Surf Sound [2007] QBCCMCmr 44 (25 January 2007)

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

I hereby order as follows –

1. that Motions 2,3 and 4 proposed at an extraordinary general meeting of the body corporate on 26^th October 2006 are deemed passed and to be a resolution of the body corporate, as at the date of this order;

2. that Motions 5,6,7 and 8 proposed at the said extraordinary general meeting are within the power of the Administrator Attilio Danieletto to make without reference to a general meeting of the body corporate and that such resolutions have been properly made by the him and are resolutions of the body corporate as at 26^th October 2006;

3. that in respect of Motions 5,6,7 and 8, levies detailed in the agenda of the said extraordinary general meeting as "due and payable by 30 November, 2006" and "due and payable by 30 December, 2006" respectively, shall in respect of all four motions be due and payable by 5pm on Friday, 23^rd February 2007.

I further order that Motion 11 proposed at the said extraordinary general meeting is within the power of Administrator Attilio Danieletto to make without reference to a general meeting of the body corporate and that on perusal of two quotations for the supply and delivery of letterboxes, he may make a decision for their supply and delivery, which decision will be a resolution of the body corporate; and

I further order that the part of the application for Motions 9 and 10 to be "declared passed" is hereby dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0950-2006

"Surf Sound" CTS 14546

APPLICATION

This is an application dated 17^th November 2006 by the body corporate for Surf Sound CTS 14546 (the body corporate) against Margaret Allan, owner of Lot 6 and Kalglen Pty Ltd, owner of Lots 1 and 2 (the Respondents), for an order that Motions 1 – 11 "considered at the Extraordinary General Meeting held on 26^th October 2006, be declared passed," and any other orders considered necessary or appropriate.

This scheme is under the administration of Attilio Danielietto, (the administrator) appointed by order of an adjudicator on 21^st July 2006, and the administrator therefore lodges this application on behalf of the body corporate.

JURISDICTION

"Surf Sound" Community Titles Scheme 14546 is a community titles scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module). There are five lots in the scheme created under three Building Unit Plans of subdivision and re-subdivision.

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.

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)).

SUBMISSIONS

The body corporate held an extraordinary general meeting on 26^th October 2006, (the EGM) partly in order for the administrator to deal with administrative matters, and partly to deal with motions from lot owners. Motions 1 – 9 were submitted by the administrator on the part of the committee, and motions 10 and 11 were submitted by the owner of Lot 7, Helen Denison (Ms Denison).

At the time of the EGM, lots 1, 2 and 6, owned by the Respondents, owed body corporate debts and therefore were ineligible to vote on any motion, unless it was a motion requiring a resolution without dissent. Only motion 12 was such a motion.

The owners of Lot 8, Lawrence and Sunny Lucock (Mr and Mrs Lucock) gave a proxy to Margaret Allan (Ms Allan) as nominee for Kalgen Pty Ltd (Kalgen) for their vote. At the meeting, Ms Allan advised that Kalglen was in the process of purchasing Lot 8. The transfer was subsequently made on 1^st November 2006.

As proxy for Lot 8, Ms Allan voted against motions 2 – 11. As a consequence, motions 2 – 11 were not passed. It is the view of the administrator that the result is unreasonable and against the best interests of the body corporate.

The body corporate had just over $3,200 in its accounts as at 26^th October 2006 and the administrator expected that the body corporate would be insolvent "within a month or so" of that date. He informed those present at the EGM of this.

Motions 2 – 11 of the EGM, in essence, were as follows –

The adjudicator’s order by which the administrator was appointed required the administrator to give the body corporate seven days notice of motions in which he was exercising the power of the body corporate or the committee. The administrator has determined that he should make an application to his Office for an order that the motions which failed at the EGM be deemed passed, since it is not in the best interests of the body corporate for them not to be passed. He notified lot owners on 3^rd November 2006, of his intention to make this application.

The Applicant submits that each motion was necessary, or advisable. He says that motions 2, 3, 4, 5 and 6 aim to increase and make more efficient the funding of the scheme, by increasing available funds which are inadequate, and by encouraging timely payments of contributions owed. Motions 7 and 8 are motions to put into effect adjudicator’s order 0024 – 2006.

