Sandown [2009] QBCCMCmr 2 (7 January 2009)

Last Updated: 19 February 2009

REFERENCE: 0821-2008

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	10524
Name of Scheme:	Sandown
Address of Scheme:	4 Montana Road MERMAID BEACH QLD 4218

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

Mr. Trevor Matthews, the Owner of lot 8 and Ms. Peg Forbes, who is the representative of the owner of lot 4

I hereby order that the body corporate for Sandown Community Title scheme is to ensure that “Motion 8” submitted by Mr. Matthews, and which reads “That the relevant limit for major spending by the scheme Sandown CTS 10524 for major spending authorised at a general meeting be limited to $5,000” is to be included on the next general meeting agenda on which it is practicable to include the motion, in accordance with section 69(2) of the Standard Module Regulation. I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0821-2008

“Sandown” CTS 10524

Scheme

“Sandown” community titles scheme 10524 was registered as a building units plan (now known as building format) of subdivision on 19 February 1982 comprising 15 lots and common property. It is regulated by the Body Corporate and Community Management Act 1997 and the Body Corporate and Community Management (Standard Module) Regulation.

Application

This application is brought by Trevor Matthews, the owner of lot 8, and Peg Forbes, the representative of the owner of lot 4, seeking the following outcomes regarding an Extraordinary General Meeting held on 4 October 2008:

• That motion 2 be declared invalid.
• That motion 3 be declared invalid.
• That motion 5 be declared invalid.
• That motion 6 be declared invalid.
• That motion 7 be declared invalid.
• That the offices of the Chairman and Treasurer be declared vacant because of breaches of Regulations and of the Act, and for breaches of fiduciary trust as enumerated in the evidence.
• That motions 2, 3, 5, 6 and 7 on the EGM voting paper for 4 October 2008 be not voted upon or if voted upon, be not acted upon.
• That motions 1 & 4 on the same EGM paper be voted upon;
• That motion 8 submitted by T Matthews for the EGM and suppressed by the BC Manager be added to the voting paper and voted upon.
  

I have previously dealt with certain matters forming the subject matter of this dispute and on 3 October 2008 I declined to make the following Interim Orders:

• That the motions numbered 2, 3, 5, 6, and 7 upon the EGM voting paper for 4-10-2008 be not voted upon or if voted upon be not acted upon.
• That motions 1 and 4 on the same EGM paper be voted upon.
• That motion 8 submitted by T Matthews for the EGM and suppressed by the body corporate manager be added to the voting paper and voted upon.
• Any other orders deemed appropriate.
  

Background

At a general meeting held on Saturday 4 October 2008 a number of motions were considered including the following:

2. That two common area fire doors and five unit doors be replaced by Gold Coast Door Services at a cost of $7,430 to be paid from the sinking fund (Carried with 10 votes in favour and 5 votes against) ;

3. That recommended safety works to the lift motor room be undertaken by Otis Elevator Co. Pty. Ltd. at a cost of $3,936 to be paid from the sinking fund (Carried with 13 votes in favour and 2 votes against) ;

5. That floor foyers, lift car, entrance area, toilet and the basement elevator entry be re-tiled.
A. That B & C tiling be engaged to undertake this work at a cost of $7,182.61 (as per quotation attached to the notice of this meeting) plus the cost of tiles estimated at $30 per square metre all to be paid from the sinking fund.
Or
B. JRP Tiling be engaged to undertake this work at a cost of $9,302.80 as per quotation attached to the notice of this meeting) plus the cost of tiles estimated at $30 per square metre all to be paid from the sinking fund. (Not carried with 7 votes in favour and 8 votes against) ;

6. That paved common areas excluding exclusive use areas be repaved.

A. That Paramount landscapes and paving be engaged to undertake this work at a cost of $20,017.50 (as per quotation attached to the notice of this meeting) to be paid from the sinking fund.
Or
B. A Step Ahead Paving be engaged to undertake this work at a cost of $20,328.00 (as per quotation attached to the notice of this meeting) to be paid from the sinking fund.
(Carried with 8 votes in favour and 7 votes against) ;

7. That all floor foyers be painted by Baker Bros at a cost of $6,105.00 to be paid from the sinking fund. (Carried with 12 votes in favour and 3 votes against) ;

The applicants claimed that the above motions were invalid for reasons which included the following:

• The motions were “not validly put by the committee”;
• Proper details were not given;
• objections by the applicants;
• “hidden proposals”;
• The work has not been budgeted for and does not comply with Regulations regarding sinking fund expenditure.
  

