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Harbour Court [2008] QBCCMCmr 381 (16 October 2008)

Last Updated: 6 November 2008

REFERENCE: 0569-2008


ORDER OF AN ADJUDICATOR


MADE UNDER PART 9 OF CHAPTER 6


BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997


Number of Scheme:
21432
Name of Scheme:
Harbour Court
Address of Scheme:
85 Miller Street URANGAN QLD 4655

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Kathy Taylor, the Owner of Lot 6


I hereby order that Graham Wareing of KBW Community Management Pty Ltd (5/12 Nissen Street, Pialba, Queensland, 4655) is appointed as Administrator (‘the Administrator’) of the Body Corporate for Harbour CTS 25253 and shall hold the appointment from the date of this order until the close of the 2009 Annual General Meeting.

I further order that the Administrator shall hold the powers of chairperson, secretary, treasurer and the committee exclusively for the period of administration and cannot delegate those powers to any other person.

I further order that the Administrator shall be entitled to remuneration for administration services from the Body Corporate for Harbour Court in the amount of $220 (inclusive of GST) for initial set up and $350 per month (inclusive of GST) for fees and disbursements, in accordance with the quote of 13 October 2008, and is authorised to levy contributions to meet the costs of the administration.

I further order that all lot owners in the scheme shall cooperate promptly with the Administrator in all matters relating to the administration of the Body Corporate for Harbour Court, including delivering all body corporate records in their possession to the Administrator within seven (7) days of the date of this order, and in giving information as required concerning the Body Corporate’s affairs and the operation of all financial institution accounts.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0569-2008


“Harbour Court” CTS 21432


Harbour Court community titles scheme 21432 (Harbour Court) consists of 12 lots and common property. The community management statement (CMS) for Harbour Court indicates that the Body Corporate and Community Management (Standard Module) Regulation 2008[1] (Standard Module) applies to the scheme. Department of Natural Resources and Water records show the scheme is registered as Group Titles Plan (GTP) 1158 which is a Standard Format Plan (SFP) of subdivision.


APPLICATION


Pursuant to the Body Corporate and Community Management Act 1997 (Act), this application was made by Kathy Taylor, Owner of Lot 6 (applicant) on 11 July 2008. The applicant sought orders against the Body Corporate for Harbour Court (respondent) in the following terms:


1. Appoint an administrator/body corporate manager for 12 months

2. All accounting, associated book work and company seal be handed to an administrator.


PROCEDURAL MATTERS


After clarification of the application as sought by case management staff of the Commissioner’s Officer, the application was provided to the Body Corporate with an invitation to the Committee and all owners to respond to the matters raised by the application[2]. Submissions were made by the owners of eight lots. The applicant inspected the submissions received and made a written reply.[3]


A dispute resolution recommendation was made referring the dispute to departmental adjudication. I then investigated the dispute, pursuant to section 271 of the Act, which included reviewing the application and submissions and seeking further information from the parties as detailed below.


MATTERS IN DISPUTE


The application relates to the functioning of the Body Corporate. The facts of the circumstances of the dispute, as outlined in the material from the parties, can be summarised as follows.


The applicant says there is internal conflict in the scheme, and particularly financial management and maintenance of the scheme. She argues there is a need to appoint an external body corporate manager (BCM) to enable the scheme to operate smoothly.


The last Annual General Meeting (AGM) for the scheme was held on 30 March 2008 with an Extraordinary General Meeting (EGM) held on 29 June 2008. It seems that the three previous Committee members (Duck, D Hobbs and Sims) resigned prior to the AGM. Three owners (Hamilton, Brown and Lever) nominated as ordinary Committee members but there were no nominations for executive members. Sims then continued to act as secretary in a ‘caretaking’ role. At the EGM another ballot was held for the Committee with M Hobbs elected chairperson, Sims elected Secretary, Taylor elected treasurer and Brown, Brooks and Hamilton elected as ordinary members. M Hobbs resigned from the Committee less than a month later and Sims apparently resigned in September. This appears to leave Taylor, Hamilton, Brown and Brooks as Committee members with the positions of Chair and Secretary vacant.


The applicant notes the following particular concerns:

Submissions from five owners support the application.

I also note that one submission claims the application documents were not received from the Body Corporate, and another says they were sent late and not delivered to his address for service.


