Edmondstone Lodge [2008] QBCCMCmr 326 (12 September 2008)

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

I hereby order as follows-
1. that the application for a declaration “that the motion to enter into new caretaking and letting agreements at the extraordinary general meeting dated 1st December 2006 is invalid,” is dismissed.
2. that the application for an order that “Carol Robinson of C Ann R Pty Ltd trading as Strata and Body Corporate Services (acts) as administrator of the Scheme to call and hold such committee meetings and general meetings as may be required,” is dismissed.
3. that the application for a declaration “that the supply of services arrangements approved by the extraordinary general meeting on 1st December 2006 need (sic) agreement in writing from each owner under section 119 of the Standard Module”, is dismissed in part subject to the order made below.

I further order that pursuant to section 169(2) Standard Module that the body corporate may not charge for a pay cable TV service to lot owners without the agreement with the lot owner receiving the service. The effect of this order is that no owner need pay for cable TV if that owner does not receive it, and that no owner can receive it without that owner’s agreement with the body corporate.

This is an application dated 6th March 2008 and amended on 4th April 2008 by Hoshiai Pty Ltd (the Applicant) owner of Lots 6, 9,14,19 and 20 in the scheme against the body corporate for the scheme (the body corporate) for orders as follows –

“Edmonstone Lodge” CTS 17100 is a community titles scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (Standard Module). There are 22 lots in the scheme created under a Building Unit Plan of subdivision.

The current Standard Module commenced on 30th August 2008, replacing the previous Standard Module that operated from July 1997 (Previous Module). A number of provisions of the Standard Module are the same, or substantially the same as provisions in the Previous Module despite the provisions having different section numbers. These provisions are generally to be dealt with as replacements of the similar provisions of the repealed legislation and anything done under the Previous Module will not generally be affected by the commencement of the present Standard Module (sections 209 -216, section 20 Acts Interpretation Act.). Where relevant, references will be made to the Previous Model in parentheses after the current module reference.

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 242 Act requires that where an applicant seeks an outcome to invalidate a motion or a meeting, the application must be made within three months of the date on which the motion was tabled or the meeting was held. An adjudicator may waive compliance with this section for “good reason.”

In this matter, the Applicant seeks as its second outcome sought, to invalidate a motion to enter into new caretaking agreements put to a general meeting on 1st December 2006. I appreciate from the material in the application that the Applicant first lodged a dispute application in this matter on 21st December 2007 although this application was subsequently withdrawn when the matter was to be determined by the conciliation process. Whilst this did not eventuate, and the matter was re-lodged for adjudication, the original application was still over 12 months after the motion now challenged.

The application makes it clear that the Applicant was aware of the circumstances immediately following the voting on the motion on 1st December 2006. The nominee of the Applicant company, Tony McQuillan (Mr McQuillan) says that the result was not a fair one since the vote of a majority lot owner carried the vote to the detriment of the minority.

The Applicant owns five lots in the scheme 6, 9, 14, 19 and 20, and did not vote at the meeting on 1st December 2006.

In the appeal of Weeks v. Commissioner for Body Corporate (Maroochydore District Court Appeal 13/99), Judge Dodds, at pages 4 and 5 of the judgment, made the following remarks which may be cited as a yardstick by which a waiver of compliance may be assessed –

“... the objects of the Act, for instance section 5(a) and (h) militate against too strict or legalistic a view about good reason for waiving non-compliance with the time limit. What will be required is a balancing of the length of the delay; the reason for the non-compliance; the effect of delay on others who are affected by the matter in dispute and importantly, whether apart from the question of non-compliance with the time requirement, an applicant will be entitled to the relief sought. The applicant, being the person seeking a waiver, will have the task overall of satisfying the adjudicator that the time limit should be waived in all the circumstances.”

On 2nd July 2008, I wrote to Mr McQuillan asking him to address this section of the legislation. Mr McQuillan replied on 11th July 2008 that at the time when the resolution was carried (1st December 2006) “ the committee ... was not validly in place” and therefore did not negotiate the proposed contract for the benefit of lot-owners. The committee was from October 2005 “under the control of the Caretaker/Letting Agent and its associates.” One committee member out of the five, Phil Angus, was the only “completely independent” committee member at the time, and he was always outvoted on committee by the other members who were all associates of Rentwell Pty Ltd, the caretaking service contractor.