A detailed attachment to the application also included the following complaints by the applicants:

• A major concern to the applicants, and a number of other lot owners, is the failure by the body corporate to upgrade the television signal distribution network. It is alleged that the committee have deceived lot owners regarding the state of the current network and have failed to reveal the true state of affairs;
• The building is now 26 years old and as a result, wiring originally installed for analogue television reception is unsuitable for digital television reception;
• Mr. Matthews has raised this issue with the body corporate with little success and consequently is unable to watch digital television;
• In December 2007 the Secretary advised Mr Howard that a quote had been obtained for rewiring the building at a cost of $3,500 and suggested that Mr Matthews submit a quote which could be considered at the upcoming AGM;
• Mr. Matthews submitted a motion for a thorough signal investigation throughout the building ($160) but the committee did not submit the promised quote and motion;
• The BC manager and the Chairman deleted the short explanatory notes to the motion on the voting paper and the motion was lost;
• the Chairman has indicated that he believes the building should be rewired with a new system suitable for digital television reception, but regards this as being of low priority;
• The committee refused to give a committee member, Ms. Carol Matthews, any information regarding the proposal;
• Between June and September, Mr Matthews invited three contractors to price corrective work necessary for the TV reception upgrade;
• A recently fitted antennae was a “cheap low gain” model which is too close to the adjacent aluminium roof. The cabling is not suitable for transmission of digital signals, has been jointed and is prone to interference. The existing distribution amplifier requires replacement.
• Further, as each unit is connected to this wiring by way of a “T” couplers which progressively reduce the signal and are unsuitable for digital television. As most owners do not have digital TV, they are unaware of the problem at present. ;
• However when this matter was dealt with at a committee meeting on 6 September 2008, a Mr Chayter referred to a much earlier report obtained from a Mr Mike Picken who had measured the signal at an undisclosed location and believed that it met the relevant Australian Standard.
• When it came to light that another report had been prepared by another contractor named SEDCO, this item of business was closed down by the Chairperson,
• The SEDCO report raised the same faults and solutions raised by Mr. Matthews, but was deliberately concealed;
• the chairman has refused to recognise a power of attorney given by P. Forbes to T. Matthews;
• it is alleged that unnecessary work was undertaken in the rooftop area;
• it is alleged that other work such as replacing all fire doors and replacement of pavers is unnecessary;
• it is alleged that inferior repair methods such as laying new tiles over existing tiles have been employed;
• it is alleged that quotations for this work were “bereft of details”, there were no plans or anticipated completion dates for the work, and there were substantial cost overruns;
• it is alleged that the body corporate has failed to repair spalling on the face of the building, apparently caused by corrosion of steel reinforcing rods; and
• it is alleged that the committee has deliberately set out to deceive owners.
  

Submissions

As stated above, I have previously declined to make certain interim orders that were sought by the applicants. Prior to making my decision on the application for interim orders, I sought submissions from the body corporate committee and other affected persons.

In accordance with section 243 of the Act, the body corporate committee and all lot owners have also been invited to make submissions regarding the application for final orders.

The body corporate committee has advised that the EGM was held on 4 October and all of the above motions except for motion 5, were carried. Consequently the committee believes that the resolutions upon motions 2,3,6 & 7 are valid. More particularly, the body corporate committee made the following submissions:

• there were no regulatory or procedural irregularities surrounding the calling of the meeting or the content of the general meeting notice;
• all regulatory requirements regarding the giving of notice of meeting and information concerning individual motions, were complied with;
• the regulations prescribe certain requirements for approval of expenditure greater than the relevant limit for major spending and in this scheme, at the time of the meeting, the relevant limit for major spending was the lesser of $1,100 x the number of lots or $10,000. As there are 15 lots in the scheme, the relevant limit for major spending was $10,000 in the absence of a resolution in general meeting;
• the expenditures proposed in motions 2,3 & 7 were less than the relevant limit for major spending and therefore no other information was required to be given;
• the proposal in Motion 6 (for paving) exceeded the relevant limit and, as required by the regulations, two quotations were provided for each motion and each motion was submitted with alternatives;
• while the applicants are entitled to their views regarding the merits of the various proposals contained in the motions, decisions on the various motions have been properly made by a majority of lot owners voting in general meeting;
  
