Teneriffe Hill Apartments [2008] QBCCMCmr 314 (4 September 2008)

Last Updated: 13 October 2008

REFERENCE: 0470-2008

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	24567
Name of Scheme:	Teneriffe Hill Apartments
Address of Scheme:	43 Florence Street TENERIFFE QLD 4006

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

Martin Perkins, a co-owner of lot 42 and current chairperson

I hereby order that Motion 16 (Eligibility for Committee Positions), purportedly passed by the body corporate at its Annual General Meeting on 26 March 2008, was at all times void and is of no effect.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0470-2008

“Teneriffe Hill Apartments” CTS 24567

Application

This application is brought by a co-owner of lot 42 and the current chairperson, Martin Ronald Perkins (applicant), against the body corporate, seeking an order that Motion 16 of the AGM of 26 March 2008, be overturned.

The minutes of the AGM of 26 March 2008 record the following in relation to Motion 16:

16. ELIGIBILITY FOR COMMITTEE POSITIONS: RESOLVED by Ordinary Resolution that the following persons are ineligible to remain as current voting committee members or be nominated as voting committee members:

• Persons currently either bankrupt or facing bankruptcy proceedings;
• Current or former directors of public companies placed into external administration;
• Current or former directors of public companies of which either themselves, or other directors of the company, are charged with criminal offences under the Corporations Act 2001 (Cth); or
• Current or former directors of public companies who are subject to legal proceedings relating to breaches of the Corporations Act 2001 (Cth).
  

The Chairperson ruled the motion Out Of Order under Section 45(1) of the Body Corporate and Community Management Accommodation Module noting that if carried, the motion would conflict with the Regulations that clearly state the eligibility criteria for Committee membership under Section 11 of the Body Corporate and Community Management Accommodation Module.

The meeting was advised that the ruling may be reversed by Ordinary Resolution and the representative of Yates Nominees Pty Ltd, Dirk Yates moved from the floor of the meeting:

That the decision of the Chairperson in ruling Motion 16 Out of Order be reversed under Section 45(3) of the Body Corporate and Community Management Accommodation Module Regulation.

Voting was counted from the floor of the meeting with the result being:

9 in favour 7 against

MOTION CARRIED BY ORDINARY RESOLUTION

The original motion was therefore taken to a vote with the voting to be counted by Poll at the request of the representative from Yates Nominees and the result was confirmed as

Yes 292 Lot Entitlements No 249 Lot Entitlements

THE MOTION WAS THEREFORE CARRIED

The applicant’s grounds are brief and to the following effect:

• Motion 16 at the AGM could have encompassed a number of people on the committee who are willing to give up their time to ensure that the building is run efficiently and for the benefit of all the investors.
• The people on the committee do not have access to cheque books – nor do they have a single voice – all major expenditure items are presented to the committee or to all owners as specified under the regulations.
• The motion will introduce an unnecessary impost on the committee to screen potential applicants for the positions at the AGM each year when elections are called and may be in breach of the unit owners’ rights to take part in the management of their investment.
• The motion is in breach of the Act and serves no useful purpose.
  

Jurisdiction

Teneriffe Hill Apartments was registered as a building units (now known as building format) plan of subdivision on 27 January 1998 comprising 68 lots and common property. The scheme is regulated by the Body Corporate and Community Management Act 1997 and the Body Corporate and Community Management (Accommodation Module) Regulation 2008. In considering the legislative requirements relating to the order sought, I have had regard to the provisions of the Accommodation Module as in force at the time that the events in question occurred, that is the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Accommodation Module)[1]. However, I draw the parties’ attention to the fact that the Accommodation Module has since been changed.

This is a dispute between an owner and the body corporate concerning an alleged contravention of the Act and comes within the dispute resolution provisions of the Act (see sections 226, 227 & 228).