It appears that there were in fact negotiations about the contract, and the body corporate obtained legal advice. The body corporate solicitor said that the agreements drafted as they were should “not be passed.” Mr McQuillan says that the solicitor for the caretaking service contractor “prepared the explanatory notes in such a way which misrepresented matters and suggested no increase in remuneration since it was alleged to be a continuation of an existing agreement.” He claims that there were many “legislative inconsistencies” surrounding the motion and the explanatory notes. Owners only became aware of the consequences of their vote when the body corporate levies increased significantly. He says: “The awareness of extra costs took time and probably accounts for the period under which section 242(2) would apply.”

I consider that the effect of allowing the non-compliance with section 242 Act, now some 21 months after the event, would be particularly serious for the caretaking service contractor and the body corporate, who are now signatories to a contract, or contracts, entered into following the resolution carried by the body corporate on 1st December 2006. To invalidate the motion would have the effect of impugning the validity of those contracts with subsequent legal consequences, perhaps for breach of contract, rescission, and/or damages.

A caretaking service contractor, and associates of a caretaking service contractor, have been ineligible as voting members of a body corporate committee since July 1997. It was therefore open for any lot owner to challenge the make-up of the committee from that time. Further, the approval of the contracts was not a committee decision but was made at a general meeting (as it should have been) with the benefit of legal advice, advising the body corporate not to sign them as drafted. The explanatory notes simply say that “the commencement salary is based on the current salary being paid” but this implies that the salary will not always remain at the “commencement salary” level. The vote was 12 - 3 and the Applicant’s next argument is that this vote demonstrates that the voting power of a majority owner acted unfairly on the minority owners who together do not have sufficient power to carry resolutions of the body corporate against the majority owner.

This argument is one of “fraud on a minority” which has been considered in this Office on several occasions. Whether or not this Office has power to explore such equitable arguments and remedies, is perhaps not pertinent here because whatever the outcome of that debate, the argument was not raised within the three months time period prescribed by section 242 Act. It could have been. None of the circumstances of the Applicant has changed since that resolution was carried. I also note that the body corporate lawyer (who was also the returning officer for the motion) mentioned in his letter dated 17th November 2006, that an application might be made to this Office in the event of a majority owner imposing its will on the minority “where it is favouring a related entity.”

However, even if it had been brought within the three month time period, it is not at all clear that such an argument would have succeeded and the Applicant be entitled to the relief sought.

In Dindas and Anor – v - Body Corporate for One Park Road CTS 2114 & Ors [2006] QDC 302, the judge found that voting rights might not be evenly distributed but that was exactly what the ownership of property allowed. He said -

“[22] If, as I understand them, these submissions are intended to support the proposition that the adjudicator’s powers to make orders that are “just and equitable” under s 276 can be construed so that minority interests may prevail over the wishes of the majority (lawfully expressed through legitimate voting) in certain circumstances the proposition runs up hard, firstly, against the difficulty that the voting process is, in many instances, one based upon property interests.......

[23] Counsel sought to circumvent this rather, on its face, significant difficulty by submitting that although the Act permitted a voting process based on ownership interests, that process was subsumed to other parts of the legislation which favoured a true democracy. The legislation is, in truth, however, a reversion to “democratic” principles applying at an earlier stage in the evolution of the voting process in democratic countries – i.e. one based upon property rights. Nothing could be clearer but that the “ethos” created under the legislation is not always one based upon an individual’s right to vote, but upon the property rights which accrue to lot owners.........”

.
The Applicant provides no evidence to support his opinion that the matter would have been deemed invalid if an application had been made to this Office within the time period.

I am not satisfied in the circumstances set out above that the Applicant has made out sufficiently good reason why he did not make his application immediately after the vote was taken in December 2006. For this reason, I am not prepared to consider the outcome sought at Item 2, and this item is dismissed.

The other outcomes sought are that an administrator, Carol Robinson of C Ann R Pty Ltd trading as Strata and Body Corporate Services is appointed to the scheme; and that an adjudicator makes and order declaring that the supply of services arrangements approved by the extraordinary general meeting on 1st December 2006 needs an agreement in writing from each owner under section 119 ( now section 169 but otherwise unchanged) of the Standard Module.

The Applicant says that at the extraordinary general meeting held on 1st December 2006, Motions 3, 5 and 7 concerned body corporate agreements with suppliers of electricity, gas and pay TV respectively. Motions 4, 6 and 8 concerned the method of payment for the supply of each of the services.