Submissions from three owners appear to oppose the application:

In her reply to submissions the applicant comments on some of the specific incidents discussed in her application and the submissions. She says the owners objecting to outside management are the owners who have been ignoring the requests of other owners and selectively spending in the past. She wants protection for all three owners, not just these three. She says they just want restoration of the complex, and higher levies would not have been required if the Body Corporate had acted responsibly and no allowed the complex to fall into disrepair. The applicant also says that a letter to the acting secretary requesting an EGM on 31 August was ignored, as were emails and a registered letter.


Pursuant to my investigative powers under section 271 of the Act I requested the applicant provide additional meeting documentation and details of the current Committee.


The application includes a quote from Whittles Management Services (Qld) to act as BCM for the scheme for 12 months. The schedule specified a fee of $165 per lot and a range of additional services. At my request a member of the Commissioner’s Office staff contacted Whittles to confirm their fees for appointment as administrator until the end of the 2009 AGM. They then provided a quote of $465 per lot, totalling $5,580. Given the increase I invited the applicant to provide alternate quotes. She then provided a quote from KBW Community Management Pty Ltd, which included an initial set up fee of $220, along with monthly fees and disbursements of $350. With the next AGM required to be held between March and May this would appear to result in a total cost of no more than $2,472 and potentially less. The applicant confirmed she had no objection to the cheaper quote.


JURISDICTION


I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.[4]


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 CMS; or

(b) the exercise of rights or powers, or the performance of duties, under the Act or the CMS; or

(c) a claimed or anticipated contractual matter about -

(i) the engagement of a person as a body corporate manager or service contractor; or

(ii) the authorisation of a person as a letting agent.


An order may require a person to act, or prohibit a person from acting, in a way stated in the order.[5] An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate.[6]


Specifically, and without limiting the power to make an order under section 276(1), an adjudicator may order the appointment of an administrator, and authorise the administrator to perform obligations of the body corporate, its committee, or a member of its committee under this Act or the community management statement or the obligations of the body corporate under another Act.[7] An administrator appointed by an adjudicator has the powers given to the administrator under the order.[8] Section 301(4) of the Act provides that the order may:

(a) withdraw all or particular stated powers from the body corporate (and any delegate of the body corporate) or from stated officers of the body corporate until the administrator has taken the necessary action to secure compliance with the obligations; and
(b) require officers or delegates of the body corporate to take stated action to help perform the work the administrator is required to perform; and
(c) fix the administrator’s remuneration.

DETERMINATION


The key issue for consideration in this matter is whether it is appropriate in the circumstances to appoint an administrator to undertake the functions of the Committee. In response to some of the matters raised by the parties I will also provide some information which may assist owners in better understanding their roles and responsibilities under the legislation.


Appointment of an Administrator


As owners will be aware, an Adjudicator considered the appointment of an administrator in this scheme as recently as February 2008[9]. As Adjudicator Schmidt noted in that application, adjudicators do not take the appointment of an administrator lightly. Such an action would not only deprive the right of owners to elect its own committee to administer the scheme on a day-to-day basis, it could have a significant cost impact on all owners. The responsibility of self administration is an inherent aspect of community titles schemes. Therefore, an applicant must demonstrate that the administration of the body corporate had broken down irretrievably or is in significant disarray.


Adjudicator Schmidt highlighted numerous practices of the Body Corporate that she considered were not in accordance with the body corporate legislation. However she concluded that the Body Corporate was largely meeting its legislative obligations and so was not persuaded that an administrator was warranted based on the material before her. It is then necessary for me to determine whether the circumstances now, some eight months later, have altered sufficiently to now justify the appointment of an administrator.


At the start I will say that, even if it were possible, I do not consider it necessary to the determination of this application to make findings of fact regarding the numerous allegations passed between the parties regarding what has or has not happened in the past. However it does appear to me that these allegations are indicative of deteriorating relationships in the scheme. Submissions from all factions highlight the level of dispute and disharmony in the scheme. I will stress that I do not consider that blame for this disharmony rests with any one party. It appears that key players on both sides have acted inappropriately at times. Further, there appears to be a misunderstanding of some legislative requirements on both sides. This is understandable in some respects given the complexity of the body corporate legislation, but it is relevant because it seems neither side is entirely in the ‘right’ or ‘wrong’ on many issues.


