Surfers Palms North [2007] QBCCMCmr 65 (8 February 2007)

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Graeme Beattie, the owner of Lot 49

I hereby order that the application for an order by Graeme Beattie, the owner of Lot 49 seeking an outcome that Logan Irwin of Independent Strata Consultants be appointed administrator to call, hold and chair an annual general meeting of Surfers Palms North, is dismissed.

I further order that within seven days of the date of this order, the body corporate must provide a copy of this order (including the 7 pages of Statement of Adjudicator’s Reasons for Decision) to the owner of each lot included in the scheme as stated on the body corporate roll.

I further order that despite the notification from CTS Management Pty Ltd on behalf of the committee to owners dated 17 January 2007 that owners may make a committee nomination and submit a motion for inclusion on the agenda of the annual general meeting by 7 February 2007, a lot owner is authorised to make a committee nomination and submit a motion for inclusion on the agenda of the annual general meeting provided the nomination and/or motion is given to the secretary by 23 February 2007.

I further order that the election of an individual as a committee member at the annual general meeting to be called and held on or before 30 April 2007 will not be invalid simply because the individual’s nomination was received after 31 January 2007.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0959-2006

"Surfers Palms North" CTS 20846

APPLICATION
This application is by Graeme Beattie, the owner of Lot 49 (applicant) against the body corporate seeking an outcome that Logan Irwin of Independent Strata Consultants be appointed administrator to call, hold and chair an annual general meeting of the Surfers Palms North body corporate.

JURISDICTION
"Surfers Palms North" Community Titles Scheme 20846 is a scheme under the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation 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^[1]. An order may require a person to act, or prohibit a person from acting, in a way stated in the order^[2]. An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate^[3]. If an order is made appointing an administrator, the administrator has the powers given to the administrator under the order^[4]. If an adjudicator appoints an administrator to perform obligations of the body corporate, the committee or a member of the committee, anything done by the administrator under the authority given under the order is taken to be done by the body corporate, committee or committee member^[5].

SUBMISSIONS
In accordance with the Act, submissions were called and a copy of the application was provided to the then body corporate manager (Challenge Strata Management) for distribution to the owner of each lot (excluding the applicant) and the committee. By letter dated 27 November 2006, Challenge Strata Management informed the Commissioner that a copy of the application was distributed as required. Submissions were made by the committee and 6 lot owners. These owners indicated support for the application. The application also contains a statement prepared by Mr Colin Lamont which seems to have been made at the invitation of six members of the committee. The invitation was made on the basis that Mr Lamont has been a consultant appointed by the committee and a witness to many claimed relevant events.

The applicant’s main submissions concern the body corporate’s non-compliance with the order made on a previous dispute resolution application, Ref.No.0767-2006 which required that a requested extraordinary general meeting be reconvened no later than 27 November 2006. The applicant contends that the committee are delaying issues or any committee changes until the next annual general meeting, a meeting which the applicant considers the committee will also cancel. Given the outcome sought, the applicant proposes the appointment of an administrator limited to calling, holding and chairing an annual general meeting.

In its submission, the committee sought to have the determination of the application delayed until such time as committee suspicions concerning the authenticity of a letter alleged to be written by the deceased past chairperson and such time as allegations of misappropriated body corporate funds have been investigated by an auditor and the police.
The committee submit that it was elected to deal with the issue of misappropriation and that this has been difficult given that non-resident owners have believed the letting agent, the person who could be at the centre of the problem. The committee claims that it would be improper if the outcome of this dispute led to a situation where the investigation was interfered with and the audit was stopped. It says that owners should not be asked to vote on which version of events is true or which faction ought to be believed until a police or audit report is available. Further, it is stated that if owners vote before all the information they need to make an informed judgement is available, it is possible that the wrong people may be believed which would be irresponsible as a compliant administrator may interfere with the audit and/or a new committee may cancel the audit which would displease the police. The committee also poses the question as to how can owners vote while it is unknown whether there is any substance to the allegations. The committee claim that the police required it "to complete an audit as a matter of urgency" as they "will not conclude their investigations until an audit is completed and they have something more to go on than a letter which cannot be authenticated". The committee submits that if the audit finds no malfeasance, the worst thing that will have happened is that a general meeting will have been delayed. However, if the allegations are proven, owners will know who they can trust as their committee.

