Surfers Plaza Resort [2007] QBCCMCmr 30 (19 January 2007)

Last Updated: 9 February 2007

REFERENCE: 0594-2006

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	6388
Name of Scheme:	Surfers Plaza Resort
Address of Scheme:	4 Rememberance Drive SURFERS PARADISE QLD 4217

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

Nicholas Chalacas, the Owner(s) of lot 68

I hereby order that the application by Nicolas Chalacas, owner of lot 68 (applicant) for orders related to enforcement proceedings taken against the applicant in the Magistrates Court, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0594-2006

"Surfers Plaza Resort" CTS 6388

Application

Surfers Plaza Resort Community Titles Scheme (Surfers Plaza Resort) is a 146 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module).

This is an application by Nicholas Chalacas, the owner of lot 68 (applicant) seeking orders against the body corporate (respondent).

Background

The background to this dispute, as indicated by the submissions and documents, is as follows:

• On 6 February 2004 the committee noted that the applicant had not complied with a request to remove For Sale signs from his windows and the matter had been placed in the hands of Herdlaw Solicitors;
• On 13 May 2004 the body corporate made an application to the Office of the Commissioner for body corporate and community management seeking an order against the applicant;
• On 7 June 2004 an adjudicator’s order was made against the applicant requiring him to remove the "For Sale" sign and flashing light from his window;
• On 11 June 2004 the committee resolved that the secretary advise Herdlaw Solicitors that the sign had not been removed;
• On 19 July 2004 a complaint and summons was sworn against the applicant requiring he attend the Magistrates Court in relation to failure to comply with the adjudicator’s order;
• On 17 December 2004 the Magistrates Court fined the applicant the amount of $1,250 for failing to comply with the adjudicator’s order and ordered that he pay additional costs and fees of $1,055.30; and
• On 20 July 2006 the applicant lodged the present application with the Office of the Commissioner for body corporate and community management. After various amendments, the application has now proceeded to adjudication.

Submissions

The applicants’ main submissions were to the effect that section 312 of the Act requires a special resolution to take an owner to court and the committee took court action against him without body corporate permission. Submissions are made to the effect that the body corporate should refund him for his fees and expenses and that the lawyers engaged by the body corporate and the committee members should refund the amounts spent by the body corporate.

Submissions from the body corporate’s solicitors were to the effect that section 312 specifically provides that a special resolution is not required for legal action to enforce an adjudicator’s order. Further submissions were to the effect that an adjudicator does not have authority to order a refund of a fine given by the Magistrates Court, that the instructions to solicitors to take the enforcement action were necessary, that the committee authorised the solicitors to take necessary action, and that owners had notice of the by-law breach and consequential proceedings by way of correspondence from the body corporate secretary and distribution of the meeting minutes. The body corporate says the application should be dismissed with costs on the basis the application is without substance.

Decision

Applicable law

The legislation includes provisions to the effect that:

• The body corporate may start a proceeding only if the proceeding is authorised by special resolution (Act, 312(1));
• However, the body corporate does not need a special resolution to start a proceeding for the enforcement of an adjudicator’s order (Act, 312(2)(d));
• Also, a decision to start certain proceedings is a restricted issue that the committee cannot decide but this does not include a proceeding for the enforcement of an adjudicator’s order (Standard Module, 26(1)(e)(iv));
• The committee may only carry out a proposal involving spending above the relevant limit for committee spending in limited circumstances, including if the spending is specifically authorised by ordinary resolution of the body corporate (Standard Module, 103);
• If the cost of carrying a proposal into effect is more than the relevant limit for major spending then owners must generally be given the opportunity to choose between two quotations for carrying out the proposal (Standard Module, 104);
• If a person, honestly and without notice of an irregularity, enters into a transaction with a member of the committee for the body corporate or a person who has apparent authority to bind the body corporate, the transaction is valid and binding on the body corporate (Act, 310).

Basic findings

Based on the submissions and documents provided, I conclude that there was no specific resolution stating that the committee had resolved to engage Herdlaw Solicitors to commence enforcement proceedings in the Magistrates Court or had resolved to authorise any specific spending for that purpose.

However, there was a committee resolution on 11 June 2004 to the effect that the secretary was to advise Herdlaw Solicitors that the sign had not been removed. I accept that enforcement proceedings in the Magistrates Court is the appropriate step to enforce compliance with an adjudicators order and that the amount spent in engaging Herdlaw Solicitors was less than the relevant limit for committee spending.

Concern about lack of special resolution to commence proceedings

The applicant has left it too late to raise his concern that the enforcement proceedings taken against him were not properly authorised by owners. The applicant should have raised any concerns before the Magistrates Court as a defence to the proceedings against him. As it presently stands, the Magistrates Court has made an order and the matter is finalised. It is not possible or appropriate for me to make any orders about that issue now.

In any event, the applicant was mistaken in his primary submission that the proceedings would have required a special resolution by owners. The legislation allows proceedings to enforce an adjudicator’s order to be properly commenced by committee resolution (Act 312(2)(d), Standard Module 26(1)(e)(iv))).

Concern about lack of authority for body corporate spending on legal fees

The applicant has also left it too late to mount a challenge in this jurisdiction to the spending of body corporate funds in undertaking the enforcement proceedings in the Magistrates Court. If the applicant could have shown that legislative requirements for spending on legal representation for the enforcement proceedings had not been complied with then the applicant may have been able to obtain an order at the time to stop any further spending of body corporate funds on legal representation unless or until the spending was properly authorised. However, all the disputed amounts have now been spent. An owner cannot take action in this jurisdiction directly against a committee member or the body corporate’s lawyers (Act, 227). If there was any merit in the argument that body corporate funds were spent without authority then it would seem proper that the body corporate take any proceedings after the passing of necessary resolutions to commence those proceedings and authorise spending on legal representation.

Even if the legal fees were incurred without proper authority the transaction would be valid and binding on the body corporate if entered into honestly and without notice of an irregularity at the request of the chairperson. In particular, I note that the relevant limit for committee spending at Surfers Plaza Resort is $18,250, on the basis there are 146 lots in the scheme with the spending limit of the committee being $125 per lot (Standard Module, 103). The applicant does not allege that this committee spending limit was exceeded.

Order

The applicant was mistaken in thinking a special resolution was necessary to authorise the commencement of enforcement proceedings. The applicant has also left it too late to effectively pursue within this jurisdiction the outcomes sought in the application. The application must therefore be dismissed.

If there was a resolution by the committee that clearly authorised the commencement of these proceedings and authorised specific funds for the purpose then I would have ordered the applicant to pay the costs of this application on the basis the application was without grounds. However, there was no such clear resolution and I have been asked to infer the proper authority from a general resolution of the committee, copies of correspondence, and the fact that enforcement was the necessary next step. In these circumstances it is possible to understand some confusion by the applicant in terms of whether the enforcement proceedings were properly authorised and I will therefore simply dismiss the application without any order for costs.