenses. The applicants recognise the work performed by Mrs Phelps and in this regard, have offered a payment of $400.00.

Mrs Phelps submitted that the expenses relate to the cost of the administration of the building. She states that a telephone call should include the line rental; a facsimile cost includes the call, the cost of the phone line, electricity, the capital cost of the machine, toner cost and paper cost; photographs include the cost of the camera and printer costs; and travel costs at $0.58 per kilometre. She states that for the year in question, other owners were absent overseas for a time, are non-resident or too ill leaving only her to attend to body corporate matters and making it difficult for at least nine months of the year to obtain committee authorisation. Mrs Phelps says that it is not an abuse of power, but that she is seeking equitable compensation and reimbursement.

The Standard Module contains a number of provisions dealing with payments to committee members. For example, section 13A specifies that a nomination of an individual as a committee member must include details of any payment to be made to, or sought by the candidate from the body corporate for the candidate carrying out the duties of a committee member. If a ballot is required for a committee position, these details must be included in the ballot paper^[7]. Further, section 26(1)(f)(i) provides that the committee cannot decide to pay remuneration, allowances or expenses to a committee member unless the decision is made under the authority of an ordinary resolution in general meeting. Section 26(2) provides that a motion submitted to a general meeting about such a payment must state the full amount of the payment and if the payment relates to expenses, the reason the expenses were incurred. Also an explanatory schedule stating the full details of the payment must accompany the meeting’s voting paper.

These provisions ensure that owners are aware of and involved in any proposals to pay committee member remuneration, allowances or expenses (other than certain expenses incurred by a member in attending a committee meeting). Depending on the significance of the payments to be made, this disclosure is an important consideration in the determination of the committee membership. Additionally, full disclosure of the details of the payment ensures that owners are aware of the basis for the payment and that the payment is subject to owners’ consideration.

It would appear that the notice of the AGM included a 4 page document covering the period from 19 April 2005 to 31 March 2006 seeking a payment to E.J. Phelps of $1,392.89. The document lists various costs for items such as telephone calls, car allowance, travel time, letters, facsimiles, time, photographs, maintenance work, and photocopies. The document is not supported by any evidencing material such as telephone payment invoices.

In my view, an essential element of any proposal to pay allowances or expenses to a committee member is that the member provides adequate details. I do not consider that the document supplied by Mrs Phelps to the AGM contains sufficient detail. Mobile and facsimile calls are not verified by a copy of the relevant section of invoices from the service provider or any explanation of the purpose of the call or the facsimile. Mrs Phelps has not provided any explanation of the basis of the determination of the car allowance nor has she explained the reason for going to the scheme. I do not agree that there is any basis for claiming for travel time, letters, photocopies or doing maintenance work. With respect to photographs, Mrs Phelps has not explained the cost incurred. Given her submission, it is possible that Mrs Phelps used her own equipment to make photocopies or to print photos. However, I do not agree that she can make calculations of costs without evidencing or verifiable material and cannot rely on the prices of retailers or service providers whose services were not acquired with the authority of the body corporate.

In my view, the body corporate is entitled to this degree of detail if a committee member is seeking a payment from it prior to the member actually carrying out duties as a committee member. In this way, the body corporate are aware of the member’s intentions if that person performs certain duties and may consider other options about the performance of the work if it considers the proposed costs too expensive (for example, the engagement of a body corporate manager). Also, the member performs the duties with the knowledge that certain approved payments will be made by the body corporate. It is more important when the member is seeking a payment subsequent to carrying out the duties. In this circumstance, the member should explain the reasons for incurring costs and demonstrate to the body corporate the actual costs incurred.

Mrs Phelps has explained the circumstances which resulted in her carrying out duties for the other members of the body corporate. It can be very difficult if one owner assumes the responsibility for administering the body corporate possibly by default and there is good argument to support that member being reimbursed for various personal costs. However, there needs to be a reasonable balance between the expectations of the other owners and the duties carried out by the committee member. The applicants have stated that they would agree to an ex-gratia payment of $400.00. This may be a reasonable settlement of the matter, particularly if it were made as a payment by owners other than Mrs Phelps.

For these reasons, I have ordered that the resolution passed on Motion 6vi at the AGM is void.

Motion 6viii, 6ix and 6x
The minutes of the AGM indicate that a point of order was raised about each Motion given that the incorrect type of resolution was stated in the voting paper for the meeting. The notice of the AGM lists each Motion as requiring an ordinary resolution. It is evident that no resolutions were made on each Motion.

The applicants’ state that each Motion was rejected by the chairperson as it required a special resolution. The applicants consider that By-Laws 35 and 45 are inequitable. Mrs Phelps submitted that the body corporate has not had the opportunity to vote on the matters stated in each Motion.

