No. 9 Port Douglas Road [2007] QBCCMCmr 566 (24 September 2007)

Last Updated: 26 September 2007

REFERENCE: 0704-2007

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

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

Maxwell Stainlay, the Owner(s) of lot 17

I hereby order that resolutions 8, 9, 10, 11, 13 and 15 recorded as being passed by ordinary resolution in the minutes of the general meeting of 4 September 2007 are not invalid by means of any technical defect and that resolutions 8, 9 and 11 are deemed, in the circumstances, to have been passed by a special resolution. I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0704-2007

"No. 9 Port Douglas Road" CTS 24368

Application

No. 9 Port Douglas Road Community Titles Scheme (Port Douglas Road) is an 18 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Accommodation Module Regulation (Accommodation Module). The scheme is described as a warehouse/office/residence converted to an 18 unit complex. Lot boundaries are designated under a building units plan (now known as a building format plan).

This is an application by Maxwell Stainlay, owner of lot 17 (applicant) against the body corporate for Port Douglas Road (respondent). The applicant seeks to invalidate motions 8 to 15 considered at a general meeting on 4 September 2007.

Background

Previous applications indicate long standing disputes in relation to the building. There have previously been submissions that the builder who converted the building from a warehouse to units went bankrupt and had not properly completed the work. It is not disputed that significant quantities of rain water have been entering apartments from the roof area, possibly due to design defects or the developer not installing appropriate waterproofing membranes in all necessary areas. A waterproofing membrane installed in 2001 almost immediately failed although it is disputed whether this was due to a failure to properly maintain the membrane or because of design defects and the unsuitability of a membrane for the conditions.

The rear of the building has a metal roof that leaks and the front of the building has open balconies that leak. The core dispute between owners has been in choosing between two alternatives to stop the leaking. Firstly, repair of the metal roof at the rear of the building and installation of waterproofing membranes at the front of the building. Secondly, repairs and installation of new metal roof over the entirety of the building including the front balconies.

The background to the present application can be briefly summarised as follows:

1. At a general meeting on 28 April 2006 owners voted unanimously in favour of a motion to "repair/replace the roof" and selected from alternative proposals. The most popular alternative was to roof the front section, carry out repair works on the remaining roof, and perform wall capping;

2. Two owners challenged this decision with the District Court ultimately concluding that the voting paper was defective in that it specified that the motion was to be decided by ordinary resolution instead of special resolution but this was an irregularity of the most technical nature in the context of the case and it was just and equitable to make an order confirming the validity of the resolution;^[1]

3. In the meantime, at an extraordinary general meeting on 15 September 2006, owners had passed five resolutions purporting to accept quotations for work related to roofing and painting the building. These five resolutions were:

Resolution 3 - To accept quotations from Kenmac Constructions for the new roof and Mossman Refrigeration Services for relocation of the air conditioners;

Resolution 4 - To accept a quotation from GND Cairns Painters to paint the building;

Resolution 5 - To accept a quotation from Darren Barnes for additional roof repairs to the western roof being wall capping, box gutter and roof repairs;

Resolution 6 - To accept a quotation from Into Constructions to replace laser light roofing; and

Resolution 7 - To accept a quotation from Into Constructions for air conditioner repairs.

4. Up until the present time the committee have not acted on the above five resolutions. It is not clear from the material why the committee failed to implement these resolutions but it appears committee members have sought some new quotations. These new quotations include some alterations to the proposed work;

5. On 16 July 2007 owners of five lots, including the applicant, requested an extraordinary general meeting to consider six motions. Four of these motions were to revoke resolutions 3, 4, 6, and 7 of the meeting of 15 September 2006, described above. The other two motions were that the body corporate accept a quotation dated 27 June 2007 from Into Constructions Pty Ltd for repair and maintenance of the complex and engage lawyers to execute an associated BSA major works contract. It appears from the material that the applicant favoured the installation waterproofing membranes for the balconies at the front of the building.

