Hakea Apartments - Mark II [2007] QBCCMCmr 590 (11 October 2007)

Last Updated: 18 October 2007

REFERENCE: 0390-2007

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	15903
Name of Scheme:	Hakea Apartments - Mark II
Address of Scheme:	Redbank Drive Greenvale QLD 4816

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Leonard Sinclair, a co-owner of Lot 13

I hereby order that the application for an order by Leonard Sinclair, a co-owner of Lot 13 against the body corporate for Hakea Apartments - Mark II community titles scheme 15903 seeking an outcome that Andrew Jensen of Jensen’s Real Estate and Livestock be appointed as administrator, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0390-2007

"Hakea Apartments - Mark II" CTS 15903

Application
This application is by Leonard Sinclair, a co-owner of Lot 13 (applicant) against the body corporate seeking an outcome that Andrew Jensen appointed as administrator. A letter from Andrew Jensen of Jensen’s Real Estate and Livestock dated 4 July 2007 states "I would be prepared to act as an administrator if required by you for the Hakea Apartments Mark II, Body Corporate at Greenvale".

Jurisdiction
"Hakea Apartments - Mark II" is a community titles scheme under the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module).

An adjudicator may make an order that is just and equitable in the circumstances to resolve a dispute, in the context of a community titles scheme, about a claimed or anticipated contravention of the Act or the community management statement; or the exercise of rights or powers, or the performance of duties, under the Act or the community management statement (s276(1), Act).

Procedural matters
On 6 July 2007, a copy of the application was provided to Body Corporate Services (the body corporate manager) for distribution to the owner of each lot (excluding the applicant) and the committee, with an invitation to respond to the matters raised in the application. Submissions were made by Cherry Garvie of Body Corporate Services (BCS) and by a lot owner. The applicant inspected the submissions received and made a written reply.

A dispute resolution recommendation has been made under section 248 of the Act referring the dispute to departmental adjudication.

Submissions
The applicant

• $7291.16 was illegally demanded when purchasing Lot 13. Monies held in trust account at Dalrymple Shire Council to be paid when monies refunded to the owner of Lot 13.

• BCS operate a slush fund from the body corporate bank account.

• No meetings held in 11 years except when he demanded a meeting. The meeting held was illegal as it was conducted by the body corporate manager and the minutes were not signed.

• Damien Collins always outvotes members and his nomination was invalid.

• Has requested documentation for all outgoings of monies, insurances, tax file numbers and licences of all service contractors. Have been refused to be supplied.

• Illegal work is being carried out on unit 14 and on common property. Vote accepted by Damien Collins whose position is illegal as chairman, secretary and treasurer.

• BCS never had an audit of any books.

• There have not been any 3 month updates from BCS.

Cherry Garvie – BCS

• Been advised that Westward Enterprises Pty Ltd (represented by Damien Collins) have sold lots. Mr Collins was the chairperson, secretary and treasurer. Been advised that Raymond Schultz sold Lot 1. Mr Schultz was an ordinary member of the committee. In the absence of a legal committee, BCS made submission on behalf of the body corporate. It is the intention of BCS to inform all owners of the situation and of the legislative requirements to have a committee. An EGM is required to elect a committee.

• Records indicate that the $7291.16 represented monies owed to the body corporate by the previous owner of Lot 13.

• All bank accounts and financial records held by BCS are available upon request.

• Records show that the first AGM was held on 22 July 1996 and there has been an AGM held each year since.

• The Annual General Meeting set for 19 October 2006 (2006 AGM) was adjourned as a quorum was not present. Mr and Mrs Sinclair and Mr Schultz were present in person on 19 October 2006, and left with Mr Martin of BCS a record of their vote and their agreement to nominate for a committee position. These were the only votes ultimately received. A nomination form on the records and received on 18 July 2006 indicates Mr Collins being nominated for committee positions. The form did not indicate the position/s Mr Collins was nominating for. The notice of the 2006 AGM shows that Mr Collins nominated for the executive positions and was elected unopposed. A debtor financial status report produced on the 19 October 2006 shows that Lot 13 was unfinancial which should have precluded the Lot from voting and nominating for a committee position.

• The body corporate management agreement dated 1 October 2005 expires on 30 September 2008 and authorises the manager to perform all powers of the committee to the full extent permitted by the Act. It is not considered to be an appointment under Part 3 Division 10 of the regulation to the Act. Records indicate that the manager have used the powers for routine or administrative matters and has otherwise acted on the instruction from owners or committee members.