• the applicants’ objections were formally recorded by way they voted at the meeting;
• there is no evidence to suggest that the decision of the body corporate in general meeting was not reasonable;
• the building is now 26 years old and has had little maintenance carried out, particularly during the period that Mr Matthews was Chairman and Mrs Forbes was Secretary/ Treasurer;
• there is nothing unreasonable about approving safety works (motions 2 & 3), upgrading exterior paving (motion 6), painting of floor foyers (motion 7); which will be funded from existing cash reserves without the need for special levies;
• all owners have been kept informed of the committee’s deliberations over the past year or so both by minutes of committee meetings and by newsletter;
• each lot owner received at least 21 days notice of the meeting and were entitled to make inquiries of the body corporate before making their decision but the applicants declined to do so;
• there is no requirement to formally vary a budget between annual general meetings if a proposal approved at an EGM approves a new expense. A budget comprises both revenue and expenditure items. An annual budget need only be changed if the revenue to be received in the last approved budget is insufficient to meet a new expense that was approved mid term. Such a variation could be in the form of a special levy or a variation to normal periodic levies;
• the last budget approved at the AGM in April 2008 provided for a surplus of over $90,000 in the sinking fund which is more than sufficient to meet new expenditure proposed by motions 2, 3, 6 & 7 without the need for special levies;
• it is usual practice for a body corporate to approve an unbudgeted expense from time to time. This is normally done by the committee (provided it does not exceed the relevant limit for committee spending) and it would be a nonsense to convene an EGM each time an unbudgeted expense was incurred;
• if the expense does exceed the relevant limit for committee spending then an EGM must be convened to approve the expenditure as was done in this case. However, there is no requirement for the annual budget to be varied at the EGM if there are insufficient funds to pay for the proposed expenditure. Where this occurs, the budget strategy is reviewed at the next budget meeting and the following year’s levies are adjusted accordingly;
• there is no evidence to suggest any irregularity in the way office bearers were elected at the last AGM in April 2008 and there is no basis for an adjudicator to vacate the positions of elected committee members for “breach of fiduciary trust”;
• the matter referred to by the applicant as “Motion 8” is a proposed motion by Mr Matthews which was dated 5 September but not received in the Office of Challenge Strata Management until commencement of business on 8 September;
• the proposed motion mistakenly attempts to restrict committee spending whereas the proposed motion would have the effect of reducing the limit for expenditure where two quotations are required;
• if there had been a breach of the statutory code of conduct, sections 34 & 35 of the Regulation sets out specific procedures which must be followed in order to declare the positions vacant. Those procedures have not been followed
• the applicants’ grounds for seeking the orders are vague and unsubstantiated statements about the Chairman and Treasurer, alleged procedural deficiencies and alleged non-disclosure of information;
• the applicants’ submissions demonstrate an ongoing personal vindictiveness toward fellow lot owners by the applicants and is diverting resources away from constructive management of the scheme. For example, $682 was spent last year defending an application, this application has cost the body corporate in excess of $1,900 and a third application has now been submitted with this office;
• it is submitted that this application is frivolous and vexatious and therefore the applicants should be ordered to reimburse the body corporate the amount of $1,972.99.
  

Submissions were also received from seven lot owners including 2 submissions which supported the application in certain respects and 5 submissions which opposed the application.

Submissions in favour of the application included the following:

• they support the applicants’ concerns regarding television distribution, rooftop expenditure, concrete spalling and body corporate management;
• they object to the “budget overrun” on repairs to the spa and sauna and the amount of time taken on the repairs;
• minutes of a meeting were fabricated;
• the “tiling project” is in fact a number of projects, some of which they support and some of which they oppose.
  

Another lot owner with the benefit of a paved exclusive use area objected to having to meet the cost of replacing pavers as, in their view, “maintenance” does not include replacement.

Submissions opposing the application included the following:

• removal of trees was necessary as they were growing too close to the building and the removal was approved by 6 of 7 committee members;
• pavers were replaced because they were over 20 years old, stained, missing in some places and dangerous;
• the roof area, sauna and spa were in a state of disrepair and presented a danger to persons entering the area;
• the actual state of disrepair to the above area only became apparent as work progressed on the area;
• plans were in existence, updated as necessary, and owners were advised accordingly.
  

Jurisdiction

This is a dispute between an owner and the body corporate and falls within the dispute resolution provisions of the Act.[1]

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 authorization 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)).

This dispute resolution application was referred to me pursuant to section 267 of the Act for consideration as to whether an interim order should be granted, and at this time, I am primarily concerned with the issue of whether an interim order is warranted. In any consideration of an application that seeks an interim order, it is necessary to determine whether, because of the nature or urgency of the circumstances relating to the application, an interim order is in fact necessary or appropriate.

