Genesis [2008] QBCCMCmr 476 (24 December 2008)

Number of Scheme:	10149
Name of Scheme:	Genesis
Address of Scheme:	26 Markwell Avenue SURFERS PARADISE QLD 4217

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

I hereby order that an application for an order that Motion 14 to be put to the annual general meeting of the scheme on 7th November 2008 should be “ruled invalid and the votes discounted” is dismissed in the circumstances that Motion 14 was withdrawn from the annual general meeting.

This is an application dated 5th November 2008 by Leslie Chapman, (the Applicant) co-owner of Lot 2, (wrongly described in the interim order as co-owner of Lot 18) against the body corporate for Genesis (the body corporate) for an order that Motion 14 to be put to the annual general meeting of the scheme on 7th November 2008 (the AGM) should be “ruled invalid and the votes discounted.”

The Applicant also sought an interim order that the body corporate should not take any action or implement Motion 14 pending determination of the dispute. On 6th November 2008, I made an interim order that if Motion 14 was carried at the AGM, that the body corporate should not act upon it pending determination of this dispute.

“Genesis” CTS 10149 is a community title scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (the Standard Module). There are 51 lots in the scheme created under a Building Unit Plan of subdivision.

The current Standard Module commenced on 30th August 2008, replacing the previous Standard Module that operated from July 1997 (Previous Module). A number of provisions of the Standard 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 These provisions are generally to be dealt with as replacements of the similar provisions of the repealed legislation and anything done under the Previous Module will not generally be affected by the commencement of the present Standard Module (sections 209 -216, section 20 Acts Interpretation Act.). Where relevant, references will be made to the Previous Module in parentheses after the current module reference.

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)).

Prior to the AGM, the Applicant was secretary of the scheme. He is concerned that Motion 14, which is a motion for the engagement of a body corporate manager, and a motion with alternatives offering the choice of three body corporate managers, sets out the alternatives in a way which is biased in favour of the current body corporate manager Complete Body Corporate Services (CBCS), and lacks a comparable platform on which lot owners can judge the three alternatives.

He says the alternatives as presented are “not equitable.” Alternative A (for Complete Body Corporate Services) shows no “estimated additional fees” whereas Alternatives B and C, for SSKB and Archers Body Corporate (Archers) respectively, have “estimated additional fees at totally unreasonable figures.” He says that the bias towards alternative A precludes any fair outcome.

The Applicant provides a copy of email correspondence dated 3rd November 2008 between himself and Peter Accornero (Mr Accornero), and dated 22nd October 2008 between Mr Accornero and Archers, voicing concerns about the lay-out of the motion and the accuracy of the tender comparisons provided in the motion. It appears from material in the application that the comparison of figures was calculated by Kim Elliott (Ms Elliott) the managing director of CBCS. The Applicant points out in an email sent on 1st October 2008 to Charles Pisasale (Mr Pisasale), Mr Accornero, Jeannette Magifesta, Robert Zocaro, Doug Hull and “ staigers@bigpond.com” ( whom I take to be committee members) that –

“it was not approved for Kim to do any comparison on figures from the other firms and in doing so states CBCS as $5,760 not $6,400 as in the copy of contract sent out.”
He says he received no reply to this email.

Alternative A (CBCS) shows a “ base professional fee” of $5,760 and “estimated disbursements” of $4,967, totalling $10,727 per annum as an estimate. Alternative B (SSKB) is shown as “base professional fee” of $6,120, “disbursements flat rate” at $3,519” and “estimated additional fees” of $10,486 giving an estimated total cost per annum of $20,125. Alternative C (Archers) is shown as “base professional fee” of $5,865, “disbursements at fixed amount” at $3,570 and “estimated additional fees” at $5,960 making an estimated total of $15,395.

The Applicant says that he believes that all three tenders should have been submitted “on the same grounds.” In addition he says he was not given a copy of the AGM agenda before it was distributed, and the motions as set out were not approved by the committee.