In that order Adjudicator Toohey, on 25^th May 2006, required that the owners of Lots 7 and 8 (Ms Denison and Mr and Mrs Lucock) be reimbursed by the body corporate; and that the owners of Lots 1,2 and 6 ( Kalglen and Ms Allan) remove a fence and gate wrongly erected by them, and that if they did not do so, the body corporate could undertake that work and seek reimbursement from them. The letterboxes were also to be replaced. Kalglen and Ms Allan have not done remedial works as ordered. The body corporate cannot at this time afford to seek enforcement of the order in the Magistrates Court.

In the case of motion 9, the Applicant advises that the by-laws are a "hotch-potch" under the old system prior to the Act, showing no plans for exclusive uses. The new by-laws also contain a by-law empowering the body corporate to claim costs of action to cover levy arrears. Without this, he says the body corporate may be exposed to significant costs in recovering arrears.

Motions 10 and 11 concerned the roof replacement and the letterbox replacement respectively. Both were proposed by the owners of Lots 7 and 8 jointly. This was also to give effect to a previous adjudicator’s order and then it would be up to the Applicant as administrator, or a future committee, to prepare a scheme for budgeting for the new roof and the letterboxes.

The Applicant advises that the body corporate will become insolvent in between 2 – 5 months, merely owing to administration costs, without spending anything. The building has been uninsured since August 2006, as the body corporate cannot afford to pay the premium. It is essential that the body corporate be given the tools with which it can collect contributions and get out of arrears.

In accordance with section 243(2)(b)Act, submissions were sought from all lot owners. Submissions were received from Ms Allan and Kalglen as owners of Lots 1,2,6 and 8.

Ms Allan in her submission seeks to invalidate the entire EGM. She says lots 1,2 and 6 were ‘financial’ and had paid levies at the time of the EGM in advance until 28th February 2007, but they were waiting for correct notices of contribution to be re-issued. She states that their rights to vote have been denied, and that this is the subject of a dispute resolution filed on 2^nd January 2007. She disputes the levies which the body corporate says are owed. She went through financial records with the Applicant on 17^th October 2006, but the original financial records were not present, and the Applicant had removed records no longer relevant which is not in accordance with the Act.

Mr Allan says that she asked at the beginning of the EGM for the meeting to be ruled out of order because of inaccuracies in accounting and the denial of her and Kalglen’s right to vote. Despite that, she says the votes were cast at the meeting, and that is the decision of the body corporate, and it should be respected.

With regard to Motion 2, she says that she does not approve of the discount procedure which will make funds "even less" and would "effectively deficit (sic) the funds". She says there would be no advantage either to changing the 6-monthly contribution to quarterly ( Motion 4) It would disadvantage her and Kalglen and together they own 88% of the scheme. She disputes the Applicant’s view that such changes would assist all owners. She says that the Administrator always makes sure he is paid but does not get insurance for the building or lawn mowing done.

With regard to Motions 7 and 8, she says that the removal of the electronic gate, ordered by an adjudicator, would be dangerous considering the state of the building. If the public had open access into the site, since the building has become worse, she would "seek indemnity" from the administrator, Ms Denison and this Office, if Lots 1,2,6 and 8 were exposed to "unnecessary risk and liability."

With regard to Motion 9, she says that the copy of the proposed by-laws were not sent with out with notice of meeting, and she did not know what she was voting for. She says that the vote should have been by resolution without dissent since it concerned exclusive uses in any event.

With regard to Motion 10, she feels that it would be illogical to replace the roof and not in line with experts’ reports previously obtained. The foundations need to be fixed first. She does not provide any ‘specialist consultant recommendations’ to which she refers.

Ms Allan refers to many areas of maintenance and repairs that require immediate attention in the scheme, although she acknowledges that the body corporate has only approximately $4000 in its bank account. She attached several undated photographs.

DETERMINATION

In this application, the administrator seeks an order that motions which were resolved 1-1, and therefore not passed, at an EGM of the body corporate held on 26^th October 2006, be declared passed, since not to pass these motions is against the best interests of the body corporate.

