Surfers Palms North [2007] QBCCMCmr 318 (7 June 2007)

Last Updated: 4 July 2007

Office of the Commissioner for Body Corporate and Community Management SPECIALIST ADJUDICATION (Caretaking Contractual Matter) Number: 0343A-2007 Applicant: PRINCI CABINETS PTY LTD Respondent: BODY CORPORATE FOR SURFERS PALMS NORTH COMMUNITY TITLES SCHEME 20846

THIRD INTERIM ORDER
7 June 2007

ORDERS under section 279(1) of the Body Corporate and Community Management Act 1997 ("Act") that – (a) Ian D’Arcy ("Administrator") of Capitol Body Corporate Administration is appointed as the administrator of the Respondent pursuant to sections 276(4)(a) and clause 23 of Schedule 5 of the Act; (b) the Administrator is authorized to exclusively perform all the obligations of the Respondent, its committee and its Chairperson, Secretary and Treasurer under the Act and community management statement 20864 ("Obligations"); (c) the Administrator is given all of the powers and authorities of the Respondent and its committee and its Chairperson, Secretary and Treasurer necessary to perform the Obligations, including, without limitation and merely for the purpose of removing any doubt, the authority to determine contributions and levy those contributions on owners; (d) the powers of the Respondent and its body corporate manager, CTS Management Pty Ltd, to perform the Obligations are suspended; (e) the positions of all committee members, including the positions of Chairperson, Secretary and Treasurer are vacated; (f) the extraordinary general meeting of the Respondent convened for 26 June 2007 is cancelled; (g) the Respondent, its committee and its Chairperson, Secretary and Treasurer (as previously constituted immediately prior to the making of these Orders) and CTS Management Pty Ltd must by no later than 5.00 pm on Friday 15 June 2007 hand all of the books, records and property of the Respondent to the Administrator so that the Administrator is in a position to perform the Obligations; (h) in performing the Obligations, the Administrator must – (i) facilitate the prompt finalization of the audit currently being undertaken on behalf of the Respondent by Ms Judy Gibson and as soon as practicable after that audit has been finalized, furnish a copy of the auditor’s report to the Commissioner; (ii) discontinue the engagement by the Respondent of Mr Colin Lamont; and (iii) engage or re-engage solicitors (who, at the discretion of the Administrator, may be Herdlaw, Solicitors) to represent the Respondent in relation to this application; (i) the Administrator must, as soon as practicable, distribute to the owners of all lots in community titles scheme 20864 copies of the following: (i) Further Interim Order made by me on 26 May 2007; (ii) Further Interim Determination made by me on 26 May 2007; and (iii) this Order; (j) the Administrator is to be remunerated at the following rates (all of which are exclusive of GST) – (i) for normal daily administrative work and record keeping – at the rate of $12.50 per lot per month; (ii) for work undertaken in relation to the administration which does not reasonably qualify as normal daily administrative work and record keeping – • if undertaken by the Administrator personally – at the rate of $225.00 per hour; • if undertaken by an employed body corporate manager – at the rate of $165.00 per hour; • if undertaken by an in-house accountant – at the rate of $125.00 per hour; and • if undertaken by an administrative assistant or secretarial staff – at the rate of $60.00 per hour; (k) in addition to the above remuneration, the Administrator is entitled to recover disbursements actually incurred in relation to this appointment; and (l) the Applicant or the Administrator has leave to apply for further orders or directions in relation to the application or these Orders.

G F Bugden OAM
Specialist Adjudicator

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Caretaking Contractual Matter)

Number: 0343A-2007

Applicant: PRINCI CABINETS PTY LTD



Respondent: BODY CORPORATE FOR SURFERS PALMS NORTH

COMMUNITY TITLES SCHEME 20846

THIRD INTERIM DETERMINATION
7 June 2007

History of the application

1. This is the third time that I have been asked to make an interim order in relation to this application. As I have said before, this is a dispute about an attempt by the Respondent body corporate to terminate a caretakers agreement and a letting agreement, both dated 28 March 2003, between the body corporate and the Applicant (which I will refer to as the "Management Rights").
2. The application was referred to me on 27 April 2007 shortly before the annual general meeting of the body corporate, scheduled for 30 April 2007, was to consider a motion to terminate the Management Rights.
3. For the reasons given in support of my interim order on 27 April 2007 I made an order to refrain the body corporate from considering or passing motion number 16 (relating to termination of the Management Rights) at its annual general meeting or at any adjournment of that meeting or any reconvened meeting. The terms of that order were very clear.
4. Contrary to the terms of that order, the body corporate not only considered the motion but also passed it. The Applicant then made application for further interim orders, including an order for the appointment of an administrator to take control of the body corporate’s affairs. In response to that further application I made further interim orders on 26 May 2007.
5. By those further interim orders I repealed the resolution passed pursuant to motion 16, invalidated any action taken by the body corporate to give effect to the resolution and restrained the body corporate from taking any further action to give effect to the resolution. I also ordered the body corporate to do a number of other things, including serving on the owner of each lot in community title scheme 20846 a copy of the further interim orders and my reasons for making those orders.
6. I declined to appoint an administrator because of the seriousness of such an appointment, but I allowed the applicant to revert to me on an urgent basis for further orders if the body corporate acted or attempted to act contrary to those further interim orders. I indicated that if such an application was justifiably made by the applicant I would appoint an administrator to take control not only of the committee’s powers, but also relevant and necessary powers of the body corporate. It was because of this possibility that I included in my further interim orders a requirement for those orders and my reasons for making them be circulated to all lot owners. I wanted all lot owners to be aware of the serious situation confronting their body corporate.

