No. 9 Port Douglas Road [2007] QBCCMCmr 330 (31 May 2007)

Number of Scheme:	24368
Name of Scheme:	No. 9 Port Douglas Road
Address of Scheme:	9 Port Douglas Road PORT DOUGLAS QLD 4871

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

I hereby order that the application for orders to:

Instruct the Body Corporate Manager to; Put on hold;

Calling of any general meetings purportedly called by committee, where committee resolution and minutes of meetings are not evident or properly recorded and proper notice of committee meeting has not been distributed as per Regulations.

and

The putting forward of any motion to invalidate the engagement of Kenmac Constructions as per motion 3 of the EGM 15th September 2006, pending outcome of this dispute.

is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0389-2007

"No. 9 Port Douglas Road" CTS 24368

No. 9 Port Douglas Road community titles scheme (No. 9 Port Douglas Road) consists of 18 lots and common property. The community management statement (CMS) for No. 9 Port Douglas Road indicates that the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation Module) applies to the scheme. Department of Natural Resources Mines and Water records show the scheme registered as Building Units Plan 106455.

INTERIM APPLICATION

This is an application for interim orders lodged by Maxwell Stainlay, owner of Lot 17 (applicant) on 8 May 2007 under the Body Corporate and Community Management Act 1997 (Act). The applicants sought interim orders against the Body Corporate No. 9 Port Douglas Road (respondent) in the following terms:

The putting forward of any motion to invalidate the engagement of Kenmac Constructions as per motion 3 of the EGM 15th September 2006, pending outcome of this dispute.

The application also seeks the following final orders:

PROCEDURAL MATTERS

In accordance with section 247 of the Act, the Commissioner for Body Corporate and Community Management has referred the application to me to decide whether the nature or urgency of the circumstances of the application warrant an interim order. The Commissioner has referred the application notwithstanding that affected persons have not been given notice of the application or afforded an opportunity to make submissions about the application (section 247(3)).

Following the applicant’s amendments to the orders sought and supporting grounds, on 22 May 2007 a copy of the application was forwarded to the Body Corporate and a limited period of time was provided to the Committee to respond to the issues raised by the interim orders sought. Three Committee members have made individual written submissions.
MATTERS IN DISPUTE

This application raises a range of issues about the conduct of the Committee and the Body Corporate Manager (BCM), and the progress of works to repair and improve the building. The circumstances of the dispute presented by the applicant are somewhat confusing, however based on the material provided I have endeavoured to summarise the issues as follows.

No. 9 Port Douglas Road was apparently a warehouse/office/residence which was converted to residential units. There is a significant history of dispute in this scheme, and this application is the 30^th matter lodged in this Office regarding the scheme (although only 14 of those have proceeded to final orders). Many of the recent disputes have related to the administration of the scheme and maintenance and improvement works in the scheme, particularly the defective roof.

On 15 September 2006 the Body Corporate held an Extraordinary General Meeting (2006 EGM) which, amongst other resolutions, passed Motion 3 to, in part, engage Kenmac Constructions Pty Ltd (Kenmac) to undertake roof works. The applicant claims the Body Corporate is jeopardizing this resolution and/or the work by seeking to change the selected builder and quote without proper authorisation. He claims this has delayed the work while further damage is being sustained. He claims Kenmac has "...cancelled any material orders after, being stood down by the secretary, and the sponsorship of another builder to replace him by the purported secretary."

The applicant goes on to claim that the Committee have acted ‘fraudulently’ by submitting motions for an EGM that was to be held on 11 May 2007, but later cancelled (the cancelled EGM), without notifying of any Committee meeting held to formulate the motions, or distribution of the minutes of any such meeting. The applicant says in fact that there has been no Committee meeting since the Annual General Meeting (AGM) of 23 February 2007.

The motions on the cancelled EGM sought approval for modified specifications for the roof repairs, to prepare a building contract on the basis of those specifications, and then to approve one of two quotes (from Kenmac and Ted Granville) for works based on the modified specifications. The explanatory note for the motions was not supplied by the applicant. The applicant alleges that no new plans were supplied, there was insufficient analysis of the effects of the modifications and the motion to select a quote was not a proper motion with alternatives. He has also raised issues about the specifics of the proposed modifications and the validity of and basis of the two quotes.

The applicant also claims the BCM has failed to comply with the Code of conduct for body corporate managers and caretaking service contractors^[1] (the Code) and the terms of their engagement by calling the cancelled EGM despite knowing that there had been no Committee resolution and by not giving official notification of the meeting’s cancellation.