Without conducting an exhaustive investigation of each point (and the documentation provided by the applicant seems to be incomplete), it does appear that the Body Corporate may have continued to fail to comply with some of the legislative requirements highlighted in the February order, and there may be further breaches of the legislation. I would stress that I have no evidence that there was anything deliberate or intentional in any such failures. Some issues include:

I am particularly concerned about the composition and process of appointing the Committee. Firstly, before every AGM, the secretary must give each lot owner a notice inviting the nomination of an individual for committee membership. The notice must be given at least three weeks before, but not earlier than six weeks before, the end of the financial year[19]. It is unclear if this occurred.


Elections must be held in accordance with sections 16 to 27 of the Standard Module unless the body corporate has decided by special resolution that elections be held in another way that is fair and reasonable. The election of the executive positions is conducted first, followed by the ordinary positions. If there is only one nomination for any of the positions that person is elected unopposed. If there are no nominations for any of the positions the chairperson must invite nominations for the positions from owners present at the meeting or in writing from owners not present. If there are more than nominations that the required number for a position then a ballot is held. In this case there were apparently no nominations for the three executive positions but it is not apparent that there was a call for nominations for these positions at the meeting. It was also inappropriate for persons who had not nominated for a position on the Committee at the AGM to then purport to act in ‘caretaker’ role when positions were left vacant, particularly given that three persons were elected to ordinary positions on the Committee at the AGM who could have undertaken this role.


If at least one executive position is not filled or the total number of voting members is less than three, an EGM must be called[20]. The EGM must be called within one month of the AGM and held within two months. In this case it was called over two and half months later and held three months later. At the EGM, the body corporate may appoint a person who is eligible to be a member of the committee to fill any vacancy and an election is not necessary. The agenda of the EGM must also include a motion to approve the engagement of a body corporate manager under Chapter 3 Part 5 of the Standard Module. That motion will only be considered if at least one executive member position is not filled or the total number of voting members is less than three. In this case the EGM appointed persons to fill the three Committee positions left vacant after the AGM. But the meeting also purported to elect three ordinary Committee positions, despite the fact that three members had been appointed at the AGM. Two of the ordinary members elected at the EGM were elected at the AGM but it is unclear whether the third (Lever) had resigned or was just incorrectly replaced.


Sections 36 to 41 of the Standard Module applies to the filling of casual vacancies on the Committee. These sections applied when M Hobbs and Sims resigned. As the number of members had not fallen below the number required for a quorum, the remaining Committee was required, within one month of the vacancies arising, to either appoint an eligible person to fill the vacancy or call a general meeting to fill the vacancy. It is not apparent that there has been any attempt by the Committee to fill the positions of chairperson or secretary.


Given the confusion caused by the various appointments and resignations and the doubt over numerous steps in the process including the validity of the AGM and the EGM, I have reservations regarding the validity of the current Committee. This, combined with concerns regarding the apparent failures in regard to the compliance with the legislation and the increasing internal conflict, leads me to consider that the scheme is now in a state of significant disarray.


Applicable format plan


It seems there is confusion regarding the format plan applying to this scheme. I provide the following general information to assist owners understand the difference. In doing so I stress that the format plan applicable is different to the regulation module applicable (which currently is the Standard Module) as it appears there is some confusion between the two.


A building format plan of subdivision (BFP), previously known as a building units plan (BUP) is usually a subdivision of a building. The boundaries are defined by reference to the structural elements of the building, such as walls, floors and ceilings. The body corporate is usually responsible for maintaining the exterior of the building. It will also normally be responsible for gardens and lawns on common property, the foundations, roofing structures, any doors or windows situated in a boundary wall between a lot and the common property, and utility infrastructure servicing more than one lot or on common property or in a boundary structure. Lot owners will be responsible for elements within the boundaries of the lot, including utility infrastructure servicing only their lot and wholly within the boundary of the lot. The body corporate must take out building insurance for the full replacement value of each building which contains a lot.