Motions 3, 5 and 7 proposed that the body corporate enter into agreements respectively with Energex for electricity, Energex for gas, and Optus for pay TV. For each supplier the body corporate voted that the account be paid by dividing the amount equally between lot owners in accordance with section 196(6)(b)(i) Act.

The Applicant says he did “not see benefit to the scheme in disputing the motions, quotations, or paperwork provided at that time.” However, under Section 119(2) (now section 169(2)) Standard Module the “body corporate may by agreement with a person for whom the services are supplied, charge for the services...” The Applicant says that this section shows that “the body corporate needs to reach agreement with people to be supplied the services”, and that this has not occurred.

Further, he says that despite the motions carried to pay for the services equally, “some of the services may not be required.” He says there was “no indication of the costs involved in these ongoing commitments at the extraordinary general meeting of December 2006.”

He provides minutes of an extraordinary general meeting on 4th June 2007, when a special levy was adopted for an increase in caretaking fees, and also for the supply of electricity, gas and cable TV. The vote was 13 – 5. Electricity was budgeted at $4,000 per quarter; gas was budgeted at $700 per quarter; and cable TV was budgeted at $1,600 per quarter.

In respect of outcome 1 sought, the Applicant explains the background to the scheme. He says that the caretaker/letting agent owns 12 lots and that until about the beginning March 2008, when he started this application, the committee was unlawfully elected, all voting members being either shareholders of the caretaking service contractor and letting agent Rentwell Management Pty Ltd (Rentwell), or having a family relationship with the directors and operators of Rentwell. Whilst this situation is now remedied, and there is a new committee, the Applicant has no faith in Body Corporate Services, the body corporate manager, which allowed this unlawful situation to proceed over several years without pointing out the abuse of the legislation. He seeks an administrator to be appointed to call and hold general meetings as may be required and to hold the body corporate records until such time as a new body corporate manager is appointed.

In accordance with section 243(2)(b) Act submissions on all three outcomes sought were invited from lot owners and the body corporate committee.

Maurice Roberts (Mr Roberts), owner of Lot 1, says that he does not wish to change body corporate managers, and that the error made by the body corporate manager was genuine. In respect of outcome 3 sought, he cannot see why the Applicant should not pay his share of utilities.

Lisa Roberts (Mrs Roberts) company nominee of Lismaur Investments Pty Ltd (Lismaur), owner of 11 units in the scheme, says that the building was finished in April 1995, constructed as a purpose-built Motel. She says that currently, the Applicant Hoshiai has 5 units, Teneriffe Investment Co has 3, Lismaur has 11, Maurice Roberts has 1, Dr Ma has 1 and Macrea Pty Ltd has 1. As a community titles scheme, it was operated on a leaseback basis for three years and the Motel operator leased all units at a set monthly rental. From July 1998 it operated under a “pooled income and expenses arrangement” with the surplus distributed to owners. She acknowledges that these arrangements were “unusual” for a body corporate, but there was a general ignorance of the legislation, and the system worked well, with no complaints from owners. The Motel business management company, Rentwell, paid all the bills from the rents received since all owners were in the renting pool. “These arrangements have been in pace with the consent of all owners for over eight years.” This ceased in about August 2006 when the Applicant purchased his 5 units and withdrew from the Motel pool.

She says that the units are not individually metered for water, gas or electricity. There are 3 electricity meters to service 22 units and the common property. There is only one gas meter to service the common property. All units obtain their hot water from communal gas hot water system and there is no means of measuring each individual unit’s use without individual meters.

When the Applicant withdrew his 5 units from the pool, the remaining 17 units were effectively paying all the caretaking fees, electricity, gas and cable TV, and the Applicant was getting free utilities. At this point, she instructed lawyers in 2006 to prepare formal agreements between the body corporate and Rentwell, and between the body corporate and the gas, electricity and cable TV suppliers. Previously the supply agreements were between the supplier and Rentwell.

From July 2006 to March 2008 the Applicant did not contact the body corporate or attend any meetings, or write any letter of complaint. He did not vote at the extraordinary general meeting on 1st December 2006 where the motions for the new agreement and expenses were put. They have tried to contact him and discuss it but Mr McQuillan of the Applicant company has refused to speak to her. The chairperson, then Maurice Roberts, therefore prepared on 30th April 2007, a memorandum to all owners to explain several issues including that to have individual meters for electricity would cost the body corporate “around $200,000.”

