Aegean [2008] QBCCMCmr 423 (13 November 2008)

Last Updated: 9 December 2008

REFERENCE: 0941-2008

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	9646
Name of Scheme:	Aegean
Address of Scheme:	30 Laycock Street SURFERS PARADISE QLD 4217

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

Scotri Pty Ltd, the Ownerof Lot 40

I hereby order that the application for an interim order: Suspend the Special Resolution Motion that was passed at the EGM. Copy of the Motion is attached to this application. is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0941-2008

“Aegean” CTS 9646

Aegean community titles scheme 9646 (Aegean) consists of 126 lots and common property. The Community Management Statement (CMS) for Aegean indicates that the Body Corporate and Community Management (Accommodation Module) Regulation 2008[1] (Accommodation Module) applies to the scheme. Department of Natural Resources Mines and Water records show the scheme is registered as Building Units Plan 5555.

INTERIM APPLICATION

This is an application for interim orders lodged by Scotri Pty Ltd, Owner of Lot 40 (applicant), who is represented by Bryan Hateley, on 3 November 2008 under the Body Corporate and Community Management Act 1997 (Act). The applicant sought interim orders against the Body Corporate for Aegean (respondent) in the following terms:

Suspend the Special Resolution Motion that was passed at the EGM.

Copy of the Motion is attached to this application.

The application also seeks the following final order:

EGM to be reconvened and Special Resolution Motion No 2 that was passed at the EGM held 17 October 2008 be suspended until such time another EGM is held.

PROCEDURAL MATTERS

In accordance with section 247 of the Act, the Commissioner for Body Corporate and Community Management has referred the application to me to decide whether the nature or urgency of the circumstances of the application warrant an interim order. The Commissioner has referred the application notwithstanding that affected persons have not been given notice of the application or afforded an opportunity to make submissions about the application[2].

In the circumstances, I provided the Committee and the Body Corporate Manager (BCM), Capitol Body Corporate Administration (CBCA), with a limited opportunity to make a submission in regard to the interim order application. Submissions were received from Committee and the BCM.

MATTERS IN DISPUTE

This application relates to voting at the Extraordinary General Meeting (EGM) of the scheme held on 17 October 2008. The meeting considered three motions, being the confirmation of the previous meetings minutes (Motion 1), a motion with alternatives requiring a special resolution for lift works (Motion 2), and the rescission of two motions passed at the previous meeting in May 2008 (Motion 3)[3]. I will summarise the issues as outlined in the application and submissions.

The applicant outlines the following incidents with votes at the EGM:

• The applicant says he mailed a written vote some two weeks before the EGM, attached to his nominee proxy form. At the meeting he was asked if he was voting from the floor and when he referred to his voting paper he was told it had not been received. After a search of the BCM’s offices a scanned copy of the voting paper was located. The BCM apologised.
• An owner who attended the meeting posted their voting paper and nominee proxy forms to the BCM’s Surfers Paradise address but they didn’t arrive in time for the meeting because they then needed to be mailed to the BCM’s Brisbane address.
• The proxy holder for Lots 15 and 119 posted their votes in sufficient time to reach the Surfers Paradise office of the BCM but were not recorded. The applicant says he voted no to Motion 2 for both lots and will sign a statutory declaration to this effect on his return from holidays.
• The Owner of Lot 9 is concerned that that her votes were not recorded. She faxed her votes to the BCM’s Surfers Paradise office on 13 October 2008, as discussed with the BCM.
• The Owner of Lot 4, who was present, was incorrectly recorded as submitting a postal vote when the vote was actually for Lot 6.
• The meeting was advised that the Owners of Lot 116 and 122 were unfinancial and so eligible to vote. However the applicant says the Owners of Lots 6, 25 and 118 were also unfinancial but their votes were counted.
• The attendance and voting register does not record how the Owners of Lot 91, 92, 94, 95, 97, 113, and 117 voted (that is, by voting paper, proxy or from the floor).
  

The applicant queries how many other voting papers were misplaced or missed the meeting, and how many other errors were made which were not identified. The applicant is concerned of the effect on Motion 2 which required a special resolution to pass. Accordingly he argues that Motion 2 should not be carried out until another EGM can be held and the voting recorded correctly.

The submission from the Committee includes the following:

