Condor [2008] QBCCMCmr 58 (21 February 2008)

Last Updated: 17 April 2008

REFERENCE: 0756-2007

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	13200
Name of Scheme:	Condor
Address of Scheme:	2 Riverview Parade SURFERS PARADISE QLD 4217

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

World Tourism Resorts and Hotels Pty Ltd, (ACN 116 650 358), the Letting Agent and owner of lots 1, 3 and 106.

I hereby order that motion 7 purportedly passed by the body corporate at its annual general meeting held on 26 September 2007 is void. I further order that within 3 months of the date of this order, an extraordinary general meeting of the body corporate is to be called and held for the purposes of considering motions for the engagement of staff or appointing a contractor to attend to caretaking and maintenance of the complex. I further order that within 14 days of the date of this order, the body corporate committee is to invite all lot owners to submit motions for consideration at the extraordinary meeting of the body corporate. I further order that within 1 month of the date of this order, a member of the body corporate or the committee may submit motions for consideration at the extraordinary general meeting referred to above. I further order that until such time as resolutions of the extraordinary general meeting are able to be implemented, the body corporate is entitled to continue to engage staff to carry out caretaking and maintenance of the complex on a month to month basis.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0756-2007

“Condor” CTS 13200

THE SCHEME

Condor Community titles scheme is a scheme consisting of 121 lots governed by the Body Corporate and Community Management Act 1997 (Act) and the Standard Module Regulation (Standard Module).

APPLICATION

The applicant is World Tourism Resorts and Hotels Pty. Ltd. which is the Letting Agent for the scheme and according to titles records, is the owner of lots 1, 3 and 106. The applicant seeks an Order that motion 7, considered at the AGM on 26 September 2007, is invalid.

BACKGROUND

Motion No. 7 originally read as follows:

That until it is resolved to make alternate arrangements by an ordinary resolution of the body corporate at a future general meeting, the Committee be authorised to employ the caretakers to carry out the maintenance and caretaking duties within the complex in such a manner as the Committee may from time to time determine and that the Committee be authorised to pay such Caretakers at a rate of pay commensurate with the level of duties to be performed and that time required for such duties to be performed.

However on or about 5 September 2007 the Chairman of the Committee distributed an amended motion to all owners. The amended motion read as follows:

That until it is resolved to make alternate arrangements by an ordinary resolution of the body corporate at a future general meeting, the Committee be authorised to employ the caretakers to carry out the maintenance and caretaking duties within the complex in such a manner as the Committee may from time to time determine and that the Committee be authorised to pay such Caretakers at a rate of pay commensurate with the level of duties to be performed and that time required for such duties to be performed up to a total amount of $90,000 for the 2008 financial year as set out in the budget estimates and for future years as budgeted.

The applicant states that the committee is attempting to enter into a contract without complying with applicable legislation and a vote in favour of motion 7, would have the effect of precluding lot owners from voting on a later motion submitted by the applicant, wherein it is proposed that the same services would be provided at a much reduced rate.

The applicant also believes that the committee is seeking to manipulate voting, and the outcome of the vote does not reflect the wishes of the majority of body corporate members. It also means that the caretakers could be able to rely on the protection afforded by section 310 of the Act and the body corporate would be committed to any contract entered into regardless of the invalidity of the motion.

The applicant believes that Motion 7 is invalid for a number of reasons including the following:

• Motion 7 seeks to incur expenditure of $90,000 which is much more than the major spending limit of $30,250 for this scheme ($250 X 121), without obtaining 2 quotations as required by section 104 of the standard module Regulation;
• The provision of caretaking services is for an unspecified period and the motion therefore seeks authority of the owners to spend up to $90,000 per year on caretaking services without the need for regular body corporate approval;
• It is also claimed that the proposed motion is invalid for lack of certainty as to the exact tasks that are to be performed by the caretaker as no proposed agreement is attached. Therefore owners have no idea of what services they are to receive, from whom and for how long;
• The motion was also inappropriately altered by the Secretary after the Notice of Meeting and Motions were distributed by the Secretary. The applicant submits that motions can only be amended in accordance with section 57 of the Standard Module Regulation.
  

Pursuant to section 243 of the Act, submissions were sought from all owners as well as the body corporate committee.

The body corporate made the following submissions:

• There is a letting agreement in existence between the body corporate and the applicant ;
• The applicant is seeking to be appointed as caretaking contractor and proposed a motion (No.37) that a caretaking agreement be entered into with the applicant;
• That motion was dealt with as an ordinary resolution without proxy by way of a secret ballot. However the motion was not carried as there were 55 votes against and 34 votes in favour;
• A significant majority of lot owners believe that caretaking and maintenance should be carried out by the committee with assistance from employees under the direction of the committee;
• The body corporate has not engaged a caretaking service contractor for approximately 20 years;
• Motion 7 was put to the AGM as an ordinary resolution and carried with 61 votes in favour, 26 votes against and 1 abstention;
• Initially the motion did not incorporate the total amount of salaries which would be required to retain staff employed by the committee as they did not their employees to know the upper limit provided for this in this item of expenditure;
• However after seeking advice, the committee amended the motion to incorporate the relevant amount and the amended notice was sent to lot owners outside the 21 day notice period;
• It is admitted that unless the services of staff are terminated, the total amount of salaries payable over a year do exceed the spending limit of the committee;
• staff can be terminated at any time and therefore there is no transaction which could be said to be valid and binding on the body corporate as contemplated by section 310 of the Act;
• Motion 7 did not propose the carrying out of work or the acquisition of personal property. Rather, it authorised the employment of staff to assist the committee in maintaining the common property and quotations cannot normally be obtained for the employment of staff;
• It is not true that owners would have no idea what value they are to receive from the employees or how the employees are to be supervised and managed;
• As motion 7 was carried by a significant majority at the meeting, the adjudicator has power to overcome any irregularity arising out of the amendment;
• The notice to lot owners contained a typographical error in that the paragraph relating to motion 7 referred to motion 39 when it should have referred to motion 37 which clearly refers to the caretaking agreement proposed by the applicant. It is unlikely that the mistake would have misled a lot owner;
• It is the case that section 104 of the Standard Module , the committee submits that section 103(1)(c ) . otherwise the body corporate would be left without anyone to carry out the caretaking functions and it is therefore essential that the current arrangements remain in place.
• This application has arisen out of a struggle for control of the caretaking and maintenance functions within the building between the letting agent who acts on behalf of investor owners and the majority of lot owners who reside in the building.
  

Four individual submissions were received from lot owners, two of which opposed the application. Two submissions opposed the application as they believe current arrangements are cost effective and working effectively.

A fourth lot owner submitted that it could be more cost-effective to appoint World Tourism than for the body corporate to directly employ maintenance staff.

In reply the applicant made the following submissions:

• There is no indication in the wording of the motion that the costs associated with the motion would be equal to the current rates of pay. Rather, the body corporate would have no control as to remuneration and members are being asked to vote on expenditure of $90,000 which is outside the “expenditure limit”;
• The full details of the proposed employment including remuneration should have been included in any motion to be voted on by the body corporate;
• Members of the body corporate have not been given any indication of what the implications would be if an employment agreement as proposed is approved;
• In a previous determination an adjudicator ruled that a motion was void where owners were not provided with the terms of a proposed contract and could not therefore properly consider the motion;
• In the present case the owners have no control over the level of remuneration payable and have not been given 2 quotes as required because the amount being voted on is outside the expenditure limit;
• The committee has no discretion to amend motions. The secretary is responsible for distribution of voting papers without amendment in accordance with section 42(a) of the Standard Module and a motion may only be amended during a general meeting in accordance with section 57of the Standard Module and then the amendment must not affect the subject matter of the motion;
• The committee is committed to paying staff salaries for as long as staff are employed and there is nothing to suggest that any of the employees are about to have their contract terminated;
• It is erroneous and/ or seriously misleading for the committee to tie the passing of the motion with control of common areas as was done in the “Important Notice to Lot Owners” issued by the committee. Granting of caretaking rights would not affect the body corporate’s control of common areas;
• The motion was carried because the committee misinformed the owners;
• Section 104 of the Standard Module requires 2 quotes to be provided to owners so they can determine whether the amount payable under a proposed contract is reasonable. The exception in subsection 104(6) is only applicable in exceptional circumstances;
• In any event even subsection 104(6) could not be relied upon in the circumstances because not even 1 quotation has been obtained;
• Section 103(1)(c ) cannot apply because that provision concerns emergency expenditure;

Section 103(1)(d ) cannot apply because that provision does not operate to condone spending which is already in progress;

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)).

DETERMINATION

The applicant previously sought an interim order to prevent the consideration of the motion at the AGM scheduled for 26 September 2007. On 25 September 2007 I made the following interim Orders:

1. That the AGM scheduled for 26 September 2007 may proceed;
2. That motion 7 (including any amendments made to motion 7) may be voted upon at the AGM;
3. That owing to the possibility that a resolution based upon motion 7 could be invalid, the Body Corporate is to refrain from carrying out any resolutions based on this motion, and is not to enter into any new Caretaking Agreement, or engage new caretakers until a final order has been made in respect of this dispute resolution application.
   

I am now concerned with the applicant’s request for a final order that the (amended) motion 7, considered at the AGM on 26 September 2007, is invalid.

The amended motion read as follows:

That until it is resolved to make alternate arrangements by an ordinary resolution of the body corporate at a future general meeting, the Committee be authorised to employ the caretakers to carry out the maintenance and caretaking duties within the complex in such a manner as the Committee may from time to time determine and that the Committee be authorised to pay such Caretakers at a rate of pay commensurate with the level of duties to be performed and that time required for such duties to be performed up to a total amount of $90,000 for the 2008 financial year as set out in the budget estimates and for future years as budgeted.

It is claimed that Motion 7 contravenes section 104 of the Standard Module Regulation as it seeks approval of expenditure of $90,000 per annum which is well above the major spending limit of $30,250 for this scheme ($250 X 121), without obtaining 2 quotations.

