La Grande Residence [2008] QBCCMCmr 368 (10 October 2008)

Last Updated: 6 November 2008

REFERENCE: 0455-2008

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	17931
Name of Scheme:	La Grande Residence
Address of Scheme:	122-130 Old Burleigh Road BROADBEACH QLD 4218

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

Jean and George Saalmann, the Owner of lot 25

I hereby order that the application for an order that the extraordinary General Meeting held on 13 May be invalidated and motion 2 “Transfer Fee” be put to the body corporate again with a secret ballot is dismissed. I hereby declare that where the body corporate proposes to spend an amount on gardening services to be provided by a gardening contractor, which amount is likely to exceed the relevant limit for major spending under the Body Corporate and Community Management (Accommodation Module) Regulation 2008, the body corporate is required to obtain at least one two quotations for the provision of these services, which are to be submitted to a general meeting of the scheme for consideration by lot owners.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0455-2008

“La Grande Residence” CTS 17931

“La Grande Residence” consists of some 60 lots registered on a building units plan (now termed a “building format plan”) and has adopted the Body Corporate and Community Management (Accommodation Module) Regulation (hereafter “the Accommodation Module”).

APPLICATION

The applicants are the owners of lot 25 and seek the following outcomes:

1. That the extraordinary General Meeting held on 13 May be invalidated and motion 2 “Transfer Fee” be put to the body corporate again with a secret ballot.
2. With reference to the minutes of the committee meeting on 10 August 2007, item 4.5 Gardening Budget, that an alternative quote be obtained in accordance with the BCCM Act i.e. $250 x 60 units (or revision thereof) requiring a minimum of two tenders.
   

BACKGROUND

The applicants believe that certain irregularities occurred in the way voting was carried out on various motions at the last EGM for the scheme. In particular, they submit that their voting papers were hand delivered to the offices of Ernst Body Corporate Management on 12 May 2008 but were lost in their office, and as a result, their vote was not counted. They are concerned that other voting papers may have been lost within the body corporate manager’s office and that therefore the results of the ballot cannot be considered correct. Attached to the application was a letter from the owner of lot 10 who stated that she handed her voting paper to the applicant to pass on to the body corporate manager but there was no record of her vote having been received.

The applicants also believe that the acceptance by the committee of a garden maintenance tender allegedly for $31,240 on 10 August 2007, without an alternative tender was contrary to the Act, and therefore another quotation should be obtained.

SUBMISSIONS

Pursuant to section 243 of the Act, all lot owners as well as the body corporate committee were invited to make submissions regarding the application. A submission was made on behalf of the body corporate but no submissions were received from individual lot owners.

The body corporate manager made the following submissions on behalf of the committee:

• They are aware of the claims made by the owners of lots 25 and 10 that their completed voting papers had been misplaced;
• Although an exhaustive search was undertaken at the offices of the body corporate manager, they were unable to find the subject voting papers or any record of their receipt;
• However the inclusion of the votes either in favour or against the motion would not change the result of the voting;
• Participation at the last EGM for the scheme on 13 May 2008 was the highest in 5 years by 10 votes (excluding 4 invalid voting papers);
• At the last committee meeting on 10 August 2007, the long term gardener for the scheme, Ralph Wood (trading as Ferntasia) advised the committee of a recommended budget to maintain the gardens to a suitable standard. This budget recommendation was considered and it was resolved to include this amount in the next body corporate budget;
• The $31,240 per annum is a budget recommendation, not a single project, and there is no obligation on the body corporate to pay that amount to Ralph Wood (trading as Ferntasia);
• There is no contractual arrangement with Ralph Wood (trading as Ferntasia) who has been carrying out garden maintenance and submitting invoices for over 10 years;
• The administrative fund budget inclusive of the recommended budget amount for Gardens and Grounds maintenance was considered and approved at the Annual General Meeting held on 25 October 2007;
• Previous budget inclusions for the Gardens and Grounds were as follows:

2004 to 2005 - $18,040
2005 to 2006 - $21,140
2006 to 2007- $30,140
2007 to 2008- $31,240; and

• The committee disputes the applicant’s claims that they made the application “under the overhanging written threat of being sued” as it refers to personal correspondence issued over 5 years ago by a person who is no longer a member of the committee.
  

