Admiralty Towers II [2008] QBCCMCmr 233 (2 July 2008)

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

I hereby order as follows –

that if either of the two alternative motions of Motion 1 are carried at the extraordinary general meeting of today’s date, that the body corporate does not carry out such resolution, and it is not acted upon, until the determination of this dispute;
that if an amendment is made to Motion 1 at the extraordinary general meeting of today’s date, and the amendment is carried, that the body corporate shall not act on any resolution relating to or affecting the engagement of Roma Properties Pty Ltd until the determination of this dispute;

I further order that pending final order, or further interim order, unless this dispute resolution application is finally determined or discontinued at an earlier time, the body corporate may not sign, execute or otherwise enter into caretaking or letting agreements with any other entity, and that Roma Properties Pty Ltd shall remain engaged on the conditions at present current as the de facto caretaking service contractor for the scheme;

I further order that this interim order expires when a further interim order is issued, or when the application is finally determined or discontinued, or upon the expiry of 12 months from the date of this order, whichever is the earliest.

This is an application dated 30th June 2008 by Andrew Mason (the Applicant) co-owner of Lot 11 in the scheme, against the body corporate for the scheme (the body corporate) for an order that the motion put to an extraordinary general meeting to be held on 2nd July 2008 is declared invalid on the basis that it is contrary and unreasonable to all owners and not in their best interests pursuant to section 94 of the Body Corporate and Community Management Act 1997; and/or that the motion of the extraordinary general meeting be declared invalid on the basis that it is contrary to section 104 of the Standard Module Regulations (sic) in relation to quotes for major spending.

“Admiralty Towers II” Community Title Scheme 15344 is a community title 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 193 lots in the scheme created under a Building Unit Plan of 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 authorization 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)).

Section 247(3) of the Act allows the Commissioner to refer an application to an adjudicator for consideration for an interim order even though proper notice of the application has not been given to the body corporate or other affected persons, and despite the fact that parties to the application have not been given an opportunity to make a submission about the matters in dispute.

It seems to me that the Act allows this process because applications for interim orders often relate to emergency or otherwise urgent circumstances, where it is simply impractical or impossible to allow a period for submissions prior to the consideration of the application for interim orders. It is also relevant that generally the purpose of an interim order is to simply maintain the “status quo” of
a situation, and not finally to resolve the matters in dispute.

Section 279(1) of the Act allows an adjudicator to issue an interim order in response to an application “if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates”. Read together with section 247(3), section 279(1) appears to allow an adjudicator to issue an interim order without any
reference to other parties to the dispute.

Notwithstanding that the Act allows for interim orders to be issued without reference to other parties, I am of the view that when possible, it is far preferable and more consistent with the principles of natural justice, to allow affected persons to make a submission about an application (even if the time allowed for submissions is necessarily extremely brief) prior to the determination of an application for an interim order.

I therefore sought submissions from the de facto caretaking service contactor, Roma Properties Pty Ltd, and the committee for the scheme.

The Applicant’s submission, prepared for him by his solicitors, Herdlaw, is that the sole motion put to an extraordinary general meeting on 2nd July 2008 is defective and should be invalidated because owners should have access to existing ‘general advice’ from solicitors Herdlaw prior to voting, and this advice was not circulated with the notice for meeting. Instead, ‘less satisfactory’ and ‘inaccurate advice’ from solicitors Teys Legal, was circulated with the notice for meeting. He says that it is not reasonable to ask owners to vote on “such a critical issue based only on the limited perspective offered by Teys.”

Further, since the sole motion concerns the engagement of a caretaker/letting agent, the committee who proposed the motion should have put forward two quotations since the engagement of a caretaker is something that will incur “major spending” for which the committee must provide at least two quotations in accordance with section 104(5) Standard Module.

Motion 1 is headed “Engagement of Service Contractor/Letting Agent” and it is submitted by the committee, that the body corporate enter into a deed of engagement with Roma Properties Pty Ltd (Roma) in accordance with a draft contract circulated with the meeting notice. The draft shows a three year contract with two further options for renewal each of three years, commencing 26th March 2008.