It is also claimed that the motion is invalid because it was inappropriately altered by the Secretary after the Notice of Meeting and Motions were distributed by the Secretary. The applicant submits that motions can only be amended in accordance with section 57 of the Standard Module.

Motion 7 relates to the employment of staff to carry out the maintenance and caretaking duties within the complex up to a total amount of $90,000 for the 2008 financial year as set out in the budget estimates and for future years as budgeted . However, the body corporate argues that staff can be terminated at any time and other than the normal employer-employee relationship, no obligation for payment exists. It is further argued that Motion 7 did not propose the carrying out of work or the acquisition of personal property but rather, it authorised the employment of staff to assist the and therefore, section 104 of the standard Module does not apply to the circumstances.

Section 104 of the standard module provides as follows:

Quotes for major spending
104.(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) Each quotation obtained under this section must be retained as an attachment to the minutes of the meeting at which the quotation is considered.

While the wording of this section is not without ambiguity, it is my view that the purpose of section 104 of the Standard Module is to enable lot owners to determine whether a proposed item of expenditure is reasonable, and the section is not limited in its scope to the acquisition of goods or engagement of independent contractors. Rather, I believe that the words “proposes the carrying out of work or the acquisition of personal property or services” is wide enough to include the engagement of staff to provide caretaking services at a cost of up to $90,000 per year. The absence of a written agreement does not necessarily mean that section 104 does not apply. To adopt such a narrow construction of section 104 could lead to the result that lot owners would be unable to determine what value they are to receive from the employees or how the employees are to be supervised and managed. Further, there is no doubt that unless the services of staff are terminated, the total amount of salaries payable over a year do exceed the spending limit of the committee. The body corporate has evidenced a clear intention to engage the staff for at least a year by including in the budget for the year to 30 June 2008 for the Administrative Fund the following entry – Wages – $80,000.

The question then arises as to whether there is scope for the application of the exceptions in sections 103(1)(c ) & (d) or 104 (6). I have no evidence at hand to suggest that the proposed expenditure is necessary to meet an emergency nor is there evidence to suggest that the proposed spending is necessary to comply with a statutory notice, order of an adjudicator or court order. Nor do I believe that in the circumstances it is impractical to obtain at least 2 quotations.

Given the relevant limit for major spending is $250 per lot, or $30,250 for this scheme ($250 X 121), I therefore believe that the motion, and the resolution based on that motion are invalid for reason of the failure to comply with section 104 of the Standard Module.

The next matter for consideration is the applicant’s argument that motion 7 was inappropriately altered by the Secretary after the Notice of Meeting and Motions were distributed, as the motion was not amended in accordance with section 57 of the Standard Module Regulation which provides as follows:

In reply, the body corporate states that the committee amended the motion to incorporate the relevant amount of $90,000, and the amended notice was sent to lot owners outside the 21 day notice period.

In my opinion the Standard Module contemplates that the Secretary is responsible for preparation of the voting paper and including all motions on the voting paper without amendment in accordance with section 42A. Under that section it is not permissible for the motions to be amended after voting papers have been issued, notwithstanding that notification of the amended motion may have been given more than 21 days before the general meeting. Rather, any such amendment of a motion must be effected in accordance with section 57 of the Standard Module which provides as follows:

57 Amendment of motions at general meetings

(1) A motion may be amended at a general meeting by the persons present, and having the right to vote, at the meeting.

(2) However, an amendment can not be made that changes the subject matter of the motion.

(3) In counting the votes cast for and against a motion to amend a motion, or an amended motion, a person who is not present at the meeting personally or by proxy, but would, if present, have the right to vote—

(a) if the person has not cast a written or electronic vote on the motion—must not be counted as voting for or against the motion; or

(b) if the person has cast a written or electronic vote on the motion—must be counted as voting against the motion.

Accordingly, a motion can only be amended by a person present (personally or by proxy) at the meeting and entitled to vote. Moreover, in counting the votes cast for and against a motion to amend a motion, or an amended motion, any person who is not present but would be entitled to vote and who has cast a vote on the motion, must be counted as voting against the motion. This is because those voters have not been given the opportunity to consider the amended motion. This means that all those votes cast by written voting paper in favour of the unamended motion are taken to be counted against the amended motion unless the voters were present at the meeting and vote for the amended motion.

I also believe that there is some substance to the applicant’s claim that the motion was void for uncertainty because owners were not provided with the terms of a proposed contract and could not therefore properly consider the motion. While it may be clear to members of the committee what maintenance and caretaking duties within the complex may entail, it would not be so clear to other lot owners, particularly those owners who do not reside within the scheme.

For the above reasons I propose to order that motion 7 purportedly passed by the body corporate at its annual general meeting held on 26 September 2007 was void.

I also propose to order that within 3 months of the date of this order, an extraordinary general meeting of the body corporate is to be called and held for the purposes of engaging staff or appointing a contractor to attend to caretaking and maintenance of the complex.

I also propose to order that until such time as resolutions of the extraordinary general meeting are implemented, the body corporate is entitled to engage staff to carry out caretaking and maintenance of the complex on a month to month basis.