I have considered carefully the previous orders made concerning this scheme, by Adjudicator Toohey and it is my view that the administrator has full power to raise a levy in this scheme without the necessity of calling a general meeting, or seeking a vote on the levy proposed. Indeed it would be remarkable if an adjudicator had appointed an administrator without giving him or her such power, albeit limited by the wording of the order.

The order which appointed Mr Danieletto on 21st July 2006 (0518-2006) granted to him exclusively "all the powers, functions and responsibilities of the committee and each executive member of the committee." In addition, he was "specifically given the power to levy special contributions, for liabilities for which inadequate provision has been made in the budget." Further, the administrator was required (my italics) to raise a special levy for any amounts required in respect of the following:

Whenever the administrator exercises the powers of the body corporate, for example by passing a resolution, he must minute the resolution. He must also send notice of motions which he proposes to resolve, to owners at least 7 days before making the resolutions, and provide a copy of the relevant minutes to owners within 7 days after making the resolutions.

Therefore, I find that there was no need to put the following motions to a general meeting: Motions 5, 6, 7 and 8. Each of these four motions concerned the raising of special levies.

Motions 5 and 6 fall clearly into the categories for which the administrator is specifically empowered.

Motion 7 concerned raising a levy to call for funds to effect an adjudicator’s order relating to a period prior to the administrator being appointed. That order was 0024-2006 made on 25^th May 2006. The order required inter alia that the body corporate must reimburse owners of Lots 7 and 8 their costs associated with obtaining an engineering report from Kavanaugh Consulting Engineers Pty Ltd.

Motion 8 concerned raising a levy to call for funds to effect part of the same order, in that works to remove a beachfront timber fence and replace it with a block fence, remove an electric gate and replace a letterbox or letterboxes, are to be undertaken by the body corporate " as soon as practicable" following that order.

These two expenses, although not defined in the order 0518-2006 must have been in contemplation of the adjudicator when he appointed the administrator only two months after making the order. I am satisfied that they fall into the category of liabilities of the body corporate for which inadequate provision has been made in the budget, and therefore the administrator has power to level a special contribution to cover them.

Motion 11 is not to raise a levy, but is a motion for approval to spend money ($626) on letterboxes. The body corporate was ordered by the adjudicator in his order 0024-2006 at item 4 to replace these letterboxes. The administrator has the power without going to a general meeting to spend up to $250 per lot on a single item. (see page 1 decisions for order 0518-2006.) . I therefore conclude that there was no reason for this matter to be put to the body corporate at a general meeting. However, payment of over $50 per lot requires two quotations. In order to bring this motion into effect, the administrator therefore needs to consider and minute that he has viewed two quotations for letterboxes, and give 7 days’ notice to lot owners of his preferred supplier.

Motions 5,6,7 and 8 may therefore be deemed resolved by the Applicant as adminsitrator as at the date of the EGM, all other formalities having been complied with. Since these motions required a payment to be made by lot owners by 30^th November 2006 (Motions 5,6 and 7) and 30 December 2006 ( Motion 8), these motions are amended so that payment is now due in respect of all four motions by the relevant lots by close of business on Friday, 23rd February 2007.

Motion 11 is to be resolved by the administrator and dated accordingly.

In respect of the remaining six motions, there is strong objection from Kalglen and Ms Allan. One of her submissions concerns the fact that she was not able to vote when in fact she claims that she and Kalglen are "financial" or that they did not owe body corporate contributions at the time of the EGM.

She does appear to me however, to owe a body corporate debt since by her own admission she has not removed the electronic gate in accordance with an adjudicator’s order, and this now becomes a body corporate expense. Despite that anomaly, I considered seeking further information on this point and I am aware that Ms Allan and/or Kalglen have made three recent applications to this office, all of which concern her and Kalglen’s eligibility and allegedly improper disqualification.

However, in the circumstances of this application, it would make no difference if the vote at the EGM for Motions 2 – 11 was 1-1, and therefore the motion failed, or if the vote was 4 -1 (including proxy vote) and the motion failed. The effect is that all motions proposed by the administrator failed at that meeting, and this application is to ask this Office to change that for the good of the scheme.

