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Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders |
Last Updated: 31 July 2009
REFERENCE: 0395-2009
INTERIM ORDER OF AN ADJUDICATOR
MADE UNDER PART 9 OF CHAPTER 6
BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997
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Number of Scheme:
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20860
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Name of Scheme:
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Isle of Palms Resort
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Address of Scheme:
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2-10 Coolgardie Street ELANORA QLD 4221
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TAKE NOTICE that pursuant to an application made under the abovementioned Act by
Kay Gehl, the Co-owner of Lot 17
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I hereby order that, pending final orders on this matter, the Body
Corporate for Isle of Palms Resort, or any person authorised by or acting on
behalf
of the Body Corporate for Isle of Palms Resort, shall not enter any lot
in the scheme for the purposes of carrying out maintenance
or other work, or
undertaking an inspection regarding the need for maintenance or other work,
except in a genuine emergency or with
the prior written consent of the owner of
the lot.
I further order that the application for interim orders shall
otherwise be dismissed.
This interim order has effect until three (3) months have elapsed from the
date of this order, a further interim or final order for
the application is
issued, or until the application is withdrawn or otherwise ended (whichever is
earlier).
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STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0395-2009
“Isle of Palms Resort” CTS 20860
Isle of Palms Resort community titles scheme 20864 (Isle of Palms Resort) consists of 174 lots and common property. The Community Management Statement (CMS) for Isle of Palms Resort indicates that the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module) applies to the scheme. Department of Natural Resources Mines and Water records show the scheme is registered as Group Titles Plan 1934 and Group Titles Plans of Re-subdivision 1946, 2020, 2039, 2089, 2097, and 2174, being a Standard Format Plan (SFP) of subdivision.
INTERIM APPLICATION
This is an application for interim orders lodged by Kay Gehl, Co-owner of Lot 17 (applicant) on 24 April 2009 under the Body Corporate and Community Management Act 1997 (Act).
The applicant sought interim orders against the Body Corporate for Isle of Palms Resort (respondent) in the following terms:
The application also seeks the following final orders:
PROCEDURAL MATTERS
In accordance with section 247 of the Act, the Commissioner for Body Corporate and Community Management has referred the application to me to decide whether the nature or urgency of the circumstances of the application warrant an interim order. The Commissioner has referred the application notwithstanding that affected persons have not been given notice of the application or afforded an opportunity to make submissions about the application[1].
In the circumstances I provided the Committee and Laurie Dodd (Dodd), who was named as an affected party, with a limited opportunity to make submissions in relation to the interim order. Submissions were subsequently received from the Body Corporate.
MATTERS IN DISPUTE
This application raises a range of issues relating to motions considered at the Annual General Meeting (AGM) of the Body Corporate on 29 January 2009. In addition. the applicant raises concerns regarding Committee flying minute resolution, expenditure in respect of Strata Sphere Management Pty Ltd (Strata Sphere), and expenditure on maintenance works.
The applicant’s first interim order seeks that no action be taken in respect of ten AGM motions pending a final order. The applicant raises the following issues with AGM motions:
Motion 1, regarding caretaking and letting agreements, was submitted by the owner of Lot 180. At the meeting an issue was raised with the validity of the motion, regarding the completion of the BCCM Form 20 Explanatory Notice – Proposal to Amend. The proxy for the submitting owner subsequently withdrew the motion. The applicant asserts that the proxy was not able to do this and the motion should have been ruled out of order by the chairperson. The applicant also queries whether secret voting papers were opened.
Motion 2 was for the confirmation of the previous minutes, being the minutes of the Extraordinary General Meeting (EGM) on 5 November 2008. The motion was carried by 73 votes in favour and 23 against. However the applicant asserts that the EGM minutes were not a true and accurate record of the EGM – specifically in regard to whether a motion to appoint an external consultant and returning officer for the AGM had been passed or was ruled out of order.