With respect to the order made on Application 0767-2006, the committee submit that in normal circumstances, it would have complied with its requirements, however the circumstances have changed and "the stakes have escalated to the potential of criminal charges being laid. If Mr Beattie wishes to pursue that order he can do so by the only means available in law to enforce an order. He can expect determined resistance if he attempts to do so".

A copy of a letter from Judy Gibson (the auditor appointed by the committee) addressed to the chairperson dated 29 November 2006 has been submitted by the committee. In this letter, Ms Gibson states that the objectives, scope and planning of the proposed audit has not been finalised, and that she understands that an ‘accounting’ audit was approved by the committee for the period up to and including 31 January 2006 and that an audit of the financial statements for the financial year ended 31 January 2007 was also approved. Ms Gibson states that the first audit will take at least two months. In an email from Ms Gibson to Mr Lamont dated 4 December 2006, Ms Gibson states that the audit will take at least two months after the end of the financial year (31 January 2007) and that if there are any further problems in obtaining documentation, it will take longer and will cost more.

In the written reply to submissions the applicant states the committee’s excuses for not complying with the adjudicator’s order are weak and serve little purpose. With respect to any findings made by an auditor, the applicant states that it has not been said that the audit findings will be relevant to the determination of the application. The applicant considers that the committee has not claimed that the body corporate will be prejudiced by the appointment of an administrator. The applicant says that the committee want to stay in control of the body corporate to meet their own objectives without regard to the interests of lot owners and to the prejudice of the body corporate’s interests. In an earlier response to the committee’s request to extend the time for making submissions, the applicant states that the letter from Judy Gibson does not disclose the purpose of the audit which seems to be a general audit. The applicant also states that if there is to be an audit, appropriate motions should be included on the agenda of the next annual general meeting. The applicant says that given the expected time to be taken to perform each audit, the committee is asking for a determination of the application to be delayed by at least 4 months. The applicant states that an audit will not ensure that the adjudicator’s order is carried out, that the existing committee will act in a balanced way, or restore order to the scheme.

The application also includes uninvited correspondence from Ian Lochlin (the chairperson), Natasha Suskova (committee member), Colin Lamont (appointed by the committee as a consultant), and Coralie Mott (CTS Management Pty Ltd). I did not to distribute this material to the applicant for a response as I do not consider the material to be relevant to the determination of the dispute.

However, given the claims being made by the committee, it is relevant to note the document from the Queensland Police Service and authorised by Act Detective Senior Sergeant J Percival Burleigh Heads Police Station and dated 12 January 2007 regarding "Investigation to be initiated as a result of Independent audit of Body Corporate dealings of Surfers North body Corporate"; and stating "regarding official results of an audit conducted in relation to the dealings and payments by the Body Corporate administration...Police are interested in findings of this audit for possible initiation of a criminal investigation".

FURTHER INFORMATION
In accordance with my investigative powers stated in section 271 of the Act, by letter dated 10 January 2007 to the body corporate secretary Mr Allen, I:

I requested that this information be provided to me by 19 January 2007. Given that this information was not provided by the requested date, a member of the commissioner’s office contacted the chairperson (Dr Lochlin) on 23 January 2007 and was informed that my letter dated 10 January 2007 had not been received. I therefore extended the time for making submissions and forwarding the additional requested information to 2 February 2007.

By facsimile dated 5 February 2007, the chairperson provided:

It is clear that this documentation does not respond to the request I made.