• Since the applicant has been an owner, the committee has voted on 3 occasions with Mr Schultz and Mr Collins voting for the proposed motions.

• BCS only recently received information from the contractors (a gardener and an electrician) and intends to present it at the upcoming AGM.

• BCS is not aware of the alleged building work.

• Historically, all audit motions were lost. It was resolved at the 2006 AGM to audit the statement of accounts. This will be done and the report provided at the next AGM.

• As BCS is not appointed under Division 10, it is not required to submit the three monthly reports.

Dennis and Lesley Macaulay
Their dealings with BCS for approximately 3 years have been conducted in a professional manner and at no time have they observed any wrongful dealings.

Reply to submissions

• Dalrymple Shire Council still has not received notification from BCS of outstanding monies, there are monies in the Council trust account to pay any outstanding debt but BCS have chosen not to collect.

• Provided documentation showing that: by letter dated 9 October 2006 addressed to BCS PO Box 1334 Townsville, Savage and Stout solicitors stated that they "act for L&V Savage and enclose levy notice together with our client’s cheque in the amount of $7,291.16; and that BCS receipted this amount on 11 October 2006 (Receipt No. 10724).

• BCS have refused to supply all documentation from previous caretakers, contractors and subcontractors.

• BCS were paying a person who did not supply an ABN Licence number or insurance.

• Mr Martin of BCS did say to him at the 2006 AGM that the meeting was the first.

• There was no adjourned meeting. He hasn’t seen the nomination form for Damien Collins.

• Questions the voting by the committee in December 2006 and May 2007.

• BCS should come to Greenvale. No-one is to carry out building or electrical work without correct licences or insurances. There are illegal cables across the floor between units 13 and 14. Work on the exterior of units requires the approval of the committee and must go through the local council and private certifier. An illegal shed has been built on the common property. Clothes lines have been taken over and a dog run built. Wire has been cut from unit 13’s Austar television dish and being used on unit 14.

• BCS are subject to a code of conduct. The agreement states that the manager shall charge $55 for the preparation of each quarterly report referred to in clause 11A and B above.

• New owners are forcing BCS to hold meeting within 15km of Greenvale.

• The applicant is the only committee member and BCS have not discussed the calling of the 23 August 2007 meeting.

• The management of the body corporate belongs to the owners, not BCS.

Further Information
In accordance with my investigative powers stated in section 271 of the Act, on 8 October 2006 I requested the body corporate manager provide information about the Extraordinary General Meeting dated 23 August 2007 (EGM) and about the 2007 annual general meeting.

On the same date, Cherry Garvie provided a copy of:

• The minutes of the EGM indicating that 4 additional persons were chosen as voting members of the committee, including to the positions of chairperson, secretary and treasurer.

• A notice dated 30 August 2007 of the Annual General Meeting proposed to be held at the office of BCS, South Townsville on 25 October 2007 (2007 AGM). The agenda provides for consideration of 28 motions and the election of the committee.

Determination
Preliminary matters
Although the Commissioner did not invite a submission from BCS, I have accepted the submission made by Cherry Garvie given that most of the applicant’s claims are against the body corporate and there was only 1 member of the committee at the relevant time (the applicant).

The applicant has detailed a number of reasons to support the outcome sought. I have mentioned those reasons I consider relevant to this determination in the above summary of submissions and have explored them in some detail below.

Body corporate
The body corporate consists of the owner of each lot and its basic purpose is to manage the common property and body corporate assets for the benefit of lot owners, enforcing the community management statement (including any by-laws), and carrying out other functions given to the body corporate under the Act or the community management statement (s94(1), Act).

The annual general meeting
The body corporate must hold an annual general meeting each year within three months after the end of its financial year (s60, Standard Module). The purpose of the annual general meeting is to provide lot owners with the opportunity to: review the past financial year’s income and expenditure; to consider future spending needs through consideration of an administration fund budget and a sinking fund budget; to fix contributions to be paid by lot owners for body corporate expenditure; to determine whether the next financial year’s accounts should be audited; to elect a committee; to review insurance; and to consider any other motions on the meeting’s agenda. The notice of the meeting must include documents such as a statement of income and expenditure, an audit statement (if necessary) and proposed budgets.