There are two alternative parts of the motion, one submitted by Roma, also for a term of three years with two options to renew, each of three years, also commencing 26th March 2008; and one submitted by the Applicant. The Applicant ‘s motion is that the term of the engagement with Roma is only for one year from 26th March 2008 with no options to renew, and that the body corporate immediately calls for expressions of interest for the provision of caretaking services after 26th March 2009.

Explanatory notes as submitted by Roma and the Applicant were sent to all lot owners with the notice of the meeting, as well as directions on how to complete a secret voting paper and how to vote for the motion, with one of the alternatives. In his explanatory notes, the Applicant says that it is not in owner’s best interests to lock the body corporate into a nine year contract without looking at other tenders and properly investigating the alternatives. In its explanatory notes, Roma says that one year contracts are unworkable and provide no stability for the body corporate, and that since the tenderer must live on site, tendering for management rights “does not work.”

The Applicant’s solicitors say that the previous caretaking/letting agreement commenced in March 2005 but the caretakers did not exercise the first of the options to renew in 2008. The agreement has since been assigned to Roma, but has now expired. Roma continues to act in the role of de facto manager, which is not a satisfactory situation since the monthly payments to Roma are not authorised by the body corporate, and are beyond the relevant spending limit of the committee.
The Applicant points out that Roma’s annual fee is substantial, and that the body corporate will not have the discretion within the wording of the draft contract, to refuse the exercise of the first option if Roma wishes to exercise it, whereas, the Applicant’s motion would allow prudence in assessing the market. He says that lot owners reading the material sent out with the notice of meeting would assume that Teys Legal is an independent firm of solicitors, but Teys Legal has a ‘real possibility’ of ‘conflict between self-interest and duty’ in this matter. The advice is also contrary to a recent matter before this Office, Cathedral Place [2006] QBCCMCr 359 in which an adjudicator said that it was prudent to provide several tenders for caretaking services. The Applicant says that Teys Legal information is “put in a shadowy and deceptive form”, and that their arguments are “fanciful”, “unsound” and “flawed.”

Further, the Teys group has strata title management interests, as well as being lawyers, and the committee had said at a committee meeting on 12th May 2008 that it would send out with the notice of meeting, both the ‘general advice’ received from Herdlaw and the view of Teys Legal on the failure of the caretakers to exercise the option. However, the Herdlaw advice was not sent.

Teys Legal’s opinion which was sent to all lot owners with the notice of meeting, sets out the background to Motion 1 and explains that “a lot owner has proposed an alternative motion...” The opinion then explores the alternative motion and the consequences to the body corporate, including advising the body corporate that it might have to pay compensation if it requires Roma to relinquish space currently used by Roma in the exercise of its de facto arrangement with the body corporate, and encouraging owners to vote for option A, Roma’s alternative.

The Applicant encloses a copy of a letter from owners Ian and Carol Clark to the committee which states that Mr and Mrs Clark have no confidence in Teys’ giving independent legal advice, and asking why the Herdlaw advice was not included. The Applicant also encloses a letter from lot owner Michael Pinnock to the committee also stating that Teys Legal “are absolutely not the appropriate firm for you to consult given their ties to a group which sells management rights” and doubting that the process is fair and transparent. Mr Pinnock calls for an independent legal opinion before owners will have a proper understanding of the motion and alternatives before them.

Roma submitted through their lawyers Hynes, that the application was frivolous, vexatious, misconceived and without substance. It criticises the late submission of the Applicant’s material and accuses him of aiming to upset the general meeting and deny the body corporate a reasonable opportunity to respond. They say he should have taken steps earlier to resolve the dispute.

It criticises the Applicant’s understanding of the terms of the draft contract, and denies the relevance of his assertions in certain particulars about the body corporate’s discretion over the exercise of the option. It points out that section 104(1)(a) Standard Module does not require two quotations to be supplied for the engagement of a caretaking service contractor.

Roma says that when it failed to exercise the option to renew, it wrote to the body corporate on 7th April 2008 and asked it to consider a new agreement on identical terms, and that meanwhile, Roma should continue on a month to month basis. Roma offered to pay for the general meeting at which the new contract would be proposed. Roma says that the body corporate was right to seek legal advice about such a proposal, and that Teys Legal are experienced and creditable lawyers. There is no basis to the claim of a conflict of interest.