A standard format plan (SFP), previously known as a group titles plan (GTP) is a subdivision of land with references to marks on the ground or a structural element (for example, survey pegs in the ground or the corner of a building). For example, a standard format plan may include a townhouse complex, where the individual lots comprise a building and land such as a courtyard. In an SFP the body corporate is usually responsible for the common property, including roads, gardens and lawns on common property, and utility infrastructure servicing more than one lot or on common property or in a boundary structure. The lot owner will usually be responsible for all their building, including the exterior walls, doors, windows and roof, and any lawns and gardens within the boundary of the lot. They will also be responsible for utility infrastructure servicing only their lot and wholly within the boundary of the lot. Where a building on one lot has a common wall with a building on an adjoining lot, the body corporate must take out building insurance for the full replacement value of each building. Where SFP has stand alone buildings insurance will be the responsibility of the lot owner but the body corporate may set up a voluntary insurance scheme.


Harbour Court is, and has always been since registration of the scheme, registered as an SFP. Regardless of if the Body Corporate has, in error, acting as if they are a BFP for 20 years, it cannot now simply ignore that it is a SFP or elect to continue to follow the BFP requirements, regardless of any difference in cost. If all owners particularly wanted the scheme to be registered as a BFP this may technically be possible. However it would require the current scheme to be extinguished, and then plans for a new BFP scheme prepared, submitted to the local council and, if approved, registered with the Registrar of Titles. I anticipate that this would be a lengthy and expensive process and I suggest that owners seek professional advice before pursuing such a course.


For as long as the scheme remains in its current format it is required to follow the legislative provisions applying to SFP, including the maintenance and insurance provisions provided above. This means that the Body Corporate is not normally entitled to pay for maintenance required on an individual lot. Owners can contact the Information Service provided by this Office on freecall 1800 060 119 if they require more information about their responsibilities.


Maintenance


There appears to be considerable concern regarding maintenance in this scheme. I have briefly outlined the maintenance responsibilities of the Body Corporate above, and also refer the parties to sections 159 and 170 of the Standard Module. Owners should note that where the Body Corporate is required by legislation to undertaken maintenance, this is a statutory obligation and not a choice that can be made dependant on a desire to minimise expenditure. Part of the responsibility of ownership of a lot in a community titles scheme is accepting that there will be costs incurred in maintaining the common property.


That said, it is to be expected that not all owners will agree on what is necessary to fulfil the Body Corporate’s maintenance obligations. If an owner considers something is required they should raise it with the Committee (provided it is within the Committee spending limit). If the Committee does not take action (or it is above the Committee spending limit) the owner who asserts the work is required should submit a specific motion to a general meeting, with appropriate quotes and other relevant information. If the Body Corporate does not agree to the maintenance at a general meeting, and an owner considers this refusal is unreasonable, the concerned owner can challenge the decision in this Office.


By-laws


Brief comments also suggest some confusion regarding the by-laws applying to this scheme. In this regard I note that Harbour Court was registered in February 1984 under the Building Units and Group Titles Act 1980 (BUGTA), which applied to schemes prior to the commencement of the current Act. The CMS for Harbour Court that was automatically registered on 15 July 2000 under the transitional provisions of the Act states that the by-laws for the scheme are taken to be those in effect as at 13 July 2000. No alternative by-laws were recorded following the registration of the scheme. Accordingly, while the current Act now applies to the operation of the scheme, the applicable by-laws are those contained in Schedule 3 of BUGTA.[21]


It appears there may have been some interest in recording new by-laws. To do so the Body Corporate must consent to record a new CMS at a general meeting. If the new CMS only differs from the current CMS by recording new by-laws (other than exclusive use by-laws) a special resolution will be sufficient. Otherwise a resolution without dissent will be required. Normally the new CMS or the terms of the new by-laws would be before owners when determining whether to consent to the new CMS. The recorded CMS must be consistent with the consent given.[22]


There are various limitations on by-laws that can be adopted by a body corporate. By-laws cannot be inconsistent with the Act or other legislation; restrict the type of residential use of a lot that can lawfully be used for residential purposes, prevent or restrict a transmission, transfer, mortgage or other dealing with a lot; discriminate between types of occupiers, or impose a monetary liability on an owner or occupier (unless in an exclusive use by-law)[23].


Conclusion


I am reluctant to appoint an administrator and I acknowledge the financial impost on owners from this action. However, I see no evidence that the conflict apparent when the Adjudicator considered the situation in February shows any sign of being resolved. Rather the situation appears to have significantly deteriorated. Without making a conclusive determination (and the application does not seek orders on such issues) there appears to be some doubt over the validity of the current Committee, the EGM and the AGM.


