Villa Paradiso [2008] QBCCMCmr 69 (28 February 2008)

Last Updated: 18 April 2008

REFERENCE: 0866-2007

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	413
Name of Scheme:	Villa Paradiso
Address of Scheme:	1-38 Williams Esplanade PALM COVE QLD 4878

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

Patrick Denis Donaghy (as trustee for The DCM Unit Trust), the owner of lot 22

I hereby order that the application for an order for the appointment of an administrator, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0866-2007

“Villa Paradiso” CTS 413

Scheme

“Villa Paradiso” was registered as a building units (now known as format) plan of subdivision comprising 38 lots and common property in two buildings on 8 May 1992. It appears that one building (Building A) was designed and is used for residential purposes while the other building (Building B) was designed and is used for retail. The scheme is regulated by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Standard Module).

Application

This application is brought by Patrick Denis Donaghy (as trustee for The DCM Unit Trust), the owner of lot 22 (applicant) against the body corporate, seeking an order that an administrator be appointed to administer the scheme. The applicant has nominated Mr Michael Silver of Stewart, Silver, King and Burns Community Managers (SSKB) and has included written consent from Mr Silver to act as administrator for the scheme.

The grounds to the application are to the following effect:

• The scheme is administered financially with respect to two distinct components: residential and retail, with separate administrative and sinking funds for each component. Lots 1 – 19 are referred to as the “residential precinct” and lots 20 to 38 are referred to as the “retail precinct”.
• Following a conciliation session between the applicant and a body corporate representative, on 1 February 2007, the body corporate sought legal advice as to the correct conduct of the body corporate.
• Legal advice was received from Nicolsons Solicitors (Nicholsons) on 15 May 2007 that indicated that the operation of the scheme as if it were in fact two distinct bodies corporate was not in accordance with the Act. It was suggested that in order for the body corporate to operate in compliance with the Act, it was necessary to consolidate the existing budgets and accounts. Further, it was advised that, assuming by-laws 21(d) and (e) (upon which the current structure relies) were valid (there was doubt as to their validity), the body corporate is authorised to separate only the repair and maintenance costs of the exclusive use areas between the residential and retail components of the scheme. All other costs (including insurance, operating costs and all costs relating to utility infrastructure), it was stated, must be met by the body corporate as a whole in order to comply with the Act.
• At the annual general meeting (AGM) of 30 October 2007, it was apparent that the motions under consideration were consistent with previous methods of administering the body corporate in contravention of the Act.
• Upon inquiry by the applicant as to why this was the case, he was advised by the body corporate manager (BCM) that the committee “had decided not to follow the Nicholsons advice”.
• The applicant has requested, but not been provided with, minutes of the committee meeting wherein the committee decided not to heed the Nicholsons advice.
• The BCM and committee have no regard for the advice received as to the proper conduct of the body corporate.
  

Submissions

Submissions in response to the application were sought from the owners of all lots (excluding the applicant) and the committee. Six submissions were received. One of the submissions (from an individual lot owner) “wholeheartedly” supported the applicant without commenting in any detail. The remaining five submissions opposed the application and were to the following effect:

• The applicant is being vexatious. The applicant and/or his associates were at one time, some years ago, granted use by the committee of four extra common property car parking bays to use as a carwash for a rental car business operating from his premises (lot 37). The operators of the car rental business abused the privilege, using more bays than allocated and created inconvenience for others. Then it was discovered that the applicant had later leased out that section of the common property to an outside party for his own gain. The committee sought legal advice and cancelled the privilege. The applicant subsequently submitted a motion to an extraordinary general meeting (EGM) in April 2007 to obtain exclusive use of the area but it was defeated 16 to 2, the only votes in favour being from lots controlled by the applicant (lots 22 and 37). Following the loss of his free use of the car park, the applicant took exception to an EGM held in February 2007 that had passed a motion for a special levy. During the resulting conciliation it became apparent that there were problems with the structure of the body corporate. An agreement was reached and a new EGM held in April 2007, including a motion to seek legal advice on the operation of the body corporate. This had never previously been an issue for any lot owner.
• Villa Paradiso comprises two separate buildings: a residential apartment building and an adjoining shopping village. Both buildings are on the same title. The existing community management statement (CMS) has some inconsistencies with the Act and Regulations in the way it provides for residential owners to pay their levy for upkeep of their own building and retail owners likewise. The CMS the body corporate inherited is not well worded and may not stand up to challenge. The body corporate is working on amendments but this also requires new survey diagrams and further legal advice. The committee takes the matter seriously and has not at any time chosen to ignore legal advice.
• Following the passing of motion 14 of the EGM of 11 April 2007, Nicholsons were briefed by the executive committee and their advice received. The chairperson has had further discussion with Nicholsons and there has been further work on proposed changes to the CMS. It is expected that these changes will be presented to an EGM early in 2008. They have not been provided to a committee meeting as yet (4 February 2008) as the work is not complete. In the meantime, the committee have established and provided consolidated accounts and budgets as recommended in the advice.
• The applicant was informed of the committee’s actions on 31 October 2007, the day after the AGM.
• The appointment of an administrator will do no more than the body corporate committee and manager are already doing but will involve significant extra expense. The location of the proposed firm in Buderim is a long way from Cairns and can only add to the cost.
• It is the stated position of the applicant to block a motion to change the CMS (a resolution without dissent is required) unless he is granted special privileges to use an area of common property.
• The body corporate has a strong, long term relationship with The Community Managers, through their representative, Alison Flaws. The committee is active and constructive and the executive members work well with the body corporate managers.
  