Motion 3 related to the statement of accounts. However the financial statements circulated with the voting papers were not the same as the audited financials, which the applicant says were received 1-2 days before the AGM and after most members had voted on this motion.
Motion 4 was for the appointment of an auditor but the applicant says it should have been ruled out of order because it was not in the form required by the legislation.
Motions 5 and 6 related to the administration and sinking fund budgets and contributions. These motions included provision for the treasurer to issue levy notices for the first six months of the next financial year, but the applicant says the legislation only allows for the Committee to fix one interim contribution for the next financial year.
In addition, Motion 6 did not give ‘yes’, ‘no’ or ‘abstain’ voting options, unlike other motions, but left the voting column blank. The applicant says some owners failed to vote on Motion 6.
Motion 7 relates to the confirmation of insurance. The applicant says Committee members organised the insurance after the due date and the premium paid was some $3,000 less than the amount listed in Motion 7. The applicant also says there was no disclosure of any benefit received by the Body Corporate or any member in respect of the insurance policy.
Motion 8 was for the appointment of a Body Corporate Manager (BCM). The applicant says that, as the amount of the proposed contract ($19,140 plus GST) was above the major spending limit, it was necessary to submit at least two quotes and present the motion as a motion with alternatives. This issue was raised at the meeting and the motion was ruled out of order by the chairperson on the basis of legal advice. The explanatory note said that four quotes had been obtained, and the applicant says alternatives should have been presented.
The voting for the motion was then queried and provided. As the overwhelming vote was in favour of the motion, the Caretaker, Simon Lill, then proposed a vote from the floor to rule the Chairperson’s decision on this motion out of order. This vote occurred with 49 votes in favour and 23 against. On that basis the Chairperson’s ruling was overturned, and the motion was put to the meeting and passed. The applicant says that Committee members used their proxy votes to overturn the motion, notwithstanding the legal advice provided at the meeting that the motion was invalid. The applicant also refers to the requirement that no votes be exercised by proxy in respect of the passing of a resolution to appoint a BCM.
Motion 10 was submitted by the applicant and her co-owners, and sought an ordinary resolution that the Committee members who engaged Strata Sphere as a consultant for the EGM pay for those services personally as there was no general meeting authority for the expenditure. The Chairperson ruled the motion out of order on the basis that the costs were within the Committee spending limit and there was no basis to refund the expenses. The applicant claims that the cost of the appointment $13,373.65. They also indicated that if the cost of the EGM was to be considered one project, the aggregate cost with the returning officer of some $4,800, was well outside the Committee spending limit.
Motion 14 sought a resolution that the Committee instruct committee member Dodd to refrain from conducting any business in conjunction with the Caretaker whilst a member of the Committee, or to forfeit his position on the Committee. The motion was defeated with 36 votes in favour and 64 votes against.
The applicant claims Dodd acts as an unlicensed letting agent. The applicant says Dodd has hire cars which are listed on the caretaker’s website and are kept on the scheme in visitor car spaces or unoccupied holiday rental unit car spaces. The applicant also asserts that Dodd owns or co-owns the scheme’s bus which has his mobile number and the scheme logo on it. She says the matter has been raised several times with Dodd being asked to stand down, but that he denies any conflict of interest. The applicant claims Dodd is an associate of the caretaker and that, pursuant to section 11(2)(b) and section 309 of the Act, he is ineligible to be a committee member. The applicant also claims Dodd is in breach of Gold Coast City Council (GCCC) development compliance requirements and the Code of conduct for committee voting members.
The second interim order sought by the applicant raises concerns about flying minutes. The applicant says that motions were passed by the Committee as flying minutes on 18 and 26 February 2009 and ratified at a Committee meeting on 18 April 2009. But the applicant says the content of the motions has not been disclosed or distributed. The applicant seeks an interim order that no action be taken on these resolutions pending a final order.