She says that when the Applicant purchased 5 units he was aware of the cost of electricity, gas and cable TV, and that the documents in his application include an account for the “motel business” for February 2006 showing a monthly payment for gas, electricity and cable TV.

In respect of outcome 3 sought, she says the only fair thing to do is divide the gas, electricity and cable TV bills equally between lots. She says that the electricity supplier is now Origin Electricity as well as for gas. The cable TV supplier is now Foxtel. It is not possible to split the cable TV bill without re-wiring the building. The budget for all three was approved at the last annual general meeting on 27th September 2007 and the budget is $4,000 per quarter for electricity; $1250 per quarter for gas budgeted at $5,000 per year; and about $6,500 per year for cable TV. She says that the Applicant understood the way in which the scheme operated because he bought 5 units in the scheme. She believes that the Applicant’s withdrawal from the letting pool was an opportunity for him to have free utilities which is hard on the rest of the unit owners.

She can see no need for an administrator, and points out that neither of the lawyers involved in drafting the caretaking agreements in 2006 spotted the unlawful dual role of the chairman and the caretaker. The question of a body corporate manager can be decided at a general meeting if the body corporate wishes to terminate or change body corporate managers. In effect, the constitution of the committee was irrelevant since all important matters in the relevant time period were decided at general meetings.

Anthony Barnet, nominee of Teneriffe Investment Company, chairperson and owner of three units in the scheme says he does not want administration or to change the body corporate manager. The Applicant is asking that supply agreements be put in place with lot owners and if that had to be put as a motion to a general meeting, the majority would just agree it, and it would be a waste of time and money. He says that the Applicant’s gambit to get free electricity “is a load of rubbish.”

Daniel Moy, manager of Body Corporate Services, body corporate manager, made an uninvited submission on behalf of his company, apologising for the unintentional oversight which allowed the committee to consist of associates and members of the family of the caretaking service contractor.

The Applicant exercised its right of Reply. In effect it endorsed its application.

On 16th July 2008, I sought further information from the body corporate manager about the change of suppliers for gas, electricity and cable TV, (Origin, Origin and Foxtel) from the suppliers with whom agreements were made at the extraordinary general meeting of 1st December 2006. (Energex, Energex and Optus.) The body corporate manager says that he is advised by the caretaker that Optus either discontinued the service or refused to continue. The body corporate did not have a general meeting to change to Foxtel. The electricity is now provided by Origin, and the gas by AGL, not Energex. Neither of these changes came about by motion put to a general meeting. He believes that the Energex change was as a result of a government decision in 2007 to dispose of its retailing assets.

I sought further information about the cable TV infrastructure from Mrs Roberts. Mr Roberts replied on 8th August 2008. He says that the change was made from Optus to Foxtel on 1st June 2007, because Foxtel took over Optus’s commercial clients. This change of contractor was not put to a general meeting. Foxtel offers a package of channels and an agreement at a fixed sum of $526.08 per month was entered into on 1st June 2007. The agreement, which describes the subscriber as “Edmonstone Motel” with provision to “22 Guest Rooms”, expires on 1st June 2010. The monthly bill is split between each unit, and included in the annual budget.

Mr Roberts says that it is not possible for an owner not to have cable TV. The TV cable is provided to each unit via the internal aerial system. There are 2 antennae points in each unit, one is dormant and has nothing attached to it. It is an abandoned system scrapped as it was poorly installed, and the signal was leaky and the picture poor. The other antenna point provides free-to-air and cable channels and all the infrastructure, including aerials and amplifiers for Foxtel and free to air is attached to that. There is no central console where specific units can be switched off. The only way in which the system could be split would be to re-cable the building. The present system has been in use for 10 years and was in place when Applicant purchased its units. He says “ the majority of lot owners wish to have cable TV and....... it is all have cable or none.”

He signed the agreement on behalf of the body corporate “after discussions with Phil Angus who was then the treasurer.”

On 19th August 2008 I sent a copy of Mr Roberts’ letter to Mr McQuillan and enquired of him whether he had investigated alternative arrangements for preventing or turning off the supply of cable TV, and how owners could “opt out” if they did not want this service. Mr McQuillan replied on 3rd September 2008.

