Cassowary Forest [2008] QBCCMCmr 47 (8 February 2008)

Last Updated: 29 February 2008

REFERENCE: 0792-2007

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	22650
Name of Scheme:	Cassowary Forest
Address of Scheme:	627 Bingal Bay Road BINGAL BAY QLD 4852

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

D & J Holohan & A Karas, the Owners of lots 1, 3 and 5.

I hereby order that the application for an order that Mr John Cleary hand over the books and records of Cassowary Forest to Body Corporate Services as per their appointment at the EGM held on 15 September 2007 is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0792-2007

“Cassowary Forest” CTS 22650

THE SCHEME

Cassowary Forest is a Community Titles scheme 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). It consists of 5 lots registered on a Group Title Plan of subdivision.

APPLICATION

At this point in time I am considering the Applicants’ request for the following order:
That Mr John Cleary hand over the books and records of Cassowary Forest to Body Corporate Services as per their appointment at the EGM held on 15 September 2007.
BACKGROUND

The applicants state that this is a small scheme which previously operated on an informal basis but when lot 4 was purchased a few years ago, the new owners, Mr. Cleary and Ms. Sweatman, became members of the committee and began to run the body corporate on a more formal basis. However, the applicants state that the committee members are selective in their compliance with relevant legislation. For example, although they are the joint owners of one lot, Mr. Cleary and Ms. Sweatman occupied the positions of Secretary and Treasurer in contravention of section 10(4) of the Standard Module.

It is claimed that the books and records of the body corporate were previously in the hands of a local solicitor but Mr. Cleary retrieved the books and records without the permission or knowledge of the other lot owners.

At an EGM held on 15 September 2007, 3 of the 5 lot owners voted to appoint a body corporate manager, Body Corporate Services, but it is claimed that Mr. Cleary refused to acknowledge this vote.

The minutes of the EGM record the following:

Appointment of Body Corporate Manager – Ordinary Resolution
That under section 87(1) of the Body Corporate and Community Management (Standard Module) Regulation 1997, the body corporate for Cassowary Forest engages Body Corporate Services Pty. Ltd. For a term of 1 year commencing on 15 September 2007 for a fee of $1,100 per annum inclusive of GST for the purposes of providing administrative services to the body corporate and be authorised to exercise the powers of the executive committee in accordance with section 119 of the Body Corporate and Community Management Act.

Although Mr Cleary has been requested to hand over the books and records to body corporate services on a number of occasions, he has failed to do so.

The applicants recounted a number of incidents regarding Mr. Cleary including allegations that as Secretary he failed to call for nominations & agenda items for the AGM within statutory timeframes, failed to prepare financial statements within statutory timeframes and was reluctant to allow them to examine books and records of the body corporate.

A response was sought from Mr Clearly regarding the various issues raised in the application. Mr. Cleary made the following submissions:

• He was elected as Secretary in August 2006 and in September 2007 was elected as Secretary and Treasurer;
• In his absence an EGM had been called for 15 September 2007 and he received relevant paperwork just prior to the meeting. On behalf of the committee he prepared an advice to lot owners stating that the quotation from Body Corporate Services did not state the total cost of providing body corporate management services that at least two quotations should have been obtained for consideration by the meeting. It was the committee’s view that based on a minimum of services to be provided by the body corporate manager, the actual cost of engaging body corporate services would be approximately $2,137 comprising a base fee of $1,100, “associated charges” of approximately $500, “ancillary costs” of approximately $276 and costs of $242 associated with conduct of committee meetings and at least one EGM;
• However Dora and Jamie Holohan insisted that the motion be put to a vote;
• The committee believes the resolution to appoint Body Corporate Services is invalid and for this reason he is unwilling to release the books and records of the body corporate to Body Corporate Services ;
• The committee is also concerned about the cost of providing management services for such a small body corporate with minimal transactions;
• The committee was of the view that the motion should be ruled out of order;
• although the motion was eventually put to a vote and carried, the committee believed that the resolution was invalid and therefore refused to hand over the books and records of the scheme;
• the applicants show a misunderstanding of events and processes, causing their statements to be misleading;
• Ms. Sweatman was elected as treasurer at an AGM held on 12 August 2006 but soon after, the committee realised that only one co-owner of lot 4 could hold an executive position. Therefore Ms Sweatman became an ordinary member and Mr. Cleary became both Secretary and Treasurer;
• The same committee was re-elected at the last AGM on 30 September 2007;
• Since the AGM on 12 August 2006 when the new committee was elected, the Holohans and Ms. Karas have pursued a course of obstructive behaviour. This includes arranging for body corporate records to be given to a third party, refusal to authorise a banking facility for the new committee and blocking the administrative budget;
• The current committee have introduced a number of changes to the practices of the body corporate including changing the financial year to match the financial year used for tax purposes; budgeting to cover actual costs rather than copying previous budgets; not moving monies between the administrative and sinking funds; timing levies before bills become payable; requiring dual signatures for cheques and clarifying the need to seek nominations and agenda items prior to an AGM;
• A number of incidents were referred to as evidence of on-going animosity between the applicants and committee members, including Mr. Cleary.
  