The third interim order sought relates again to Strata Sphere. The applicant seeks an interim order that there be no future expenditure on Strata Sphere and Melissa Pahl pending final orders, on the basis that the Committee has exceeded its expenditure authority. The various engagements of Strata Sphere appear to be as follows:
Pahl and/or Strata Sphere were engaged to conduct of the EGM pursuant to a Committee resolution on 20 August 2008. This resolution did not name an appointee but merely referred to an ‘external consultant’ at the rate of $150 plus GST per hour plus outlays.
Pursuant to the disputed third motion at the EGM, Pahl and/or Strata Sphere were engaged to conduct the AGM. The EGM resolution did not name an appointee but referred to an ‘external consultant’ (and a returning officer). The motion did not mention quotes or costs.
At the AGM Strata Sphere was appointed as BCM for the scheme pursuant to the disputed Motion 8. The cost of this appointment was $19,140 plus GST for one year.
On 16 February 2009 the Committee passed two resolutions outside a Committee meeting. One was that Pahl be appointed the Public Officer for the scheme and the second was that Pahl be appointed the Tax Agent for the purpose of contacting the Australian Tax Office and dealing with tax records for the scheme. The resolutions do not indicate whether there is any fee or cost associated with these appointments.
The applicant includes copies of the following financial records relating to Strata Sphere:
Invoice of 22 August 2008 for $1,100, as “Retainer for Consultancy Services to assist with carrying out the Order of the Commissioner dated 5 August 2008”
Invoice of 22 August 2008 for $435.05, as “Disbursements to date for Consultancy Services”
Invoice of 14 October 2008 for $6,175.50, as “Preparation of EGM Paperwork in relation to the Order of the Commissioner dated 5 August 2008”
Invoice of 14 October 2008 for $2,422.35, as “Disbursements to date for Consultancy Services including preparation and posting of EGM Notice and associated paperwork”
A document headed “Summary of Outlay Charges” lists expenditure of $395.50 up to 22 August 2008 (the ex-GST amount on the 22 August 2008 disbursements invoice); $2,202.14 up to 14 October 2008 (the ex-GST amount on the 14 October 2008 disbursements invoice); and $820.75 for the period 18 October to 19 November 2008.
General ledger transaction list indicating a payment to Strata Sphere dated 22 January 2009 for $3,295.75, with the GST component deducted and the amount of $2,996.14 remaining.
The applicant argues that Pahl has been paid $13,373.65 for activities associated with the EGM, but with no record of payments for activities associated with the AGM and later. She says Pahl was engaged at an undisclosed cost in respect of the AGM, and that the Committee has not indicated the cost for her appointment as public officer and tax agent. She asserts that the activities of Pahl at the AGM were beyond the limited duties agreed to by owners in the EGM motion. The applicant also asserts that the duties undertaken by Pahl were carried out in the presence of the then contracted BCM, Marika Maseli of Queensland Strata Administration (QSA). The applicant asserts that the additional activities at the AGM would have cost the Body Corporate more than owners agreed to in the EGM motion or the cost of her duties for the EGM. She asserts that the Committee mislead owners as to Pahl’s duties. The applicant says the Committee has effectively engaged Pahl as a de facto BCM since 20 August 2008 and are now ‘presumably’ instructing her as a BCM despite not being validly appointed as such at the AGM.
The fourth interim order sought relates to the Committee’s authorisation of work on lots without the consent of lot owners. There are three separate issues raised. The applicant seeks an interim order apparently because more work is currently being undertaken.
Firstly, it seems new downpipes are being added to existing guttering which spans two lots. The applicant says the existing downpipe was adequate for 19 years. She says the new downpipes are being attached to the front wall of each lot at the entrance of the front gate, which is on the lot and is unsightly. She says the pipe is not connected to the storm water and will result in water flowing onto the entrance area of the lot, causing a slip hazard. In addition, photographs of the downpipes indicate that the pipes have been located where there is an electrical main at the base of the pipe. The applicant queries whether the downpipe accords with GCCC regulations because they are not connected to the storm water pipes. She says GCCC advised her on 21 April 2009 that a compliance permit would be required from a building certifier before work could commence.