• There was considerable tension at the EGM, with particular hostility by Hateley to the BCM.
• Motion 2 is the only disputed motion. It involved work to improve common property and so required a special resolution.
• At the EGM Motion 2 was declared as being passed as a special resolution. 53 votes were counted with 42 votes in favour of Motion 2, 10 against and 1 abstention.
• The concerns raised by the applicant have been taken into account by the BCM and the Committee. Minutes are provided which set out the issues raised and the corrected result. If all matters were resolved in favour of the applicant the result does not change.
• The result declared at the meeting included votes for Lots 6, 25 and 118 who were unfinancial at the time. If those votes are taken out the special resolution still passes.
• The applicant’s vote was counted on the day and so he was not disadvantaged.
• CBCA received voting papers and proxies from the Building Manager after the EGM which were posted on 15 October 2008. These have been included in the recount.
• Proxy votes for Lots 15 and 119 were received after the meeting. Including these votes does not change the result.
• The votes received for Lots 15, 64 and 119 had a proxy form rather than a company nominee form and arguably could have been disallowed. With a view to reassessing the views of owners, those no votes have been included in the recount but do not change the outcome.
• The vote for Lot 9 was taken into account but this does not change the result.
• The Owners of Lot 91, 92, 94, 95, 97, 113, and 117 voted by voting paper. This is recorded in the minutes and the voting papers were available for inspection at the EGM.
• Following the EGM the Body Corporate notified the successful contractor that the motion was successful. This Committee now has an Agreement for signature. The tenders were valid only until 30 October 2008. This has been extended to 14 November 2008 but the contractor will not allow further extensions.
• Given that the tender amounts were set when the Australian dollar was over US$0.90, and the value of the Australian dollar has since decreased significantly, and the parts for the lift come from overseas, the cost of the tendered upgrade will increase significantly if the Body Corporate cannot accept the current tender and is forced to seek new tenders. This additional cost could range from $125-200,000. This additional cost is unnecessary.
• The modernisation of the lifts is necessary to keep the lifts in good repair and ensure that they continue to be safe for use. Recently two lifts were out of service for weeks.
• Notwithstanding some irregularities, there was no impact on the vote and a requirement to reconvene the meeting would disadvantage all owners.
  

The submission from the BCM includes the following comments and information:

• Katrina O’Kane was the BCM attending the EGM on behalf of CBCA.
• O’Kane accepts that the count taken at the meeting was flawed, and this is regretted.
• O’Kane acknowledges that the applicant’s voting papers were not included in the documents before her at the meeting.
• Paul Burnell for the Building Manager[4] advised the meeting that his voting papers were not present. These were posted to CBCA on Wednesday 15 October 2008 and received in an express post envelope from Australia Post on Monday 20 October 2008. After the papers were received O’Kane advised Burnell that they did not include company nominee forms appointing him but rather proxy forms from the company nominee. However a company must appoint a nominee and a corporate owner cannot delegate authority by way of proxy.
• Hateley also completed a proxy form instead of a company nominee form.
• In respect of the incorrect proxy votes, CBCA takes the view that the proxies had been given by the owners with the intent that Burnell and Hateley vote on behalf of the companies.
• CBCA received voting papers after the EGM which should have been posted prior to the meeting and received in time to be included in the count.
• To ensure that a correct vote was recorded CBCA printed a new voting register and recorded votes for all lots received in writing and in person at the meeting. This included the incorrect proxy votes received from Burnell and Hateley. It also included votes sent prior to the meeting with sufficient time to have been received by the date of the meeting, including the vote for Lot 9. The new record of voting also removed the three unfinancial votes.
• The outcome of the motions was not affected by recording the corrected voting. All the votes referred to in the application as being against the motion have been counted, even those received after the meeting or where a proxy was used instead of a company nominee. This does not change the outcome and the requirements for a special resolution were met.
• The corrected result is that 54 votes were counted for the EGM. Of those, 41 yes votes were recorded. The applicant does not challenge those yes votes.
• CBCA has made every attempt to ensure that the EGM Minutes record all votes submitted and have an extensive note explaining what was done.
• All records, including voting papers, proxies and attendance records, are held at the CBCA office and able to be viewed by the Adjudicator.
• The reconvening of the EGM would not serve any purpose other than to delay acceptance of the quote for refurbishing the lifts.
  

JURISDICTION

I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.[5]

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 claimed or anticipated contravention of the Act or the CMS; or the exercise of rights or powers, or the performance of duties, under the Act or the CMS; or a claimed or anticipated contractual matter about - the engagement of a person as a body corporate manager or service contractor; or 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.[6] An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate.[7]

Section 279(1) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances.

DETERMINATION

Urgent interim relief

At this time, I am concerned with the application for an interim order and the threshold issue of whether interim orders are warranted. An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates.[8] Any order granted must be just and equitable in the circumstances.[9] The examples in section 279 of the Act indicate the usual circumstances where an interim order might be made and are in the nature of injunctive relief. While it is not possible to define the range of matters that might be the subject of an interim order, an applicant needs to establish that the circumstances warrant an interim order. An interim order will not be made if the only urgency relates to an applicant’s desire to resolve or expedite the matters in dispute, or where the nature of the circumstances are such that the matter is not capable of being dealt with in the context of an interim order.

It is not appropriate to consider the substantive issues in the application in detail at this time. But to determine whether it is just and equitable to grant interim relief, it can be relevant to briefly consider the issues raised in the application. As an interim order can be considered on an ex parte basis, an adjudicator must be satisfied that the application raises serious legal questions and that the balance of convenience between the parties justifies injunctive relief. That is, an adjudicator must balance the inconvenience of granting relief now if final orders are ultimately refused against the inconvenience of refusing relief now if final orders are ultimately granted. Of particular relevance is evidence that an interim order is necessary to prevent serious or irreparable harm.

Serious legal issue

Pursuant to section 108 of the Act an ordinary resolution (where no poll is requested) is carried if the votes counted for the motion are more than the votes counted against the motion. Motions 1 and 3 clearly passed as ordinary resolutions, regardless of any discrepancies in the voting.

