AustLII [Home] [Databases] [WorldLII] [Search] [Feedback]

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders
You are here:  AustLII >> Databases >> Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders >> 2008 >> [2008] QBCCMCmr 65

[Database Search] [Name Search] [Recent Decisions] [Noteup] [Download] [Help]

Surfers Palms North [2008] QBCCMCmr 65 (13 March 2008)

Last Updated: 21 April 2008

Office of the Commissioner for Body Corporate and
Community Management


SPECIALIST ADJUDICATION
(Caretaking Contractual Matter)

Number: 0343A-2007


Applicant:

PRINCI CABINETS PTY LTD

Respondent:

BODY CORPORATE FOR SURFERS PALMS NORTH
COMMUNITY TITLES SCHEME 20846

FINAL ORDERS
13 March 2008
ORDERS, with the consent of the parties, that:
(a) the interim order made by me on 27 April 2007 is repealed;
(b) item (e) of the further interim orders made by me on 26 May 2007 is repealed;
(c) Mr Ian D’Arcy of Capital Body Corporate Administration is re-appointed as administrator of the Respondent with the same authorizations and powers as those contained in paragraphs (b) and (c) of my third interim orders dated 7 June 2007 and upon the same terms and conditions as his original appointment;
(d) on or before 31 August 2008 Mr D’Arcy is to convene and hold a general meeting of the Respondent (“General Meeting”) for the purpose of electing a new committee of the Respondent;
(e) prior to convening the General Meeting Mr D’Arcy is to call for nominations of candidates for election to the committee and to invite all persons nominating to provide a written statement (not exceeding 120 words) setting out their past involvement in the governance or management of the Respondent and any other information they consider relevant to their candidature for election to the committee;
(f) all the conforming written statements provided by candidates are to distributed to lot owners with the notice convening the General Meeting;
(g) in all other respects such election shall be conducted in accordance with the applicable law for the conduct of committee elections at an annual general meeting;
(h) the notice of the General Meeting may contain one or more, if more, alternative, motions proposing the appointment and authorization of a new body corporate manager for the Respondent, which may include Mr D’Arcy or his firm;
(i) the notice of the General Meeting may, at Mr D’Arcy’s discretion, contain other motions;
(j) Mr D’Arcy’s appointment and authorizations in paragraph (c) above are to continue until the conclusion of the General Meeting, at which time they terminate;
(k) the application is dismissed as regards the orders sought in paragraphs 1 and 2 of Part 5 of the application;
(l) Mr D’Arcy is to provide a copy of this order and the corresponding Determination to all lot owners in the Scheme as soon as practicable after this order takes effect; and
(m) upon conclusion of the General Meeting the application is in all other respects dismissed.
FURTHER ORDERS by determination THAT:
(a) the costs of the adjudication be paid by the Respondent within 45 days of receipt of an invoice for those costs;
(b) that the application by Dr Ian Lochlin made on or about 30 July 2007 seeking cancellation or variation of my orders made on 7 June 2007, to the extent that it is a valid application, is dismissed; and
(c) that the application by Dr Ian Lochlin and Mr Vic Allen made on or about 6 March 2008 seeking cancellation or variation of my orders made on 7 June 2007, to the extent that it is a valid application, is dismissed.

G F Bugden OAM
Specialist Adjudicator

Office of the Commissioner for Body Corporate and
Community Management


SPECIALIST ADJUDICATION
(Caretaking Contractual Matter)


Number: 0343A-2007


Applicant: PRINCI CABINETS PTY LTD


Respondent: BODY CORPORATE FOR SURFERS PALMS NORTH

COMMUNITY TITLES SCHEME 20846


FINAL DETERMINATION
13 March 2008


Background

  1. This is the fourth time that I have been asked to deal with this application by way of orders. For completeness I will re-state the facts surrounding the application.
  2. Community titles scheme 20846 (which I will refer to as the “Scheme”) relates to a residential apartment building at 2 St Kevins Avenue, Benowa comprising 62 apartments.
  3. On or about 28 March 2003 the Respondent (which I will refer to as the “body corporate”) entered into a Caretaking Agreement and a Letting Agreement with Kibshire Pty Ltd as Trustee for the G & T Gray Family Trust. I will refer to these agreements as the “Agreements”.
  4. By Deed of Assignment dated 31 January 2006 between the body corporate, Kibshire Pty Ltd, Princi Cabinets Pty Ltd, as Trustee for the R Princi Family Trust and Rocco Princi, the Agreements were assigned to the Applicant (who I will refer to as the “Manager”). The body corporate consented to the assignment and gave certain warranties, including a warranty that, so far as it was aware, Kibshire Pty Ltd was not in breach of the Agreements. Mr Princi, as owner (or prospective owner) of lot 1 in the Scheme provided certain covenants about transferring his interest in that lot in the event that the Agreements were required to be transferred in accordance with certain provisions in the Body Corporate and Community Management Act 1997 (“Act”).
  5. Although the Deed of Assignment does not refer to any consideration relating to the assignment of the Agreements, the nature of the documentation and prevailing commercial practice at the time, would suggest that the Manager would have paid a substantial sum of money as consideration for the transfer of the Agreements. Also, ownership of lot 1 would have been transferred to Mr Princi at the same time as the Agreements were assigned.
  6. Prior to this application there appears to have been a turbulent history within the Scheme and it is clear from material on the file of the Commissioner for Body Corporate and Community Management (“Commissioner”) that a number of dispute applications had been made in respect of the body corporate.
  7. In January 2007 the body corporate served on the Manager a Notice to Remedy Defaults dated 18 January 2007 (“First Default Notice”). It alleged defaults under both of the Agreements. These alleged defaults were particularised in some 5½ pages. By letter dated 2 February 2007 Hynes Lawyers, on behalf of the Manager, comprehensively responded to the First Default Notice and concluded by saying that “The allegations are unsubstantiated, incapable of remedy and the Notice is invalid.”
  8. The body corporate served on the Manager a further notice dated 28 March 2007 (“Second Default Notice”) alleging that the earlier notice had not been fully complied with and that further breaches of the Agreements had occurred. The Second Default Notice particularised the alleged defaults over some 5 pages. By letter dated 10 April 2007 Hynes Lawyers, again on behalf of the Manager, responded in detail to the Second Default Notice on the basis that it was invalid for technical reasons.
  9. Prior to these default notices, a previous Chairman of the body corporate, shortly before his death, allegedly made a “death bed confession” about certain activities relating to the financial affairs of the body corporate. As a result of this the body corporate committee in early 2007 appointed Ms Judy Gibson, a registered auditor, to undertake certain work in relation to the body corporate’s affairs, including the conduct of an audit of its accounts for the year to 31 January 2007. Shortly before the annual general meeting of the body corporate Ms Gibson produced an “Auditor’s Note to Owners” dated 24 March 2007 which the committee sent to all owners on or about that date.
  10. It is fair to say that Ms Gibson’s note was highly critical of the Manager’s performance and also contained serious allegations of illegal practices and incorrect authorizations for payments. While not all these allegations were directed at the Manager, they clearly reflected very badly on the Manager. Indeed, at one point she stated that she had recommended to the committee that “they give serious consideration to replacing the Caretaker”. The note stated that a more detailed report was being prepared for the committee.
  11. In a letter dated 29 March 2007 the then body corporate solicitors, Heiser Bayley & McDonald, advised the body corporate as follows:

“In view of the matters raised in the Auditor’s Report dated 24 March 2007, the committee in carrying out their duties should refer the Auditors report to the Queensland Police for their determination as to whether it is possible to instigate a criminal investigation as outlined in the Queensland Police Service letter of 12 January 2007.