Roma provides a copy of the ‘Herdlaw advice’ which is not specific to the scheme and is generic in nature. It is headed “Options available to Bodies Corporate on the Expiration or Termination of Management Rights Agreements.” In contrast, the Teys advice was specific and independent. It says that the Applicant could have circulated the Herdlaw document if he had wished to do so. It denies that obtaining legal advice was an unreasonable act of the committee.

Roma is concerned that it risks losing a very valuable asset by its neglect to exercise its option, and the body corporate has the right to decide whether it will renew the option. The Applicant has put forward an alternative motion and it is up to the body corporate to vote on which motion it prefers. The general meeting should proceed. Roma seeks costs of $3,402 being legal costs for the response to the application at a rate of $297.00 per hour, and asks that the application be dismissed.

The body corporate says that the purpose of the general meeting is either to re-appoint Roma on the same terms as in its former contract or give the committee a mandate to seek alternative caretaking and letting agreements. It says there are current underlying disputes within the scheme which this application “highlights.”

The body corporate says that contrary to the Applicant’s indication that the body corporate has not responded to his faxed letter dated 25th June 2008 to the committee, the committee responded as requested within 24 hours by mail on 26th June 2008, because the Applicant had not provided his fax number or email address. He should have received the letter by 30th June 2008 at latest, although his application is dated 30th June 2008. The letter explains that the committee had at its meeting on 2nd June 2008 resolved to overturn the motion passed at its previous meeting on 12th May 2008 to send out the Herdlaw advice, since it was not specific to the scheme and owners could not compare “apples with apples.” The minutes were circulated to lot owners on the same day.

The general meeting was to be held earlier, but after receiving the Applicant’s motion the motions had to be re-drafted as motions in the alternative. The body corporate says it has taken pains to accommodate the Applicant and to make sure his motion is drafted as he required it.

It points out factual errors in the Applicant’s understanding of the draft agreement, and is concerned that the meeting should not be cancelled at this very late stage when owners will have made arrangements, and the returning officer for the secret ballot is coming from the Gold Coast.

The committee has no objection to the Applicant’s alternative interim outcome sought that the vote be taken but not acted upon until after the dispute is resolved. They also ask that “no adjournment of the meeting is allowed,” and argue that if it was, it would be in contempt of any interim order which had a result that the general meeting should proceed as planned.

In this matter there are complex issues and allegations made which cannot be explored at interim stage.

The purpose of an interim application is often simply to maintain the “status quo”, and in looking at such applications one must balance the inconvenience to the party whose proceedings will be brought to a halt, with the hardship or detriment faced by the applicant. The body corporate has no objection to an interim order which allows the general meeting to proceed this evening ( 2nd July 2008) and a vote be taken, but the resolution not be implemented until after the dispute is determined. Roma has not addressed the alternative interim outcomes sought in particular, and has not argued that any detriment to it will flow from an order to delay the carrying out of any resolution made at tonight’s meeting.

The balancing act must also consider the Applicant’s chance of a successful outcome.

The Applicant argues that at least two quotations should be provided by the body corporate in accordance with section 104 Standard Module, about ‘major spending.’ However, Section 104(1) specifically excludes the application of the provision of two quotations where the service to be supplied is that of a “caretaking service contractor” (as defined by the legislation to be a service contractor who also has a letting agency.)
“104 Quotes for major spending
(1) This section applies if—

(a) a motion to be moved at a general meeting of the body corporate proposes the carrying out of work or the acquisition of personal property or services, including the engagement of a body corporate manager or service contractor, but not including the engagement of a service contractor who also is, or is to be, a letting agent; and

(b) the cost of carrying the proposal into effect is more than the relevant limit for major spending for the scheme. “Etc.....(my underlining)

“Cathedral Place” to which I was also referred, is a scheme governed by the Mixed Use Development Act 1993 and the Building and Group Titles Act 1980, and is not governed by the Body Corporate and Community Management Act 1997. I note that the adjudicator in this matter simply stated that there was no prohibition on the body corporate from submitting two or “any number” of tenders, and that might be consistent with good management. The same applies to a scheme governed by the Act, but it is particularly stated that there is no legal obligation to provide two quotations for a prospective caretaking service contractor.

