Acacia Lodge Hostel [2008] QBCCMCmr 459 (10 December 2008)

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

I hereby order as follows –

that the motion purportedly resolved by the Committee on 15th August 2008 is invalid;

2. a) that Ian D’Arcy (“Administrator”) of Capitol Body Corporate Administration is appointed as the administrator of the scheme pursuant to sections 276(4)(a) and clause 23 of Schedule 5 of the Act for a period of 12 months from the date of this order;

the Administrator is authorised exclusively to perform all the obligations of the body corporate and its committee under the Act and community management statement (“Obligations”);

the Administrator is given all of the powers and authorities of the body corporate and its committee necessary to perform the Obligations, including the authority to determine contributions and levy those contributions on owners;

the Administrator is to convene a general meeting which shall be valid as the annual general meeting for the scheme if convened and held before 10th April 2009 and is otherwise in accordance with the requirements for holding annual general meetings;
the body corporate and its committee must by no later than 30th December 2008 hand all of the books, records and property of the body corporate in their possession or control to the Administrator ;
the Administrator may seek return of body corporate records from other entities and perform other tasks as detailed in the reasons for decision, with the assistance of lot owners at his discretion;
the Administrator is to be remunerated in accordance with a letter dated 31st October 2008 to this Office, at the following rates (all of which are exclusive of GST) –
- an hourly rate for acting as Administrator personally- $185.00;
- if undertaken by an employed body corporate manager, as required – at the rate of $125.00 per hour;
  - if undertaken by an in-house accountant, as required – at the rate of $75.00 per hour; and
- if undertaken by an administrative assistant or secretarial staff, as required – at the rate of $55.00 per hour;
- facsimiles - $1.00 per page; photocopying $0.30 per page; postage - a $0.50 per standard letter ( other postal services at cost) STD and mobile call costs - $0.50 per minutes and all other disbursements at cost.

h) the Administrator has leave to apply for further orders or directions in relation to this order.

3. In all other respects the application is dismissed.

This is an application dated 25th August 2008 and amended on 26th August 2008 by Rita Commisso (the Applicant) the owner of lots 1, 4 and 5 in the scheme, against the body corporate for the scheme (the Body Corporate) for an order as follows –

1. that the motion purportedly resolved by the Committee on 15th August 2008 is invalid;

Corporate to exclusively perform all of the obligations of the body corporate, its committee and its chairperson, secretary and treasurer under the Act and the community management statement, pursuant to sections 276(4)(a) and clause 23 of Schedule 5 of the Act;

By further application dated 19th September 2008 and amended on 23rd September 2008, the Applicant sought the following further order –

3. that the Applicant be declared a valid voting member of the committee, and entitled to vote on motions to be decided by the committee

By further application dated 19th September 2008 and amended on 23d September 2008, the Applicant sought the following further interim order –

On 16th October 2008 I dismissed the further interim order sought in this matter for reasons given in that order.

“Acacia Lodge Hostel” CTS 25755 is a community title scheme governed by the Body Corporate and Community Management Act 2008 (the Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module). There are six lots in the scheme, three being owned by Dominic Surace (Mr Surace) and three by the Applicant.

The current Accommodation Module commenced on 30 August 2008, replacing the previous Accommodation Module that operated from July 1997 (Previous Module). A number of provisions of the Accommodation 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 Accommodation Module (Accommodation Module sections 207-2146, section 20 Acts Interpretation Act.).

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 authorisation 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)).

The Applicant and Mr Surace are the only two lot owners in the scheme, and therefore by virtue of section 14(5) Accommodation Module, the Applicant shares the executive positions on the committee of chairperson, treasurer and secretary with Mr Surace.

The Applicant is the sole director of the company Rita Commisso Enterprises Pty Ltd (the company) which is a party to two contracts assigned to it in about 2002, to provide services to the body corporate as the caretaking service contractor, inclusive of letting rights. The company receives a monthly salary from the body corporate for caretaking services. The Applicant provides basic health care to elderly tenants in the scheme.

Since the company is the caretaking service contractor in the scheme, the Applicant is considered by Mr Surace to be “an associate” of a caretaking service contractor and therefore ineligible to be a voting member of the committee in accordance with section 11(2)(b) Accommodation Module. Both parties agreed at a teleconference held on 3rd September 2008 that this was a most unusual situation. The Applicant’s solicitor is of the view that it is inequitable that the Applicant cannot vote on the committee and that the legislation could not have intended this bizarre result.