Submissions

In accordance with section 243 of the Act, a copy of the application was provided to the body corporate, via Mr Scott Simpson of Teys Strata (the body corporate manager) for distribution to all owners (excluding the applicant) and the committee along with an invitation to respond to the matters raised in the application. A total of 47 submissions were received. Of these, I disregarded 4. I disregarded one submission because no comments were made, only the submission cover sheet was completed and submitted. I disregarded a further three for not having been made by the registered owner of the relevant lot. Of the 43 submissions I considered, two opposed the making of the order sought and 41 were supportive of the applicant.

The submissions made in support of the applicant were to the effect that the Act provides adequate grounds for the eligibility of committee members and that motion 16 is in conflict with the Act which was designed to protect owners and investors rights.

Mr Dirk Yates made detailed submission on behalf of Yates Nominees Pty Ltd, opposing the application to the following effect:

• The applicant failed to make reasonable attempts to resolve the dispute by internal dispute resolution pursuant to section 238(1)(b) of the Act (incorrectly referred to as being of the Module by Mr Yates).
• Motion 16 does not breach the Act or Accommodation Module. The inclusion of the phrase “without limiting the reasons a member may become ineligible” in section 23(3) of the Accommodation Module indicates that the section is not to be interpreted as being exhaustive and was intended to apply after already taking into account both sections 11 and 23.
• The wording “without limiting the reasons a member may become ineligible” was inserted to allow bodies corporate to determine their own eligibility criteria for being a voting committee member, based on their own unique and infinitely variable facts and circumstances. Parliament could not draft section 23 so widely so as to cover every conceivable reason why a member could be considered ineligible. Parliament therefore empowered bodies corporate, the lot owners themselves, to reasonably determine their own criteria for voting committee member eligibility.
• The fact that the present chairperson holds his position is evidence that the legislation does not already provide adequate grounds for eligibility. Mr Yates goes on to explain, in some detail, why he believes the current chairperson does not have the best interests of the scheme at heart and does not act in the best interests of the body corporate.
• Motion 16 is reasonable. The motion is extremely narrow in its potential scope to affect lot owners. The applicant is, to his knowledge, the only lot owner to fall within the clauses of the motion; however, the motion does have general applicability to all lot owners and is intended to apply universally for their protection going forward.
• Motion 16 was validly passed and carried by the body corporate at the AGM.
• The motion was not enforced by the body corporate manager at the AGM. Mr Yates goes on to criticise the body corporate manager’s handling of this matter at the AGM.
• The applicant is alleged to have made false and misleading statements.
• Mr Yates concludes by requesting that the following orders be made:
  • That the applicant has failed to make an adequate attempt at internal dispute resolution.
  • And, or in the alternative, that the Motion as validly passed by the body corporate is valid.
  • And, or in the alternative, should it be found that a particular clause of the motion is void, that clause be excised and the balance of the motion remain valid as passed.
  • A declaration that Teys have breached the Code of Conduct for Body Corporate Managers, and an order directing Teys to provide a written apology to all lot owners.
  • An order directing the body corporate to call an EGM for an election for the position of chairperson. The cost of the EGM is to be paid by Teys.
  • The applicant be fined 60 penalty units for breaching section 297 of the Act.
    

The only other submission opposing the application commented that screening of any potential member of the committee is not really called for but an upfront disclosure regarding current criminal or potential criminal charges should be stated by the potential member. In my view, the submission gave only partial, rather than whole-hearted support for Motion 16.

The applicant exercised his right to inspect the submissions made and submitted a reply.

Determination

Applicable Law

Section 45 of the Accommodation Module details a chairperson’s power to rule a motion out of order, as follows:

45 Power of person chairing meeting to rule motion out of

order [SM, s 47]

(1) The person chairing a general meeting of the body corporate

must rule a motion out of order if—

(a) the motion, if carried, would—

(i) conflict with the Act, this regulation or the

by-laws, or a motion already voted on at the

meeting; or

(ii) be unlawful or unenforceable for another reason;

or

(b) except for a procedural motion for the conduct of the

meeting, or a motion to correct minutes—the substance

of the motion was not included in the agenda for the

meeting.