The applicants say owners were not advised of the project and no permission was granted for the downpipes to be installed. Rather, she says a plumber just turned up and installed them, in some cases removing plants etc from the wall. The applicant says the issue was raised at the Committee meeting on 18 April 2009. Apparently the Caretaker said he had authorised two downpipes to be installed previously. Dodd then apparently indicated that he had initiated the installation due to a recommendation from the insurance company, but no insurance report was provided. Reference was made to previous legal advice regarding the maintenance of individual lots, and to the Body Corporate responsibility regarding the maintenance of guttering spanning more than two lots. The applicant says the Body Corporate has never maintained these gutters and that this is not an issue relating to maintenance but to new downpipes.
Secondly, the applicant says that since January 2009 Lots 1 to 48 have had a sewer inspection riser and associated vertical pipe replaced. She asserts that this work was instigated by the Caretaker, who inspected the risers with the plumber and concluded that many of the pipes were blocked because root penetration had cracked junctions. Some pipes were unblocked with a sewer machine and plunger, at a cost of $868, a number of pipes were replaced. The total cost of the original inspection and subsequent work already exceeds $9,000.
The applicant says the sewer rises and vertical pipes are on private property. The invoices individually charge for the lots but have apparently been paid from Body Corporate funds. The applicant says no contact was made with owners and no permission was sought. The applicant’s lot was one of those affected but she says she hadn’t had a problem with the sewer. She queries whether work was actually done, because photos of the area indicate that nothing appears to have been disturbed or replaced and her tenants (one of whom is a stay-at-home mother) are unaware of any work being done. Another owner queried the work on the basis that there was nothing wrong with the sewer line and no trees present to provide tree roots.
Finally, the applicant refers to the collapse of a balcony on one lot in April 2008. The applicant says the Committee used Body Corporate funds to pay for engineering reports on 103 waterfront lots with balconies (with remaining lots having no balconies), at a cost of $17,800. She says this was contrary to legal advice regarding the responsibility for balconies, and was carried out without the permission and, in most cases, knowledge of the lot owners.
Final orders are sought in respect of each of the matters raised in the interim orders. In addition, the applicant seeks a further final order that the Body Corporate provide access for lot owners and interested parties to all material and information related to the secret ballots at the EGM and AGM. The applicant says ballot materials for the EGM and AGM are being held by the respective returning officers for those meetings, who have denied access to the records. The applicant says Pahl has advised that an adjudicator’s order would be required to obtain access to these records. The applicant says the scheme has a history of improper voting procedures. She says some owners believe there may be flaws in the voting papers for the EGM, as two sets of voting papers were sent out because of mistakes by the returning officer for that meeting. The applicant also notes that section 88(7) of the Accommodation Module requires that a returning officer must return all secret ballot records, including voting papers, to the chairperson after counting the votes. The applicant also refers to the right of owners to access to records in section 205 of the Act and section 202 of the Accommodation Module.
Submission
The submission from the respondent Body Corporate opposes the application. They seek the dismissal of the interim and final orders, that the application be considered vexatious and without substance, and that the applicant pay the respondent’s costs under section 270 of the Act. They claim the applicant has failed to particularise legislative breaches with supporting evidence and most of her arguments relate to peripheral matters related to the subject of motions rather than the motions themselves. They argue the applicant’s submissions are unreasonable, untrue or irrelevant. They also note that the applicant had her associates have caused four out of five EGMs to be requisitioned over the last five years, incurring the Body Corporate over $80,000. They say any benefit in the interim orders sought is far outweighed by the inconvenience.
In regard to the AGM motions, the respondent makes the following comments:
No interim order is warranted on Motion 1 as no voting occurred on that motion.
The subject matter of the applicant’s submissions regarding Motion 2 was considered previously by an Adjudicator and that application was subsequently withdrawn[2]. Further, the Committee members present at the EGM and returning officer for the EGM are prepared to sign statutory declarations that the disputed EGM motion was not ruled out of order.