The committee should further investigate the possibility of civil actions to recover monies from parties as recommended by the Auditor.

We confirm your advices and have perused the Default Notices of which you have advised have not been complied with.

The motion to terminate the Management Agreement should be included in the Motions for an Annual General Meeting or Extraordinary General Meeting as required by the Act to allow the owners to decide the matter.”

  1. The Manager’s grounds in the current application allege that a copy of that letter was sent to unit owners in the Scheme before the time expired for compliance with the Second Default Notice, which was also before the date of the body corporate’s annual general meeting held on 30 April 2007. This raises the issue whether the statement in the solicitor’s letter (which relied on the instructions received from the body corporate) was entirely accurate and, if not, how that statement may influence lot owners intending to vote on a subsequent motion to terminate the Agreements at the annual general meeting.
  2. The Manager’s grounds also allege that the statements in the solicitors letter are even more significant when read in light of a letter from the Unit Owners and Body Corporate Alliance (Inc.) written by its Chairman, Mr Colin Lamont, and dated 1 April 2007, a copy of which was also circulated to unit owners before the annual general meeting. That letter read as follows:

“Independent Report to Committee – Surfers Palms North:

The Unit Owners Alliance was formed to support and advise owners particularly in the exercise of their right under the Act, to control their own affairs and most importantly their own bank accounts, thus taking control out of the hands of managers. In this we are supported by the government who work with us in an ongoing review of legislation to increase owners’ control over managers. Your committee has moved with the times in the actions they have taken.

Auditor’s and Lawyer’s recommendations: Based upon findings of “considerable evidence of illegal practices” and “incorrect authorization of payments during the time of the previous two chairmen”, both your auditor and your solicitor have recommended the Committee should “refer matters to the Police for possible criminal charges” and seek legal advice about “civil actions to recover monies for illegal payments”. Your auditor and solicitor both enjoy a reputation of being above reproach. They came to these conclusions without fear or favour.

Candidates for election at this AGM: Under the law owners can not only sue anyone committing an offence, they can sue previous office bearers who may have allowed it to happen by not exercising due diligence by ensuring necessary controls. This is not unknown! Some people who may have failed in their stewardship have nominated for committee. Everyone is entitled to a presumption of innocence but if I were associated with irregularities on my watch, I would withdraw my nomination, to avoid any perception of conflict of interest. It is normal practice for people potentially under a cloud to resign or, if facing election, stand aside. We hear public and media outrage and cries for resignation from politicians or company directors who face such allegations. Is this any different? Standing aside would not be an admission of guilt but a demonstration of integrity. One must at all times avoid a potential conflict of interest.

Body Corporate Commission support: Owners should be reminded in late January this year after two months of examination of matters at Surfers Palms North, the Body Corporate Commission in Queensland came down on the side of Ian Lochlin and the present committee, rejecting attempts by his opponents to put Financial control back in the hands of a manager. Despite this, those opponents persist. There is a motion at the end of your agenda at this forthcoming AGM that would again return the body corporate to the bad old days when managers had total control. That is contrary to warnings from government about owner control and warnings from my organization of strict control over managers by owners to police and reduce over-servicing, overcharging and other unwanted burdens on your pockets.

Voting at this AGM: Can owners afford to ignore the collective support for Ian Lochlin and his team from the Body Corporate Commission, from an auditor who is a Fellow of the CPA, from the Unit Owners Alliance and from a solicitor who has been the Law Society’s advisor to the Minister on the Body Corporate Act?

Your finances: For the first time in five years, your bank accounts are now under your control not under the control of a Body Corporate Manager. You may not be aware that before Ian Lochlin took over your bank regarded the Body Corporate Manager as the client not the owners. This meant they could and did write their own cheques. There was no control of over-servicing and overcharging. Why anyone would want to return you to that disastrous position again is beyond reason yet some candidates for this election support that folly. This is what the Body Corporate Commission rejected in January. Your present committee is to be congratulated for its determination to do the right thing by owners.

Conclusion: I believe owners should return this committee to finish the job. An alternative Chairman who lives in Melbourne cannot possibly allocate the time with the auditor, necessary to see this through nor can he respond promptly to the needs of other professionals helping put Surfers Palms North back in good order. Owners should vote for the team that produced the first audit in five years and has done the right thing about your finances and told owners the truth throughout, even in the face of monstrous and defamatory campaign of false allegations against them.”

  1. The paragraph in that letter headed “Voting at this AGM” contained the statements complained of in the Manager’s grounds. The Manager contended that the statements were “designed to greatly increase the authority attached to the letter” (i.e. the solicitor’s letter).
  2. Anyone reading Mr Lamont’s letter could well form the opinion that the Unit Owners and Body Corporate Alliance (Inc.) is a body opposed to “managers” which may well include both body corporate managers and building managers. The letter is clearly partisan and designed to influence the vote of unit owners on the re-election of the body corporate committee and promote its stance against the Manager.
  3. The Manager’s grounds also complain that Mr Lamont’s statement that the “Commission” came down on the side of Ian Lochlin (the then current Chairperson) and his committee is inaccurate. The grounds cite a number of matters from Departmental Adjudicator’s decisions, including the following in Surfers Palms North [2006] QBCCMCmr 626 (28 November 2006) where it was said:

“It would appear to me that the scheme has not been functioning in a satisfactory way and it may be in the best interests of all owners that an independent and professional Administrator, not associated with any particular faction or service provider, be appointed with all of the powers of chairperson, secretary and treasurer and of the committee and that the powers of the members (executive and ordinary) of the body corporate committee be withdrawn.”

  1. Also, in Surfers Palms North [2007] QBCCMCmr 65 (8 February 2007) a departmental adjudicator said:

“The committee cannot choose to act contrary to directions of the body corporate or as is evident in this instance, its members use their elected positions to prevent the body corporate being able to consider management issues, including the composition of the committee. ..........

In my view the committee has erred in failing to comply with the order made on Application 0767-2006 and in authorizing an audit contrary to the Accommodation Module. I am also concerned that the committee has seemed to have chosen to ignore my request for information.

As I have stated above, I consider that the committee has inappropriately dealt with certain issues. While these actions may have resulted in an order being made in the terms sought, I have dismissed the application principally because the body corporate’s annual general meeting is now due and it has become evident from information provided by the applicant that the committee has initiated processes towards convening this meeting.”