In response, the applicant advised as follows:

• The minutes of a previous meeting record that his is not the first time that a discrepancy has occurred with voting papers;
• The body corporate fees for this complex are $120 per week per lot which is comparatively high and is due to the “illegal use of the home unit complex providing itinerant accommodation to tourists, creating higher maintenance costs and vandalism repairs”.
• claims that the missing voting papers “would not change the result” is not sufficient excuse to deny their existence;
• Grounds maintenance is currently carried out by a garden maintenance contractor for $30,000 per year;
• As the Act states “that any work to be carried out or to supply services to the body corporate for a value greater than $250 by the number of lots must be accompanied by two quotations”
  

To assist further in my consideration of the application I sought the following additional information by way of letter dated 10 September:

• Minutes of AGM held on 25/10/2007;
• Accounts submitted to the last AGM;
• Administrative fund budget;
• Gardening functions required to be performed under Management and Letting agreement;
• Amounts paid to Mr. Ralph Wood / Ferntasia over the last 3 years.
  

In reply I received a copy of the minutes for the last AGM, held on 25 October 2007 including accounts for the period 1 August 2006 to 31 July 2007 , administrative fund budget for the period 1 August 2007 to 31 July 2008 and copy of the “Deed of Variation of Management and Letting Agreement”. I noted from the deed that the gardening duties of the resident manager are to “weekly cut grass and trim edges and supervise the gardening contractors for all gardening duties”.

While I noted that the budgets and accounts do not specifically refer to the amounts paid to the gardening contractor, the body corporate advised that the amounts paid for gardening duties undertaken by the contractor, “Ferntasia”, over the last 3 financial years were as follows:
1/8/2005 – 31/7/2006 $38,575.45;
1/8/2006 – 31/7/2007 $38,160.06 and
1/8/2007 – 31/7/2008 $40,574.84.

JURISDICTION

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;

(b) the exercise of rights or powers, or the performance of duties, under the Act or the community management statement; or

(c) a claimed or anticipated contractual matter about -

(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)).

DETERMINATION

At this point in time I am considering the application for the following orders:

• That the extraordinary General Meeting held on 13 May be invalidated and motion 2 “Transfer Fee” be put to the body corporate again with a secret ballot; and
• With reference to the minutes of the committee meeting on 10 August 2007, item 4.5 Gardening Budget, that an alternative quote be obtained in accordance with the BCCM Act i.e. $250 x 60 units (or revision thereof) requiring a minimum of two tenders.
  

The applicant has also presented arguments to the effect that La Grande Residence is “operating illegally as a tourist accommodation complex because while it was approved by the Gold Coast City Council as a “Class 2 residential building”, it is allegedly being used as a “Class 3 building” i.e. for hotel/ motel type accommodation. At this juncture I would point out that this is not a matter over which I have any jurisdiction, as it is not dealt with by the Body Corporate and Community Management Act and Regulation Modules. Rather, that is a matter dealt with by the Gold Coast City Council and the Building Code of Australia as it applies in Queensland.

The next matter for consideration is the applicant’s contention that that the extraordinary General Meeting held on 13 May be invalidated and motion 2 “Transfer Fee” be put to the body corporate again by way of a secret ballot.

The relevant motion is Motion 2 which read as follows:
“That the body corporate requires, as a condition of approving the assignment under Motion 1, above, that Ace investments Pty. Ltd. ACN 009725375 pay the body corporate the maximum amount assessable under section 83 of the Body Corporate and Community Management (Accommodation Module ) Regulation which is currently assessed to be $65,400”.

At that time section 83 of the Accommodation Module provided as follows:

Payment of amount on transfer
83.(1) This section applies to an engagement of a person as a service contractor, or the authorisation of a person as a letting agent, if—
(a) section 107(3) of the Act applies to the engagement or authorisation; and
(b) the engagement or authorisation is not the result of the exercise of an option by the service contractor or letting agent under the terms of the engagement of the person as a service contractor, or the authorisation of the person as a letting agent, contained in a previous engagement or authorisation for the scheme; and
(c) the approval of the body corporate is sought to the transfer of a person’s rights under the engagement or authorisation.
(2) The body corporate may require, as a condition of approving the transfer, that the transferor under the transfer pay the body corporate an amount (the “relevant amount”).
(3) The body corporate may require the payment of the relevant amount only if the date (the “approval date”) on which the body corporate approves the transfer is not more than 3 years after the date (the “contract date”) on which the engagement or authorisation was entered into, or on
which the term of the engagement or authorisation was extended.
(4) The relevant amount is the relevant percentage of the amount representing fair market value for the transfer.
(5) The relevant percentage is—
(a) if the approval date is not more than 1 year after the contract date—3%; or
(b) if the approval date is more than 1 year but not more than 2 yrs after the contract date, 2%; or
(c) if the approval date is more than 2 years, but not more than 3 years, after the contract date,1%.
(6) The body corporate may not require the payment of the relevant amount if—
(a) the transferor is a financier under section 109 of the Act who is acting under the provisions of the financier’s charge over the engagement or authorisation; or
(b) the transferor is seeking approval to the transfer on the basis of genuine hardship not reasonably foreseeable by the transferor at the contract date.
(7) The relevant amount must be paid into the body corporate’s sinking fund.

