Swell Residences [2009] QBCCMCmr 204 (4 June 2009)

Last Updated: 31 July 2009

REFERENCE: 0019-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	36211
Name of Scheme:	Swell Residences
Address of Scheme:	1 Ocean Street BURLEIGH HEADS QUEENSLAND 4220

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

Garry Allen and Kim Hurst (applicants), the Owner(s) of lot 2049 and 2022 respectively

I hereby declare that Garry Allen was improperly disqualified from election to the committee at the annual general meeting on 22 December 2008. I further declare that Kim Hurst was improperly disqualified from election to the committee at the annual general meeting on 22 December 2008. I further order that, unless within two weeks the applicants and the existing committee members agree in writing otherwise, the body corporate must within two months hold a general meeting at which all existing committee positions must be vacated and a new committee ballot is conducted. The ballot must be conducted as nearly as practicable in the same manner as at an annual general meeting except that prior to calling the meeting the body corporate should send a notice allowing only two weeks for each owner to submit nominations for committee membership.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0019-2009

“Swell Residences” CTS 36211

Application

Swell Residences Community Titles Scheme (Swell Residences) is an 82 lot scheme under the Body Corporate and Community Management Act 1997 (Act) and the Act’s Accommodation Module Regulation (Accommodation Module). The scheme is designed for residential purposes.

This application is by Garry Allen and Kim Hurst, the owners of lots 2049 and 2022 respectively (applicants) seeking orders against the body corporate for Swell Residences (respondent). The applicants are seeking to overturn a ruling at the annual general meeting of 22 December 2008 to the effect that they were unfinancial and therefore ineligible for election to the committee.

Decision

Investigation and Submissions

Submissions

The main grounds in support of the application, provided on behalf of the applicants, were to the effect that:

• Gary Allen was declared unfinancial based upon an amount the body corporate was claiming for collection of arrears that was disputed. The body corporate manager had told him that he was financial; and
• Kim Hurst had been declared unfinancial on the basis of an amount of $32 for electricity. This amount was not shown as arrears in her levy notice and the body corporate manager had told her that she was financial. She had either paid this amount or was not aware it was owing. Also, she had offered to pay this small amount at the meeting in question but this offer was refused.
  

The main submissions by the chairperson were to the effect that:

• Prior to the meeting it became apparent that many owners had outstanding debts;
• Ernst Body Corporate attempted to get clarification for owners in attendance of the nature of these debts. The information obtained was all very confusing and unsatisfactory but I relied on the information provided on the day;
• Initially I had accepted a payment offered on the day from one owner. However, once it became apparent that a number of owners were affected it appeared unfair to persons not present to accept payments from those who were present. I therefore refunded the payment that had been accepted and refused to accept any other payments;
• Kim Hurst and Garry Allen were not treated any differently from any other owners;
• My decisions in relation to these matters were not overruled by a vote from the floor, unlike a subsequent decision about the validity of a motion.
  

All owners were given an opportunity to provide written submissions. The main submissions by owners were to the effect that:

• The system at Swell is that the body corporate is billed for bulk supply of electricity, pays the account, and then seeks reimbursement from owners. Kim Hurst has her unit in the holiday letting pool so would have received the electricity account herself for payment;
• The committee members in question were unfairly sponsored by the caretaker so should not be allowed to be elected anyway;
• I was in attendance at the annual general meeting and was disgusted by the attitude of the chairperson;
• We found out after the meeting that our vote had not been allowed due to $4.85 in service fees on our electricity statement. We strongly feel that this small amount has nothing to do with body corporate levies and should not have disqualified our vote. We had telephoned the body corporate manager before the meeting and been told that we did not have any outstanding levies;
• We were present at the meeting and the chairperson refused to listen to the advice given to her by the body corporate manager’s representatives. In particular, the chairperson declared Gary Allen unfinancial despite the body corporate manager’s representatives telling her that a court judgment would be necessary before this alleged debt became one that would render him unfinancial;
• We were dismayed to find that we were also judged to be non-financial on a technicality. However, including two members of the previous committee gives all owners the benefit of a more balanced committee and the applicants cannot claim to be elected when so many votes both for and against the applicants were disallowed;
• The body corporate managers have now changed the way they account for moneys owed. The application should be disallowed and all owners should have the opportunity to vote again;
• I paid my outstanding amount of $57 "on the spot" despite the body corporate manager not being able to tell me what the debt was for. Out of fairness to other owners in a similar position I decided to cancel my payment and the amount was refunded. I had been nominated to stand as secretary or committee member. In the end there were only 32 valid voting papers;
• The chairperson was not forewarned about the financial position of owners and acted reasonably at the meeting in not allowing any nominations from unfinancial owners to be accepted;
• The chairperson took the only option available to her in the chaos of the body corporate manager not being able to explain debts. The two applicants cannot be favoured above other who were caught up in this fiasco; and
• The applicants are only two of a number of owners affected. The only sensible and fair result would be to have another election.
  

Further enquires

I asked the body corporate manager for more information relating to payments for electricity. The body corporate manager informed me that owners must purchase electricity from the body corporate pursuant to by-law 46 and provided a copy of a list showing details of sixteen owners who were in arrears for electricity payments at the date of the annual general meeting.

I note that by-law 46 provides that, regarding electricity supply, "The Body Corporate may render accounts to each Owner or occupier and such accounts are payable to the Body Corporate within fourteen (14) days of the delivery of such accounts".

The body corporate provided a copy of the bill that was addressed to Gary Raymond Hurst & Kim Therese Hurst at 90 Cassowary Drive Burleigh Heads. This bill was dated 7 November 2008 and showed the amount of $33.95 for supply from 30 September 2008 to 29 October 2008. This bill required payment by 21 November 2008.

Issues for determination

Applicable law

Legislation relevant to the present dispute has provisions to the effect that:

• A "body corporate debt" is a contribution, penalty interest amount, and other amounts associated with the ownership of a lot (e.g. an amount owing for lawn mowing services arranged by the body corporate on behalf of the lot owner) (Accommodation Module, Schedule - Dictionary);
• At least 30 days before the payment of a contribution is required the body corporate must give each owner written notice of any arrears and the date the contribution must be paid. This notice may include notice about an amount payable by an owner to the body corporate for a specially contracted service enjoyed by the owner (Accommodation Module, 140);
• A person is ineligible to be a voting member of the committee if they owe a body corporate debt at the time voting members are chosen (or were nominated by a person who owes a body corporate debt at that time) (Accommodation Module, 11); and
• An owner does not have a right to exercise a vote (except on a resolution without dissent) if they owe a body corporate debt at the time of the meeting (Accommodation Module, 82).

Was Gary Allen properly declared unfinancial?

I accept from the submissions that the body corporate was seeking approximately $4,000 from Gary Allen at the time of the annual general meeting. I further accept from the submissions that Gary Allen did not have any outstanding contributions and that this amount of $4,000 predominately related to recovery costs relating to the collection of previously outstanding contributions. Further, that Gary Allen disputed his liability to pay those recovery costs.

Based on the legal authority of Body Corporate for Liberty v Alotier Pty Ltd & Ors,[1] a claim for recovery costs cannot be included in the body corporate’s records as a "body cooperate debt" unless fixed by a judgment (or, presumably, by a deed of settlement).

I am satisfied that the body corporate improperly included disputed recovery costs in its financial records as a "body corporate debt" owing by Gary Allen. Further, I am satisfied that Gary Allen should not have been declared unfinancial at the annual general meeting given the evidence that he had paid all contributions owing and the lack of evidence of any body corporate debts that were due and payable.

Was Kim Hurst properly declared unfinancial?