Section 94(2) Act requires the body corporate to act reasonably in everything it does. In Dindas & Anor –v- Body Corporate for One Park Road CTS 2114 & Ors [ 2006] QDC, Wilson DCJ queried whether this meant the committee must act reasonably in its committee functions, or that the body corporate must make reasonable decisions at a general meeting. He found that section 94

"is clearly intended to apply to the performance of functions and not the carriage of resolutions made at meetings..."

However, His Honour allowed that section 276 Act (quoted above) gave wide jurisdiction to an adjudicator. He did not, on appeal, disturb an adjudicator’s decision that a majority vote should be overturned where the vote was in favour of the majority lot-owner becoming building manager of the scheme, when independent building managers had tendered for lesser amounts. He said

"It appears to be within the adjudicator’s powers under section 276(1)(c)(i) and to have attracted justifiable interference on the " just and equitable" ground....." ^[1]

It is also clear that an adjudicator has power to void a resolution purportedly passed at a general meeting.^[2] That the converse is true would follow.

In respect of motions 2,3, and 4, I find as follows:

In this scheme, the administrator has been appointed to perform specific functions to get the body corporate working as it should. He has devised certain motions to increase cash flow and promote prompt payments. I would say that both the 20% discount scheme (Motion 2) and the imposition of penalties (Motion 3) are not unusual proposals and are commonly used in community titles schemes. Motion 4 proposes quarterly in lieu of six monthly contributions, but the quarterly payments proposed for the first quarter of 2007 are to represent one half of the last six-monthly contribution.

The administrator says that Ms Allan and Kalglen have shown no good reason, ie, that they are not acting reasonably, in voting against these administrative changes. Ms Allan in her submission says that the discount procedure "would effectively deficit the funds," which I find is to misunderstand the calculations required in order to set the budget. The body corporate is required by section 95 Standard Module to fix a budget for the year, requiring that a certain amount of money is put into the body corporate coffers for the planned year ahead. If it is presumed that all owners will pay on time, and that all owners will receive a discount of 20%, the discounted sum must be the total required in the budget. The 20% is therefore added onto the proposed budget as an incentive to make owners pay on time.

She further says that it would disadvantage her particularly to pay quarterly and not six monthly. She says that it " would offer no budgeting or cash flow assistance" to her and that she would incur unnecessary losses on investment structures. Since the payments proposed are merely one half of the six-monthly total, I am not convinced by this somewhat vague argument. This argument is supported by hearsay statements and a historical reference to the fact that Ms Allan, Kalglen and Ms Denison, owner of Lot 7 " has always agreed with six monthly payments" and that they have agreed to keep the scheme’s maintenance and costs to a minimum. There is veiled reference to Mrs Allan and Ms Denison (and also the former owners of Lot 8) letting the property fall into disrepair until "a developer came along and offer an inflated price."

As a general comment I would advise the body corporate that even though there may be future re-development of the scheme land, that the responsibility to maintain the common property cannot be excused.

However, is it "justifiable" to interfere with the body corporate vote on these three motions? Lot owners have been ordered to cooperate with the reasonable requests of the administrator,(order 0158-2006) but nothing in the power of appointment allows the administrator to change the way in which contributions are paid.

In the circumstances, I consider that these changes are of a mere administrative nature, and that the administrator is authorised to make these changes, for the benefit of the administration of the scheme, as from the date of this order.
Motion 9 proposes a new community management statement (CMS) be recorded with new by-laws. I have not perused all the by-laws but note that one of the new by-laws proposed (By-law 24) is that the body corporate may recover money from lot owners on demand. By-laws with similar wording have been held on frequent occasions by this Office to be contrary to the legislation and unenforceable.^[3]

To record a new community management statement is a progressive and pro-active step on the part of the administrator, and something which I am of the view requires body corporate approval at a general meeting. This has not been forthcoming.