For Motion 3, the initial statement of account sent with the AGM notice was supplied by the former BCM, QSA. The Committee found the QSA figures to be incorrect and referred them back to QSA for rectification. The Auditor had difficulty getting the financial statements from QSA which meant the audited accounts were not able to be sent with the AGM notice.
In regard to the motion referred to as Motion 4, they do not consider that the appointment of an auditor motion was in fact Motion 4. There has been no detriment to owners in having an auditor appointed to audit the books and records and any anomalies in the wording of the motion would assist lot owners by requiring an audit to occur.
For Motions 5 and 6, due to the lateness of QSA sending out previous levies, a decision was taken to make the timing and amount of levy payments for the first six months of the next financial year. If levies are collected each quarter it is unworkable to collect the second period if the AGM is held at the end of the three month time frame after the financial year.
Submissions that Motion 6 did not provide for any vote notification are illogical and unreasonable as 78 owners voted in favour, 22 against, and 12 abstaining.
In regard to the insurance motion, the Committee notes the relevant legislative provisions and says that none of the parties have received any commission, remuneration or financial incentives. They say the applicant has made allegations without evidence.
In respect of Motion 8, the explanatory note about the Chairperson ruling this motion out of order is comprehensive. The legislation provides for those present at a meeting to overrule a Chairperson’s decision. Objections are raised in regard to unsubstantiated and defamatory allegations regarding the Committee members. The legislation does not prohibit the use of proxies for a procedural vote in relation to a contractual matter and the vote was valid in all circumstances. Inconvenience would be caused by an interim order on this motion.
In regard to Motion 10, the Committee appointed an external consultant at $150 an hour to assist them with the EGM. The cost of the EGM was not included in the Administration Agreement with the then BCM, QSA. At the time of the appointment, on 19 August 2008, the Committee were able to authorise expenditure up to $21,750 and so the appointment was within the Committee’s expenditure limit. The AGM motion does not seek to challenge the validity of the appointment of Pahl, and that subject was previously dealt with by an Adjudicator. Owners overwhelming rejected the applicant’s proposal that Committee members personally refund the cost of the consultant.
The applicant’s assertions with respect to Motion 14 are “incredulous, unsubstantiated and ridiculous”. She has failed to provide any evidence that Dodd is an associate for the Caretaker, as defined in the legislation. Her broad-brush allegations amount to defamation. Dodd states unequivocally that he has no business relationship with the Caretaker that would prevent him being an impartial Committee member or would amount to an ‘association’.
In regard to the second order sought relating to flying minutes, the Committee acknowledge that the subject flying minutes were not sent to lot owners as required. This was overlooked because Strata Sphere had only recently received the books and records from QSA. Strata Sphere confirms it will now circulate the minutes to lot owners, and a copy is provided in the submission.
In respect of the third order sought, the submission says that Pahl is no longer engaged as an independent consultant and has not provided consultancy services to the Committee since the last invoice submitted. Pahl had been engaged as an independent consultant when the Body Corporate lost faith in QSA but needed to call an EGM in compliance with an adjudicator’s order. Strata Sphere were appointed as the BCM at the AGM and since then have been remunerated in accordance with their Administration Agreement. In regard to the appointment of Strata Sphere as BCM, the submission says the validity of Motion 8 should be considered in the final order. However in regard to the interim order, Strata Sphere has carried out its duties and responsibilities pursuant to the Administration Agreement entered into following the AGM resolution and will continue to seek payment for the duties that it carries out. Whether the motion is valid or not, the Body Corporate will require a BCM to undertake administrative duties and it is unrealistic to expect the Committee to undertake these activities itself. Accordingly they argue it is inappropriate to prohibit the Body Corporate from further expenditure on Strata Sphere.