In accordance with section 243(2)(b)Act, submissions were invited from all lot owners and from CBCS.

Matthew Wilson, owner of Lot 23, says that he voted for CBCS because they offered the lowest base rate, and he is satisfied with the services which that firm provides. Joan Dyer, nominee of Joaldy Pty Ltd, owner of lot 13 made a similar submission, as did Hilma Mangifesta, owner of Lot 33.

Ivy Powell, owner of Lot 12 said the same, that CBCS were the cheapest and that since it is the existing body corporate manager, she knows of and is happy with the service given by it. This was echoed by Geertruida Winkelman, owner of Lot 16.

Brian and Shona Gapes and Kenneth and Barbara Lindsay, co-owners of Lot 1, and building managers for the scheme, say that they have been happy with CBCS’s services for the five years which they have been managers, and that the quoted base rate was lowest.

David and Jane Corney owners of Lot 37, say that CBCS have quoted a good rate and that they have had “no problems” with their service since owning their unit.

However, David and Barbara Stuart, co-owners of Lot 39 support the application fully and the reasons for it. Mr Accornero, co-owner of Lot 36, also fully supports the application, saying that “several owners” have complained to him as a committee member about this matter.

Jessie Clough, owner of Lot 49 supports the application but gives no reasons in her submission for her support.

Mr Pisasale, co-owner of Lot 44, was the chairperson for the scheme until the AGM. He says that it was at his request that Ms Elliott re-worded the originally drafted motion in order to make it clear “exactly what the actual total of each quote was.” He provides a copy of the original wording of the motion. He also provided a copy of the AGM minutes, showing that Motion 14 was withdrawn. As chairperson of the meeting, he withdrew the motion because of this application. On a personal note he would vote for CBCS as it provides a professional service, and its fees are comparable. He believes the wording of the motion was clear.

Ms Elliott, of CBCS, says that CBCS were last engaged by the body corporate for three years from 4th November 2005, and have been continuously appointed for the last 13 years. CBCS is

“aware of particular firms representing, or rather falsely representing, their charges as a combination of a fixed or base fee, plus what they describe as a “ fixed disbursement fee.” In every instance, upon examination of the detail... such fixed disbursements do not come close to encompassing all the services a body corporate would require from their manager AND a raft of other “ charges for additional duties” kicks in.”

She says that this is a nuisance to the on-going appointment of competent managers. CBCS expected to be re-appointed at the AGM, prior to the committee meting of 26th September 2008. At that meeting, there were only 4 committee members present, and the Applicant and Mr Accornero “both asserted CBCS disbursements had become unreasonable and each tabled proposals from other body corporate management firms”, Archers and SSKB, to be included as alternatives for the AGM.

Mr Pisasale telephoned Ms Elliott not long after the meeting saying that he was unaware of the proposals for an alternative body corporate manager, and said he was “concerned about the terminology used in the various proposals...” He asked Ms Elliott to prepare and provide a detailed item for item comparison of all three proposals. Ms Elliott prepared the comparisons with two experienced officers in her office, doing a “line by line” comparison from the other twos respective schedules of fees, on “a typical year” within the knowledge of CBCS. On 30th September 2008, she then provided a copy of the draft to Mr Pisasale who asked her to circulate the “ draft minutes” and the detailed comparison prepared “ in a matrix”.

Several owners made enquiries to her office directly about the “cost comparison matrix.” On 11th October 2008, Mr Pisasale was given a draft of the AGM agenda, which after some amendments, was again checked by him and “approved for circulation to every owner on 12th October 2008.” Full copies of each of the three agreements for management were attached, for owners to make their own comparisons about fees. Motion 14 was withdrawn “pursuant to the interim order...”

Minutes for the committee meeting of 26th September 2008 provided by Ms Elliott show that Mr Pisasale, the Applicant, Mr Accornero and Warren Staiger were the only voting members present at the meeting. In connection with body corporate management it states simply: “Body corporate management – three tenders to be proposed.”