The Applicant says that section 14(5) Accommodation Module and section 11(2)(b) Accommodation Module are at odds, and she claims a right to vote pursuant to her role as an executive member of the committee by virtue of section 14(5). This is the third outcome sought of her final orders in this application.

Following an audit of body corporate records in June 2008, it transpired that the company had never charged GST for its services. On 7th July 2008, the then body corporate manager Sargeant Strata wrote an email to Mr Surace in his role as the executive membership of the body corporate committee, saying that the auditor had advised that GST should have been charged. It relevantly stated –

“The Management salary will therefore increase by around $3000 and the possibility of back pay is another consideration....”

Mr Surace’s solicitors replied on 24th July 2008 inter alia, that Mr Surace required a committee meeting to be held to call for the appointment of a lawyer for the purpose of assessing the building manager’s remuneration. On 15th August 2008, Mr Surace gave the Applicant one hour’s notice through her solicitors, that he would be voting on a motion outside a committee meeting. The motion was that lawyers be “urgently and immediately” retained by the body corporate to act on its behalf in relation to the payment of GST to the company. Mr Surace stated that the Applicant was not entitled to vote on this motion since she had a conflict of interest.

The Applicant replied by return that she could see no basis for the urgency of the matter, and reminded Mr Surace that the committee spending level was then $750. She strongly objected to the voting on the motion outside a committee meeting and considered that if there was a conflict of interest on the GST issue, then both Mr Surace and she were affected by it, as lot owners, and that any third party who advised on the issue should be agreed upon. It is her view that the she was only given one hour’s notice about the motion so that Mr Surace could “deliberately avoid discussion on the matter.”

Despite the Applicant’s protest, the resolution was purportedly passed by Mr Surace at the time given in the notice. His solicitors stated that Mr Surace had no conflict of interest; that the matter was urgent; and that the Applicant was no longer permitted to correspond with Sargeant Strata “in relation to the matter pertaining to the GST” but should make enquiries through the lawyers, Ramsden Bow.

At about the same time, the Applicant was advised by Sargeant Strata that there was only $859.98 in the scheme bank account, which meant that there were insufficient funds to pay the company for its monthly salary in August 2008. The Applicant says that the body corporate has failed to agree or attend to the annual budgets, and the budgets for the period 1st June 2008 to 31st May 2009 have not been determined or agreed. A draft budget was prepared by Sargeant Strata and sent to Mr Surace in June 2008, advising that a special levy appeared necessary, but Mr Surace did not convene an annual general meeting.

The Applicant seeks the appointment of an administrator because of the increasingly intractable stance taken by Mr Surace. She cites the issues concerning the lack of notice to her about motions being voted on outside committee meetings; the refusal to allow her to vote either on the ground that she is a non-voting member of the committee or that she has a conflict of interest; the failure to respond meaningfully on the proposed budgets in the face of a lack of funds in the account; a previous dispute about her exclusive use of common property which was determined by a specialist adjudicator last year; and an issue about a council notice concerning the requirement for a compliant grease-trap which the Applicant has costed at up to approximately $14,000, and the body corporate refusing to acknowledge liability for payment of the grease trap.

Mr Surace said at the interim stage of this application that he is of the view that that the engaging of lawyers to look into the GST issue was of the utmost urgency. He was concerned about independence and credibility of Sargeant Strata and whether the body corporate manager or the Applicant were removing records from the body corporate files. There are tax implications about the non-payment of GST and Sargeant Strata had withheld the audit between 23rd June 2008 and 7th August 2008 from Mr Surace and his advisers.

The engagement of Sargeant Strata as the body corporate manager terminated on 8th October 2008, and no other body corporate manager has been appointed. Mr Surace has objections to Sergeant Strata’s appointment as an administrator because of concerns about that company’s previous actions concerning the audit, and other matters.

The body corporate through Mr Surace submitted on 7th October 2008 in respect of the Applicant’s final order’s sought, that it was not possible for an adjudicator to find some “just and equitable” way of enabling the Applicant to vote at committee meetings. He said that “just and equitable” has been held to mean “according to law”, and that there is no room for an adjudicator to find some just and equitable resolution to a dispute which is outside the legislation. Further he says that an “executive member” is not defined in the legislation in terms of the voting rights of such members, whereas a caretaking service contractor is stated to be automatically, a non-voting member of the committee.