6. The secretary initially failed to call the extraordinary general meeting within time and when the meeting was eventually called there were an additional eight motions listed as submitted by the committee for the consideration of owners. Most of these motions related to proposed engagement of contractors and lawyers to execute associated contracts. It appears from the material that the committee favoured works that involved roofing the balconies at the front of the building.

7. The minutes of the extraordinary general meeting of 4 September 2007 reflect that the motions proposing work favoured by the committee were declared passed, usually with 12 votes in favour and 5 votes against, whereas the motion proposing appointment of the contractor favoured by the applicant was lost with only 5 votes in favour and 12 votes against. The applicant challenges the validity of the resolutions that were declared passed.

Submissions

The applicant’s main submissions were to the effect that:

• The committee had not been holding meetings and the motions purportedly submitted by the committee were submitted unilaterally by the secretary and do not comply with the legislative processes;

• Motions 9 and 11 relate to lowering of air conditioners and creating of new stormwater systems that are an "improvement" rather than maintenance. These would have required passing by a special resolution; and

• Motion 8 creates a new roof and balcony areas that will be, by default, an exclusive use area for one of the owners. A resolution without dissent should therefore have been required, or at least a special resolution.

Submissions from the committee were to the effect that:

• There was again, overwhelming support by owners to repair the complex by way of roofing the affected areas;

• At the meeting the applicant admitted that he probably received a copy of minutes of committee meeting that authorised the calling of the extraordinary general meeting and the relevant motions; and

• The committee had received legal advice prior to sending out meeting notices that the applicant's motions seem to be out of order but should be encompassed in a motion with alternatives and voted on by lot owners. However, the applicant refused to allow his motions to be reorganised.

Other owners have also provided submissions. One owner supports the proposals put forward by the committee. This owners submits that the current roofing and drainage arrangements are totally inadequate and they consider the best option to rectify the situation is that supported at the meeting of 4 September 2007. Submissions are to the effect that the committee members are not experts in the legislation but that the committee properly decided to combine consideration of the committee motions at the same extraordinary general meeting requested by the applicant. It is further submitted that all owners have paid levies to fix the problem, the builder is ready to perform the work, and that the continual requests for orders are just increasing costs for owners. Another owner supports the application saying the committee is not following proper procedures and special resolutions are required. Submissions are also made to the effect that the builder is the de facto brother in law of the secretary, the brother of another owner, was unlicenced at the time the quotation was submitted, and had his gold card cancelled due to bankruptcy or litigation.

The applicant has responded to the submissions to the effect that the general meeting is a requested extraordinary general meeting by concerned owners and was not a meeting that any committee authorisation could have any bearing upon. It was also submitted that the purported committee authorisation to call a meeting did not formulate or submit motions to be considered at the meeting and motions at the extraordinary general meeting included quotations that were only obtained subsequently. The applicant also emphasises that his application is submitted through genuine concern for the continued prosperity of the scheme and its proper function according to legislative process and is not submitted just to create a nuisance.

Decision

Technical defects with motions

Applicable law

The legislation includes provisions to the effect that:

• A general meeting may be called by either the secretary or another member of the committee who has been authorised by the committee to call the meeting (Accommodation Module, 38);

• An extraordinary general meeting must be called if a notice is given to the secretary requesting an extraordinary general meeting to consider and decide motions proposed in the notice and the notice is signed by owners of at least 25% of the lots (Accommodation Module, 59);

• A motion for consideration at a general meeting may be submitted at any time by a member of the body corporate or the committee (Accommodation Module, 39(1)). The motion must generally be included on the next general meeting agenda on which it is practicable to include the motion (Accommodation Module, 39(2)). However, a motion submitted by a member of the body corporate may be included on the agenda for an annual general meeting only if the secretary receives the motion before the end of the body corporate's financial year immediately preceding the meeting (Accommodation Module, 39(3)); and

• The secretary must prepare one voting paper for all open motions to be decided at a general meeting (Accommodation Module, 40A). If two or more motions proposing alternative ways of dealing with the same issue are submitted under section 39 as motions for consideration at a general meeting then the voting paper must list the substance of each of the original motions as alternatives under a single motion submitted by the committee (Accommodation Module, 40B).