However, I have concerns about a legal opinion being sent out with the notice of motion, wherein the legal opinion particularly asks voters to vote for a particular motion (the committee’s motion) and describes the Applicant’s alternative as having consequences which might result in expenditure or even litigation. I am not able or prepared to evaluate the legal opinion, but question whether such material should have been sent at all.

Section 42C(8) Standard Module states that “explanatory material” may accompany a voting paper or a notice of a proposed general meeting only if required or permitted under the Standard Module. That section in full states as follows -

(1) A voting paper for a general meeting must be accompanied by an explanatory schedule if—

(a) the submitter of a motion stated in the voting paper gives the secretary an explanatory note about the motion, and the note is not longer than 300 words; or

(d) the voting paper states a motion proposing that a regulation module be applied to the community titles scheme that is different from the regulation module identified in the scheme’s community management statement; or

(e) an explanatory schedule is required to accompany the voting paper under another provision of this regulation.

(2) The explanatory schedule must, for a motion mentioned in subsection (1)(a), include only the following—

(3) The explanatory schedule accompanying a voting paper for an annual general meeting must, for a motion about adopting administrative and sinking fund budgets, include an explanatory note stating that, under section 94A, the amount of a budget adopted at the meeting may be more or less than the proposed budget amount by an amount equivalent to not more than 10% of the proposed budget amount.

(4) The explanatory schedule must, for a motion with alternatives, include each of the following—

(a) each motion (original motion), the substance of which is stated as an alternative under the motion with alternatives, in the form in which it was submitted under section 41;

(b) an explanatory note about each original motion, given to the secretary by the submitter of the original motion, if the note is not longer than 300 words;

(i) for the motion, by voting for the motion and for 1 of the alternatives; or

(ii) against the motion.
Example of an explanatory note for subsection (4)(c)—

To vote on this motion, you must either vote against the motion OR vote for the motion and 1 alternative.

To vote against the motion—Mark ‘No’ opposite the motion on the voting paper. If you mark ‘No’, do not place a mark beside any of the alternatives. To vote for the motion and 1 alternative—Mark the voting paper in 2 places. Firstly, mark ‘Yes’, opposite the motion on the voting paper. Secondly, mark ‘Yes’ opposite the alternative you want to vote for. You can vote for only 1 alternative.

(5) The explanatory schedule must, for a motion mentioned in subsection (1)(d), include an explanatory note, in the approved form, explaining the effect of the proposed change.

(6) To remove any doubt, it is declared that an explanatory schedule for a motion must not contain explanatory material, other than an explanatory note mentioned in subsections (3) to (5) or required under another provision of this regulation, written by a person other than the submitter of the motion.

(7) A notice of a proposed general meeting may be accompanied by explanatory material given by the committee, other than an explanatory note mentioned in subsections (2) to (5), if the material is contained in a schedule of the committee’s explanatory material that is separate from the explanatory schedule.
Example for subsection (7)—

The schedule of committee’s explanatory material might contain general explanatory material that does not relate to a particular motion stated in the voting paper, or information relating to a motion.

(8) Explanatory material may accompany a voting paper or a notice of a proposed general meeting only if required or permitted under this regulation.

This section requires that where a motion with alternatives is proposed, the committee must accompany the notice of the general meeting with an “explanatory schedule” explaining how to vote for a motion with alternatives; and an “explanatory note” from the submitters of each of the alternatives provided it is no longer than 300 words in length. Whilst the content of the “explanatory schedule” for a motion with alternatives is inclusive, and not exclusive, Section 42C(6) makes it clear that no other explanatory material must be included in the explanatory schedule, except for as stated in subsections (3) to (5). However, the committee may accompany the notice of meeting with other explanatory material from the committee, if the material is contained in a schedule of the committee’s explanatory material that is separate from the “explanatory schedule.” (Section 42C(7)). The example of this is that the committee might want to give some general information that does not relate to a particular motion.

Whilst the drafting of Section 42C Standard Module could be clearer, the intention of the section which was an amendment coming into force in 2003, was that any explanatory material should be undoctored by the recipient of the motion; not be in excess of 300 words; and be fair.