In addition, the application queries the eligibility of Richard Sheers to be elected as Secretary at the AGM. Sheers was nominated by Lot 15 whose registered owner is Sheridan Schweitzer. Sheers apparently indicated he is the part owner of Lot, by way of trust holdings, and the legal representative of Lot 15. The applicant claims Sheers is the de facto partner of Schweitzer and that a de facto is not a spouse under section 11(5)(a) of the Accommodation Module.

Finally the applicant asserts that the Committee’s fraudulent and misleading behaviour means they are unfit for the role but, as they hold a voting majority, internal processes are unlikely to have any effect. Accordingly he seeks the appointment of an administrator to fulfil this function ‘impartially’.

The submission from the Secretary (who claims to also represent the currently absent Chairperson) rejects the application as a delaying tactic and also notes:

Another submission says that, while they thought the papers for the cancelled EGM was a genuine mistake, and believe everyone wants to progress the work and get it right, they are concerned the Secretary is too close to the process. They would like to see detailed specifications provided to both builders, confirmation of their quotes, and independent advice that the modifications are in the best interests of the scheme. They consider an administrator would ensure transparency.

The caretakers have made a submission confirming that while do not know of any Committee meetings since the AGM, they have participated in several discussions with committee members about potential variations to the building works. They say the changes aim to achieve better rainwater management, help prevent leaks and save more than $50,000. They contacted all owners to solicit their views and all, with the exception of the applicant, apparently indicated that they would support the variations if they were put to an EGM, subject to receiving more detailed information. This outcome was communicated to two Committee members who said they would canvass calling an EGM with the Committee. The caretakers were surprised to receive notice of the cancelled EGM as the papers had not been circulated to the Committee for consideration. They note the operation of the Body Corporate is improving but errors appear to have been made by some Committee members. They believe the interests of owners will be best served by calling an EGM as soon as possible to amend the building plans, with quotes from Kenmac and another party put as a motion with alternatives, and the works to proceed before the next wet season. However they also note an independent administrator might be appropriate given the ‘...perpetual and mostly petty arguing..." which is causing delays in progressing the repairs.

JURISDICTION

In general I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.^[2] However I will note to parties that I have no jurisdiction to make any orders (primarily raised in the final order application) about the compliance of the BCM with the Code or the terms of their engagement. The reasons are:

Is respect to those matters that are within my 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

(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.

Section 279(1) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances. 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

The nature of interim orders

At this time, I am concerned with the application for interim orders and the threshold issue of whether interim orders are warranted. An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates.^[4] Any order granted must be just and equitable in the circumstances.^[5] The examples in section 279 of the Act indicate the usual circumstances where an interim order might be made and are in the nature of injunctive relief. While it is not possible to exhaustively define what matters might be the subject of an interim order, an applicant needs to establish that the circumstances warrant an interim order. An interim order will not be made if the only urgency relates to an applicant’s desire to resolve or expedite the matters in dispute, or where the nature of the circumstances are such that the matter is not capable of being dealt with in the context of an interim order.

It is not appropriate to consider the final order issues in detail at this time. But to determine whether it is just and equitable to grant interim relief, it can be relevant to briefly consider those matters. As an interim order can be considered on an ex parte basis an adjudicator must be satisfied that the application raises serious questions to be determined and that the balance of convenience between the parties justifies the grant of injunctive relief. That is, an adjudicator must balance the inconvenience of granting relief now if final orders are ultimately refused against the inconvenience of refusing relief now if final orders are ultimately granted. Of particular relevance is evidence that an interim order is necessary to prevent serious or irreparable harm.

Calling general meetings

A member of the Commissioner’s Office contacted the applicant to clarify the basis of the interim orders were being sought and why orders of an interim nature were warranted. The applicant’s response in regard to the first interim order simply relates to the conduct of the BCM in regard to the cancelled EGM. With respect, this has little relevance to the interim order sought and provides no guidance on the specific actions apprehended by the applicant to warrant an interim order.

The applicant has given no particular evidence that a general meeting is about to be called without Committee approval, but it does seem likely that the Committee intends to call an EGM to consider the issue. It also appears that that no Committee meetings have in fact been held since the AGM. Accordingly it is not unreasonable for the applicant to be concerned that a further EGM may be called without being authorised by the Committee.
Notwithstanding this, the applicant has not indicated that his application is motivated by specific apprehended conduct. The order he is seeking would simply have the effect of requiring the Committee to always comply with the legislation when calling a general meeting. While of course the Committee should comply with the legislation, this is not an appropriate interim order.