The Applicant exercised his right of Reply. He emphasises that his complaint is not about the quotations from each firm or about costs, but about the manner in which the business was being conducted. This included the body corporate manager sending out meeting minutes and agendas without the secretary’s approval, and the Applicant was at the time secretary of the scheme.

He says that nominations for body corporate manager were not in alphabetical order; that “inside information” was used to change quoted prices; and that there were instructions given by the chairman to the body corporate manager.

He feels that engagements for three years are not acceptable without looking at alternatives. At the meeting of 26th September 2008, two quotations for body corporate management were submitted to the chairman. He raises other issues which are not considered here, about CBCS being conflicted in its involvement in the body corporate’s affairs, and the appointment of a power supplier. In respect of this application, he provides documentary evidence that CBCS’s fees are not as stated to be in Motion 14, since disbursements for the month of November 2008 alone were $3,506.57. He is of the view that the current body corporate manager has over the years done as it pleases and needs its practices need to be re-examined.

In this matter, the Applicant has raised concerns about the way in which three quotations for body corporate manager were not in his view presented equally to lot owners; and the process by which the agenda for the AGM came into existence.

I share his concerns about the process by which it appears that the chairperson Mr Pisasale liaised with the current body corporate manager Ms Elliott, apparently without the authorisation of the committee, to change the wording of at least two of the alternative motions.

However, the application is not at all clear as to whether the proposals, shown in the “original draft” submitted by Mr Pisasale, were the words of the Applicant and/or Mr Accornero or were drafted by the body corporate manager. The Applicant on 3rd November 2008 sent an email to Mr Pisasale, entitled “minutes of 26th September” but the “proposals” do not appear to be a part of the minutes of that meeting. The minutes of that meeting state simply: “Body corporate management – three tenders to be proposed.”

In any event, Ms Elliott at the request of Mr Pisasale revised the wording of the original motions, and Ms Elliott and her colleagues drafted a “cost comparison matrix.” Again, it is not clear when this matrix document was sent to lot owners, as part of the minutes of the 26th September 2008 meeting or if it was part of the agenda for the AGM.

I would therefore need to investigate this matter further with the Applicant, if it was not for the fact that it appears that the then chairperson, Mr Pisasale, withdrew Motion 14 from a vote at the AGM.

This was not the intention at all of the interim order, and it appears that the chairperson and the body corporate manager have erred in this regard. The interim order was simply to maintain the status quo, and that if Motion 14 was carried, then the body corporate was to take no action to put the result of that resolution into effect until this matter was determined, that is, that no contract be entered into with the winning contractor until after the validity of the motion had been determined.

I must therefore dismiss this application, since there is no extant motion the validity of which needs to be determined. To make it clear, the result is that the votes on Motion 14 given prior to the AGM are not counted, since Motion 14 is not a motion which was put to a vote, but was withdrawn.

However, it is likely that a motion for the engagement of a body corporate manager will arise in the near future on the agenda of an extraordinary general meeting, and I therefore take this opportunity to refer the committee to certain particulars of the legislation.

Where there is a motion submitted by a lot owner, the substance of the motion may be listed by the committee, but an ‘explanatory schedule’ must accompany the motion with the exact words as submitted by the lot owner (Section 73(4)(a) Standard Module) and also any “explanatory material up to 300 words” given by the submitter of the motion, if the motion is to be part of a “motion with alternatives.” The names and lot numbers of the person(s) submitting each alternative must also be given. (Section 71(5)(b) Standard Module.)

It appears that the committee did send explanatory material in the form of draft contracts for each of the proposed body corporate managers in accordance with section 114(2)(c) Standard Module The material must include “the terms of the engagement... including when the term of the engagement ... begins... and ends; and the term of any right or option of extension or renewal of the engagement...”.[1]

Section 114(2)(a) Standard Module requires that a body corporate manager is engaged by ordinary resolution of a body corporate, and that no votes are exercised by proxy on this motion.