Determination

The applicants are now seeking the following final orders:

• That motion 2 be declared invalid.
  • That motion 3 be declared invalid.
  • That motion 5 be declared invalid.
  • That motion 6 be declared invalid.
  • That motion 7 be declared invalid.
  • That the offices of the Chairman and Treasurer be declared vacant because of breaches of Regulations and of the Act, and for breaches of fiduciary trust as enumerated in the evidence.
  • That motions 2, 3, 5, 6 and 7 on the EGM voting paper for 4 October 2008 be not voted upon or if voted upon, be not acted upon.
  • That motions 1 & 4 on the same EGM paper be voted upon;
  • That motion 8 submitted by T Matthews for the EGM and suppressed by the BC Manager be added to the voting paper and voted upon.
    

While the poor television reception is a matter of considerable concern to the applicants, they have stated that “there is no application herein for an order in relation to the technical issues”.

Motions 2, 3, 5, 6 and 7 read as follows:

2. That two common area fire doors and five unit doors be replaced by Gold Coast Door Services at a cost of $7,430 to be paid from the sinking fund (Carried with 10 votes in favour and 5 votes against) ;

3. That recommended safety works to the lift motor room be undertaken by Otis Elevator Co. Pty. Ltd. at a cost of $3,936 to be paid from the sinking fund (Carried with 13 votes in favour and 2 votes against) ;

5. That floor foyers, lift car, entrance area, toilet and the basement elevator entry be re-tiled.
A. That B & C tiling be engaged to undertake this work at a cost of $7,182.61 (as per quotation attached to the notice of this meeting) plus the cost of tiles estimated at $30 per square metre all to be paid from the sinking fund.
Or
B. JRP Tiling be engaged to undertake this work at a cost of $9,302.80 as per quotation attached to the notice of this meeting) plus the cost of tiles estimated at $30 per square metre all to be paid from the sinking fund. (Not carried with 7 votes in favour and 8 votes against) ;

6. That paved common areas excluding exclusive use areas be repaved.

A. That Paramount landscapes and paving be engaged to undertake this work at a cost of $20,017.50 (as per quotation attached to the notice of this meeting) to be paid from the sinking fund.
Or
B. A Step Ahead Paving be engaged to undertake this work at a cost of $20,328.00 (as per quotation attached to the notice of this meeting) to be paid from the sinking fund.
(Carried with 8 votes in favour and 7 votes against) ;

7. That all floor foyers be painted by Baker Bros at a cost of $6,105.00 to be paid from the sinking fund. (Carried with 12 votes in favour and 3 votes against) ;

The applicants have claimed that the above motions were invalid for a number of reasons which can be summarised as follows:

• The motions were “not validly put by the committee”
• work has not been budgeted for and does not comply with Regulations regarding sinking fund expenditure;
• Proper details were not given to lot owners.
  

I have perused the documentary material provided by the applicants, including the minutes of the committee meeting held on 6 September 2008 where it was resolved to include the various motions on the EGM agenda and am unable to find any significant deficiency in the way that the agenda was set, the content of the agenda or the notice of general meeting.

Similarly, I am unable to find any evidence that expenditure was not properly authorised. At the time of the meeting, the relevant limit for major spending was the lesser of $1,100 x the number of lots or $10,000. As there are 15 lots in the scheme, the relevant limit for major spending was $10,000 in the absence of a resolution in general meeting. The expenditures proposed in motions 2,3 & 7 were less than the relevant limit for major. The proposal in Motion 6 (for paving) exceeded the relevant limit and, as required by the regulations, two quotations were provided for each motion and each motion was submitted with alternatives.

While certain items of expenditure were approved after the budget had been approved in April 2008, it does not necessarily follow that the budget needed to be changed. Such action is only necessary in circumstances where revenue to be received in the last approved budget is insufficient to meet a new expense that was approved mid term. However it is evident that there were sufficient monies in the sinking fund budget to meet new expenditure proposed by motions 2, 3, 6 & 7 without the need for special levies;

In response to the applicants’ allegation that insufficient detail was provided regarding the relevant works, the body corporate has advised that motions 2 & 3 related to the replacement of the fire doors and the upgrade of the lift motor room, made necessary by health and safety concerns. While the necessary expenditure does exceed the relevant limit for committee spending, I note that it does not exceed the new relevant limit for major spending (i.e. the lesser of $16,500 or $10,000) and therefore there is no need to obtain 2 quotations.

