Harbour Court [2008] QBCCMCmr 41 (5 February 2008)

Last Updated: 1 March 2008

REFERENCE: 0840-2007

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

Mary Ann Cameron, the owner of lot 6

I hereby order that the application for orders to appoint an administrator to call and hold an Extraordinary General Meeting and to overturn Motion 10 of the Annual General Meeting of 26 May 2007, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0840-2007

“Harbour Court” CTS 21432

Application

This application is brought by the owner of lot 6, Mary Ann Cameron, against the body corporate, seeking the following orders:

1. Appoint administrator to call and hold extraordinary general meeting (EGM); and
2. To overturn motion 10 (Audit) of the annual general meeting (AGM) of 26 May 2007.
   

The applicant includes written consent from KBW Community Management Pty Ltd agreeing to them being appointed as administrators. The grounds to the application are to the following effect:

• The secretary failed to call and hold an EGM pursuant to a request for same by three lot owners, dated 18 September 2007;
• Payment of a stipend to the treasurer without due process;
• No audit has been undertaken for 3 – 4 years;
• No 10 year sinking fund budget exists;
• Chairperson also performs role of treasurer
• Financial statements don’t detail income and expenditure;
• Motions for projects are generalised with no detail;
• Agenda items from owners are not tabled or discussed
• Minutes of 2007 AGM indicate that levies have been increased by 10%; only some lots were increased;
• Notices, agendas, action plans and minutes of committee meetings are not circulated to all owners;
• Insurance was not raised, as moved at 2006 AGM;
• 2007 AGM minutes are incomplete – several items were omitted;
• At a meeting convened for 8 September 2007, the applicant, along with the owners of lots 2 and 8, attempted to raise and discuss all of the above issues without success. After lengthy and aggressive debate, the exercise was abandoned.
  

Jurisdiction

“Harbour Court” was registered as a group title (now know as standard format) plan of subdivision on 23 February 1984 comprising 12 lots and common property. The scheme is regulated by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Standard Module).

This is a dispute between an owner and the body corporate concerning claimed contraventions of the legislation and comes within the dispute resolution provisions of the Act (see ss.226, 227 & 228)

Non-Compliance with Section 242 Time Limit

Section 242 of the act imposes a time limit on certain adjudication applications. For an order declaring a resolution of the body corporate void, the adjudication application must be made within three months after the meeting at which the resolution was passed or purported to be passed. I consider the time limit imposed by section 242 of the Act applicable to the second order sought by the applicant, to overturn motion 10 of the AGM of 26 May 2007. This application was lodged on 18 October 2007, over four months since the AGM was held. The applicant provides the following by reason of explanation for the delay in lodging this application:

• Minutes of the 2007 AGM were not circulated until the end of June. An immediate request was put to the secretary for a special general meeting to be held for the purpose of resolving the concerns over the contents of the minutes.
• The secretary called a meeting for 8 September 2007. The meeting collapsed into chaos and the chairperson closed it down without any result being achieved.
• Another meeting was called for 6 October 2007. On 18 September 2007, three of the twelve lot owners requested that this be an EGM. The request was denied.
  

In the circumstances, I consider that the applicant was taking steps to attempt to resolve the issue within the legislative time frame and I am prepared to waive the non-compliance with the section 242 time limit.

Submissions

Submissions in response to the application were sought from all owners and the committee. Eight submissions were received, all from individual owners. Of the eight, I regarded one as being neutral, three being generally supportive of the applicant and the orders she seeks and four being generally unsupportive of the applicant and the orders she seeks. Detailed submissions from the secretary and chairperson/treasurer, opposing the application, were received, to the following effect:

• There is no record of an audit of the body corporate records ever having been done. The motion was duly considered at the 2007 AGM and it was decided not to have an audit. The applicant voted not to have an audit.
• The insurance coverage was increased pursuant to a motion at the 2006 AGM.
• The issue of conducting an audit can be considered again at an AGM, which is due to be held in March.
• The applicant has taken issue with the committee only since the front Cocoas palms were removed on 27 July 2007, two months after the 2007 AGM. The applicant was at the 2007 AGM and supported the garden makeover. The committee intends to replace the palms that were removed with palms of a more agreeable nature, to wood bark the gardens and to plant out drought tolerant plants. Before the meeting of 8 September 2007, a letter was sent to all lots owners with an agenda to nominate their choice on the garden project. Lots 3, 4, 5, 7 and 9 support the body corporate continuance of the project. Lots 10, 11 and 12 do not have gardens. Lots 1, 2, 6 and 7 did not respond.
• The request for an EGM was denied on the basis that one of the three owners requesting it was not an owner at the time of the 2007 AGM, which the EGM sought to overturn. Legal advice was obtained to this effect.
• It was first thought that a sinking fund budget was only required for the first 10 years; it is now understood that it is required indefinitely and is required to cater for a 10 year period. This will now be rectified.
• At the AGM, financials are tabled as a report.
• All owners have the right to add to the agenda. To date, no owner other than David Hamilton has advised of a particular item for the agenda.
• All work carried out is quoted for. The committee has a spending limit of $125 per lot, that is $1,500.
• It was discussed at the AGM that a 10% increase in levies was reasonable as there had not been an increase in five years and costs had gone up considerably. Owners were paying varying amounts of levies. It was unanimously decided to bring all owners up to an equal amount of $185.
• Committee meeting agendas and action plans are circulated to owners, as are minutes of the AGM.
• An administrator is not needed. The committee have been honest, transparent and committed.
• The reason Mrs Channer (mother of owner of lot 12) has not been receiving information from the body corporate is that the owner of lot 12 has the lot in the hands of a managing agent, who is the recipient of lot 12’s body corporate information.
  

Further information which I considered to be irrelevant to this dispute was also included. I have disregarded it for the purposes of my determination.

The applicant did not exercise her right to inspect the submissions or reply to them.

Decision

Applicable Law

• The body corporate must have its statement of accounts for each financial year audited by an auditor unless the body corporate resolves by special resolution not to have the statement audited (section 106(1), Standard Module).
• Even if the body corporate resolves not to have its statement of accounts for a particular financial year audited, the body corporate may, by ordinary resolution, resolve to have its accounting records for a particular period, or for a particular project, audited and appoint an auditor for the purpose (section 106(4), Standard Module).
• An EGM must be called if a notice asking for an EGM to consider and decide motions proposed in the notice is signed by or for the owners of at least 25% of all the lots included in the scheme and given to the secretary (section 61(1), Standard Module).
  

Request to Overturn Motion 10 (Audit) of AGM of 26 May 2007

The minutes of the AGM indicate that a motion was passed not to have an audit for the 2007 to 2008 accounting period. The voting results for the motion are not recorded, although the applicant is stated, in the secretary’s submission, to have voted for the motion not to have an audit.

While it appears as though the motion was not considered in the form required by the legislation, I am reluctant to overturn it at this late stage. The motion appears to have been in accordance with the wishes of both the applicant and other owners, at the time of the meeting. I decline to grant the order sought by the applicant.

Request for Appointment of Administrator

An order appointing an administrator for a scheme is not made lightly. Generally, to be successful in an application for the appointment of an administrator, an applicant must demonstrate that the day-to-day administration of the body corporate has broken down irretrievably, and/or that the affairs of the body corporate are in such disarray as to warrant the appointment of an administrator. One of the secondary objects of the Act is “to balance the rights of individuals with the responsibility of self management as an inherent aspect of community titles schemes”. In my view the right of a body corporate to administer its own affairs should therefore only be disrupted in very serious circumstances. I am not persuaded on the material before me that the appointment of an administrator is warranted in this case.

Having said this, I have identified the following practices of the body corporate that I do not consider to be in accordance with the legislation:

• Although it appears as though the financial statements are tabled at the AGM, it does not appear that they are forwarded to owners with the Notice of Meeting prior to the AGM. A copy of the statement of accounts must accompany the notice of the AGM first happening after the end of the financial year for which the accounts are prepared (section 105(6), Standard Module).
• It appears as though owners present at the AGMs have been permitted to submit motions for consideration at the meeting, from the floor. A general meeting may pass a resolution on a motion only if the motion is included as an item of business on the agenda and stated in a voting paper accompanying the notice of meeting (section 52(5)(a), Standard Module).
• At least three weeks before, but not earlier than six weeks before, the end of the body corporate’s financial year, owners must be invited to nominate for committee membership and also to submit motions for consideration at the AGM (sections 13 & 41(5), Standard Module). It does not appear that this occurs.
• Motions are recorded in the minutes of meetings as having been moved by someone and seconded by someone, but voting results are not recorded. The chairperson is required to declare the result of voting on motions at meetings by stating the number of votes cast for the motion, the number of votes cast against the motion and the number of abstentions from voting on the motion. These numbers must be recorded in the minutes of the general meeting (section 56(1), (2) & (3), Standard Module). A voting tally sheet recording certain specific information must also be kept (see section 56(4) Standard Module).
• It is not permissible to waive body corporate levies for committee members (or other owners) who perform services for the body corporate (See section 95, Standard Module). Committee members can be paid remuneration , allowances, or expenses only under the authority of an ordinary resolution of the body corporate, unless the payment is for reimbursement of expenses incurred by the member in attending a meeting if the amount is not more than $50 and the reimbursement does not result in the member being reimbursed more than $200 in a 12 month period for committee meeting attendance, in which case committee authorisation is sufficient (section 26(1)(f), Standard Module).
• The practice adopted at the 2007 AGM whereby it was decided that owners would contribute equally towards the sinking and administrative funds is incorrect. Contributions must (except for certain specific exceptions) be proportionate to the contribution schedule lot entitlement of the lot (section 95(5), Standard Module). The community management statement for Harbour Court indicates that lots 7, 8, 9, 10, 11 and 12 have a contribution schedule lot entitlement of 10, while lots 3 and 4 have a contribution schedule lot entitlement of 11 and lots 1, 2, 5 and 6 have a contribution schedule lot entitlement of 12. Those lots with a lot entitlement of 10 should each contribute 10/130 of the total body corporate budget, while those lots with a lot entitlement of 11 should each contribute 11/130 of the total body corporate budget and those lots with a lot entitlement of 12 should each contribute 12/130 of the total body corporate budget.
• It appears to me that the request for an EGM, made by the owners of lots 2, 6 and 8 was valid in terms of section 61 of the Standard Module and should have been complied with. Even if the secretary and treasurer’s contention that the request was flawed because the owners of lot 2 were not owners at the time of the 2007 AGM had some merit (and I doubt it does) this only affects two of the three motions requested to be considered.
• The sinking fund budget must cover a period of at least ten years (see section 94(3), Standard Module). The secretary acknowledges that this does not, at present, occur, although the error is to be rectified.
• It is not necessary for the administrative and sinking funds to be kept in separate accounts. Section 100(5) of the Standard Module states that all amounts received by the body corporate for the credit of the administrative or sinking fund must be paid into 1 or more accounts kept solely in the name of the body corporate at a financial institution. The treasurer seems to be of the view that the body corporate must have at least two accounts. This is not the case. One is sufficient, although more are allowed if required or desired by the body corporate.
  

While I acknowledge that there is some evidence of non-compliance with the legislation, it appears that the body corporate is continuing, for the most part, to meet its legislative obligations, financially and administratively. It holds AGMs and although those AGMs are not held strictly in accordance with the legislation, their validity has not been challenged through this office. The body corporate maintains adequate insurance, has a bank account, budgets for the administrative and sinking funds and has an elected committee.

The body corporate appears to me, to be functioning in substantial compliance with the legislation. It has been held that the very detailed provisions of the regulations make it almost inevitable that from time to time there will be non-compliance. Equally though the provisions of the Act make it clear that non-compliance of an insubstantial nature will not be allowed to imperil the actions of bodies corporate or their committees, particularly in the instance of committees where actions are taken bone fide.^[1] In this case, I am in no doubt that the actions of the executive committee were bona fide.

I am also reluctant to order than an EGM be held at this stage, when the AGM is due to be held in March. I see no reason why the applicant’s concerns cannot be addressed at the AGM, provided it is convened in accordance with the legislation.

I have therefore dismissed this aspect of the application. The applicant is at liberty to arrange for an independent audit of the books and records of the body corporate by an auditor of her choice, at her expense. She is also free to submit her own motions for consideration by owners at the next general meeting, which will be the AGM for 2008.

To facilitate the convening of the AGM for 2008 in accordance with the legislation, I propose to send the body corporate, via the secretary, an information pack containing relevant body corporate information. Individual owners can obtain their own copies if they wish, by contacting the Information Service. I encourage committee members to make use of the Information Service provided by this office to assist the body corporate to better comply with the legislation. The Information Service can be contacted on 1800 060 119.

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^[1] Wei-Xin Chen v Body corporate for Wishart Village [2001] District Court (Brisbane) 4080 of 2000