The applicant has not provided any evidence to support his contention about the absence of general meetings prior to the 2006 AGM. On the contrary, the minutes of the 2006 AGM refer to an annual general meeting held on 6 October 2005 and Cherry Garvie’s submissions about yearly meetings has not been disputed in the applicant’s reply to submissions. The 2005 and 2006 AGMs were held within 3 months of the end of the respective financial years (31 July). The 2007 AGM is proposed to be held before 31 October 2007.

It is demonstrated that legislative processes for the 2007 AGM have been initiated as nominations and motions have been sought from owners in the way prescribed by sections 13 and 41 of the Standard Module. The copy of the notice of the 2007 AGM provided by Cherry Garvie indicates that the agenda includes the statutory motions and many management issues in Motions 13 to 28. The notice also includes financial statements and an audit report, and makes provision for committee elections.

The applicant has questioned the place where general meetings have been held. Section 44 of the Standard Module basically provides that a general meeting cannot be held more than 15km from the scheme if at least 25% of owners object to the proposed place of the meeting. The applicant states that the meetings have been held in the offices of BCS in Townsville. It is evident that the 2007 AGM is proposed to be held in Townsville which is more than 25km from Greenvale. Clearly, if owners object then the meeting cannot be held in Townsville. However, the applicant has not shown for example, that sufficient owners have repeatedly objected to the proposed place of a general meeting or that owners have not been able to participate in a meeting because of it being held in Townsville.

The committee
The body corporate chooses a committee comprised of a chairperson, secretary and treasurer and ordinary committee members (if any). The body corporate for this scheme must choose at least 3 but not more than 7 persons to the committee. The committee is chosen at each annual general meeting and generally is responsible for the day-to-day management of the body corporate.

The legislation provides the committee with the power to make body corporate decisions (s100, Act). It also restricts the matters the committee can make decisions on, for example its expenditure limit for a particular item is $125 multiplied by the 16 lots in the scheme; it cannot fix a contribution to be paid by lot owners; and it cannot make a decision on an issue which may only be determined by the owners in general meeting (ss26 and 103, Standard Module).

It is apparent that the body corporate elected a committee at the 2006 AGM. The applicant questions a previous nomination of Damien Collins to the committee. The applicant did not however specifically dispute the election of this person within a reasonable time of the election. It is now clear that Mr Collins is no longer a member of the committee. The body corporate has convened a general meeting to deal with the appointment of committee members until the next annual general meeting. While a general meeting may only be called internally with committee authorisation or if sufficient owner’s request the meeting (ss40 and 61, Standard Module), it is noted that the EGM held in August was largely limited to filling vacancies on the committee.

Body corporate management
Where there is a committee, a body corporate may only engage a person as a body corporate manager to exercise some or all of the powers of an executive member of the committee (chairperson, secretary, treasurer) (s119, Act). In this situation, the manager primarily performs an administrative function and is generally subject to direction from the body corporate or its committee. The body corporate may not choose a committee but instead may engage a manager to exercise the powers of the committee and the executive members (s120, Act). This more extensive engagement is made in accordance with the provisions of Division 10 of Part 3 of the Standard Module. A Division 10 engagement has not been made in this case. The BCS authorisation is limited to the powers stated in section 119 of the Act.

The copy of the written agreement between the body corporate and BCS provided by the applicant indicates that the engagement does not end until 30 September 2008. The applicant refers to a quarterly report. While it is not a function of a department adjudicator to examine the contents of a contract (this is a matter for specialist adjudication or the Consumer and Commercial Tribunal should a proper application be made about the contract), it would seem that Clauses 11 and 12(e) of the agreement refer to a s120 engagement (which is not in force for this scheme at this time).

As a lot owner, the applicant cannot make an application under the dispute resolution provisions of the Act against the body corporate manager. Only the body corporate can do so and if the dispute relates to a contractual matter it can only be determined by specialist adjudication or the Consumer and Commercial Tribunal.

Other issues
Financial status of the owner of Lot 13
The applicant has provided material suggesting that the body corporate debt mentioned was paid prior to the 2006 AGM. While there may be contention about the financial status of Lot 13 at the time of the meeting, it is apparent from the minutes of the adjourned 2006 AGM that the owner of the Lot participated at the meeting.