  1. It would appear from the above material that Mr Lamont’s statement that “the Body Corporate Commission in Queensland came down on the side of Ian Lochlin and the present committee, rejecting attempts to put financial control back in the hands of a manager” is inaccurate and misleading.
  2. The grounds of the application also objected to Mr Lamont presenting his report as an “independent” one when he was in fact engaged as a consultant to the body corporate, as was evidenced in the minutes of the committee meeting of 25 January 2007. Those minutes record a unanimous resolution of the committee “to continue to use the services of Colin Lamont of the Unit Owners Alliance as a consultant to the Body Corporate Committee during the audit process to a maximum of $7625”.
  3. The grounds then went on to allege that the letter from the Auditor, the letter from Heiser Bayley & McDonald and the letter from Mr Lamont had the capacity to mislead owners voting at the upcoming annual general meeting, particularly regarding the motion to terminate the Agreements.
  4. The annual general meeting of the body corporate had been convened to be held on Monday 30 April 2007. Motion 16 proposed for that meeting read as follows:

“THAT the Caretaking and Letting Agent agreements between Princi Cabinets Pty Ltd ABN 006 687 896 (sic) and Surfers Palms North CTS 20846 be terminated immediately due to Princi Cabinets continually failing to meet it’s contractual obligations through ignorance or blatant disregard to the essential terms and conditions of the agreements, failure to remedy such breaches and general misconduct not in the best interests of the Body Corporate for Surfers Palms North by R. Princi, it’s approved nominee.”

The application

  1. The application was made on or about 23 April 2007. It sought interim orders, including one preventing the meeting on 30 April 2007 voting on motion 16. It also sought final orders including:

First interim orders

  1. The application was referred to me by the Commissioner on 23 April 2007. For the reasons given at the time I made an order on 27 April 2007 to refrain the body corporate from considering or passing motion number 16 (relating to termination of the Management Rights) at its annual general meeting or at any adjournment of that meeting or any reconvened meeting. The terms of that order were very clear.

Second interim orders

  1. Contrary to the terms of that order, the body corporate not only considered the motion but also passed it. When Motion 16 was dealt with Mr Lamont was acting as Returning Officer, having previously been appointed by the committee.
  2. The Applicant then made application for further interim orders, including an order for the appointment of an administrator to take control of the body corporate’s affairs. In response to that further application I made second interim orders on 26 May 2007.
  3. By those second interim orders I repealed the resolution passed pursuant to motion 16, invalidated any action taken by the body corporate to give effect to the resolution and restrained the body corporate from taking any further action to give effect to the resolution. I also ordered the body corporate to do a number of other things, including serving on the owner of each lot in the Scheme a copy of the further interim orders and my reasons for making those orders.
  4. I declined to appoint an administrator because of the seriousness of such an appointment, but I allowed the applicant to revert to me on an urgent basis for further orders if the body corporate acted or attempted to act contrary to those further interim orders. I indicated that if such an application was justifiably made by the applicant I would appoint an administrator to take control not only of the committee’s powers, but also relevant and necessary powers of the body corporate. It was because of this possibility that I included in my further interim orders a requirement for those orders and my reasons for making them be circulated to all lot owners. I wanted all lot owners to be aware of the serious situation confronting their body corporate.
  5. Subsequent to me making the second interim orders there were strong protestations and claims from various persons on behalf of the body corporate and/or the individuals involved.

Third interim orders

  1. The Applicant then made a further application, pursuant to the leave I previously gave, seeking the appointment of an administrator on the basis that the body corporate had failed to comply with the terms of those orders in that it is had not distributed to lot owners a copy of those orders and my reasons for making them.
  2. By way of investigation of this further application, I exercised my powers under section 271 of the Act by speaking to both the solicitor for the body corporate, the solicitor for the Applicant, three unit owners in Surfers Palms North, as well as the body corporate manager.
  3. On the basis of the conversations that I had with those people, plus the materials that were submitted in support of that further application, I was satisfied that:
  4. Many of these findings were consistent with the experience of other adjudications conducted with respect to the Scheme. In particular, I refer to the above quotations in Surfers Palms North [2006] QBCCMCmr 626 (28 November 2006) and Surfers Palms North [2007] QBCCMCmr 65 (8 February 2007).
  5. On 7 June 2007 I therefore made the third interim orders appointing an administrator. I appointed Mr Ian D’Arcy of Capital Body Corporate Administration to exclusively perform all of the obligations of the body corporate, its committee and its chairperson, secretary and treasurer under the Act and community management statement 20864.
  6. To ensure that the work of the administrator was not impacted by the members of the body corporate committee, I vacated the positions of all committee members. I also gave directions to the administrator to:
  7. I also ensured that owners had the opportunity of following what had occurred in relation to my orders of 26 May 2007, as well as the third interim orders.

Other applications

  1. By letter dated 30 July 2007, Herdlaw Solicitors applied to the Commissioner on behalf of Dr Ian Lochlin (the former chairman of the body corporate) to make:
  2. A further application was made on 6 March 2008 by Dr Lochlin and Mr Vic Allen (the former secretary of the body corporate) for variation of the third interim orders appointing the administrator.
    1. The Commissioner referred the letter dated 30 July 2007 from Herdlaw Solicitors to me. By letter dated 1 August 2007 to Herdlaw Solicitors I indicated that I would delay dealing with that application until after the Commissioner finally referred the principal application to me for determination. I had doubts about Dr Lochlin’s standing to make such an application and doubts about whether the letter of 1 August 2007 was in fact a valid application. However, I invited Herdlaw Solicitors, as well as the solicitors for both the body corporate and the Manager, to make submissions.
    2. That application by Dr Lochlin alone is effectively based on the following grounds:

(a) that my order of 26 May 2007 was in the course of being complied with when I appointed the administrator and therefore I was in error in concluding that the body corporate had not or did not intend to comply;

(b) that the order did not state when it had to be complied with and therefore it was not possible for me to conclude that the body corporate was in breach;

(c) that the body corporate manager had not resigned in the circumstances that I stated, but had resigned because of a dispute with the body corporate over unpaid fees;

(d) that, contrary to my conclusion, the body corporate could be relied upon to comply with my orders;

(e) that, contrary to my conclusion, the affairs of the body corporate were not in disarray;

(f) that, contrary to my conclusion, the committee could be relied upon to properly participate in the application in the interests of all lot owners; and

(g) that, contrary to my conclusion, the committee could be relied upon to provide me with accurate information.

  1. The further joint application of 6 March 2008 was made on lengthy grounds that I summarize as follows:
  2. I will deal with the two applications for variation of the third interim orders first. Some of the grounds in those applications can be easily disposed of. Others will require an examination of some of the evidence, including evidence that was not available to me at the time the orders were made.
  3. At the outset it needs to be understood that, by the very nature of interim orders, they are made without the benefit of all the evidence and without the benefit of some or all the available evidence being tested. They are intended to preserve the status quo until the matters raised in an application can be fully investigated with the benefit of time and proper process.