Section 106 of the Act provides that a special resolution is passed if at least two thirds of the votes cast are in favour of the motion, and the number of votes against the motion are not more than 25% of the number of lots in the scheme and represent not more than 25% of the contribution schedule lot entitlements for the scheme. As there are 126 lots in this scheme, less than 32 ‘no’ votes must cast for the motion to pass. It is clear that that level of opposition could not be achieved in this matter. Give that all lots have similar contribution schedule lot entitlements, a calculation on that basis will have little effect. But the number of votes needed to achieve the two-thirds support for the motion depends on the total number of votes cast for and against the motion.

The original voting declared in respect of Motion 2 was 42 in favour and 10 against. This clearly achieved the two-thirds majority. The EGM minutes apparently record the ‘corrected’ voting tally for Motion 2 as 41 in favour and 12 against. Again, this achieved the two-thirds majority. The minutes say that if the three incorrect proxy votes and the three votes which were not received in time were counted, the result for Motion 2 would be 41 votes in favour and 15 against. Again, this result would achieve the two-thirds majority[10].

There does appear to be some discrepancy in the information provided by the Committee and BCM as to what has been included or not in the ‘corrected’ voting and I have not yet received the amended tally sheet. The tally sheet marked up by the applicant questions three votes in favour of Motion 2 which were apparently unfinancial (Lots 6, 25 and 118) and that votes in respect of Lots 9, 59, 15 and 119 were not recorded.

If the three unfinancial votes are excluded, and the disputed four votes are included, from my calculation it would appear that a total of 54 votes were cast in respect of Motion 2, with at least 39 votes in favour (if all four of the originally excluded vote were against ). Again, this clearly exceeds the two-thirds majority.

Issues exist as to whether the votes cast by proxies rather than company nominees were in fact valid, and whether the votes apparently not received by the date of the meeting should be accepted. These matters would require further investigation, but would appear to only affect whether the majority in favour of Motion 2 is even greater.

Inconvenience from an interim order

Where there is evidence that voting discrepancies could potentially alter the outcome of a motion, it may well be appropriate for an adjudicator to prevent a disputed resolution from being implemented until the matter can be fully investigated and a final determination made. This would ensure that a body corporate does not take action which must then be unwound if the result is later overturned. But in this case, while some discrepancies may have occurred, the applicant has not satisfied me that any errors would be sufficient to alter the outcome of the disputed motion. Moreover, even the allowance or disallowance of a couple of further votes than have been queried in this application would not affect the outcome of the motions.

If there was limited adverse impact from putting a resolution on hold, an adjudicator may be more inclined to make an order to that effect while there was doubt over the voting. However in this case the Body Corporate has argued that putting the motion on hold could cost the Body Corporate a very significant additional amount. Accordingly, I am loath to put this motion on hold given that I currently have no evidence that the likely final outcome of this dispute will be to declare the motion not passed. I note that in any event it would be more usual in these circumstances that a final order would simply declare the correct voting, based on proven errors, rather than require a further EGM to reconsider the motions.

I appreciate that the applicant is concerned that, as some errors have been identified, other errors may also exist. However an adjudicator can only make a determination based on the evidence before them and not on conjecture.

I also note that the Committee and BCM appear to have been willing to accept that errors have occurred, and have made some attempt to clarify these issues in the minutes. I would assume that the BCM and Committee will pay much closer attention to such matters in future, and will ensure that any difficulties with facsimile machines and mail delivery between offices are addressed.

Conclusion

Prima facie it does appear that there may have been some errors in the declared voting for the EGM on 17 October 2008. However, based on the evidence presented to me, at this stage it does not appear that the correction of these errors would affect the overall result of any of the three motions passed at the EGM. Accordingly, I do not consider that it would be just and equitable in the circumstances to make an order preventing the Body Corporate from implementing Motion 2.

Given my preliminary findings on this matter, the applicant should consider whether he wishes to proceed with this application or not. It may have been that the minutes issued by the Body Corporate since the application was lodged have sufficiently addressed the applicant’s concerns. If the applicant does wish to proceed, I invite him to provide any further argument and evidence in support of his application which may be relevant in light of the matters raised in the submissions received to date. The final order application would then be investigated in accordance with the usual processes undertaken by this Office, including inviting submissions from all affected owners.

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[1] As of 30 August 2008 the new Accommodation Module came into force, replacing the Body Corporate and Community Management (Accommodation Module) Regulation 1997 which applied until that date.
[2] Section 247(3) of the Act

[3] Those motions were the subject of a previous dispute lodged by the applicant – reference 0509-2008.
[4] Jonjen Pty Ltd, Owner of Lots 1 and 2
[5] See sections 227, 228, 276 and Schedule 5 of the Act
[6] Section 276(2) of the Act
[7] Section 284(1) of the Act
[8] Section 279 of the Act
[9] Section 276 of the Act

[10] I note that abstentions are not counted in calculating the total number of votes cast. See Windsor Shores at Seaforth [2007] QBCCMCmr 451 (30 July 2007) for a detailed discussion on this issue.