DETERMINATION

Previous dispute resolution applications
This application is subsequent to the order made on a previous dispute resolution application^[6] and the body corporate’s non-compliance with this order is a primary ground in support of the outcomes being sought. Application 0767-2006 was made by Dudley Allen, the owner of Lot 11 on 20 September 2006 seeking an outcome that the Extraordinary General Meeting held on 13 September 2006 be declared null and void. Briefly, the background to this application is that owners had requested an extraordinary general meeting to consider a number of motions, including motions about the composition of the committee. The meeting was scheduled to be held on 13 September 2006. The notice of the meeting included various explanatory material about the motions, including a letter from Mr Beattie dated 14 August 2006 containing statements similar to those now being relied upon by Mr Beattie. Even though it would seem that this meeting was belatedly cancelled by 5 of the 7 committee members, the meeting was purported to be held. On 12 October 2006, Adjudicator MA Ricardo ordered (in part) that the purported meeting was invalid and that "the extraordinary general meeting...be reconvened by no later than 27 November 2006".

Dr Lochlin of the committee made a subsequent dispute resolution application^[7] on behalf of the committee seeking relief from the above order. On 9 January 2007, Adjudicator R Miskinis made an order dismissing the application.

Despite these decisions, the committee’s submissions indicate that it is adamant that it will not comply with Adjudicator MA Ricardo’s order, at least until the findings of the auditor appointed by it are known (it would seem that action has not been taken to enforce this order under part 10 of chapter 6 of the Act).

The audit
The committee has appointed an auditor to conduct an audit it would seem, for the period up to and including 31 January 2006 and for the financial year ended 31 January 2007. The committee has not provided any material evidencing that the body corporate had previously decided in general meeting to have this audit conducted.

Sections 105 and 106 of the Accommodation Module make provision for auditing of statements of accounts by an auditor. Section 105(1), (2), (3) and (8) make provision for consideration of the statutory audit motions at each annual general meeting. The purpose of the initial statutory motion is that the body corporate gives consideration as to whether its statement of accounts for the financial year is to be audited. If the body corporate decides that the accounts are to be audited, the body corporate must also consider a motion to appoint an auditor with the qualifications and experience stated in section 106. "Even if the body corporate resolves not to have its statement of accounts for a particular financial year audited, the body corporate may, by ordinary resolution, resolve to have its accounting records for a particular period, or for a particular project, audited and appoint an auditor for the purpose"^[8].

Despite these provisions, the committee appointed an auditor to conduct an audit. A decision of the committee is a decision of the body corporate subject to the decision being on a restricted issue for the committee^[9]. The committee is restricted from making a decision on an issue that may only be made by ordinary resolution of the body corporate^[10]. It is clear therefore that committee did not have authority under the legislation to decide to have its accounting records for a particular period audited.

The committee has claimed that the appointment was made at the urging of the police. However, this claim is unsubstantiated and cannot be relied upon as a basis for non-compliance with the legislation. I do not agree that the document provided from the Queensland Police Service dated 12 January 2007 supports the committee’s claim. Even if such a direction was demonstrated, the question should have properly been submitted to owners for determination in general meeting or if necessary, subsequently for determination under the dispute resolution provisions of the Act.

The committee may also consider that there are reasonable grounds to support incurring body corporate expenditure to engage an auditor to audit its accounting records (it should be noted that the accuracy of the committee’s claims is not a matter that is being examined in the resolution of this dispute). However, it was necessary that the committee submit the proposal to owners in general meeting. I do not agree that the committee can withhold submitting the proposal to owners for the reason that owners may vote against it in general meeting because the owners (in the opinion of committee members) may not accept the committee’s views. Furthermore, it is apparent that body corporate monies are being incurred for the audit. It is uncertain whether the body corporate has made an appropriate allowance in its budget for this expenditure. Therefore, it should be noted that in the absence of proper provision in a budget, the liability for the auditor’s costs should be met by a special contribution fixed by ordinary resolution in general meeting^[11].

I do not consider that it is appropriate that I make any orders with respect to the decisions made by the committee about the having an audit conducted and appointing an auditor. The body corporate in general meeting can make resolutions about such matters and in my view such a meeting is the appropriate forum for determining the issues related to the committee decisions (which may include ratifying or not ratifying what has been decided by the committee).