“To remove any doubt, it is declared that an explanatory schedule for a motion must not contain explanatory material, other than an explanatory note mentioned in subsections (3) to (5)[2] or required under another provision of this regulation, written by a person other than the submitter of the motion.”

However, a committee may accompany the notice of meeting with ‘other explanatory material’ given by the committee, if the material is contained in a “schedule of the committee’s explanatory material” that is separate from the “explanatory schedule.” (Section 73(7) Standard Module.) The example of this is that the committee might want to give some “general explanatory material that does not relate to a particular motion stated in the voting paper, or information relating to a motion.”

These sections about explanatory material are not very clear or easy to understand and the aim behind the legislation, as detailed in the parliamentary Explanatory Notes to former section 42C Standard Module is that the committee must not receive a lot owner’s motions and then doctor them in a way that makes a vote unfair.

The parliamentary explanatory notes to (the former) Section 42C Standard Module, state as follows –

“Some practices have been that the committee has, after receiving a motion from an owner, included in the meeting notice its own argument regarding the motion in a way that did not allow voters to distinguish between the material provided by the person moving the motion and the material provided by the committee. In some instances the committee has altered the explanatory material provided by the owner. This places the committee in an unfair position of being able to manipulate the meeting material to seek to influence the manner in which persons vote. For this reason, the schedule must include the explanatory note in the form given by the motion’s submitter. The committee can include an explanatory note for a motion it submits to the meeting, and the committee can also include general explanatory material if it does not relate to a particular motion.

However, in its role as the elected representatives of the body corporate the committee is often aware of particular information in relation to a matter that it considers the voters should know when deciding how to vote on a motion. The committee will be likely to present this information at the general meeting, but those persons not attending the meeting do not have access to this information before they decide how to vote on a motion.

Provision is made for the committee to prepare a separate Committee Schedule containing such information. This allows the committee to provide appropriate background information but distinguishes this from the explanatory material.....” [3] (my underlining)

There is no requirement in the legislation that the alternatives are placed in alphabetical order.

Section 94 Act requires the body corporate (committee) to act reasonably in anything it does. It therefore has a general duty to make sure that any motions placed on an agenda are fair and accurate. The committee might provide explanatory material that one candidate or another is known to the body corporate or has in the past provided good service, but such remarks must also be balanced and reasonable. The committee is entitled to demonstrate its preference, if it has a preference, but should not denigrate candidates or motions proposed by other lot owners.

Finally, the body corporate may only make decisions at committee meetings; on motions voted on outside committee meetings (section 54 Standard Module); or at general meetings. The final agenda for an annual general meeting should be approved by the committee, preferably at a committee meeting, or by a committee member authorised by the committee specifically to approve final drafts etc. The chairperson would not have such power unless specifically authorised to do so in a particular circumstance, by the rest of the committee. The budgets and other such statutory motions should also be approved by the committee at a pre-AGM meeting.

The legislation does not give any member of the committee power to make decisions alone with the body corporate manager, or to give the body corporate manager instructions. Whilst the body corporate manager usually takes instructions from one member of the committee to facilitate the process of communication, this is a decision to be taken by the committee, preferably at a committee meeting. The body corporate manager acts on behalf of the committee. Section 119(3) Act forbids the body corporate (including the committee) from preventing an executive member of the committee from exercising an authorised power, or from directing the body corporate manager about how an authorised power is to be exercised.

[1] Section 114(2)(c) Standard Module 2008
[2] 73(3) motions to an AGM about budgets; 73(4) motions with alternatives; 73(5) a motion to change the regulation module of a scheme
[3] Body Corporate and Community Management Legislation Amendment Regulation (No.1)2003 Explanatory Notes for SL 2003 No. 263

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Genesis [2008] QBCCMCmr 476 (24 December 2008)