He comments with regard to Mr Roberts’ letter that the motion about cable TV put to the meeting in December 2006 did not have “full documentation” attached to it. It was not clear at that time that the body corporate was entering into an agreement for 3 years, and the motion should therefore not have been considered. He assumes from Mr Roberts’ letter that the reference to a continuation of the service from Optus to Foxtel (because Foxtel took over Optus’ commercial clients) shows that there is already an agreement between the body corporate and Optus.

He says that if free to air TV has been linked to Foxtel cabling, the owners who did not want to use Foxtel could have investigated installation alternatives, but they were not given the opportunity.

He points out that Phil Angus never held the position of treasurer but was secretary of the scheme. He also refutes that a discussion between the two constitutes an approval of the body corporate to enter a three year contract, but places the body corporate in a difficult position since a decision of the committee can be taken to be a decision of the body corporate. (Section 310 Act). Further the Foxtel agreement shows the subscriber to be “Edmonstone Lodge” and not the body corporate. The address for service of notices is given as the body corporate manager’s address and the registered subscriber address is at the building. He says that this shows that the agreement is with the caretaker and not the scheme, but that it is the lot owners who are paying for it. He says that the former cable agreement was with Rentwell and that the Foxtel agreement is new as it is now charged through the levy system. Owners should have had the choice under section 119 Standard Module, and they may even now approve it, but it is important that an owner can make that decision. The fact that the majority may want cable TV does not limit individual owners’ rights to consideration.

In respect of the technology of the building, he says that this was created by the original developer in conjunction with Rentwell the letting agent and that it is a concern. Updating of equipment might be a better option, but he fears that “various matters (television being one) which were originally the province of the letting agent have been placed as costs on the body corporate.” He says that “matters need to be investigated whereby control over the supply is possible.” He has not yet made any investigations. He does not agree that owners have been paying for this service for 10 years by way of body corporate levies, prior to 1st December 2006, since before that it was a responsibility of the letting agent.

The roots of this dispute lie in the history of the scheme and its construction as a purpose-built Motel. The caretaker and letting agent, Rentwell does not in fact own any lots in the scheme, but eleven lots (one half of all lots in the scheme) are owned by Lismaur Investments Pty Ltd. Maurice Roberts, the owner of Lot 12 in the scheme, is a director of Rentwell as is Lisa Roberts. Rentwell, uses Lot 1, owned by Lismaur, for the operation of its letting business. Lisa Roberts is the company nominee of Lismaur. The caretaking agreement is between the body corporate, Lismaur and Rentwell. Lismaur and Mr Roberts between them own 12 lots in the scheme and can therefore together form a simple majority.

All utility services were provided to the “Motel” in the name of Rentwell until 2006, when the body corporate put its house in order and made sure that agreements with utility service providers were in the name of the body corporate. Motions 3, 5 and 7 put to the extraordinary general meeting on 1st December 2006 carried explanatory notes stating that the then current system was that Rentwell paid the gas, electricity and TV bill, and then was reimbursed by lot owners. This is not a situation envisaged by the legislation. The body corporate as an entity is responsible for the management of scheme land and body corporate infrastructure and assets, on behalf of owners of lots in the scheme. (Section 4(e) Act.) It is therefore the body corporate which must enter in agreements with gas, electricity and TV suppliers and with contractors for services.

In respect of the third outcome sought, the Applicant relies on section 119 (now section 169 unchanged) Standard Module. I understand him to be of the view that before having to pay for the supply of electricity, gas and cable TV, he should have a written agreement with the body corporate.

Section 169 Standard Module states as follows -
169 Supply of services by body corporate—Act, s 158

(1) The body corporate may supply, or engage another person to supply, utility services and other services for the benefit of owners and occupiers of lots, if the services consist of 1 or more of the following—

(a) maintenance services, which may include cleaning, repairing, painting, pest prevention or extermination or mowing;

(b) communication services, which may include the installation and supply of telephone, intercom, computer data or television;

(c) domestic services, which may include electricity, gas, water, garbage removal, air conditioning or heating.

The body corporate might engage a corporation to supply PABX services for the benefit of the owners and occupiers of lots.

(2) The body corporate may, by agreement with a person for whom services are supplied, charge for the services (including for the installation of, and the maintenance and other operating costs associated with, utility infrastructure for the services), but only to the extent necessary for reimbursing the body corporate for supplying the services.