(2) The person chairing the meeting must, when ruling a motion

out of order—

(a) give reasons for the ruling; and

(b) for a ruling given under subsection (1)(a)—state how the

ruling may be reversed by the persons present and

entitled to vote on the issue.

(3) The persons present and entitled to vote may reverse a ruling

given under subsection (1)(a) by passing an ordinary

resolution disagreeing with the ruling.

(4) The reasons given by the person chairing the meeting for

ruling a motion out of order must be recorded in the minutes

of the meeting.

Section 11 of the Accommodation Module makes provision for eligibility for committee membership as follows:

11 Eligibility for committee membership [SM, s 10]

(1) A person is eligible to be a voting member of the committee if

the person is an individual nominated for membership of the

committee by a member of the body corporate (the

nominating entity) and is also—

(a) a member of the body corporate; or

(b) a person of a following category—

(i) if the nominating entity is an individual—

(A) a member of the individual’s family; or

(B) a person acting under the authority of a

power of attorney given by the individual;

(ii) if the nominating entity is a corporation—a

director, secretary or other nominee of the

corporation;

(iii) if the nominating entity is the body corporate for a

subsidiary scheme in a layered arrangement of

community titles schemes—a representative of the

subsidiary scheme.

(2) However, a person who is otherwise eligible under subsection

(1) to be a voting member of the committee is not eligible to

be a voting member of the committee if the person is—

(a) a body corporate manager, service contractor or letting

agent; or

(b) an associate of a body corporate manager, service

contractor or letting agent, other than a lot owner who is

the associate of a letting agent only because the letting

agent, in conducting the agent’s letting agent business,

acts for the lot owner; or

(c) a person, other than a letting agent for the scheme, who

conducts a letting agent business for the scheme.

(3) Also, a member of the body corporate—

(a) is not eligible to be a voting member of the committee if

the member owes a body corporate debt when the

members of the committee are chosen; and

(b) may not nominate a person for membership of the

committee if the member owes a body corporate debt

when the nomination is received by the secretary.

(4) Unless otherwise permitted under this regulation, only 1

co-owner of a lot can be a voting member of the committee,

on the basis of ownership of the lot, at a time.

(5) In this section—

family, of a nominating entity who is an individual, means the

following persons—

(a) the individual’s spouse;

(b) each of the children of the individual or the individual’s

spouse who is 18 years or more, including a step child or

an adopted child;

(c) each of the individual’s parents, including a step parent;

(d) a brother or sister of the individual.

Section 23(3) of the Accommodation Module elaborates on the circumstances in which a committee member becomes ineligible to hold their position, as follows:

(3) For subsection (2)(b), without limiting the reasons a member

may become ineligible to hold the member’s position, a

member is ineligible to hold the member’s position if the

member—

(a) was a member of the body corporate at the time the

member was elected but is no longer a member of the

body corporate; or

(b) was not a member of the body corporate at the time the

member was elected and was nominated for

membership by a member of the body corporate who is

no longer a member of the body corporate; or

(c) is engaged as a body corporate manager or service

contractor, or authorised as a letting agent.

(4) If the body corporate engages a body corporate manager

under a part 3, division 10 engagement—

(a) the term of office of a member of a committee for the

body corporate ends; and

(b) subsections (1) to (3) do not apply to the member.

(5) To remove any doubt, it is declared that subsections (1) to (3)

do not apply to a non-voting member of the committee.

Issue for Determination

The sole issue for determination in this application is whether Motion 16 conflicts with the Act or Accommodation Module (as alleged by the applicant), or not (as alleged by Mr Yates). I do not propose to consider the other matters raised by Mr Yates, for the following reasons.

In relation to Mr Yates allegation that the applicant failed to make reasonable attempts to resolve the dispute by internal dispute resolution pursuant to section 238(1)(b) of the Act, the Commissioner could have rejected the application under section 241(c)(ii) of the Act if she believed that, but did not. The Commissioner made a dispute resolution recommendation that the dispute be resolved by departmental adjudication, under section 248 of the Act. I have therefore proceeded to determine this dispute.