However, for the information of all parties I will summarise some key Accommodation Module requirements in regard to Committee meetings and calling general meetings:

All Committee members must be aware that they have no authority to act unilaterally or make decisions for the Committee or the Body Corporate, and that the Committee’s decision-making powers cannot be delegated. The Committee is on notice that the validity of any meeting that does not comply with these processes is put in doubt. If a meeting is called that any owner considers does not comply with the legislative processes they may apply to put the meeting or any resolutions purportedly passed at the meeting on hold pending a determination of the dispute.

I would also note that, based on a preliminary review of the issues, it seems there were defects in the cancelled EGM. The wording of the motions and incorrect attachments, combined with the apparent failure of the meeting and its agenda to be authorised by the Committee, would certainly have put the validity of the meeting in doubt had it proceeded. Accordingly, it was entirely appropriate to cancel the meeting. The Committee should take care to avoid such issues arising in future. While the BCM can only act under the direction of the Committee, I would also encourage the BCM to alert the Committee to potential defects in documentation and processes.

Implementation of Motion 3 from the 2006 EGM

In respect to the second outcome sought, the applicant says the Committee has failed to implement Motion 3, engaging Kenmac to undertake roof works, and other resolutions passed at the 2006 EGM. It is somewhat unclear from the material provided what has happened in regard to the proposed works since September 2006. However, I note that the applicant was one of several parties to a dispute resolution application (lodged on 29 September 2006 and finalised by order on 18 December 2006) to invalidate Motion 3 and other motions at that meeting. While the applicant was certainly entitled to pursue his concerns regarding those motions he should acknowledge that the uncertainty created by the dispute may well have contributed to the delays in implementation.

The applicant seeks an interim order to prevent a motion to invalidate Motion 3. However there is nothing to suggest that the Committee is seeking to ‘invalidate’ the motion and an adjudicator has previously dismissed an application to invalidate the resolution^[6]. Moreover, there is nothing to prevent a body corporate from amending or revoking a motion passed by it.^[7] This is a matter for owners themselves to decide if any such motion is put before them.

It does appear that the Committee is looking to submit motions to modify the specifications for the building work and then to obtain approval for revised (lower) quotes for that modified work. While I appreciate the genuine concerns of all owners regarding the ongoing delay in this matter, I do not consider it unreasonable for the Committee to submit an alternative option to owners when they become aware of it. It seems that the majority of owners may have given some ‘in principle’ support for this approach. Moreover, it would arguably be inappropriate of the Committee to simply proceed with the original approved quote without informing owners that they had became aware of information about a potentially better and/or cheaper alternative for the work or giving the owners the option to choose whether to proceed with the original or modified proposal. It should be for owners to decide in a general meeting whether they agree to the alternative proposal and new quotes. While the applicant has raised some issues regarding the modified proposal, I am not satisfied at this stage that the alternative is so manifestly unreasonable that owners should not be entitled to vote on it if the proposal is submitted to them for consideration.

Conclusion

On the evidence before me, and for the reasons outlined above, I simply do not consider that the applicant has presented sufficient basis to warrant the granting of the interim orders sought. The matter will now be investigated in accordance with the usual processes of this Office, including calling submissions from affected parties. A final order to the application will be made in due course.

In the interests of all owners and the scheme I would encourage the Committee to progress either an EGM to consider modified specifications, or the originally approved work, as soon as reasonably practical. The existence of the pending final order application should not be seen as a barrier to this proceeding.

However, the Committee should be mindful to ensure that proper processes are followed by them in regard to the administrative processes for Committee and general meetings. In particular they should ensure that any decisions regarding any EGM are taken by the Committee as a whole in a formal Committee process. The Committee should also take particular note of section 40B of the Accommodation Module regarding the framing of motions with alternatives. I would encourage Committee members to call the Information Service in the Commissioner’s Office on 1800 060 119 if they are in doubt as to their responsibilities.

I would also encourage the Committee to make every effort to address all reasonable concerns raised in regard to the modified specifications and to include as much information as possible in the explanatory notes for any future motions on this issue to ensure owners are fully informed before making any decisions. The Committee as a whole should discuss whether any more detailed specifications, clarification of quotes, or additional independent advice is necessary. Moreover, if owners are not satisfied with the level of information provided to them they are entitled to vote against any proposed motions on that basis.