(3) In acting under subsections (1) and (2), the body corporate must, to the greatest practicable extent, ensure the total cost to the body corporate (other than body corporate administrative costs) for supplying a service, including the cost of a commercial service, and the cost of purchasing, operating, maintaining and replacing any equipment, is recovered from the users of the service.

I do not follow this line of argument, in that section 169 is about the supply of a utility service by the body corporate. In this instance, in respect of electricity and gas, the service is not supplied by the body corporate but by Origin and AGL respectively to the body corporate. The body corporate is simply billed for the service supplied and it divides up the bill. The body corporate has no input into the supply, nor is it passing on a supply. Gas and electricity are supplied to the body corporate by outside entities. The body corporate consists of all the lot owners in the scheme, (Section 31 Act) and each lot owner is responsible to the utility service provider for a share of the utility service provided. (Section 196(2) Act.)

This section enables bodies corporate, particularly large schemes, to buy for example, bulk gas and electricity and to pass it on to individual units by agreement with lot owners at an agreed, usually beneficial, rate. Generally, when such an agreement is in place, it will be a condition of the contract of sale that each new owner accepts the transfer of the supply agreement on purchasing the lot. Such agreements are not applicable to the situation at Edmonstone Lodge.

At a general meeting on 1st December 2006, the body corporate decided that gas and electricity bills should be shared equally. Such provision can be made under section 196(6)(b)(i) Act where there is no way of measuring which unit has used a specific amount of electricity or gas.

196 Utility services not separately charged for
(1) This section applies to a community titles scheme if—

(a) there is no practicable way available to a utility service provider to measure the extent to which the utility service is supplied to—

(ii) if the utility service is also supplied to the common property—the common property; and

(b) the supply of the utility service to scheme land is charged according to usage, and is not charged for on the basis of the unimproved value of land.

(2) A lot owner is liable to the utility service provider for a share of the total amount payable for the provision of the utility service to scheme land.
(3) The share is proportionate to the contribution schedule lot entitlement for the lot.

(4) However, the body corporate may, by arrangement with the utility service provider, take on liability for owners or occupiers of the lots for the utility service supplied for the benefit of owners or occupiers.

(5) If an arrangement is in force under subsection (4), the utility service provider can not separately charge the owners or occupiers for the utility service to which the arrangement relates, and the body corporate must satisfy the liability to the utility service provider out of—

(a) the contributions paid by lot owners to the body corporate under the regulation module applying to the scheme; or

(b) a levy imposed on the individual lot owners in the way stated in subsection (6).
(6) The levy must be made—

(a) for lots for which the body corporate has a way of measuring the extent to which the utility service is supplied to each lot—according to the extent of supply; and

(b) for lots for which the body corporate does not have a way of measuring the extent to which the utility service is supplied to each lot—

(ii) proportionately among the lot owners according to the contribution schedule lot entitlement for each lot.

It is not disputed that the scheme has only three electricity meters to cover all 22 units and the common property alike, and only one gas meter, which provides hot water to all units. Since the body corporate has entered into an agreement with the gas and electricity providers respectively, to pay for the gas and electricity supplied, the body corporate must satisfy the liability to the service provider out of contributions paid by lot owners or by way of levy imposed on lot owners as set out in subsections 196(5) and 196(6) Act.

The Applicant’s argument that lot owners need not pay for gas and electricity unless there us an agreement in place between the body corporate and the lot owner therefore fails.

However, in respect of a television service and the cable TV, now supplied by Foxtel, the situation is not the same. On 1st December 2006 at the extraordinary general meeting, the body corporate approved that the body corporate enter into an agreement with Optus “for the supply of Pay TV to the Complex” in lieu of Rentwell. The previous agreement with Rentwell was to be terminated. The motion approved the execution of an agreement by the secretary and a committee member, or two committee members, or the secretary acting alone “or in any other way permitted by law.” Mr Roberts advises that the Optus agreement came to an end because Foxtel took over Optus’ commercial clients, and on 1st June 2007, a new agreement was entered into with Foxtel, signed on behalf of the body corporate by Mr Roberts after consultation with committee member, (there is disagreement as to whether he was secretary or treasurer) Phil Angus. Mr Angus no longer owns a unit in the scheme.

The agreement shows that Foxtel were to install a 90cm dish on the roof and install cabling, decoders, modulators, amplifiers and splitters and “integrate the Foxtel signals with the existing MATV system” at a cost of $3,498.68. I am not advised whether this cost was a cost to the body corporate, or if it was a cost to “Edmonstone Motel” as shown on the contract. The Applicant says that it seems to him that the Foxtel agreement was with the caretaking service contractor, Rentwell, and that there was no authority of the body corporate to enter this contract.