A body corporate is entitled to require payment of a body corporate contribution from the current owner of a lot. If there are any outstanding issues in relation to the debt amount stated in the application, the applicant should provide the necessary documentation to the body corporate committee for its consideration.

Financial management
The applicant refers to BCS operating a slush fund. The applicant does not substantiate this claim.

A body corporate must establish and maintain an administrative fund (to meet its short term recurrent liabilities) and a sinking fund (catering for its long term capital expenditure needs) (s100, Standard Module). If by slush fund, the applicant is referring to the sinking fund, the applicant needs to be aware that, for each financial year, the body corporate must adopt a sinking fund budget covering a period of at least 10 years (s94, Standard Module). The body corporate then fixes contributions to be paid by the lot owners to meet the adopted budgets (s95, Standard Module).

These financial management arrangements must be considered at each annual general meeting by owners. I note that the agenda for the 2007 AGM includes motions dealing with these issues.

Access to body corporate records
Section 205 of the Act provides for the giving of information by the body corporate from its records and makes provision for persons such as lot owners being able to inspect body corporate records or being given a copy of a record kept by the body corporate (after payment of a prescribed fee). Section 150(1) of the Standard Module provides The body corporate must allow all members of its committee reasonable access (without payment of a fee) to the body corporate’s records. Ms Garvie has stated that the documentation held on the records by BCS is available. As a committee member, the applicant is entitled to free access to the records and depending on the circumstances, reasonable access may include sending a copy of requested records to the applicant.

Contractors
I note that Motion 26 on the agenda of the 2007 AGM proposes discussing contractors. A motion for consideration in general meeting ideally should be drafted in a way capable of being voted on by a person entitled to vote whether that person attends the meeting or submits a voting paper. The problem with Motion 26 is that it proposes a discussion of past problems relating to contractors. While it may be beneficial to discuss this matter at a general meeting, it will be difficult to arrive at a decision on the Motion unless for instance, the motion is capable of being amended at the meeting in the way prescribed in section 57 of the Standard Module. The applicant has in this application stated his concerns about the engagement of contractors. If nothing transpires at the 2007 AGM with respect to this issue, the applicant should refer his concerns to the elected committee for its consideration.

The applicant has not shown that BCS has to obtain information of the nature stated by the applicant about contractors. Unless there has been authorisation from the body corporate, BCS should not be appointing any contractors. This should be done by the body corporate or its committee and processes should be put in place dealing with this issue.

Work carried out on scheme land
The applicant has referred to some instances of unauthorised work being carried out on the scheme. It would seem that some of these issues have been raised for consideration at the 2007 AGM. Preferably, these are matters for determination by the body corporate. The committee should be monitoring and managing the work being carried out by owners and occupiers. The applicant has not demonstrated that BCS has any obligation to do this work for the body corporate.

Order
The applicant seeks an outcome that Andrew Jensen of Jensen’s Real Estate and Livestock be appointed as administrator. In the absence of a statement as to the specific purpose of the appointment (for example, to convene a particular meeting), it would seem that the applicant proposes the appointment for a particular period of time such as for instance, a period of one year. Further, given that it does not seem that the applicant objects to a committee being chosen and having some input into the management of the body corporate, it would appear the nominated administrator would have limited (unspecified) powers.

The appointment of an administrator to perform the obligations (some or all) of the body corporate or its committee can be a significant imposition on a body corporate, particularly when the body corporate is a party to an existing body corporate management agreement. An application proposing such an appointment may be successful where for example, it is clear and indisputable that the affairs of the body corporate have deteriorated to the extent that it is highly likely that there will continual fundamental breaches of the legislation to the detriment of the lot owners, or that circumstances indicate that there has been repeated and unjustifiable disregard for the legislation. These circumstances are not apparent in this scheme at this time.

The applicant has not demonstrated that the appointment will remedy some substantial and significant management problem. In fact, it would seem that the procedures adopted relating to meetings and the committee comply to a large extent with the legislation. Most of the other issues raised by the applicant can be rectified if the owners (either through the committee or in general meeting) make appropriate decisions. The applicant has not shown that he has sought to present all of his concerns to the body corporate. To a large extent, these are not matters for the body corporate manager. Nor is it clear that would they be for the administrator.

In the circumstances, I am not satisfied from the material presented that an order of the nature being sought is warranted. The application is dismissed.