On the matter of conflict of interest, he the body corporate says that committee members must act in the best interests of the scheme and that the Applicant’s caretaking contracts will place her “in the majority of times” inherently in a position of conflict.

Mr Surace says that because he has a greater lot entitlement than the Applicant, he can be considered “ the majority lot owner” since he spends more money on the scheme administration. He disputes that there is an antagonistic relationship between himself and the Applicant, but says that the Applicant’s actions required committee action, for example, she has previously submitted accounts for gardening services to the body corporate manager for payment, when gardening is something that is conducted under the terms of the caretaking agreement by the company.

He says the scheme traditionally operates without formality and resolutions are made by telephone, email or fax, through his lawyer Mr Gordon. He says he has always acted reasonably with regard to convening meetings of the committee, and that where committee meetings have been held at short notice, it is because of emergency situations.

He refers to an appeal from an order of a specialist adjudicator in relation to a dispute about exclusive use areas, which was heard on 26th September 2008. He says that he obtained an order for costs against the Applicant in this matter. He says that the Applicant has sought to mislead in this application and has omitted materially relevant documents about the budgets. He is concerned that Sargeant Strata has made unauthorised payments to the Applicant.

The Applicant exercised her right of Reply on 31st October 2008. She now recognises that since the resignation of Sargeant Strata as body corporate manager, that it “presumably no longer desires to be the administrator for the scheme” and proposes in lieu, Ian D’Arcy of Capitol Body Corporate Administration or Ian Leslie of Brisdon Body Corporate Service.

She said at that time that despite the interim order of 4th September 2008, the company has not been paid for the month of August. It is also owed money for the months of September and October and the body corporate has failed to comply with the interim order. This failure lends support to the argument that an administrator is needed. She also believes that the appointment of an administrator will help reduce the body corporate’s legal costs.

In addition, the date of the annual general meeting has still not been called, and there is no body corporate manager.

She says that the company has as yet made no claim in respect of the GST issue and that the situation for the body corporate has never been urgent. She denies that she has ever threatened or considered taking legal proceedings. She denies that any costs order was made in favour of Mr Surace in relation to the hearing of the appeal from the specialist adjudicator.

She concludes that the material provided by both parties and the accusations made demonstrate that the affairs of the body corporate are in disarray and need an administrator.

Further information
On 20th November 2008, the Applicant wrote a letter to this Office with a copy to Mr Gordon, saying that the situation was becoming increasingly urgent. She stated as follows –

On 27th November 2008 I invited Mr Surace to make submissions about this further information and wrote to both parties saying that I was considering the appointment of an administrator, and asked both parties to liaise on the appointment of an administrator and to submit names by 8th December 2008.

On 1st December 2008, Mr Surace responded that “the primary reason for the schemes present lack of financial standing arises as a direct result of the Applicant expending monies above the scheme’s limit without the authority of the body corporate/committee...” This she was able to do through the former body corporate manager.

Mr Surace said that he had been able to draft the notice of the annual general meeting and had proposed two quotations for body corporate managers, and that the Applicant had been invited to present motions for the AGM including that of appointment of body corporate manager but had refused. The delay had been caused by the difficulty in obtaining records from the former body corporate manager, and that certain records were still missing. He sought an order that the body corporate might call a valid AGM with a shortened notice period of 7 days. He provided a copy of the draft notice of meeting.

On 8th December 2008, the body corporate through Mr Surace, advised it had no objection to the appointment of either Mr D’Arcy or Mr Leslie, although “there was no basis upon which an administrator should be appointed.”

In this matter the Applicant’s final orders sought have been somewhat overtaken by an intervening teleconference and interim order made, the resignation of the body corporate manager who she proposed to be an administrator for the scheme, and the agreement by the body corporate/Mr Surace that there is objection to the administrators proposed by the Applicant, even though he does not believe that they are required.

The Applicant’s first outcome sought is that the motion purportedly resolved by the Committee on 15th August 2008 is invalid. This was the urgent and immediate appointment of Ramsden Bow lawyers to act on behalf of the body corporate “in relation to the wrongful payment of GST” to the company. Mr Surace passed the single vote recorded at this vote on a motion outside a committee meeting.

As indicated in the interim order, I am of the view that the committee did not act reasonably in this regard, in contravention of section 94 Act, and that even at short notice, the Applicant, voting or not, should have had been able to provide input into a decision about legal fees which she would have in part to pay. Further, the motion is unclear as to remit of the lawyers engaged, and there was no limit for how much the committee was to spend on this service, whatever it was – advice, or action.