The relationship between the body corporate and its committee
A body corporate is comprised by the lot owners^[12] and it has numerous obligations under the Act to administer and otherwise deal with the common property and body corporate assets. For example, a body corporate’s general functions and duties include administering the common property and body corporate assets for the benefit of lot owners^[13]. Consistent with its self management objectives, the Act creates a relationship between the body corporate and its committee. The Act (and in this case, the Accommodation Module) confers powers on the committee to do things required to be done by the body corporate and also limits the things which the committee can do^[14]. It is clear from the legislative framework that the committee is subordinate to and subject to the direction of the body corporate. For instance, the body corporate members or lot owners choose the members of the committee at each annual general meeting of the body corporate and may, between annual general meetings decide to alter the composition of the committee^[15]. Furthermore, the body corporate may, in general meeting, specify matters on which the committee is restricted from making decisions and the committee is compelled to put into effect the lawful decisions of the body corporate^[16].

The committee cannot choose to act contrary to directions of the body corporate or as is evident in this instance, its members use their elected positions to prevent the body corporate being able to consider management issues, including the composition of the committee. The committee’s reluctance to convene a general meeting is based on claims that owners should have conclusive material before them before making decisions and without this material, the outcomes of the meeting may have a detrimental affect on investigations. The committee submits that if the audit finds no malfeasance, the worst thing that will have happened is that a general meeting will have been delayed. However, if the allegations are proven, owners will know who they can trust as their committee. The committee does not have this discretion and if it is claiming to be acting in accordance with the legislation, it should ensure that it is being seen to be doing so.

In my view, the committee has erred in failing to comply with the order made on Application 0767-2006 and in authorising an audit contrary to the Accommodation Module. I am also concerned that the committee has seemed to have chosen to ignore my request for information.

Outcome sought
The applicant seeks the appointment of an administrator to call, hold and chair an annual general meeting. The applicant relies primarily on the fact that the committee has not called and held the extraordinary general meeting ordered in Application 0767-2006. The applicant has also provided other grounds relating to the performance of the committee. The appointment of an administrator is a significant matter and the onus lies with the applicant to clearly demonstrate that the administration of the body corporate has broken down irretrievably and/or is in such disarray as to warrant the appointment. The applicant has simply listed a number of claimed deficiencies with the committee’s practices. In my view, these unsubstantiated statements do not constitute grounds to warrant the order. These concerns were given to lot owners in the notice of the extraordinary general meeting that was set to be held on 13 September 2006, and were also distributed by the previous body corporate manager at the direction of the commissioner.
However, owners generally have not responded to the claims by making submissions to the application which may suggest that owners generally do not share the same concerns as the applicant. The applicant also expresses a concern that the committee will not convene the annual general meeting which must be held by 30 April 2007^[17]. However, other than the committee’s misguided reluctance to comply with an adjudicator’s order, the applicant has not provided any grounds to support this contention.

As I have stated above, I consider that the committee has inappropriately dealt with certain issues. While these actions may have resulted in an order being made in the terms sought, I have dismissed the application principally because the body corporate’s annual general meeting is now due and it has become evident from information provided by the applicant that the committee has initiated processes towards the convening of this meeting. In this circumstance, there would be more inconvenience to the body corporate to now appoint an administrator limited in powers to convening the annual general meeting than allowing the committee to convene the meeting. In reaching this conclusion, I have considered that the limited time which would be available to an external administrator to familiarise him/herself with the body corporate administration, organise the preparation of the necessary documentation and provide owners with proper notice of the annual general meeting could be challenging when it is essential that the annual general meeting be held by the end of April 2007.

A fundamental element of the annual general meeting process is the nomination procedures stated in sections 14 and 14A of the Accommodation Module. I had sought information from the committee about evidencing that the secretary had complied with sections 14 and 39(5) of the Accommodation Module to discover if the body corporate had sought nominations and motions from owners. Despite being given to 2 February 2007 to provide this information, it was not forthcoming. Instead, uninvited extraneous material was provided from a variety of sources.