The new by-laws concern exclusive use areas at By-law 26 and Ms Allan and Kalglen say that this motion should have been a resolution without dissent. The Applicant explains that no plans exist showing exclusive use areas and that the new CMS would show these at Schedule E, as is the current modern format. Section 62 Act requires that the lodging of a new community management statement which shows a difference in the by-laws must be by special resolution unless the changes show a "difference in exclusive use by-laws" when the resolution must be a resolution without dissent. (section 62(2) and 62(3)(a)). However, the motion does not have to be by resolution without dissent (or even a special resolution) if the change to the "exclusive use" by- law wording is merely "recording the details of allocations of common property ... made under an exclusive use by-law" (section 62(4)(e) Act) which seems to be the case in this instance.

However, I am not proposing to overrule the vote at the general meeting. Ms Allan/Kalglen say (as a proxy on behalf of Lot 8), that they voted against the motion because they had not seen a draft of the by-laws with the notice of the meeting. There would seem no justification for ‘interference’ in this case as this motion is a motion concerning a change of some substance rather than a change to administrative procedures.

Motion 10 proposes simply that the scheme approves a new roof. I can find no reference to a new roof in any prior adjudicator’s order. The Applicant has now advised that he is unable to find an adjudicator’s order concerning a new roof and has withdrawn that statement in his application which was made in error. This matter is simply one of repairs for the lot owners and not a matter of administration. I have no evidence as to the state of the roof, and it is not argued that this matter is urgent, or in the nature of an emergency, although Ms Allan/ Kalglen provide several photographs of examples of disrepair of scheme land.

Because of this, and the fact that Ms Allan exercised a proxy vote against a motion proposed by the proxy givers, (Mr and Mrs Lucock) it would appear that Ms Allan is voting against instructions and against her own ultimate interests, but that is a matter between her and Mr and Mrs Lucock, who probably have no further interest in the fabric of the scheme. I make no order to overturn the vote on Motion 10.

^[1] Para 46
^[2] Examples of Orders at Schedule 5 BCCM Act
^[3] Liberty CTS 2741 0464-2004; Surfers Plaza Resort CTS 6388 0305-2004; Sailfish Point CTS 20973 0259-2005; Chiara Sands CTS 29522 0364-2005; Seabay CTS 28805 0652-2006

2.	provided for a discount mechanism (20%) to encourage owners to pay contributions within prescribed time limits;
3.	provided for a late payment penalty of 2.5% per month to late contributions;
4.	provided for quarterly levy contributions in lieu of half-yearly scheme will need to incur major expenditure in the foreseeable future
5.	provided for a "special administrative fund levy" of $250 per lot payable by 30^th November 2006 as fund for pursuing owners for recovery of body corporate debts;
6.	provided for another " special administrative fund levy" of $250 also payable by 30^th November 2006 for " general maintenance and administration expenses for which no provision had been made in the previous budget;
7.	provided for the striking of a sinking fund levy of $68.75 gross per lot entitlement payable by 30^th November 2006;
8.	provided for the striking of further funds for the sinking fund levy of $187.50 gross per lot entitlement payable by 30^th December 2006 only by those lots who had failed to comply with an adjudicator’s order requiring removal of a fence and electronic gate and replacement of a block wall and letterboxes so that the body corporate could undertake the work to comply with the adjudicator’s order;
9.	provided for a new community management statement to be recorded with new by-laws;
10.	provided for the roof to be replaced, a motion with alternatives;
11.	provided for new letterboxes to be obtained by the body corporate at a cost of $626 as per a quotation from a supplier circulated with the notice of meeting;

•	to engage and pay Exact Plumbing Services Ltd to perform stormwater works for $15,559 from the sinking fund budget;
•	to pay D and C Mifsud Electrical Contractors the amount of $3,245 from the sinking fund budget;
•	to engage and pay legal representatives to pursue proceedings on behalf of the body corporate for payment of levies or enforcement of adjudicator’s orders, where the administrative fund budget was insufficient, provided the sum estimated and payable to the legal representatives for any single proceeding was less than $10,000.

Number of Scheme:	14546
Name of Scheme:	Surf Sound
Address of Scheme:	Surf Sound

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Surf Sound [2007] QBCCMCmr 44 (25 January 2007)