On balance I consider that it is appropriate to appoint an administrator for a short period to get the administration of the scheme ‘back on track’. The applicant seeks an administrator for 12 months but this would end mid financial year and could leave the scheme in limbo when the administration period ends. I propose to appoint an administrator from the date of this order until the close of the 2009 AGM. Hopefully the appointment of an independent administrator will provide owners with some breathing space and the opportunity to focus on the maintenance and other issues facing the scheme, rather than being embroiled in personality issues relating to Committee membership and functions. The administrator will also provide a model for how meetings should be conducted, and owners will be able to use the administrator’s documentation as a guide to conducting future meetings after the administration period has ended.


At the 2009 AGM a proper Committee election can be conducted. Those nominating for Committee membership at that time should be aware of the obligations provided in the Code of conduct for committee voting members[24]. Owners will also have the opportunity to submit a motion to the AGM for the appointment of a BCM to assist the Body Corporate with administration on a longer term basis. Owners should ensure any motion and proposed terms of engagement comply with sections 114 to 121 of the Standard Module. I encourage owners to read the fact sheet on BCMs which is published by this Office, along with numerous other useful fact sheets[25].


Normally a BCM exists concurrently with a Committee. The BCM does not have responsibility for the Body Corporate and its maintenance and administration but, rather, carries out the decisions of the Body Corporate as passed in general and committee meetings. In rare circumstances a BCM may be appointed to carry out the functions of the Committee and the executive[26]. This engagement can only be made if the Body Corporate is unable to fill all executive positions on the Committee or three or more members of the Committee. An EGM must be held after the AGM fails to filled the relevant positions, or a vacancy arises which cannot be filled by the Committee. The EGM agenda must include a motion to engage a BCM under Chapter 3 Part 5 of the Standard Module, which can only be considered if the necessary positions remain unfilled at the meeting.


I have no evidence that either of the two alternative companies nominated by the applicant is not appropriate for appointment as administrator. Both are members of the Community Titles Institute of Queensland[27] and I understand both have previously been contemplated by owners. Of the two quotes one is significantly lower and I consider it reasonable to limit the costs to owners. On that basis, I propose to appoint Graham Wareing of KBW Community Management Pty Ltd as administrator. The Body Corporate will be responsible for the administrators fees for providing administration services, as specified in the quote dated 13 October 2008 provided to this Office.


I encourage all owners to work cooperatively with the administrator, to put the disputes of the past behind them, and to use this period to try to establish a degree of harmony in the scheme. I also encourage owners to make use of the information resources of the Commissioner’s Office and the administrator to better inform themselves of their rights and responsibilities under the legislation.


[1] As of 30 August 2008 the new Standard Module came into force, replacing the Body Corporate and Community Management (Standard Module) Regulation 1997 which applied until that date.
[2] Section 243 of the Act,
[3] See sections 246 and 244 of the Act respectively
[4] See sections 227, 228, 276 and Schedule 5 of the Act
[5] Section 276(2) of the Act
[6] Section 284(1) of the Act
[7] See Item 23 of Schedule 5 to the Act
[8] See section 301(2) of the Act
[9] Harbour Court [2008] QBCCMCmr 41 (5 February 2008), Ref: 0840-2007
[10] Section 74 of the Standard Module
[11] Section 87(5)(a) of the Standard Module
[12] Sections 69 and 71(5)(a) of the Standard Module
[13] Section 71(5)(a) of the Standard Module
[14] Section 96(3)(e) of the Standard Module. Under section 93(4) a voting tally sheet must also be retained.
[15] As required by section 154(6) of the Standard Module
[16] Section 139 and 141 of the Standard Module
[17] Sections 114 to 121 of the Standard Module

[18] Section 155 of the Standard Module. This Body Corporate is always required to have its financial statements audited unless it passes a special resolution on the specific form set out in the section.
[19] Section 16 of the Standard Module
[20] Sections 29 to 32 of the Standard Module
[21] See section 339(5)(a) of the Act and section 30 of the BUGTA.
[22] See sections 62 to 66 of the Act
[23] Section 180 of the Act
[24] Schedule 1A of the Act, pursuant to section 101B of the Act

[25] Contact the Information Service on 1800 060 119. Fact sheets and other useful information is also published on the Commissioner’s Office website: www.bccm.qld.gov.au
[26] Sections 58 to 62 of the Standard Modoule
[27] www.ctiq.org.au


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