Whether motions properly submitted by the committee?

Upon owners of at least 25% of lots requesting an extraordinary general meeting it became incumbent on the secretary, or other appropriate committee member, to call an extraordinary general meeting at which owners could consider the motions put forward by the owners in question. However, there is nothing to stop additional motions from being considered at the same meeting. In fact, if another owner has already submitted a motion or submits a motion shortly after the request for the extraordinary general meeting then the legislation would require the other motions to be included on the same general meeting agenda if practicable (Accommodation Module, 39(2)).

The committee can therefore agree on its own motions to include on the agenda of a requested extraordinary general meeting. Minutes of a committee meeting on 20 June 2007 have been provided indicating that the committee was seeking quotations on revised plans. However, no minutes are provided of a meeting at which the committee actually proposed to include the specific motions on the agenda or accepted the exact wording of the motions and any explanatory material. Having said that, non-compliance with the legislation of an insubstantial nature should not be allowed to imperil the actions of bodies corporate or their committees.^[2] In particular, provided that the order is "just and equitable" there are circumstances in which an adjudicator can relieve a person from a particular requirement of the regulation module.^[3] Formalities may not have been exactly complied with but the committee members as a whole appear to support those motions having been put forward. I do not consider it just and equitable in the circumstances to invalidate the motions for this reason alone.

The wording of the disputed motions may not have been formally proposed and agreed by the committee as a whole. However, these motions were put on the agenda with the support of the committee and owners had a fair opportunity to consider the motions and adopt them by a strong majority. Resolutions 10, 13 and 15 should therefore be allowed to stand, there being no other objections to those resolutions. The further concerns with motions 8, 9 and 11 will be considered below.

Should repair of the roof have been presented as a singe resolution with alternatives?

The applicant proposed fixing the leaks by some repairs on the metal roofing and the installation of waterproofing membranes on open areas at the front of the building. The committee supports installation of a metal roof over the entire building.

The applicant has the view that his preferred option is merely "maintenance" requiring only an ordinary resolution whereas the committee's preferred option is an "improvement" requiring a special resolution.

The applicant requested that the different proposals not be listed as alternatives to a single motion because having a single motion requiring a special resolution would wrongly represent the level of authorisation required for one of the alternatives and coerce voters to accept the initial special resolution to vote for their preference. This may result owners of more than 25% opposing a particular alternative that required a special resolution but actually voting in favour of the motion because they wished to select one of the other alternatives.

I accept the applicant has a genuine concern in this respect. If there are alternatives that require different levels of authorisation then it is possible that persons can abuse the use of alternative motions to attempt to engineer a particular result.

However, there are problems with listing the motions separately too. Firstly, what if both motions were passed? It is obviously not appropriate for the body corporate to accept two different quotations to effect two different methods of waterproofing the roof. Secondly, what if neither of the motions are passed? There results a position of deadlock where nothing can be done.

In the present case, I consider the issue in question to be water pouring through the roof of the complex. The two alternatives involved one based on the installation of water proofing membranes on open areas of the building or, alternatively, one based on the installation of a roof over the open areas of the building. There should have been a single motion listing both options as alternatives.

This was not done and the motions dealing with repair of the roof were listed separately rather than as alternatives. On this basis alone, all motions about the leaking roof should be declared void (Accommodation Module, 40B(5)).

Rectifying problem with resolutions

In addition to relatively minor procedural questions, the applicant has raised a serious concern that a special resolution is required rather than just an ordinary resolution. On balance, it seems most likely that the proposed works are partly "improvements", at least in regard to the creating of additional balcony areas. On this basis a special resolution would be required.

In fact, the applicant makes the claim that these new balcony areas are not currently on the plan and are of a permanent nature so should be passed by resolution without dissent as being exclusive use areas accessible to lot 16. If the owner of lot 16 wants those areas to be formally granted to his exclusive use and recorded as such in the community management statement so that the body corporate can never choose to remove the balconies then that owner would need to gain the benefit of a resolution without dissent. However, a special resolution would be sufficient to merely create the balconies and those balconies will be able to be removed again by a subsequent special resolution if desired.