The submission says that the fourth order relates to a matter which is the subject of another application[3] before the Commissioner’s Office and that the applicant in that matter is in conciliation talks with the Body Corporate. They submit that it is not appropriate to make an interim order on a matter that is being dealt with in another application. Further, the submission asserts that the Committee have not spent Body Corporate funds on any private property or lots, but has authorised plumbing works relating to sewerage connections to individual units and the installation of extra down pipes. They say these works were recommended by the insurance company so as not the void the Body Corporate’s insurance policy and because the Body Corporate has a duty of care to ensure that the insurance coverage for the scheme is not jeopardised. Further, the Body Corporate says that as the scheme is a standard format plan of subdivision, the Body Corporate is responsible for providing services such as plumbing, electrical and communication. They say that blocked drains were a severe problem identified by a fully qualified plumbing company who identified that 24 out of 48 sewerage connections inspected were in need of repair.
JURISDICTION
I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.[4]
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 CMS; or
(b) the exercise of rights or powers, or the performance of duties, under the Act or the CMS; or
(c) a claimed or anticipated contractual matter about the engagement of a person as a body corporate manager or service contractor; or the authorisation of a person as a letting agent.
An order may require a person to act, or prohibit a person from acting, in a way stated in the order.[5] An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate.[6]
Section 279(1) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances.
DETERMINATION
Urgent interim relief
At this time, I am concerned with the application for an interim order and the threshold issue of whether interim orders are warranted. An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates.[7] Any order granted must be just and equitable in the circumstances.[8] The examples in section 279 of the Act indicate the usual circumstances where an interim order might be made and are in the nature of injunctive relief. While it is not possible to define the range of matters that might be the subject of an interim order, an applicant needs to establish that the circumstances warrant an interim order. An interim order will not be made if the only urgency relates to an applicant’s desire to resolve or expedite the matters in dispute, or where the nature of the circumstances are such that the matter is not capable of being dealt with in the context of an interim order.
It is not appropriate to consider the substantive issues in the application in detail at this time. But to determine whether it is just and equitable to grant interim relief, it is relevant to briefly consider the issues raised in the application. As an interim order can be considered on an ex parte basis, an adjudicator must be satisfied that the application raises serious legal questions and that the balance of convenience between the parties justifies injunctive relief. That is, an adjudicator must balance the inconvenience of granting relief now if final orders are ultimately refused against the inconvenience of refusing relief now if final orders are ultimately granted. Of particular relevance is evidence that an interim order is necessary to prevent serious or irreparable harm.
I will consider the four interim orders sought in turn, in regard to whether there are any serious legal questions raised and, if so, whether the balance of convenience warrants any interim orders.
AGM Motions 1, 2, 3, 4, 5, 6, 7, 8, 10 and 14
Motion 1 was not voted on or passed. There is a technical question as to whether the motion should have been withdrawn by the proxy or ruled out of order by the Chair, and the handling of the secret voting papers. However as the motion was not voted on, there is no decision that can be acted upon pending a final order. As such there is no basis for an interim order.
The second issue purports to relate to Motion 2 confirming the minutes of the EGM of 5 November 2008. However, it seems the applicant is really challenging the minuted outcome of the third motion at the EGM itself. The question appears to be whether the EGM motion was ruled out of order or was voted on and passed. Pursuant to section 242 of the Act, an application to invalidate the purported result of the motion should have been lodged within 3 months of the date of the EGM, unless there are good reasons for an adjudicator to waive the time limit. The applicant has not indicated when the EGM minutes were distributed or why the minuted outcome of that motion was not challenged by the applicant earlier. Those matters, and the question of whether the EGM motion was passed or not (apparently disputed in discussions at the AGM), can be considered in the final order. However, for the purpose of the interim order sought, the EGM motion appears to have already been implemented (with the appointment of an external consultant and returning officer for the AGM). As such there is no relevant interim order that can be made on this issue.