In relation to his allegations concerning the body corporate manager, they are of no relevance to this dispute. Further, the body corporate manager is not a party to this dispute and I do not propose to give any further consideration to those allegations.

In relation to his assertion that the applicant has breached section 297 of the Act by making three separate statements that Mr Yates argues are false and misleading in a material particular and that the applicant knows the statements to be false and misleading, I comment as follows. None of the statements alleged to be false and misleading have had any bearing on my determination of this dispute. I do not regard the specific statements referred to as material to the determination of this dispute. If Mr Yates wishes to continue to pursue this issue, he is at liberty to do so personally in the Magistrate’s Court at any time. A complaint under section 297 of the Act must be pursued in the Magistrates Court under the Justices Act 1886. An Adjudicator does not have power to impose a penalty.

Conclusion – Eligibility for Committee Membership

In my view, eligibility for committee membership is clearly and sufficiently provided for in the Accommodation Module. A lot owner is eligible to be a member of the committee
provided the eligibility criteria in section 11 are satisfied.[2] I am unable to concur with Mr Yates’ view that the inclusion of the words “without limiting the reasons a member may become ineligible to hold the member’s position” in section 23(3) as part of the 2003 amendments to the Accommodation Module has the significance he alleges. There was no equivalent section 23(3) prior to the 2003 amendments. All the new section 23(3) did was to elaborate on the circumstances in which a committee member must vacate their position because they become ineligible to hold their position, under section 23(2)(b). These circumstances are not to limit the ineligibility criteria already mentioned in section 11(2) & (3)). I consider Mr Yates’ references to the Explanatory Notes and Second Reading Speeches to be taken out of context. When read in context, I believe they confirm my view that eligibility for committee membership is now clearly and sufficiently provided for in the Accommodation Module. It regulates who is eligible to be a member of the committee and provided that person is properly nominated and elected, that person is able to hold that position subject to, for example, section 23 of the Accommodation Module. It is a matter for lot owners to determine the eligible person to be chosen to a committee position. The applicant was chosen to be the chairperson at the most recent AGM.

It is worth noting that no individual committee member has the authority to make unilateral decisions on behalf of the body corporate. The legislation sets out specific procedures for the committee to follow in making decisions and there are limits on the committee’s powers. Specifically, the powers of a chairperson are limited to chairing committee and general meetings at which they are present and ruling motions out of order in certain defined circumstances[3].

Further, one cannot ignore the existence of section 23(2)(f) of the Accommodation Module which enables a committee member to be removed from their position by the passing of an ordinary resolution of the body corporate. To my mind, this provision provides more protection than that purportedly offered by Mr Yates’ Motion 16. It enables a committee member to be removed from office without any reason being given, provided sufficient owners desire that result and can pass an ordinary resolution. Herein lies the problem for Mr Yates. It is clear from the submissions made in response to this application, that the applicant has the support of an overwhelming majority of owners and it would not be possible to remove him from his position on the committee under section 23(2)(f) if the submissions are any indication of how owners would vote on an ordinary resolution to remove him from office.

To the extent that Motion 16 purports to introduce different criteria than those mentioned in the legislation for eligibility for committee membership, I regard it as inconsistent with the legislation and therefore, void. In my view, Motion 16, introduces criteria for eligibility for committee membership entirely inconsistent with the legislation, such that no part of the Motion may be severed.

I have no hesitation in making an order that Motion 16, purportedly passed at the AGM of 26 March 2008 was at all times, void. It was correctly ruled out of order by the chairperson for conflicting with the Accommodation Module. It follows that there is no need to order that an Extraordinary General Meeting be held, as suggested by Mr Yates.

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[1] Section 20, Acts Interpretation Act 1954
[2] La Lagon [2006] QBCCMCmr 757 (27 September 2006)
[3] See sections 44 and 45 Accommodation Module