Therefore, to rectify the problems with the resolutions the body corporate should hold another extraordinary general meeting to consider, by special resolution, how it will rectify the leaking roof. One alternative should be by works including the installation of waterproofing membranes as proposed by the applicant. The other alternative should be the roofing of the building as favoured by the committee.

Special circumstances requiring order

While it would be possible for owners to simply have another meeting, there are special circumstances that indicate that I should make a final order now to resolve the real issue in dispute. The body corporate has been in breach of its requirement to maintain common property in good condition for a number of years but now has a builder ready and able to commence work.

The results of the meting on 4 September 2007 shows that the option of roofing the building is clearly the option preferred by the majority of owners. In fact, the material indicates that over two thirds of owners support the proposal to roof the building. Of course, five owners do oppose this proposal, comprising more than 25% of lots who are therefore able to block the resolution (Act, 106). However, such an action would result in deadlock with the majority blocked in its desire to have the building roofed and the minority unable to gain sufficient support to have waterproofing membranes installed on the balconies.

An adjudicator has a general power to make an order that is just and equitable in the circumstances to resolve a dispute. Specific examples of orders that can be made by an adjudicator include orders declaring a resolution valid and orders giving effect to a motion where opposition was unreasonable in the circumstances (Act, Schedule 5 – Items 9,10).

In order to break the deadlock and allow the body corporate to comply with its maintenance obligations, I am prepared to deem the works favoured by the majority of owners to have been passed by a special resolution. Given the deadlock and the need for work to be done urgently, it is unreasonable for five owners to continue to oppose the work favoured by the other owners. I have not made any qualitative determination as to whether the works preferred by the committee are preferable to the works preferred by the applicant. It is simply a matter that the applicant's views are in the minority, that an order is required to break the deadlock and repair the roof, and the proposal favoured by over two thirds of owners does not appear unreasonable.

In dismissing the application, I note the applicant expressed concern that he may be viewed as a nuisance and wished to emphasis that the application was submitted through genuine concern for the continued prosperity of the scheme and its proper function and commitment to the legislation. I confirm that the application did raise some legitimate concerns about failure to comply with legislative procedures and that the application was not dismissed on the basis that it was frivolous, vexatious, misconceived or without substance. There is no basis upon which to order costs against the applicant.

Need for supervision of building works

While the applicant has not shown that the proposal favoured by the majority of owners is unreasonable, one owner has submitted that the proposed builder was unlicenced in Queensland at the time he submitted his quotation and is related to two of the owners resulting in a conflict of interest. The legislation does not prohibit owners from voting in general meeting to appoint a related party and there is nothing in the application that satisfies me that the choice of builder is unreasonable.

However, it would perhaps reassure owners if the committee disclosed the manner in which the body corporate was proposing to supervise the building works. For a project of this size I would expect it would be appropriate for a body corporate to engage a builder or building inspector licensed by the Building Services Authority in the appropriate field to assist the committee to supervise the works. This would enable the committee to check the quality of work and ensure the work is performed according to the contract. This is different from the mandatory requirement that a local government accredited certifier checks the work complies with the approved plans or building standards. Unless some committee members have specific expertise in supervising the relevant type of building work then I would expect the committee would need to engage its own professional just to ensure the building work was being performed as required by the contract.

Order

For these reasons, I make the order above.

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^[1] Maxwell Stainlay and Tecelec (Qld) Pty Ltd v Body Corporate for No. 9 Port Douglas Road Community Title Scheme 24368, District Court (Cairns), White DCJ, 1 December 2006.
^[2] Boulton J, Wei-Xin Chen v. Body Corporate for Wishart Village CTS 19482, District Court (Brisbane) D4080/2000, 29 May 2001.
^[3] Holloway, Wilson and Watts v Meek (unreported), Appeal 22/1998, District Court (Maroochydore), Dodds DCJ, 24 December 1998 at page 10.