^[1] Schedule 2 of the Act
^[2] See sections 227, 228, 276 and Schedule 5 of the Act

^[3] See section 265 of the Act. Normally specialist adjudicators are nominated by an applicant, appointed by the Commissioner if there are no reasonable objections from the respondent, and paid for by the applicant unless otherwise directed by the specialist adjudicator. When the Body Corporate and Community Management and Other Legislation Amendment Act 2007 comes into effect, likely to be later this year, these disputes will be determined by the Commercial and Consumer Tribunal.
^[4] Section 279 of the Act
^[5] Section 276 of the Act
^[6] No. 9 Port Douglas Road [2006] QBCCMCmr 674 (18 December 2006)

^[7] Section 56 of the Accommodation Module allows this to occur providing that the resolution to amend or revoke is of the same time (ordinary, majority, special or without dissent) as the original motion.

1.	Order declaring that resolutions purportedly (in correspondence) passed (since last AGM) at meetings of the committee resulting in motions for consideration in notices of EGM for the 11th May 2007, for the body corporate were at all times void.
2.	Order body corporate manager to comply with terms of engagement / authorisation and code of conduct (Act), in relation to unlawful calling of an EGM containing unlawful motions and then cancellation without any official notification.
3.	Confirm and Enforce Body Corporate resolution contained in Motion 3 of the EGM 15th September 2006 "Roof Repairs" (Attach 1) Also; ; Air conditioner repairs, Western roof, (motion 7. 15/9/06, Into Constructions), Attach 5
4.	An order invalidating the Secretary's appointment or declaring the resolution (9) appointing the Body Corporate Secretary (because of nomination irregularities) at the AGM of the 23rd February 2007, was at all times void.
5.	Appoint an Administrator to perform the function of the Body Corporate Committee and Body Corporate until its obligations for proper finalization of all necessary building repair / improvements are completed.

-	An EGM was called but then errors in the plans and motion wording were discovered.
-	Owners were notified of the need to cancel the meeting in a memo from the Chairman and Secretary on 2 May 2007, which was included in the application material.
-	He was nominated as the representative of Lot 15 by a power of attorney approved at the time of nomination and not because of any family relationship.
-	The modified specifications suggested by Ted Granville were mirrored by Kenmac, as was detailed to all owners on 2 May 2007, and represent cost savings and a better result.
-	The four Committee members who met Granville invited him to submit a quote.
-	The Committee was advised that the nature of the alterations to the plans were sufficient to require the matter to go back to owners for approval.
-	The Committee sought advice from a consulting engineer on the hydraulic components of the new plans which has now been received.
-	As soon as the Body Corporate’s solicitors have finalised building contracts, the Committee will be in a position to go back to owners to seek revised approval.

1.	There is no jurisdiction under section 227(1) of the Act for an owner to make an application against a BCM.
2.	While the applicant has not (following amendments to the application) named the BCM as a respondent, he has purported to seek orders against the BCM. It would generally be contrary to the principles of natural justice to make an order against a party who has not been named as a respondent to a dispute and been able to respond to the dispute as such.
3.	If such issues were to be considered in a dispute resolution application (for example in the context of a dispute between a body corporate and a BCM), they would need to be determined by specialist adjudication because they raise contractual issues.^[3]

-	Under section 38 a general meeting (other than a requested meeting which is provided for in section 59 and 59A) may be called by the secretary or other committee member, but only if they are authorised by the committee, or a person authorised by an adjudicator.
-	Under section 43(1) the committee must prepare the agenda for each general meeting.
-	A committee can only make decisions (including to authorise the calling of a general meeting and to prepare an agenda) by a resolution in a committee meeting (section 31) or in accordance with the processes for voting outside committee meetings (section 33).
-	‘Advice’ of a committee meeting must placed on the body corporate’s notice board (if one exists) and must be given to lot owners at the same time as written notice to committee members, which is at least 7 days before the meeting unless the committee has agreed to a reduced notice period for the proposed meeting (section 26).
-	Under section 34 a committee must ensure that full and accurate minutes of a committee meeting are taken and given to lot owners within 21 days of the meeting (or within 21 days of the passing of a resolution outside a committee meeting).

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

No. 9 Port Douglas Road [2007] QBCCMCmr 330 (31 May 2007)