Kim Hurst has provided a copy of an electricity bill dated 7 November 2008 that lists the amount of $287.80 as the "Amount from last bill" and the amount of $321.75 as the "Amount Payable". The bill has the words "Overdue Account Please Pay Immediately" stamped on it but lists the due date as 21 November 2008. The bill has been annotated with the comments "Paid 12/11 Ref 032974842".

The statement provided from the body corporate’s records indicates that the body corporate received $287.80 from the applicant on 13 November 2008 rather than the $321.75 that Kim Hurst believes she paid on 12 November. There is therefore an obvious discrepancy and the applicant would need to check her records to determine whether she inadvertently paid only $287.80 rather than the full amount due. If so, Kim Hurst owed the body corporate $33.95 for electricity. If not, the manner in which the body corporate kept its records was inappropriate and Kim Hurst did not owe any money for electricity.

In any event, I am satisfied from the submissions of Kim Hurst and Sandra Princz that Kim Hurst offered to pay the amount at the meeting but that this offer was refused.

Any amount owed for electricity would appear to fall within the definition of a "body corporate debt" as being an amount associated with the ownership of a lot. However, even if this amount did remain unpaid at the time of the meeting, it was not proper for Kim Hurst to be declared unfinancial given that she tendered payment of the amount. This conclusion is based on the legal authority of Re Slaters, Tilers & Roofing Industry Union (Vic)[2] and Re appln by Kenward for an enquiry into election for offices in the Federated Liquor and Allied Industries Employees’ Union of Australia South Australian Branch.[3] As a matter of general principle, Kim Hurst tendered payment of the amount owing at the meeting so it was improper to refuse that offer and declare her unfinancial. It is not relevant whether other owners also attempted to tender payments and I do not accept the submission of Sandra Princz to the effect that it was fairer not to accept outstanding amounts from anyone given persons not present did not have the same opportunity to tender payments

I therefore conclude that Kim Hurst should not have been declared unfinancial at the annual general meeting.

Conclusion

An adjudicator is required to make an order that is just and equitable to resolve a dispute. I am prepared to make declarations that Gary Allen and Kim Hurst should not have been declared unfinancial at the annual general meeting. However, these declarations will not resolve the underlying dispute. It is claimed that Gary Allen and Kim Hurst could have been elected to the committee instead of two of the other members if they had not been improperly declared unfinancial. It is not obvious to me that this is the case as I do not have all the voting records and presumably votes from the floor of the meeting could have been different if the applicants had been allowed to stand for election. Other nominees or voters may also have been incorrectly declared unfinancial.

In the circumstances, it seems likely that a new ballot will need to be held for the relevant positions. Further, given the irregularities in the election and uncertainty about other voters or nominees incorrectly being declared unfinancial, it is appropriate that the "will of the owners" be reflected in new elections for all committee positions. Having said this, the existing members may be able to look at the record of voting at the annual general meeting and the "will of the owners" may be sufficiently obvious that all relevant persons can be satisfied as to how the committee should be composed. If all existing committee members and the applicants agree then it should be possible for one or two existing members to resign and for the remaining members to appoint either or both of the applicants (Accommodation Module 33(2)(c), 38(1)(a)(i)). If the "will of the owners" is not obvious and no agreement can be reached then another general meeting will need to be called. It seems appropriate that the ballot should be conducted in the same manner as at an annual general meeting except that a request for nominations need only give owners two weeks to put forward their nomination prior to the calling of the meeting. I will allow two months for the entire process to take place.

Finally, I note that any committee decisions made since the annual general meeting are not invalid simply because of an irregularity in the original ballot (Act, 100(4)). However, those decisions can obviously be varied or revoked by subsequent resolution subject to the body corporate or committee acting reasonably in that respect (Act 94, 100).

Order

For these reasons, I make the order above.

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[1] CCT KA009-08, KD Dorney QC, 11 February 2009.
[2] (1983) 72 FLR 411.
[3] Federal Court of Australia, South Australia District Registry, Industrial Division, Keely J 10 July 1989 BC8908248.