It is certainly not clear to me whether the agreement entered into on 1st June 2007 was the agreement approved by the body corporate on 1st December 2006, or whether there was in the interim a body corporate agreement with Optus which came to an end when Optus withdrew its services to commercial clients, and Foxtel “took over.” Further, there is, as pointed put by the Mr McQuillan no mention in Motion 7 of the EGM on 1st December 2006 that a copy of any proposed agreement was attached. However, section 242 Act, discussed above under “Jurisdiction”, means that it is not now open to the Applicant to challenge the validity of Motion 7 so long after the event, and he has not sought to do so in this application.

Cable TV is not “consumed” in a way that gas and electricity is consumed. The cable TV costs a monthly fixed fee to the body corporate is $526.08 per month and is a known quantifiable expense. It costs no more however much cable TV is watched by each unit. At present the $526.08 per month is divided equally between the 22 units, and all units have the service already installed, apparently using infrastructure on which they can also receive “free-to-air” TV. The body corporate has arranged for an additional service to be channelled through that infrastructure. The Foxtel signals, are as of 1st June 2007 at latest, now integrated with the existing MATV (Master Antenna Television Service), so the offer of the additional Foxtel programmes is a service supplied by the body corporate at an additional cost to lot owners.

The legislation is clear on this point. Where the body corporate supplies a service, including a pay TV service, the body corporate must, to the greatest practicable extent, ensure the total cost is recovered from users of the service (Section 169(3) Standard Module). The body corporate may charge for the service only to the extent necessary to reimburse itself, and only by agreement with a person for whom the services are supplied. (Section 169(2) Standard Module.) In short, no lot owner in this scheme may be required to receive the pay-TV service without his or her agreement.

However, from correspondence with Mr Roberts, I understand that there is no practical method by which cable TV might be disconnected to a particular unit or “blocked.” The only way that this might be achieved is if the entire building was re-cabled at prohibitive expense. Since this is the case, Mr Roberts says that “it is all or none.”

Obviously it is just and equitable that any owner benefiting from receiving the cable TV service should pay for it. The difficulty arises in that owners are legally entitled to opt out of receiving the service but the type of cable installed in the building leads to practical difficulties in allowing owners to do so.

It appears that to change this technology is a matter which has not been taken up with Foxtel ( or previously with Optus.) It is not known whether it is technically possible to install wall socket filter mechanisms to individual units, or to have a central supply console controlled by the resident manager, so that owners who did not wish to receive cable TV could opt out of the supply. If the installation of such filters or a central console had been possible, given that all owners have been receiving a cable service for many years I would potentially be willing to order that all owners are deemed to have agreed to receive the service, and could opt out only by written notice to the body corporate. Owners would also have to give consent for reasonable access by Foxtel (or other supplier) to allow for the installation of a suitable filter, or other technology, to prevent the reception of cable TV, within the unit.

Mr McQuillan says that owners have not been paying for the service for 10 years by way of levies, but he does not dispute that the system of infrastructure has been in place for 10 years, or that he has been receiving the service. In my letter of 19th August 2008 I said –

“I am presuming that your objection is that you do not want to receive Foxtel cable TV in the lots owned by you, and not that you do not want to pay for it unless you have entered into an agreement with the body corporate.”

He replied: “...we do not agree that this should be a charge without individual owners agreeing...”

Whilst prior to 1st December 2006, the scheme was not run in accordance with then current body corporate legislation, in effect lot owners paid for all services provided by the body corporate out of rents received. Owners received a monthly account showing a total of all rents received, less expenses variable and monthly, arriving at a sum available for distribution in accordance to whether the owner owned a “loft” or a “standard” room. From the application, the example given for February 2006 shows a monthly expense for Budget Chain fees, advertising, electricity, gas, cable TV and wages.

I find that whether owners paid for cable TV by way of levies or by way of reduction from their rents received is somewhat academic. The lot owners have always paid for the cable TV by reimbursement to Rentwell which held the contract with the cable TV supplier. But they were obliged to pay for cable TV because they received it, like it or not.

I am not happy with the current situation at Edmonstone Lodge in the light of section 169(2) Standard Module and shall order that the body corporate enters into agreements with lot owners, retrospectively if required, for the supply of cable TV to lot owners. Lot owners not contributing to the Foxtel service are not entitled to receive it.