The overall effect of Section 42C is to restrict explanations being sent out with motions by the submitters of those motions, including the committee. The parliamentary explanatory notes to Section 42C, state as follows –

“Section 42C provides for a new schedule to accompany a voting paper for a general meeting which will contain explanatory material for the voters for the meeting.

This schedule will contain the information necessary to assist voters to vote on the motions on the agenda of the meeting. The inclusion of this material in a mandatory document will improve a voter’s ability to identify what is explanatory material and will prevent the voting paper of a general meeting from becoming a long and confusing document. Under the current provisions it is extremely common for the motion and the explanation to be rolled together in a long document. The splitting of the two will limit this problem.

Voters will be made aware of the existence of the explanatory note for a motion through a notification in the voting paper. Section 42C(1) provides for the material to be included in the schedule. The maximum length of the explanatory note, which is given by the submitter of a motion, has been increased from 100 to 300 words. The amendment will not significantly increase the meeting costs of a body corporate and will allow voters to be properly informed as to the intent of the motion.

It is also important that the explanatory material includes advice as to how to vote for a motion with alternatives.........

Some practices have been that the committee has, after receiving a motion from an owner, included in the meeting notice its own argument regarding the motion in a way that did not allow voters to distinguish between the material provided by the person moving the motion and the material provided by the committee. In some instances the committee has altered the explanatory material provided by the owner. This places the committee in an unfair position of being able to manipulate the meeting material to seek to influence the manner in which persons vote. For this reason, the schedule must include the explanatory note in the form given by the motion’s submitter. The committee can include an explanatory note for a motion it submits to the meeting, and the committee can also include general explanatory material if it does not relate to a particular motion.

However, in its role as the elected representatives of the body corporate the committee is often aware of particular information in relation to a matter that it considers the voters should know when deciding how to vote on a motion. The committee will be likely to present this information at the general meeting, but those persons not attending the meeting do not have access to this information before they decide how to vote on a motion. Provision is made for the committee to prepare a separate Committee Schedule containing such information. This allows the committee to provide appropriate background information but distinguishes this from the explanatory material.....” [1]

The Applicant has not raised this particular issue, but has stated that the material sent by the committee (the Teys Legal opinion) came from a non-independent source; and that its criticism of his own motion was inaccurate and misleading. In all, he says that the action of the committee in sending lot owners this material was not reasonable and contrary to section 94 Act, whereby the committee is required to act reasonably in anything it does in carrying out its functions.

I am of the view that the Applicant has made out a prima facie case and that no interested parties will be prejudiced by the making of an interim order since Roma is currently acting in the role of caretaking service contractor, and the root of the motion (that the body corporate enter into caretaking and letting agreements with Roma) is not itself in dispute. I am not prepared to delay the general meeting which appears to have been properly convened. Lot owners will also now have cast their votes and have made arrangements to attend the meeting, perhaps at some inconvenience to their own routines.

I order that if either of the two alternative motions are carried at the extraordinary general meeting of today’s date, that it is not acted upon until the determination of this dispute, nor if any amendment is made and carried, shall the body corporate act on a resolution relating to or affecting the engagement of Roma until the determination of this dispute.

In the meantime, the body corporate may not enter into caretaking and/or letting agreements with any other entity, and Roma may remain as de facto caretaking service contractors and letting agents, under the current arrangements.

The body corporate has raised the issue of a motion from the floor at tonight’s meeting to adjourn the meeting. I am of the view that there is no power in the Act for such a motion to be proposed unless it is either made by the convenor of the meeting because a quorum has not been achieved (section 48 Standard Module applies) or the motion is a written motion on the agenda. Since no such motion has been proposed on the agenda, then any motion from the floor to adjourn must be ruled out of order by the chairperson for the meeting.

Submissions will now be invited from all lot owners on this matter, in the usual way.

[1] Body Corporate and Community Management Legislation Amendment Regulation (No.1)2003 Explanatory Notes for SL 2003 No. 263

Number of Scheme:	15344
Name of Scheme:	Admiralty Towers II
Address of Scheme:	501 Queen Street, Brisbane QLD 4000

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Admiralty Towers II [2008] QBCCMCmr 233 (2 July 2008)