The third issue relates to Motion 3 and the statement of accounts. The explanatory note for this motion clearly advises that the auditor’s report would be issued later because it was unable to be prepared in time to be sent with the meeting. There is a discrepancy in the accounts included in the AGM papers and the audited statements which were later issued and purportedly approved by the motion. The AGM minutes indicate that this discrepancy was discussed at the AGM, with the advice that the accounts were prepared by the previous BCM (Queensland Strata Administration) who liaised with the auditor with some apparent delay. The bulk of the discrepancy seems to relate to the Caretaker’s salary and the minutes explain that the amount was more than the Caretaker had actually been paid over the 12 months because of the correction of a previous accounting error. The facts of this matter can be investigated in due course. However, as the discrepancy relates to past expenditure and the applicant has not demonstrated that there is any future action expected as a result of this motion that requires the protection of an interim order. Accordingly, at this time I find no basis for an interim order in regard to this motion.
The next issue relates to Motion 4 to appoint an auditor. Section 153 of the Accommodation Module is prescriptive regarding the form of statutory audit motions and Motion 4 does not adhere to that format. Section 74(3)(a) of the Accommodation Module provides that the agenda for each AGM must include the substance of each ‘statutory motion’ to be considered at the meeting, and the Dictionary Schedule definition of ‘statutory motion’ includes “a motion appointing an auditor for the body corporate’s accounts for the next financial year; or not auditing the accounts”. In due course will consider whether the Body Corporate failed to comply with the requirements of section 153 in determining the final orders. However, as the purpose of Motion 4 is to appoint an auditor to audit the current financial year’s accounts, and presumably this audit would not occur until the end of the current financial year, it is not apparent that there is any immediate action expected that would warrant an interim order.
In regards to Motions 5 and 6, there is a potential issue as to whether the motions were purporting to allow the Committee to impose interim contributions for the next financial year beyond the scope provided for in section 139 of the Accommodation Module. However, if the motion is incorrect in this respect, it is likely to only be incorrect in respect of the contributions scheduled for payment in 2010. Accordingly, it is not apparent that there is an urgent issue warranting an interim order.
In regard to the voting paper in respect of Motion 6, there is also a question of whether the voting paper failed to comply with the requirements of section 69 of the Accommodation Module, which sets out the requirements for voting papers, or whether owners were otherwise misled by the voting paper in respect of this motion. The voting results indicate that less votes were cast in respect of this motion (around 30 votes less than most other motions), but that the motion passed by a margin of some 46 votes. However, I am not convinced that there is any particular urgency or likely detriment warranting an interim order at this time. Even if the motion were invalid, the same or similar motion is likely to be adopted if the matter were reconsidered and if owners ultimately resolved to adjust the budget and contribution amounts included in this motion, any contributions that have been incorrectly levied on the basis of this motion can be rectified through a corresponding adjustment in future contributions.
In regard to the insurance disclosure in Motion 7 it may be that there was a discrepancy in the amount of the premium shown in the motion, although the applicant has not provided a copy of any invoice or receipt for the premium and the premium is not shown on the certificate of currency of the insurance policy. This can be investigated in due course, including any evidence that any discrepancy was deliberate or inadvertent or whether it had any adverse impact on owners. However, as the premium has apparently already been paid, it does not appear that there is any urgency or any other issue warranting an interim order at this time.
There does appear to be a genuine question over the validity of Motion 8. In the absence of a Body Corporate resolution to increase the major spending limit in this scheme, the major spending limit is $10,000[9]. Section 150 of the Accommodation Module provides that proposals with a cost that is above the major spending limit generally require at least two quotations for the proposal to be provided with the meeting notice. It is apparent that the appointment of the BCM was significantly above the major spending limit but only one quote was provided. It seems from the submissions that all persons present at the AGM, including Strata Sphere, were on notice as to the irregularity with this motion.