The application of 30 July 2007

  1. The first ground is that my order of 26 May 2007 was in the course of being complied with when I appointed the administrator and therefore I was in error in concluding that the body corporate had not or did not intend to comply.
  2. Since the third interim orders were made more evidence has been made available to me. This evidence includes a Statutory Declaration of Ms Natasha Suskova dated 23 July 2007, supported by receipts from Australia Post. On the basis of that and other new evidence I am satisfied that at the time the third interim orders were made, efforts were underway by the body corporate to distribute those orders to unit owners. It is unfortunate that, despite a number of efforts on my part to ascertain the actual position, this information was not made available to me at the time. The first ground is therefore established.
  3. The second ground is that the order did not state when it had to be complied with and therefore it was not possible for me to conclude that the body corporate was in breach.
  4. Clearly, the order did not set a date for compliance. It therefore required compliance within a reasonable time. My enquiries at the time of considering the application for interim order failed to detect any intention on the part of the body corporate to comply with the order. Indeed, the body corporate’s solicitor, who agreed to advise me of the body corporate’s intention, did not make further contact with me. The logical conclusion at the time was that the body corporate had not complied and was not intending to comply, particularly in light of the former committee’s prior conduct in respect of other dispute applications.
  5. The third ground is that the body corporate manager had not resigned in the circumstances that I stated, but had resigned because of a dispute with the body corporate over unpaid fees. The body corporate manager’s evidence on this point is clear. There is evidence of a dispute over fees and claims of rumours upsetting Ms Mott and it has been put to me by the applicant and Mr Lamont that these are the true reasons why the body corporate manager resigned. They may well have been factors, but I rely upon the clear and unretracted reason given to me by Ms Mott herself. Also, the fact is that she had resigned. I am therefore not satisfied that this ground is established.
  6. The fourth ground is that, contrary to my conclusion, the body corporate could be relied upon to comply with my orders. In view of all the evidence on the Commissioner’s file and the prior conduct of the former committee in relation to earlier dispute applications I am still not satisfied that the body corporate, under the control of the previous committee, could be relied upon to comply with orders that I might make. Some of the evidence I will canvas shortly in relation to other matters will also be supportive of the view I have reached.
  7. The fifth ground is that, contrary to my conclusion, the affairs of the body corporate were not in disarray. While the quantum may be a matter for debate, the fact that the body corporate was not functioning as it should have been is a matter on which I am still satisfied. That was certainly the view expressed to me at the time by the former body corporate manager and also a unit owner who I spoke to by telephone at the time. It is also supported by the evidence taken as a whole and particularly by the conduct of the body corporate committee members before and after the annual general meeting.
  8. The sixth ground is that, contrary to my conclusion, the committee could be relied upon to properly participate in the application in the interests of all lot owners. I am still convinced that my conclusions in this regard were correct. The committee, with the support of Mr Lamont, was so focused on removing the Manager that, in my opinion, it was incapable of dealing with the matter objectively and in the best interests of unit owners.
  9. The seventh and final ground is that, contrary to my conclusion, the committee could be relied upon to provide me with accurate information. I was and have remained concerned about the tendency for evidence by and on behalf of the former committee members to be moulded to suit desired outcomes or to be more perceptual than factual. I will deal further with this aspect later in this determination. Suffice to say that, for those and other reasons, I am still not confident that I can rely upon information provided by the former committee or Mr Lamont on its behalf.

The application of 6 March 2008

  1. The first ground of the March 2008 application is that there was a denial of procedural fairness in the making of the interim orders. The particulars of this ground do not support the claim that procedural fairness was denied. There is a statement that suggests parties had the right to be informed about the intention to make the first interim orders and be given the right to respond before those orders were made. While I do not argue against that principle, the fact is that the Act sets up the procedure that is to be followed and the urgency of the situation ruled the day. It was simply not possible, in the time available, to call for and receive submissions. This is very common in applications of this nature.
  2. The question of urgency is even disputed by the applicants for variation. They claim there was no urgency involved because “the committee had decided not to act on the termination order whether or not it was carried (they were prepared to call an EGM to rescind the order on legal advice)...”. The evidence before me shows that this is simply not the case. Again, I will canvas the evidence relating to this later in this determination. Meanwhile, I find that the first ground is not established.
  3. The second ground is that the “owners” have been deprived of legal advice as a result of the way in which the administration has progressed. I have added the emphasis on the word “owners” because it is ambiguous. I assume it means the body corporate, because any owner as an individual was at liberty to obtain their own legal advice. As regards the body corporate, it was and still is being represented by McMahon Clarke, Solicitors. It may be that those solicitors are not the preferred choice of Dr Lochlin and Mr Allen, but the choice is not a matter for them, or any other owner. That is the unfortunate result of this type of administration. In any event, the administrator has given sound reasons for his choice of solicitor. The second ground is not established.
  4. The third ground is that the administrator incorrectly assumed that a sale of the management rights would not be supported. The reasonableness of the assumption may be questioned, but I am satisfied that the assumption was reasonably and conscientiously made and, in those circumstances, it is not appropriate to use that as a ground for removal of the administrator. The assumption may also be correct.
  5. The fourth ground is that owners are deprived of information about how their property is being managed. The only substantive statement in support of this is in the following terms:

“There has been an administrator in the complex for almost 8 months. We have had little or no reporting from the administrator and we have no idea how much we are being charged or what administrative decisions may have been made on our behalf.”

  1. I have met with the parties and their lawyers, including the administrator, on three occasions since the third interim orders were made in an attempt to provide some form of reporting and supervision of the administration. On the basis of the information provided to me during the course of those meetings I am satisfied that the administration is progressing satisfactorily. I also understand that the administrator readily engages in discussions with owners in relation to their enquiries. Also, from the information provided to me I am aware that the administrator is very conscious of trying to keep the costs of the administration under control.
  2. The particulars also complain that the administrator is a Board member of the Community Titles Institute of Queensland Inc. and in view of past attacks by this organization on and directed at the Unit Owners’ & Body Corporate Alliance (Inc.), of which all members of the former committee belong; the administrator is in a position of conflict of interest. This is simply expressed in the grounds as a “concern” and no example of the conduct of the administrator has been put forward in support of the proposition. I am mindful that claims of “conflict of interest” can be useful tactical moves in many instances and in the absence of a real possibility of a conflict I would be very reluctant to terminate an otherwise successful administration on this basis.
  3. I am not satisfied that the fourth ground has been established.
  4. The fifth ground is that the key protagonists who were largely responsible for the current dispute are no longer members of the body corporate. On the evidence before me, responsibility for the dispute is more likely to lie with the former committee rather than the “key protagonists” referred to. The immediate trigger for the dispute was the biased and aggressive way in which the former committee pursued the Manager, as is demonstrated by the communications that were sent to owners before and with the notice of the annual general meeting. If the former committee were to be reinstated then the absence of these protagonists may create a real risk that the activities of the reinstated committee will escape serious scrutiny.
  5. The sixth ground is that assumptions I made on limited information when I made the interim orders were incorrect and can be proven to be incorrect if the evidence is fairly explored. The basis of this ground appears to be that I was only aware of the management rights dispute at the time and was not aware of the police investigation. That is not correct. The file contained information about the police investigation and the audit relevant to it and that is why I facilitated the finalization of the audit by the terms of the orders made. This ground is not established.
  6. The seventh ground is that the committee never sought, never received, nor were offered, nor did it take advice on management rights from anyone other than the body corporate solicitors. This has been exhaustively stated and restated by various members of the former committee and Mr Lamont. It goes to the question whether my earlier conclusions that Mr Lamont was advising the body corporate on management rights issues was correct.
  7. I have concluded that this is one of those instances where perceptions distort the true situation, where there is a failure to interpret the facts accurately. It is similar to Mr Lamont’s earlier denials that he gave legal advice. In an e-mail to the Commissioner on 30 May 2007, after denying in the e-mail that he gives legal advice, he said:

“I do discuss tactics and I discuss what the Act says and how I believe unit owner (sic) might be able to act within the Act to pursue their legitimate purpose. that (sic) extends no further than telling owners they can make applications about matters, or explaining how a S 33 might work and how they can requisition EGM’s. I also advise what rights they have to require a BCM to be responsible to the committee, what motions they might be allowed to put to control their bank accounts.”