Although the minutes of the meeting do not record the receipt of voting papers from lots 25 and 10, the minutes do record results of the vote upon this motion as follows:
Yes – 11; No- 20; Abstentions- 2.

The question for me to determine is whether it is just and equitable to order that the extraordinary General Meeting held on 13 May be invalidated and motion 2 “Transfer Fee” be put to the body corporate again with a secret ballot.

To ascertain the extent of alleged irregularities in the manner that voting was conducted, I ensured that a copy of this application was provided to all lot owners as well as the body corporate. While I invited submissions from all recipients, no submissions were received from individual lot owners.
The body corporate advised that participation at the EGM on 13 May 2008 was the highest in 5 years by 10 votes (excluding 4 invalid voting papers) and the inclusion of the votes either in favour or against the motion would not change the result of the voting.

While I do not see any basis to doubt the applicant’s allegation that voting papers from lots 10 and 25 went astray, I have some difficulty in coming to the conclusion that this should vitiate the results of voting upon the motion.

All lot owners were provided with a copy of the first 5 pages of the application, including the concerns regarding missing voting papers, but there were no allegations of other voting papers going astray or being tampered with. That the papers from lot 10 and 25 went missing is cause for concern, but on balance, the evidence at hand suggests that the absence of the voting papers would not have made any difference to the outcome of the vote upon the subject motion ,and hence, there has been no detriment caused. In the circumstances I do not believe it would be just and equitable to invalidate motion 2 and require that the motion again be put to a vote of the body corporate.

The next matter for consideration is the request for the following order:

With reference to the minutes of the committee meeting on 10 August 2007, item 4.5 Gardening Budget, that an alternative quote be obtained in accordance with the BCCM Act i.e. $250 x 60 units (or revision thereof) requiring a minimum of two tenders.

The body corporate has replied that the “long term gardener for the scheme, Ralph Wood (trading as Ferntasia) advised the committee of a recommended budget to maintain the gardens to a suitable standard and that it was resolved to include this amount in the next body corporate budget”. However, the body corporate has also advised that there is no obligation on the body corporate to pay that amount to Mr. Wood. Further, in response to my queries, I was advised that the amounts paid for gardening duties undertaken by the contractor over the last 3 financial years were as follows:
1/8/2005 – 31/7/2006 $38,575.45;
1/8/2006 – 31/7/2007 $38,160.06 and
1/8/2007 – 31/7/2008 $40,574.84.

The applicant argues that the continuing engagement of Mr. Wood amounts to “major spending” which, at the date of the application, was calculated as $250 multiplied by the number of lots i.e. $250 x 60 or $15,000, and therefore, in accordance with section 102 Body Corporate and Community Management (Accommodation Module) Regulation 1997, 2 quotations should have been obtained before the expenditure was voted upon at a general meeting.

As of 30 August 2008, the Body Corporate and Community Management (Accommodation Module) Regulation 1997 was replaced by the Body Corporate and Community Management (Accommodation Module) Regulation 2008, and section 102 of the 1997 Regulation was replaced by section 150 of the 2008 Regulation which provides as follows:

150 Quotes for major spending decided at general meeting [SM, s 152]
(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 giving effect to the proposal is more than the relevant limit for major spending for the community titles scheme.
(2) The owner of each lot must be given copies of at least 2 quotations for carrying out the work or supplying the personal property or services.
(3) If the motion is proposed by the committee, the committee must obtain the quotations.
(4) If the motion is not proposed by the committee, the person proposing the motion must obtain the quotations and give them to the secretary.
(5) Copies of the quotations or, if voluminous, summaries of the quotations and advice about where the complete documents may be inspected, must accompany the notice of the meeting where the motion is to be considered.
(6) If, for exceptional reasons, it is not practicable to obtain 2 quotations, a single quotation must be obtained and must accompany the notice of meeting.
Example—
If goods to be acquired by the body corporate are obtainable from only 1 source, a quotation for supplying the goods must be obtained from the source and circulated with the notice of meeting. The fact that goods
with the necessary characteristics are only obtainable from a single source would be an exceptional reason for not obtaining 2 quotations for the supply of the goods.
(7) Unless subsection (6) applies, the motion must be stated as a motion with alternatives in the agenda and on a voting paper for the meeting.
(8) Each quotation obtained under this section must be retained as an attachment to the minutes of the meeting where the quotation is considered.
(9) For this section—
(a) the cost of engaging a body corporate manager or a service contractor includes any payment for the body corporate manager’s or the service contractor’s services,provided for under the engagement, for the term of any right or option of extension or renewal of the engagement; and
(b) if a series of proposals forms a single project, the cost of carrying out any 1 of the proposals is taken to be more than the relevant limit for major spending for the scheme if the cost of the project, as a whole, is more than the relevant limit.