Most recent events

7. Subsequent to me making the further interim orders there were strong protestations from various persons on behalf of the body corporate and/or the individuals involved. This included a claim that, although the votes on motion 16 were counted at the annual general meeting, the motion was not actually passed. There was also a claim (in conflict with the above claim) that there was no intention to act on the motion once it was passed. To quote the returning officer for the annual general meeting, Mr Lamont, "I believed that all that was required was that the motion not be acted upon. I believed that as returning officer I should count the motion anyway as there was every likelihood that the final order would not prevent acting upon it provided that the owners passed it. I believed the committee had to know what the owners feelings were."
8. There were also claims that at the time the motion was passed, the returning officer, the chairman and committee were unaware of the terms of the interim order of 27 April 2007. Given what Mr Lamont has said and having regard to information since provided to me from unit owners who attended the annual general meeting, it is highly unlikely that those persons were unaware of the terms of the interim order and, if they were unaware, it was most likely because they choose to be unaware.
9. There are other inconsistencies in the information provided to me on behalf of the body corporate. For example, Mr Lamont stated in an e-mail to the Commissioner on 30 May 2007 when complaining about aspects of the reasons I gave on 26 May 2007 "Nor do I attempt to give legal advice. .... I don’t give legal advice I cannot." Presumably, this was in response to the following comments I made in the reasons for my further interim order:

"In the meantime, the body corporate would be well advised to take its advice from a qualified and competent lawyer rather than Mr Lamont, who despite whatever good intentions he may have, should not be advising on such complex matters as the termination of management rights agreements."

10. Leaving aside the fact that my comments related to "advice" and not "legal advice", relevant to Mr Lamont’s statement, in the same e-mail to the Commissioner he said:

"I do discuss tactics and I discuss what the Act says and how I believe unit owner (sic) might be able to act within the Act to pursue their legitimate purpose. that (sic) extends no further than telling owners they can make applications about matters, or explaining how a S 33 might work and how they can requisition EGM’s. I also advise what rights they have to require a BCM to be responsible to the committee, what motions they might be allowed to put to control their bank accounts."

11. I have not singled out Mr Lamont’s comments to embarrass him. In my reasons of 26 May 2007 I have already acknowledged that he probably means well and I still do not question his good intentions. However, I am mindful that:

(a) he has been engaged as an "advisor" to the body corporate in relation to the termination of the Management Rights;
(b) the committee appears to have valued and relied on his advice;
(c) despite that advisory role, he also undertook (inappropriately in my view) the independent role of returning officer for the motion for a resolution terminating the management rights;
(d) as such returning officer he played a significant part in causing the body corporate to breach the terms of my interim order of 27 April 2007; and
(e) I propose to make an order in relation to his future as advisor to the body corporate and it is important that the reasons for such order are understood.

Further application

12. Since my further orders on 26 May 2007, the Applicant has made a further application, pursuant to the leave I previously gave, seeking the appointment of an administrator on the basis that the body corporate has failed to comply with the terms of those orders in that it is has not distributed to lot owners a copy of those orders and my reasons for making them.
13. By way of investigation of this further application, I exercised my powers under section 271 of the Body Corporate and Community Management Act 1997 ("Act") by speaking to both the solicitor for the body corporate, the solicitor for the Applicant and three unit owners in Surfers Palms North.

Findings

14. On the basis of the conversations that I had with those people, plus the materials that have been submitted in support of this further application, I am satisfied that:

(a) the body corporate has not complied with its obligation under my further orders of 26 May 2007 to serve on the owner of each lot in community title scheme 20846 a copy of the further interim orders and my reasons for making them;
(b) the body corporate manager, CTS Management Pty Ltd, has resigned out of frustration over the way in which the body corporate is being managed by its committee;
(c) the committee cannot be relied upon to comply with any orders that I may need to make in relation to this application, whether interim or final orders;
(d) the affairs of the body corporate are in disarray;
(e) the committee cannot be relied upon to ensure that the body corporate participates in the determination of this application in a proper manner and in the interests of all of the owners in community titles scheme 20846; and
(f) the committee cannot be relied upon to provide me with accurate information in relation to the matters that I need for the purpose of determining this application.

Proposed orders

15. Under these circumstances, it is in everyone’s best interests that I appoint an administrator to take control of the body corporate. I therefore propose to make orders appointing an administrator to exclusively perform all of the obligations of the body corporate, its committee and its chairperson, secretary and treasurer under the Act and community management statement 20864.
16. To ensure that the work of the administrator is not impacted by the members of the body corporate committee, I propose to vacate the positions of all committee members. I also propose to give directions to the administrator in relation to:

(a) the body corporate audit that is currently under way;
(b) Mr Lamont’s role as advisor to the body corporate; and
(c) continuing representation for the body corporate in relation to the application.

I also propose to ensure that owners have the opportunity of following what has occurred in relation to my orders of 26 May 2007, as well as the orders I propose to make today.

Choice of an administrator

17. As regards the choice of an administrator, three names have been submitted to me by the Applicant’s solicitors. One of those persons has since withdrawn their consent to act. The other is a Gold Coast based body corporate manager while the third is a Brisbane based body corporate manager.
18. I propose to appoint the Brisbane based body corporate manager, namely Mr Ian D’Arcy of Capital Body Corporate Administration. I have chosen Mr D’Arcy because:

(a) his fees are substantially cheaper than those proposed by the Gold Coast manager;
(b) he has no prior knowledge of or connection with the community title scheme and the individuals associated with this dispute; and
(c) he is based in Brisbane and therefore distant from any interest that this dispute may be generating on the Gold Coast.

19. In my opinion, these factors heavily outweigh any disadvantage of having this scheme administered by a body corporate manager located in Brisbane.

Costs

20. The question of costs will be determined when the substantive aspects of the application itself are finally determined

G F Bugden OAM
Specialist Adjudicator