  1. The evidence in relation to Mr Lamont’s role clearly shows that he was providing advice to the body corporate on the fraud allegations and police investigation and was promoting the re-election of the committee and thereby, at least indirectly, its efforts to remove the Manager. The fraud allegations and police investigation were an integral part of the attack on the Manager and as such are not distinguishable from the management rights dispute. Although Mr Lamont may not have been engaged in terms expressly related to the termination of the management rights it does not follow that he was not involved in advising on that dispute.
  2. It is clear from e-mail exchanges between Ms Mott and Mr Lamont in June 2007 that he was more involved in the dispute than merely advising on the fraud and audit aspects. There is also the stated objective of Mr Lamont’s organization, the Unit Owners’ & Body Corporate Alliance (Inc.), to assist owners taking control out of the hands of managers, as set out in his letter to unit owners dated 1 April 2007. On the balance of probabilities I am satisfied that Mr Lamont was involved in advising the body corporate in relation to the management rights aspects of the dispute. Therefore, I am not satisfied that this ground is established.
  3. The eighth ground is that the allegation that the Chairman and others deliberately ignored the interim order and counted the termination motion is contrary to logic and common sense, therefore highly improbable.
  4. On the evidence finally assembled, I have some difficulty in deciding whether or not the third interim orders were deliberately ignored. I have decided, on the balance of probabilities, that they were deliberately ignored. The Chairman and Mr Lamont were aware of the orders. They were either expressly aware of their terms as well, or they deliberately choose to be ignorant of those terms. I will later canvas some of the evidence that leads me to these conclusions.
  5. The ninth ground is that the dismissal of the committee in the third interim orders was based on limited information. I agree with this ground, but, as I have said, that is the very nature of interim proceedings. It is not, in itself, a ground for variation of interim orders.
  6. The tenth ground is the Act is predicated upon the principle of self government. I agree with this ground. However, the Act also allows for the appointment of an administrator in appropriate circumstances.
  7. The eleventh and final ground is the debacle that was the meeting on 17 August 2007. The non-parties to the dispute that came to that meeting, including Dr Lochlin and Mr Lamont, acting on behalf of Mr Allen, sought to use it to achieve their own personal objectives and when they were forced to follow proper process and focus on the relevant issues they interpret that as a “debacle”. I do not accept that proposition, but in any event I reject this as a ground for varying the third interim orders. I must say that I find it strange that in the first ground of the second application the applicants complain that procedural fairness was not afforded them, yet when procedural fairness is afforded the actual parties to the principal application they, as non-parties, object to that.

Relevant evidence

  1. I made mention above about the evidence that was available to me. The Commissioner’s file in this matter, when combined with my own documents, comprises 6 large ring binders of material. There is also substantial material in electronic form. Clearly, I cannot canvass all of that material in these reasons and I will confine my comments to the material that is relevant to the two applications seeking variation of the third interim orders and other material relevant to other conclusions I need to make.
  2. At the outset I must point out that much of the evidence on the Commissioner’s file is in conflict. Indeed, it has been very difficult to get to the truth of many aspects of the matter. To some extent this has been caused by people presenting things in the best possible light for their cause. Also, as I have already indicated and demonstrated, I have detected a distinct difference between some people’s perception and reality of things. Inconsistencies in accounts of events have been common.
  3. I have found it particularly difficult to assess the reliability of Mr Lamont’s evidence. I have been concerned about the numerous inconsistencies and sometimes exaggerated claims that appear in the material he produces, his apparent bias against “managers” and his lack of independence (having backed the efforts of the previous committee for, in his own words in a letter to me of 26 May 2007, “easily 200 hours over six months”).
  4. When dealing earlier with the issue about whether or not he gives legal advice I made mention of the problems caused by the way he interprets facts. A further example of this can be found in the administrator’s report to unit owners (paragraphs 7.1 to 7.3, inclusive) relating to Mr Lamont’s denial of being under “contract” to the body corporate.
  5. In an e-mail to Mr D’Arcy dated 17 August 2007 Mr Lamont claimed that the minutes were wrong and subsequently corrected. He maintained his denial that he was under contract but he admitted that he received payment after he had done work. He also agreed that he had been paid $4,000 in advance for work to be done by himself, Ms Mott and Ms Gibson and he admitted to providing invoices. All of these statements are in the same e-mail where he denied having a contract with the body corporate and accused Mr D’Arcy of being wrong in his assumption that there was a verbal agreement.
  6. Yet further examples were given by me in my interim determination dated 7 June 2007. I will not repeat them here.
  7. Another example (which is relevant to a claim made in the second application to vary the third interim orders) concerns an alleged decision by the committee not to proceed with the termination notices if motion 16 was passed by the annual general meeting, irrespective of the interim order. Mr Lamont maintained that the committee had made that decision and pointed to a statement to that effect made by Dr Lochlin at the annual general meeting and recorded in the minutes. Mr Lamont maintained this stance in the oral statements he gave to me at the meeting of the parties on 17 August 2007.
  8. In contrast, in an e-mail dated 1 May 2007 from Mr Lamont to various people considering draft minutes of the annual general meeting and whether or not they should record the statement by the chairman that motion 16 was to be withdrawn, Mr Lamont said:

“This was only a foreshadowed advice as the committee never voted on it. It was to be referred to the next committee meeting, along with the special adjudicator’s ruling”.

  1. It is also significant that Dr Lochlin and Mr Allen in their application for variation of the interim order state categorically that “... the committee had decided not to act on the termination order whether or not it was carried (they were prepared to call an EGM to rescind the order on legal advice) ...”. In a Statutory Declaration dated 23 July 2007 a former committee member, Ms Hatasha Suskova, stated that “It had already been agreed not to proceed with the termination well before the AGM.”
  2. The administrator gave evidence that there is no record of any such decision of the committee in its minutes of meetings. The fact is that no such decision was ever made.
  3. What we are likely to be dealing with here is an informal discussion at a meeting that was not recorded because it was inconclusive, verses an actual decision by a committee to take or not to take a course of action. The perception has distorted the facts. It may also be an example of moulding the facts to suite a desired outcome. Whatever the case, it does nothing to assist a proper determination of the applications.

Were the second interim orders deliberately ignored?

  1. I have already indicated that I have decided, on the balance of probabilities, that the second interim orders were deliberately ignored by Mr Lamont and Dr Lochlin. I also indicated that I would canvas the evidence in support of that finding.
  2. The background to this is a statement by Ms Mott that she gave Mr Lamont a copy of those orders and also read them to him prior to the meeting. She also said she gave a copy to Dr Lochlin. Mr Lamont has strongly denied that evidence.
  3. In a letter to me dated 26 May 2007 Mr Lamont when referring to the annual general meeting stated “It is extremely important to know that everyone in that room, including Peter Hunt, knew that the committee had no intention of ignoring the interim order. Everyone in the body corporate knew there was an interim order because it had been distributed.” This statement was inconsistent with his earlier claims that the order had not been distributed.
  4. In verbal statements given to me at the meeting of the parties on 17 August 2007 he made other conflicting statements to me. For example, he said at various points in his address, quoting from the official sound recording of the meeting, that (when referring to he and Dr Lochlin) “We did not have your order Sir” and later (referring to motion 16) “We did not know you had ordered it withdrawn” and later again saying that Ms Mott “gave all 3 copies that she had of that order to Dr Lochlin. She could not have read it to me and she could not have handed it to me.” Subsequently he then said referring to Ms Mott and the order:

“She did not alert Dr Lachlin as Chairman, or me, and on behalf of Vic Allen I assure you she did not alert the secretary. .... She did not give a copy to the secretary, she did not ask that the committee be called together” .... “We had no idea of an order.”