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; or

(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 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)).

DECISION

The applicants are seeking the following order:

That Mr John Cleary hand over the books and records of Cassowary Forest to Body Corporate Services as per their appointment at the EGM held on 15 September 2007.

The applicants argue that at that EGM, 3 of the 5 lot owners voted to appoint Body Corporate Services as body corporate manager but Mr. Cleary refused to acknowledge this vote.

The minutes of the EGM record the following:

Appointment of Body Corporate Manager – Ordinary Resolution
That under section 87(1) of the Body Corporate and Community Management (Standard Module) Regulation 1997, the body corporate for Cassowary Forest engages Body Corporate Services Pty. Ltd. For a term of 1 year commencing on 15 September 2007 for a fee of $1,100 per annum inclusive of GST for the purposes of providing administrative services to the body corporate and be authorised to exercise the powers of the executive committee in accordance with section 119 of the Body Corporate and Community Management Act.

On the other hand, Mr Cleary points out that the quotation from BCS did not state the total cost of providing body corporate management services. As previously advised at the EGM, based on a minimum of services to be provided by the body corporate manager, the actual cost of engaging body corporate services would be approximately $2,137 comprising a base fee of $1,100, “associated charges” of approximately $500, “ancillary costs” of approximately $276 and costs of $242 associated with conduct of committee meetings and at least one EGM. These costs would equate to at least $400 per lot.

Mr Cleary believes that under section 104 of the Standard Regulation Module, two quotations should have been obtained and that the resolution to appoint Body Corporate Services Pty. Ltd is invalid. For the above reasons he is unwilling to release the books and records of the body corporate

While I am generally reluctant to interfere with an ordinary resolution which has been carried by a majority of votes in a general meeting, I believe that there is substance to the argument by Mr Cleary that section 104 of the Standard Regulation Module has not been complied with.

Section 104 provides as follows:

104 Quotes for major spending

(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 carrying the proposal into effect is more than the relevant limit for major spending for the scheme.

(2) The lot owners 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 at which 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 at which 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.

In this scheme, the relevant limit for major spending is $1,250^[1]. However Mr Cleary has produced a spreadsheet listing the various costs and charges involved in engaging Body Corporate Services and concludes that the true cost would be approximately $2,137. I have reviewed the various items listed in this spreadsheet, and having regard to the draft agreement provided by Body Corporate services, agree that the actual cost of engaging Body Corporate Services would be in excess of $250 per lot.

I therefore believe that the resolution to appoint Body Corporate Services is void and that therefore as the elected Secretary, Mr. Cleary is entitled to maintain custody of the books and records.

This is not to say that a body corporate manager cannot be appointed to carry out administrative functions for this scheme, but such an appointment must be effected in accordance with the Body Corporate and Community Management Act 1997 and the Body Corporate and Community Management (Standard Module) Regulation 1997, particularly section 104.

Should the applicants favour the appointment of a body corporate manager, they may wish to requisition an extraordinary general meeting and propose a motion with alternatives to engage one of at least two body corporate managers who have supplied quotes for provision of body corporate management services.

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^[1] See definition of “relevant limit for major spending” in Dictionary to Act - $250 x number of lots