Further, the body corporate and a number of lot owners have advised that above motions related to necessary maintenance and improvements to a 26 year old building that has little elective maintenance carried out over the years. For example, pavers were over 20 years old, stained, missing in some places, and dangerous. The roof area, sauna and spa were in a state of disrepair and presented a danger to persons entering the area. In my view it is also evident that the real state of disrepair only came to attention as remedial work progressed on the area.

The final matter for consideration is the applicants’ request for the following order:
That motion 8 submitted by T Matthews for the EGM and suppressed by the BC Manager be added to the voting paper and voted upon.

This motion read as follows: That the relevant limit for major spending by the scheme Sandown CTS 10524 for major spending authorised at a general meeting be limited to $5,000.

In response to the application, the body corporate has stated that “Motion 8” was proposed by Mr Matthews by means of a facsimile message dated Friday 5 September but not did not come to the attention of staff from Challenge Strata Management until commencement of business on Monday 8 September. As the agenda for the subject EGM had already been determined at a meeting of a committee on 6 September, it was too late to include the matter on the agenda for the EGM. However the body corporate acknowledges that section 69(2) of the Standard Module Regulation provides that if a motion is submitted by a member of the body corporate, it must “be included on the next general meeting agenda on which it is practicable to include the motion”. Accordingly, the body corporate has stated that it will include that motion on the agenda for the next general meeting to be held for the scheme.

Finally the applicants also seek orders that the offices of the Chairman and Treasurer be declared vacant because of breaches of Regulations and of the Act, and for breaches of fiduciary trust as enumerated in the evidence.

With respect, I do not believe that the evidence submitted in support of the application supports a conclusion that there had been a breach of the statutory code of conduct. Further, the evidence submitted by the applicants does not support a finding that there has a breach of fiduciary obligations owed by committee members to lot owners.

In any event, I am unable to make an order vacating committee member positions as sections 34 & 35 of the Standard Regulation Module sets out specific procedures which must be followed in order to declare the positions vacant i.e. Notice of breach must firstly be given to the committee member and the body corporate in general meeting must decide by resolution to remove a committee member from office.

Section 34 of the Regulation Module provides as follows:

34 Notice for breach of code of conduct—Act, s 101B
(1) If a body corporate believes a voting member of the body corporate’s committee has breached the code of conduct for the member, the body corporate may decide, by ordinary resolution, to give the member a written notice stating each of the following—
(a) that the body corporate believes the member has breached a stated provision of the code of conduct;
(b) details sufficient to identify the breach in not more than 600 words;
(c) that the member may give any other member of the body corporate, within the stated period of at least 21 days after the member is given the notice, a written response
to the notice in not more than 600 words;
(d) that, if asked by the member, the body corporate will pay the member all postage charges and photocopy expenses reasonably incurred by the member in giving a
written response under paragraph (c) to any other member of the body corporate;
(e) that the body corporate is to consider a motion to remove the member from office for the breach at the next general meeting of the body corporate called after
the period mentioned in paragraph (c) ends.
(2) If asked by the member, the body corporate must pay the member all postage charges and photocopy expenses reasonably incurred by the member in giving a written response under subsection (1)(c) to any other member of the body corporate.

Section 35 of the Regulation Module provides as follows:

35 Removal of voting member at general meeting for breach of code of conduct—Act, s 101B
(1) This section applies if—
(a) a body corporate gives a voting member of the body corporate’s committee a notice under section 34(1); and
(b) the period mentioned in section 34(1)(c) for the notice
has ended.
(2) The body corporate must—
(a) include on the agenda of the next general meeting of the body corporate, called after the period mentioned in section 34(1)(c) ends, a motion to remove the member from office for breaching the code of conduct for the member; and
(b) attach to the agenda a copy of the notice given to the member.
(3) The member may be removed from office, by ordinary resolution, at the next general meeting mentioned in subsection (2)(a).

Clearly, the procedures enumerated in the above sections of the Regulation have not been followed.

Accordingly I do not propose to make the orders sought by the applicants except for the following:

That the body corporate is to ensure that “Motion 8” submitted by Mr. Matthews, and which reads “That the relevant limit for major spending by the scheme Sandown CTS 10524 for major spending authorised at a general meeting be limited to $5,000” is to be included on the next general meeting agenda on which it is practicable to include the motion in accordance with section 69(2) of the Standard Module Regulation.

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[1] See ss.226,227 and 228