The applicant exercised his right to inspect the submissions made and replied to the following effect:

• The use of the car wash bay ceased in December of 2005 and is not an issue with this application. Reference to the car wash is meant to distract from the real issue, which is management of the body corporate in compliance with the Act;
• While the committee and BCM purport to be making an attempt to comply with the Act in that they have provided consolidated accounts, as the minutes of the AGM of 30 October 2007 show, despite Nicholson’s advice, they continue to prepare motions and levies as if the scheme were two separate schemes.
• SSKB manage in excess of 20 bodies corporate in North Queensland and organise meetings to spread the travel cost to attend over several bodies corporate, thus negating higher costs as an issue.
• The only way that the scheme will operate within the law is for an administrator to be appointed.
  

Jurisdiction

This is a dispute between an owner and a body corporate concerning alleged contraventions of the Act and comes within the dispute resolution provisions of the Act (see ss.226, 227 & 228).

Section 276(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about-

(a) a claimed or anticipated contravention of the Act or the community management statement; or

(b) the exercise of rights or powers, or the performance of duties, under the Act or the community management statement; or

(c) a claimed or anticipated contractual matter about-

(i) the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or

(ii) the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

Decision

At the outset, I wish to point out that an order appointing an administrator for a scheme is not made lightly. Generally, to be successful in an application for the appointment of an administrator, an applicant must demonstrate that the day-to-day administration of the body corporate has broken down irretrievably, and/or that the affairs of the body corporate are in such disarray as to warrant the appointment of an administrator. One of the secondary objects of the Act is “to balance the rights of individuals with the responsibility of self management as an inherent aspect of community titles schemes”. In my view the right of a body corporate to administer its own affairs should therefore only be disrupted in very serious circumstances. In this case I am not satisfied that the appointment of an administrator is warranted for the following reasons:

• Five of the six submissions made in response to this application were opposed to an administrator being appointed.
• The body corporate committee acknowledges that the separate administration of the residential and retail precincts is not in accordance with the legislation. The committee has established and provided consolidated accounts and budgets as recommended in the Nicholsons advice and are working on changes to the CMS which they hope to put to an EGM in the near future.
• The body corporate has an active and functioning committee and engages the services of a body corporate manager. The body corporate holds regular meetings and maintains requisite insurance. There is one committee for the body corporate and both precincts conduct meetings together as one.
• The body corporate has been administered in the current fashion (that is, separately for the retail and residential precincts for financial purposes), according to the owner of lot 12, since the inception of the body corporate in 1992. No-one has sought to challenge the administration of the scheme in this fashion over the last 15 years. Even now, the applicant does not seek orders that would challenge the current administration, for example, by seeking orders that particular motions of the 2007 AGM be declared invalid, but instead, seeks the appointment of an administrator, providing no justification as to why the existing committee can’t rectify the error. He states that the committee have decided to ignore the Nicholsons advice. The submissions from the committee and individual owners suggest otherwise. I am mindful of the claim made in the opposing submissions that the applicant is vexatious. On the basis of the information supplied to me, I am inclined to the view that the applicant’s motives in lodging the application appear somewhat spurious and his actions appear to me to be counter-productive.
• The administrator nominated by the applicant is located in Buderim, while Villa Paradiso is located in Cairns, resulting in the body corporate having to incur travel and accommodation expenses that would not be payable for an administrator located in Cairns. The comment by the applicant that “SSKB manage in excess of 20 bodies corporate in North Queensland and organise meetings to spread the travel cost to attend over several bodies corporate, thus negating higher costs as an issue” I regard as misinformed on the basis of paragraph 6 of the covering letter from SSKB dated 30 October 2007 which clearly states “Further to the above charges, an additional amount of $2,000 would be payable for travel and accommodation expenses to attend applicable meetings of the body corporate.”
  

The applicant has not persuaded me that the services of an administrator are either necessary or warranted. While it appears that the scheme may not be being administered strictly in accordance with the Act, the administration of the scheme in this fashion has not been challenged through this office and I make no findings in this regard. The committee appears to be working on the issue in any event. I do not consider it just and equitable to grant the order the applicant seeks.