  1. These statements are in direct conflict with Ms Mott’s account which maintained that she gave Mr Lamont a copy of the order at the meeting and also read it to him. Ms Mott cited the auditor, Ms Gibson, and one of Ms Mott’s employees, “Warren”, as corroborating her version of what occurred. In subsequent e-mail exchanges between Mr Lamont and Ms Mott, Mr Lamont put considerable pressure on Ms Mott to retract her account. Despite this pressure Ms Mott strongly maintained her account of the events. Indeed, she has never indicated to me that she retracts those claims, having had opportunities to do so since Mr Lamont challenged her in relation to them.
  2. Another important piece of evidence on this point is in an exchange of e-mails between Ms Mott and Mr Lamont on 30 May 2007. In an e-mail from Ms Mott to Mr Lamont Ms Mott said

“I advised you and Ian before the commencement of the AGM that motion 16 could not be discussed or voted on. I gave you a copy of G. Bugden’s Interim Order. Even Graham Beattie pointed out that there was an order out re motion 16. You even referred to the order yourself.”

  1. In a later e-mail on the same day Mr Lamont said:

“I was aware of the order. I believed that all it required was that it should not have been acted upon. I had seen plenty of interim orders. They usually allow a count to be taken but no further action.”

  1. In another e-mail from Mr Lamont to Ms Mott dated 30 July 2007 Mr Lamont acknowledged that Ms Mott gave Dr Lochlin a copy of the order at the meeting.
  2. Against all of that, I was provided with a Statutory Declaration by Ms Doreen Mather dated 12 June 2007, a unit owner in Surfers Palms North, who appears to be an independent party, saying that, in a conversation with her, Ms Mott “faltered” when she was about to say that she gave Mr Lamont a copy of the interim order at the meeting. She says Ms Mott said “...actually I can’t remember whether I gave one to Colin or not.” This suggests that there may have been some doubt in Ms Mott’s mind about the matter.
  3. Also, in the Statutory Declaration by Ms Suskova I have already referred to, Ms Suskova says “Coralie Mott or no other person informed me or read to the meeting Adjudicator Bugdens interim order issued 27 April 2007.” That is not evidence that Ms Mott did not give a copy to Mr Lamont or that she did not read the order to him. Indeed, Ms Mott has never said that she read the order to the meeting or that she gave Ms Suskova a copy of it.
  4. In a Statutory Declaration dated 24 July 2007 Mr Lamont again denied that he was aware of the content of the interim order made just before the annual general meeting He says:

“I was aware that an order had been made by Mr Dowling that the meeting could proceed however certain motions could not be acted upon. I was aware that another order came in on the morning of the AGM. I assumed it was the same as the other as no one told me otherwise. I never asked to see it as I knew if there was anything I needed to know the chairman would tell me.”

  1. Ms Mather’s evidence is the only independent evidence I have, yet it is not conclusive as to Ms Mott’s recollection. I am also reluctant to accept it in preference to the specific evidence of Ms Mott which she strictly adhered to under substantial pressure from Mr Lamont in the e-mail exchange I have referred to. Ms Mott’s evidence is clear and, as I have indicated, it has been tested by Mr Lamont himself. Mr Lamont’s evidence is contradictory and confusing. It also needs to be viewed in light of the reliability of his evidence generally in respect of this application.

Troubling matters

  1. I am particularly troubled by four other aspects of this matter which go to the question of whether the former committee should be reinstated at this stage of the administration, namely:

(a) how a committee could appoint Mr Lamont as Returning Officer for the annual general meeting when the whole purpose of a Returning Officer under the Act is to create an environment of independence;

(b) how Mr Lamont could accept such an appointment in light of his views about conflicts of interest expressed in his letter under the banner of the Unit Owners’ & Body Corporate Alliance (Inc.) dated 1 April 2007;

(c) how a Chairman of a meeting and its Returning Officer would not be concerned to see and read a copy of a known order restraining certain things in relation to the very motion being dealt with by the meeting; and

(d) why a video tape made of the meeting by or in support of the former committee has not been mentioned by the body corporate in these proceedings or produced to clear up the allegations and counter allegations made, and general inconsistencies, about the meeting.

  1. The existence of the tape was brought to my attention by Ms Mott and others. It is also referred to by Mr Lamont in e-mails. In particular an e-mail from him to Ms Mott dated 12 June 2007 in which he said:

“In so far as Beattie’s comments at teh (sic) AGM which I have now picked up from the tape. I have to say that I did not pick it up on teh (sic) day.”

  1. The tape was also referred to by Mr Lamont in an e-mail from him to Ms Mott dated 29 June 2007 where he said:

“The tape shows a lot of things not least of which is that the allegation by Gary Bugden that I strongly “advocated” counting the vote is just not true.”

  1. I should point out that the allegation was effectively Ms Mott’s allegation, not mine. It was also an allegation that Mr Lamont strongly denied and objected to. Indeed, he went to extremes in his complaints about this matter, but has not seen it necessary to arrange for the tape to be made available to me.
  2. Based on the evidence on how Mr Lamont and the former committee have conducted themselves in the past, I can only assume that the tape was not made available because it was unfavourable overall to the cause of the sacked committee and the body corporate generally.

The allegation against Mr Lamont

  1. Although only indirectly relevant to this determination, in fairness to Mr Lamont I should canvas new evidence that has come to light relating to the allegation that he advocated the counting of the vote on motion 16 at the annual general meeting. This relates to a diary note I made of a conversation I had with Ms Mott on 25 May 2007, part of which reads:

“Lamont influenced the Chairman to put the motion in defiance of the order.”

  1. In my first determination in this matter, based on the evidence of Ms Mott who, at the time I regarded as an independent witness, I was critical of Mr Lamont’s influence on the conduct of the annual general meeting. He has relentlessly pursued this criticism on the basis that it was unfair and that he did not have the right of reply to the allegations. First of all, let me say that he has certainly had the right of reply since then. There are now dozens of pages in the Commissioner’s file putting his side of the events.
  2. This part of my diary note was put by Mr Lamont to Ms Mott for comment without her knowing the source of the wording. In an e-mail from Ms Mott to Mr Lamont dated 24 July 2007 Ms Mott said in relation to that part of the note:

“Colin, I do not know who told you that I said “Lamont influenced the Chairman to put the motion in direct defiance of the order” but I can state categorically that I did not say that.

You are obviously making your own conclusions.”

  1. Ms Mott was said to have agreed to write to me and clarify that aspect, although she has not done so. The denial in her e-mail and Mr Lamont’s own evidence suggest that the statement may be too harsh on Mr Lamont. He may not have “influenced the Chairman to put the motion in direct defiance of the order”. However, from the other evidence generally available I am satisfied that he did have an influence on the preparation for and conduct of the meeting that went well beyond the role of a Returning Officer and in assessing whether or not the former committee should be reinstated it is significant that the former committee allowed this to occur.