I note that Mr Surace, per the committee, has redrafted this motion in the alternative with a choice of two lawyers, at motion 15 of the draft agenda, so perhaps it is accepted by the body corporate that the vote on a motion on 15th August 2008 was not valid. In any event for completeness, I so order.

The second outcome sought is the appointment of Sargeant Strata as administrator. For the reasons given above, Sargeant Strata is no longer proposed as a suitable administrator. The administrators proposed are Ian D’Arcy of Capitol Body Corporate Administration or Ian Leslie of Brisdon Body Corporate Service.

I am of the view that this scheme would benefit from a period of time under the administration of an independent third party. Mr Surace wears two hats and it is not easy for him to differentiate between his role as a lot owner and as the executive committee. The Applicant also wears two (or perhaps three) hats, although she does not have a vote on the committee. It is clear that there are of late disputes between the parties in their respective capacities, about payment of accounts and responsibilities under the caretaking contract. As the parties are aware, disputes about obligations under a contract are heard by specialist adjudication. Such disputes are quite common where one person performs various roles, one lot owner is absent, and the day to day running of the scheme has been in the hands of a body corporate manager. Mr Surace hints at improper financial practices, and perhaps an administrator can assist in assessing the financial records which may just be in a muddle, or incomplete. Unfortunately, they often are.

I appoint Mr Ian D’Arcy to be the Administrator of this scheme for a period of 12 months with all the powers of the executive committee. Mr D’Arcy alone may make decisions for the committee. Mr Darcy is to convene the annual general meeting. Motions now drafted as submitted “by the committee” may be submitted by the individual lot owners, as well as any other motions in the time which the Administrator will invite. Mr D’Arcy will chair the annual general meeting and has the power as chairman to rule motions out of order where relevant. Draft Motion 11 for the appointment of a body corporate manager will no longer be relevant.

Mr D’Arcy is to set the budgets for the year, with input from lot owners if he wishes.

The company should be paid the agreed monthly salary under its contract as a priority, and other debtors of the body corporate should be paid.

Mr D’Arcy is to be handed all body corporate records in the possession or control of either Mr Surace or the Applicant. Mr D’Arcy has the power to seek the return of records from Sargeant Strata if any records remain in the possession or control of that entity, or any other body. He also has the power to appoint a financial expert to review the body corporate’s financial records at the cost of the body corporate, at his discretion.

The Administrator may direct that a shorter period of notice than the 21 days required by legislation be sufficient notice for the AGM. It is my view that in any event, if all parties are unanimous in this regard that the period of notice may be shortened without reference to this Office.[1]

The Administrator is to be paid from body corporate funds in accordance with the letter dated 31st October 2008 to this Office.

The annual general meeting, if held within the next four months, shall be a validly held annual general meeting for the scheme notwithstanding that it is held out of time.

The Applicant’s final outcome sought is that she be allowed to vote as a valid member of the committee. Whilst this matter will not be pertinent for the next 12 months, I am of the view that the Applicant, by being the sole director of the caretaker is “an associate” of the caretaker and someone in a relationship of a corporation and executive officer of the corporation (Section 309(2)(g) Act ) and thus precluded from voting. I am also of the view that the legislation has not considered someone in the position of the Applicant, and that the chance that of only two lot owners in a scheme, one is the director of a caretaking service contractor, is remote.

I also agree with Mr Surace, that I cannot use the “equitable jurisdiction” in a vacuum, and that to enable the Applicant to vote on the committee, I must be able to find that the legislation does not expressly prohibit a person in the position of the Applicant, from doing what by equity I am proposing she be allowed to do.

There is of course, no reason why the Applicant should not vote in an informal way, and I understand that this happens where both parties are in agreement. The Applicant must also, for the committee to act reasonably within section 94 Act, be invited as part of the committee to take part in discussion on all committee matters, and to be made aware of them with notice as required by law.

Regretfully, I must dismiss this part of the application. The Applicant’s remedy here is perhaps to change the relationship of herself and the company. I say again, that the peculiar situation in which the Applicant finds herself requires an unusually high degree of transparency and accountability on behalf of the committee.

Number of Scheme:	25755
Name of Scheme:	Acacia Lodge Hostel
Address of Scheme:	40 - 42 Imperial Parade LABRADOR QLD 4215

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Acacia Lodge Hostel [2008] QBCCMCmr 459 (10 December 2008)