This then leads to the possible difficulty for owners who do not want the Foxtel service getting reception of “free- to-air” TV. A body corporate is under no duty to supply TV infrastructure to any lot, but if by the addition of the Foxtel service, the body corporate has taken away an existing ability to receive free-to-air TV, then the body corporate should replace or supply any necessary existing infrastructure.

If however, there has never been separate infrastructure for “free-to-air” and the TV service has always been delivered through a cable network, then any owner who wises to opt out of receiving TV via cable, must make arrangements for reception of free-to-air TV. If that is going to be difficult, for example, because of the situation of the building, or because there are no aerials/antennae available, owners and the body corporate might consider further options, possibly the upgrading of the infrastructure, seeking advice from Foxtel about blocking or directing reception of cable TV, or allowing individual owners to make improvements to common property for the benefit of their lots if further equipment is required.

Because of lack of information as to the technical possibilities and the capability of the available infrastructure prior to 1st June 2007, I make an order only that no owner is required to receive cable TV without their consent; that no owner need pay for cable TV if they do not receive it; and that the body corporate may not charge for the service without an agreement with the lot-owner to whom it is supplied.

I turn now to the Applicant’s outcome sought that an administrator is appointed to the scheme.

The evidence provided by the Applicant is that the committee was previously operating with members who were ineligible for election to the committee until the date on which this application was made. This is admitted by the committee members and the body corporate manager Dan Moy of Body Corporate Services. The former committee members say that they were unaware of the legislative prohibition on them being voting members of the committee when they were caretaking service contractors for the scheme or associates of the caretaking service contractor. The body corporate manager apologised for this “error of judgment.”

It seems that previously, there were very few owners, or perhaps only one lot owner, Phil Angus, who was not part of the caretaking service contractor’s family or an associate, so that there were few eligible people to be nominated for the committee. Whilst this was regrettable, there is no claim by the Applicant of dishonesty or deliberate wrongdoing in the dealings of the former committee.

There is now a new committee. There are six owners in this scheme, two of which, Mr Roberts and Lismaur (and its nominee Mrs Roberts) are ineligible to be voting members of the committee. This leaves four eligible entities who can make up a valid committee of a minimum of three persons, and includes the Applicant.

The fact remains that there two lot owners, Lismaur in the control of Mrs Roberts, and Mr Roberts, who together have 12 votes at a general meeting and can therefore legitimately pass any resolution which requires an ordinary resolution. Putting the scheme under administration will not alter this, and many small schemes have the same problem if the majority lot owner is upholding a minority viewpoint. In such circumstance, applications can only be made to this Office to overturn a motion which it is claimed in all the circumstances is an unreasonable decision of the body corporate, and contrary to section 94 Act.

If the Applicant, or any other owner has little faith in the current body corporate manager for allowing the previous committee to stand, then the answer is to engage a new body corporate manager, and refuse to renew the current body corporate manager’s contract, or seek to terminate the contract using the provisions of the legislation. If the majority lot owners succeed in re-engaging the same body corporate manager in opposition to the majority of owners (with the minority of lots), that might be a dispute suitable for this Office, although as quoted above at page 3 in the Dindas case, the burden on the minority owners to show that the engagement or re-engagement was unreasonable, would be quite high.

The Applicant in any event is only seeking that Carol Robinson of C Ann R Pty Ltd trading as Strata and Body Corporate Services acts as an administrator of the scheme to call and hold such committee meetings and general meetings as may be required. There is no evidence put forward by the Applicant that committee meetings or general meetings are not held, or are improperly convened. I am not satisfied that this scheme has need of an administrator.

It appears that the failings which prompted the Applicant to make this application have over time to a certain extent been addressed in that lot owners are now aware of the provisions of the legislation. I would encourage all lot owners and committee members to take advantage of the many Fact Sheets produced by this Office which are available on the Department’s website www.bccm.qld.gov.au and the “on-line training” available on that site which is designed principally for committee members but contains useful exercises for any person interested in the correct administration of a community titles scheme.

Number of Scheme:	17100
Name of Scheme:	Edmondstone Lodge
Address of Scheme:	24 Edmondstone Street SOUTH BRISBANE QLD 4101

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Edmondstone Lodge [2008] QBCCMCmr 326 (12 September 2008)