Illegal practices and criminal offences

  1. There is another matter on which I should comment. It relates to allegations of illegal practices, criminal offences and the police investigation. I will deal with it so that owners will have the opportunity to re-assess some of the claims that have previously been made.
  2. The common concept of an “illegal practice” is a practice that is contrary to the law. Illegal practices are not necessarily criminal in nature. In community title management, as in everyday life, many things occur that are not strictly in accordance with the law. For example, if you park in the disabled or visitor’s car park at your building you are acting illegally. Any fair and balanced investigation into the affairs of a community titles scheme, so far as non-criminal illegal practices are concerned, must focus on the substance of things and not technicalities. Criminal offences on the other hand are much more serious and clear cut. But even criminal offences range from minor or technical offences to blatant criminal activity.
  3. During the course of this dispute much has been said about illegal practices and criminal offences, sometimes in a very exaggerated and emotive way. Furthermore, there has been a thorough audit of the body corporate’s accounts and an investigation of its affairs by a competent auditor who was very committed to the interests of unit owners. There was also a formal complaint made to the police and certain information and documents have been made available to the police. My third interim orders were worded in a way that ensured that the audit and police investigation were not impeded and the administrator, Mr D’Arcy, has supported my efforts in this regard.
  4. The final audit report was issued by the auditor and a copy provided to both the Commissioner and me. I understand that a collection of material has also been given to the police.
  5. In his latest written report to me Mr D’Arcy (who I might add has formal legal qualifications and past experience practicing as a solicitor) stated:

“I have made several requests of the Queensland Police for a report as to the state of their investigations. None of my e-mails have been acknowledged. However, yesterday, Mr Hunt, the lawyer for Mr Princi, had more success. I have been provided with a copy of an e-mail Mr Hunt received from Detective Senior Constable Paul Anoleck. In summary, Detective Senior Constable Anoleck has stated that ‘the matter is still under investigation’. He goes on to say ‘the matters involved relate to payment of money for services not provided on three reported occasion, with each occasion totalling $200.00, making a full outstanding amount of $600.00.’ Then he adds ‘there is an alleged signing of a document without authority’. In summation he states ‘No charges have been laid against any person and the investigation is a long ongoing process of establishing differences between civil and criminal matters.’

In my report to owners in August 2007, I made the following statement that:

‘In my opinion, there is nothing specifically contained in the Auditor’s report or Advice that requires me to refer the Report or any part thereof to the Police.’

I remain of that opinion.

In my report, in relation to Ms Judy Gibson’s Audit and Advice Document I noted that:

‘The advice document states that ‘thousands of dollars of body corporate monies appear to have been misappropriated’. However no specific financial transaction or transactions are highlighted as being illegal or unlawful in such a way that I can commence proceedings on behalf of the body corporate in relation to such a transaction or transactions. If any such transaction is brought to my attention or discovered by me in the course of my administration then I will take appropriate action on behalf of the Body Corporate.’

The Police response to Mr Hunt was in relation to Mr Princi only. Mr Hunt’s enquiry was limited to Mr Princi’s position. However, I am yet to see any documentary evidence that any party could be pursued on a civil or criminal basis for any substantial sum of money.”

  1. In a letter to Mr Lamont in September 2007 the Commissioner for Fair Trading reported that the Police had advised him that “the material referred lo (sic) the police revealed no evidence of a criminal standard and in his opinion, the issues were civil, in nature”.
  2. It is important to understand that even if overpayments and an unauthorized document signing are proved this does not necessarily mean that the actions were criminal in nature. This appears to be the difficulty confronting the Police in their investigation.

The applications for variation

  1. I will now deal with the two applications for variation of the third interim orders. At least the last of those applications is suggestive of the former committee being restored to power.
  2. At the outset, there is an issue about the standing of the applicants in respect of both applications. Dr Lochlin is the sole applicant in relation to the first application and Dr Lochlin and Mr Allen are joint applicants in relation to the second application.
  3. This question of standing is regulated by the Act, as it existed before it was amended by the Body Corporate and Community Management and Other Legislation Amendment Act 2007 (“Amending Act”). Section 279(2)(b) of the Act as it then was says that an interim order may be extended, varied, renewed or cancelled by the adjudicator until a final order is made. There is no mention of who may apply for such an extension, variation, renewal or cancellation. Clearly, a party to the dispute could make such an application. The only parties to the dispute are the body corporate and the Manager. The question is whether a non-party to the dispute, such as Dr Lochlin and Mr Allen, can make the application.
  4. Section 289 is relevant in that it provides that an “aggrieved person” (which includes a person who made a submission on the original application) may appeal to the District Court against a decision of an adjudicator. Both Dr Lochlin and Mr Allen made such submissions.
  5. The question is whether a person who has the right to appeal against the order can apply under section 279 of the Act. The answer to that question is not clear, but in the current matter it is not necessary for me to decide the question because in any event I am not prepared to cancel or vary the third interim orders.
  6. Based on the evidence I have previously canvassed and for the reasons previously given I am not satisfied that it would be in the interests of the members of the body corporate for me to terminate the administration at this time. Indeed, I believe that in view of the current state of administration of the body corporate (which I will briefly outline) it is in the best interests of all concerned to allow the administration to continue for some months to come. Hopefully, during this time the issues between the body corporate and the Manager can be finally resolved.
  7. I am also of the view that when it is time to terminate the administration the owners should have the opportunity of choosing a new committee to take over the governance of the body corporate, rather than the former committee being reinstated.

The administration

  1. Since my orders of 7 June 2007 the body corporate has been under the administration of Mr D’Arcy. The administrator choose to appoint McMahon Clarke to represent the body corporate in lieu of Herdlaw Solicitors. McMahon Clarke and the administrator worked together to assess the body corporate’s prospects in relation to the application.
  2. The administrator provided a comprehensive written report to lot owners in the Scheme. In this report the administrator said:

“9.7 The termination of a contract due to the default of one of the parties, is a serious step in any commercial transaction. The termination of a Resident unit manager’s caretaking contract is no exception. If the basis for the termination is non-compliance with a notice to remedy breach, then the provisions of such a notice need to be clear and water tight. On any objective reading of the notices of default issued by the Body Corporate to Mr Princi those notices are imprecise and amateurish to say the least.

9.8 Following my appointment, I read the material including the Notice to Rectify Defaults dated 18 January 2007 and Second Breach Notice dated 28 March 2008.

9.9 I immediately had concerns regarding the adequacy of the Notices. Further, I was concerned that these inadequacies did not appear to have been commented upon by the Advisers to the Body Corporate, either in relation to the dispute proceedings or leading up to the General Meetings at which motions to terminate the Caretaking Agreement were to be considered. It was my view that while there may have been some evidence of breaches of the caretaking and letting agreements, the notices that were issued were not effective in concisely identifying sustainable breaches with realistic remedies.

9.10 For this reason, I elected to engage a different firm of lawyers to advise me, rather than engage one of the firms that had previously advised the body corporate.”