The relevant limit for major spending is defined in the Dictionary section of the Regulation as follows:

relevant limit for major spending, for a community titles scheme, means—
(a) the amount last set as the relevant limit for major spending by ordinary resolution of the body corporate at a general meeting; or
(b) at any time there is no amount set, the lesser of the following amounts—
(i) an amount worked out by multiplying $1100 by—
(A) for a principal scheme in a layered arrangement of community titles
schemes—the number of layered lots for the scheme; or
(B) for another scheme—the number of lots included in the scheme;
(ii) $10,000.

Therefore the applicant’s argument that expenditure on gardening services provided by Mr. Wood, (trading as Ferntasia) exceed the relevant limit for major spending, continue to apply notwithstanding changes to the definition of relevant limit for major spending under the Body Corporate and Community Management (Accommodation Module) Regulation 2008.

On the other hand however, the body corporate argues that the $31,240 per annum is a budget recommendation, not a single project, and although it has paid Mr Wood in excess of $38,000 per annum for each of the last 3 years, there is no obligation on the body corporate to pay that amount to Mr. Wood as there is no contractual arrangement with him. Rather, it is argued, he periodically performs work and submits invoices for work done.

While the wording of this section is not without ambiguity, it is my view that the purpose of section 150 (previously section 102) is to enable lot owners to determine whether a proposed item of expenditure is reasonable, and the section is not limited in its scope to the acquisition of goods or engagement of a contractors by means of a written contract.

In a similar case considered by this Office[1] an adjudicator declared that an 84 lot body corporate which proposed to spend up to $20,000 to carry out certain work during the year was required to give owners the choice of at least two quotes.

I believe that the words “proposes the carrying out of work or the acquisition of personal property or services” is wide enough to include the engagement of a person to provide gardening services at a cost of around $40,000 per year. The absence of a written agreement does not necessarily mean that section 104 (now section 150) does not apply. It is clear that Mr Wood’s firm has carried out certain specified functions, namely watering gardens, fertilising lawns, treating lawns for weeds, treating plants for pests/ insects, trimming and pruning plants and periodically mulching gardens, for some 10 years. Further it is not disputed that over the last 3 financial years the body corporate has paid “Ferntasia” the following amounts:
1/8/2005 – 31/7/2006 $38,575.45;
1/8/2006 – 31/7/2007 $38,160.06 and
1/8/2007 – 31/7/2008 $40,574.84.

It would therefore seem to me that unless the services of Mr Wood (trading as Ferntasia) are terminated, the total amount of remuneration paid to him over the course of the year can be expected to exceed the relevant limit for major spending.

The purpose of section 104 (now section 150)of the Accommodation Module, outlined above, is to ensure accountability and transparency in the body corporate’s dealings, and to dispel any suspicions that may be raised as to whether the body corporate is receiving value for money. In my view, in order to comply with that section, the body corporate should seek at least two quotations from service providers which should be presented to a general meeting for consideration. In deciding which quotation to accept, the body corporate would obviously be entitled to consider both price and non-price criteria which may include expertise, reputation or previous experience in caring for the scheme’s gardens.

Given the ambiguity regarding this matter I do not believe it would be just and equitable to impugn previous decisions of the body corporate regarding the engagement of the gardening contractor, Mr Wood (trading as Ferntasia) and indeed, there would be little to be achieved in doing so where the services have already been provided.

However, I do propose to make a declaratory order that in future, where the body corporate proposes to spend an amount on gardening services to be provided by a gardening contractor, which is likely to exceed the relevant limit for major spending, the body corporate is required to obtain at least two quotations for the provision of these services, which are to be submitted to a general meeting of the scheme for consideration by lot owners.

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[1] Application 53-2003, South Pacific Plaza, DJ Reardon, 11 February 2003.