The by-laws applying to the scheme form part of the scheme’s community management statement (CMS). Generally, if the body corporate is proposing to amend, add or remove a by-law it must consent to a new CMS to incorporate that by-law. Section 62 of the Act deals with the body corporate consenting to a new CMS. Section 62(3) provides that unless there is to be a difference in an exclusive use by-law, the consent may be in the form of a special resolution.

By-Law 35 relates to the imposition of a fine. By-Law 45 relates to the use of lots. In these circumstances, a special resolution was necessary to pass each Motion. The notice of the AGM incorrectly showed the Motions as requiring an ordinary resolution. As a consequence, the Motions were not transacted at the AGM. The applicants seek to have the Motions adopted. I do not consider that this order can be made given that the body corporate has not yet voted on the Motions. It may well be that if the Motions are correctly put to a general meeting, they will be passed. Until the body corporate makes its decisions, I do not agree that there is a dispute to warrant the making of the order in the terms sought. For example, if the body corporate does not resolve to remove a by-law and an owner considers that the by-law is contrary to the Act, that owner is then entitled to make an application under the dispute resolution provisions of the Act providing detailed grounds to support the outcome sought.

Reimbursement of expenses
The applicants have sought an outcome that any reimbursement to be a maximum of $50 for the year and any request to exceed this be ratified by the committee and supported by invoices based on actual cost without profit.

The applicants state that the ballot paper for the election of 2006 to 2007 committee members does not mention any remuneration sought by nominees nor did the agenda of the AGM. The applicants state that Mrs Phelps is using her voting powers to generate income for a family member.

Mrs Phelps submitted that by notice dated 27 March 2006 she nominated Linda Phelps (family member) for election to the positions of chairperson, secretary and treasurer, and that a schedule of fees was attached to the nomination. She says that the fees are in line with the charges imposed by body corporate managers and are significantly less than charged by a solicitor. Mrs Phelps submits that her daughter is currently responsible for all correspondence of the body corporate, preparing and forwarding notices and minutes and other documentation.

Section 13A of the Standard Module specifies that a nomination of an individual as a committee member must include details of any payment to be made to, or sought by the candidate from the body corporate for the candidate carrying out the duties of a committee member. If a ballot is required for a committee position, these details must be included in the ballot paper^[8]. Section 26(1)(f)(i) provides that the committee cannot decide to pay remuneration, allowances or expenses to a committee member unless the decision is made under the authority of an ordinary resolution in general meeting. Section 26(2) provides that a motion submitted to a general meeting about such a payment must state the full amount of the payment and if the payment relates to expenses, the reason the expenses were incurred. Also an explanatory schedule stating the full details of the payment must accompany the meeting’s voting paper.

The nomination of Linda Phelps included details of the payment being sought by the candidate for carrying out the duties of chairperson, secretary and treasurer. The minutes of the AGM indicate that Linda Phelps was elected to the nominated positions. However, the minutes do not show that the body corporate actually resolved to pay the committee member the payments sought in the nomination. While a candidate may seek payments, the body corporate must authorise the payments by ordinary resolution. The inclusion of an item of expenditure relating to a payment in a budget adopted by the body corporate is not authority for the expenditure^[9].

The applicants have not referred to a body corporate decision authorising this payment and indeed state that there was not a motion on the agenda of the AGM to this effect. Given the absence of a disputed body corporate resolution, the outcome sought appears to be general in nature and could be seen as establishing a direction for any future payment. In my view, an adjudicator cannot make an order about a possible future event.

For these reasons, the outcome sought is dismissed.

The schedule of fees provided with the nomination detail the payment sought by the nominee. The applicants have questioned the fees claiming that they are inequitable and that Mrs Phelps is using her voting powers to generate income for a family member. The fact that a nominee may seek certain payments for carrying out elected duties or that an owner may have a majority vote does not, in my view automatically mean that the election of this nominee would be inequitable. I consider that there would need to be material suggesting that another individual was nominated for the same positions and that person was willing and able to carry out the duties at a lower cost to the body corporate. However, if no other persons nominated for election and there was no other person such as a body corporate manager authorised to carry out the functions, it would be difficult (without verifiable material) to support a view that the nominee should not be able to be authorised to be paid by the body corporate in the terms being sought.

^[1] Section 276(1), Act.
^[2] Section 276(2), Act.
^[3] Section 284(1), Act.
^[4] Section 104(2), Standard Module.
^[5] Section 104(6), Standard Module.
^[6] See section 94 and 152, Act.
^[7] See sections 16 and 17, Standard Module.
^[8] See sections 16 and 17, Standard Module.
^[9] Section 94(7), Standard Module.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

L'Colonial Court [2007] QBCCMCmr 153 (14 March 2007)