  1. Since that report the administrator, through the body corporate’s solicitors, has been pursuing a negotiated settlement of this dispute. I have, at the request of both parties, allowed generous time for those negotiations, using meetings of the parties convened by me to monitor progress.
  2. At our last meeting on 19 December 2007 I was advised by the parties that agreement had been reached on a settlement and that agreement had been reduced to a Deed of Settlement. A copy of that Deed has since been made available to me. I have been asked to make certain consent orders to allow the negotiated settlement to proceed.
  3. While I am aware of the terms of the Deed it is not appropriate for me to comment upon or endorse those terms. They have been negotiated over a considerable period of time at arms length by the parties, each with the benefit of legal advice. Suffice if I say that this is a matter that should be resolved by negotiation and I congratulate the parties on reaching agreement in that way.
  4. I propose to facilitate the settlement by making the orders agreed to by the parties. I have personally had input into those orders to ensure that the interests of units owners are fully protected in the way I think is appropriate. In particular I was keen to ensure that the administration of the Scheme continued for a short time so that unit owners can read and absorb this determination and give careful consideration to who should be elected as the new committee when a general meeting is convened for that purpose.
  5. In relation to such an election, I note that there has been much conflict within the Scheme for many years, not only under the committee that I removed, but also under the prior committee. This conflict, along with the unfortunate publicity this application has attracted in the local press, must have had an adverse impact on the value of units within Surfers Palms North.
  6. I encourage the unit owners at Surfers Palms North to consider carefully who they want to represent them on their next committee. I also encourage owners who have not been involved in past governance of the Scheme to consider making themselves available as candidates for election. If the Scheme is not rebuilt and a sense of community fostered within the building, then there is a real risk that the value of owner’s interests in their unit will be seriously eroded in the years to come.

Costs of the adjudication

  1. While the parties have been able to agree on a settlement, they have not been able to reach agreement in relation to the costs of the adjudication (i.e. my fees and expenses). They have asked me to decide which of them should bear those costs.
  2. Section 280 of the Act as it existed prior to commencement of the Amending Act provided:

“280(1) This section applies to an application dealt with by specialist adjudication mentioned in section 265.

(2) Unless the adjudicator otherwise orders, the applicant is responsible for the costs of the adjudication.”

  1. In summary, the Manager’s solicitors have submitted:
  2. The Manager’s solicitors have also directed my attention to the decision in Harbourside Resort [2005], which was followed in Cartwright [2006], were three tests were cited as influencing an award of costs, namely:

The Manager’s solicitors maintain that all 3 tests are satisfied in favour of the Manager in relation to this application.

  1. My attention was directed to a number of circumstances that were said to support that proposition. The Manager’s solicitors also made submissions suggesting that a sharing of costs would not be appropriate in this matter.
  2. The body corporate’s solicitors provided a comprehensive and impressive response to those submissions. In relation to the three tests in Harbourside Resort they said, in summary and corresponding to the sub-paragraphs in clause 128 above:

(a) this is not relevant as the facts have not been tested by the respondent or the adjudicator;

(b) apart from the failure of the body corporate to comply with the interim orders there is no other adverse conduct on the part of the body corporate and indeed –

(i) the very question of non-compliance is disputed;

(ii) there has been no determination that the actions of the body corporate were improper, nor that the application was necessary; and

(c) the Manager has not succeeded in obtaining the principal relief sought and this, combined with the fact that the matter was settled, means the Manager cannot claim success.

  1. The body corporate’s solicitors also submitted:
  2. I will deal with the last point first. It does not refer to Mr Allen because the submission was made before the second application to vary the third interim orders was made.
  3. I can only make an order for costs against a party to the proceedings. If this were not the case the question of who should pay the costs would be answered differently. I have already stated that I have a doubt about Dr Lochlin and Mr Allen’s standing to make the applications for variation or termination of the interim order. In light of that doubt I am not inclined to make any orders for costs against either of them personally.
  4. It is true that many facts in this matter have not been tested. However, from what I have said in these reasons a number of important facts have been tested and I am satisfied, reasonably I believe, about a number of important matters. The results are not generally favourable to the body corporate.
  5. As regards the conduct of the body corporate, in light of the content of a collection of e-mails that have been placed before me and the material on the Commissioner’s file generally, I am satisfied that the body corporate was guilty of adverse conduct. Indeed, it appears clear to me that the former committee of the body corporate engaged in a course of conduct, which at times was collusive and manipulative, designed specifically to remove the Manager, without due regard to the interests of unit owners.
  6. There is very clear and convincing evidence that the passing of motion 16 at the annual general meeting could not be sustained in any event in light of the conduct of the body corporate and its committee in putting questionable and biased information before unit owners simply to ensure a positive vote on the motion. To understand the resolve of the former committee one need not look past the note at the bottom of motion 19 where a “Yes” vote would have the effect of blocking any immediate prospect of the Manager obtaining an extension of the Agreements. That note read:

“Warning: If you vote NO to this motion you will be leaving the way clear to rewarding the caretaker with a new contract valued at over one million dollars and his solicitors have already advised he will sell this for the profit as soon as possible to an unknown person. This would be a farewell gift of one million dollars despite his gross negligence, failure to be licensed, failure to obtain insurance. At the same time it could leave you with an unsatisfactory letting agent the choice of which would be out of your control.”

  1. This conduct on the part of the former body corporate committee has implications that I believe key members of that committee fail to appreciate. I have heard and read on numerous occasions the claim that 80% of unit owners voted in the committee and supported its stance against the Manager. Superficially that may be the case. However, given the inaccurate and biased information that was circulated to unit owners before and with the notice of meeting one may well express surprise that the figure was not higher.
  2. It was even put to me that any loss of confidence by owners in the former committee after the application was made arose as a consequence of my earlier determinations. There is clearly a total failure on the part of some people to appreciate the way in which unit owners were manipulated by the former committee. This was an important factor in my decision expressed earlier in this determination not to vary the third interim orders and, more importantly, not to allow the former committee to take power again, as the second application suggested.
  3. The circumstance surrounding non-compliance with the second interim orders may be debated, but there is no doubt that they were not complied with.
  4. I agree that the Manager cannot claim success in relation to the principal relief sought. It does not necessarily follow that the Manager cannot claim success in relation to the application, even ignoring the settlement. The parties have clearly negotiated a settlement. I am aware that the costs of the adjudication were the subject of negotiations. I presume that no agreement was reached on the question because both parties have asked me to determine the question of costs. That being the case I do not feel constrained by the fact that the matter was not fully contested.
  5. In view of the request that has been made to me it is sufficient if I consider the matter to the point it has reached and decide the question of costs to that point. However, I have gone beyond that. For some days now I have been pouring over the mountain of material before me to get some feel for the merits of the case and to assist me in dealing with the applications for variation of the third interim orders. Even allowing for some testing of key points, on the papers there is a prima facie case in favour of the Manager. Had this matter proceeded, the Manager may well have succeeded, maybe not in the exact terms of the final orders sought, but rather in the broad outcome sought.
  6. I therefore propose to make an order that the body corporate pay all the costs of the adjudication. This is a very unfortunate outcome for the unit owners at Surfers Palms North because most of them, as individuals, do not deserve to contribute to these costs. However, neither does the Manager deserve to contribute to the costs, although it too will do so marginally by virtue of its membership of the body corporate.

G F Bugden OAM
Specialist Adjudicator


AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback
URL: http://www.austlii.edu.au/au/cases/qld/QBCCMCmr/2008/65.html