Relevantly, the applicant has provided documentation dated 17 January 2007 (within the time frame of my request for information from the committee) evidencing that CTS Management Pty Ltd has invited owners to make nominations for election to the committee and to submit motions for inclusion on the agenda of the annual general meeting. This documentation included committee resolutions to extend the deadline for nominations and motions and to appoint CTS Management Pty Ltd to provide consultancy body corporate management services. While the reason for the committee not to inform me about this action is uncertain, it does indicate that the committee has initiated processes towards convening the annual general meeting. In my view, this is significant in the determination of this application. However, it should be noted that given the definition of body corporate manager^[18] and the requirements of section 87 of the Accommodation Module, it is arguable whether the committee could in fact make the decision to appoint CTS Management. As I stated with respect to the committee’s audit decision, this appointment should also be a matter for consideration by the body corporate in general meeting.

However, despite these concerns, I do not consider it appropriate that this process be interfered with which could if anything cause more confusion to owners. It indicates that the committee is progressing towards convening the annual general meeting by 30 April 2007 which dispels the applicant’s concern that the committee will cancel the annual general meeting.

The committee has disputed that it is dysfunctional. The committee may consider that it is acting in the best interests of lot owners, but this is not supported by its reluctance to put matters before owners or by some decisions it has made. The committee now has the opportunity to demonstrate its willingness to ensure that the body corporate is properly administered by convening the annual general meeting in accordance with the legislation.

If this meeting is not held, is delayed unnecessarily or is held contrary to the legislative requirements, then I would suggest that there will be good reason to make an order of the nature that the applicant has sought on this occasion. In making this statement, I do not believe that claims about alleged misappropriation of monies or about the progress of the present audit are of any consequence in a decision about ensuring that the body corporate holds its annual general meeting.

In my view, there is a distinct possibility that uncertainty may exist within the body corporate about the notice given by CTS Management Pty Ltd inviting nominations and motions when this application had not been determined. The 7^th February 2007 was given as the time for providing nominations and motions to CTS Management. Nominations and motions must be given by the end of the financial year^[19]. The committee cannot decide to extend or change the legislated period. However, I am satisfied that the information provided to owners otherwise complies with the Accommodation Module. For the purposes of ensuring that the committee’s decision to allow nominations and motions to be received after the end of the financial year is not a reason to dispute the annual general meeting or the election process, I have ordered that the election of an individual as a committee member at the annual general meeting will not be invalid simply because the individual’s nomination was received after the end of financial year of the body corporate.

Further, as this order is made after the date decided by the committee for the receipt of nominations and motions, I consider it appropriate that owners be given an extended time to submit nominations and/or motions as it is possible that there may be confusion among lot owners given the existence of this application. All owners should be afforded the right to be able to nominate an individual for election or to submit a motion to be included in the agenda of the annual general meeting and this order will ensure that this right is upheld. I do not consider that this extension will unnecessarily interfere with the convening of the annual general meeting.

I also consider it appropriate and necessary that all owners be given a copy of this order.

Given the orders made, I do not consider it necessary that I comment on the submissions made about the applicant’s nominees for appointment as administrator, Logan Irwin of Independent Strata Consultants and Michael Teys of Teys Strata Management.

^[1] Section 276(1), Act.
^[2] Section 276(2), Act.
^[3] Section 284(1), Act.
^[4] Section 301(2), Act.
^[5] Section 278, Act.
^[6] Application 0767-2006, Surfers Palms North.
^[7] Application 0888-2006, Surfers Palms North.
^[8] Section 105(4), Accommodation Module.
^[9] Section 100(1) and (2), Act.
^[10] Section 24(1)(d), Accommodation Module.
^[11] Section 93(2), Accommodation Module.
^[12] Section 31, Act
^[13] Sections 94 and 152, Act.
^[14] For example, see sections 24 and 101, Accommodation Module.
^[15] Section 12(1) and section 23(2)(f), Accommodation Module.
^[16] Section 101(2), Act and section 24, Accommodation Module.
^[17] Section 58, Accommodation Module.
^[18] Section 14, Act.
^[19] Sections 14(4) and 39(3), Accommodation Module.

Number of Scheme:	20846
Name of Scheme:	Surfers Palms North
Address of Scheme:	2 St Kevins Court BENOWA QLD 4217

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Surfers Palms North [2007] QBCCMCmr 65 (8 February 2007)