Section 79 of the Accommodation Module provides that the chair of a meeting must rule a motion out of order if it the motion, if carried, would be unlawful or unenforceable. The chairperson ruled Motion 8 out of order on that basis. Section 79(3) allows the persons “present and entitled to vote” to pass an ordinary resolution overturning the chair’s ruling. Given that section 112(2) of the Accommodation Module prevents votes to be exercised by proxy in respect of the passing of an ordinary resolution to approve the engagement of a BCM, there may be a question as to whether proxy votes can be used on a procedural motion to give effect to an ordinary resolution to approve the engagement of a BCM. But even if proxy votes could be used the decision of voters at a meeting to overrule a chairperson’s vote cannot validate a resolution that is otherwise invalid.
Without finally deciding the matter, I am satisfied that there are prima facie grounds for arguing that Motion 8 was invalid. It is apparent that the Body Corporate has already acted to appoint Strata Sphere pursuant to Motion 8, and accordingly incurred costs in respect of that appointment which may be difficult to unwind, particularly in the context of an interim order. In this regard I note that section 310 of the Act provides that if a person, acting honestly and without notice of an irregularity, enters into a transaction with a member of a body corporate committee or a person with apparent authority to bind the body corporate, the transaction is valid and binding on the body corporate. In this case, as a representative of Strata Sphere was present at the AGM and was privy to the legal advice provided regarding the invalidity of Motion 8, it could be argued that Strata Sphere was on notice of the irregularity with Motion 8. However, even if Motion 8 and any resulting contract is ultimately invalidated, it may well be that Strata Sphere would be entitled to normal fees incurred for services rendered in performance of an invalid agreement under the quantum meruit (“as much as he deserved”) principle. It would be for parties to seek their own legal advice in this regard.
I am concerned that without an interim order, further costs will be incurred by the Body Corporate in respect of a potentially invalid agreement. However I accept the Committee’s arguments regarding the difficulties that would arise if the Committee, particularly in a scheme of this size, was left without a BCM to assist in the administration of the scheme. Moreover, given the size of the majority vote, it may well be that owners would vote in favour of Strata Sphere if the matter were reconsidered at a future meeting with multiple quotes provided. Although there is certainly a arguable basis to make the interim order sought on this motion, on balance I am not satisfied that it is in the best interests of owners given the inconvenience that could arise to the Body Corporate.
In regard to Motion 10, it seems the applicant seeks to overturn the Chairperson’s decision to rule this motion, regarding the responsibility for the payment of the fees for an external consultant to for the 2008 EGM, out of order. On 20 August 2008 the Committee passed a resolution outside a committee member (six votes in favour and nil against) to engage an external consultant to assist with the preparation of the EGM as ordered by the Adjudicator in a previous dispute[10]. A memorandum was sent to all owners on 21 August 2008, in part advising owners of this decision and that it was done to ensure that the required EGM complied with the legislation and the order.
The applicant asserts that the Committee’s spending was above its limit. The applicant provides four invoices from Strata Sphere dated 22 August and 14 October 2008 totalling $10,133.90 so I am unclear as to the amount of $13,373.65 referred to in her grounds. As at 20 August 2008, Committee limit was $21,750 ($125 x 174 lots).[11] Prima facie it would seem that the expenditure was within the Committee’s power to authorise. This matter can be investigated further in the course of determining the final order. However as the motion was not voted on by the AGM, there is no decision that can be acted upon pending a final order. As such there is no basis for an interim order.
In respect of Motion 14, it will be a factual issue to be investigated in the context of the final orders whether Dodd is currently an associate of the caretaking service contract, which would render him ineligible to be a member of the Committee. If it were to be found that Dodd were an associate, there may be a question as to whether it was unreasonable of the Body Corporate to fail to pass Motion 14. However, at this time, as no motion was passed at the AGM, there is no decision that can be acted upon pending a final order. So again, there is no issue warranting an interim order.
Flying minutes
Pursuant to section 54 of the Accommodation Module, a Committee can pass resolution outside a Committee meeting called and conducted in accordance with sections 44 to 53 of the Accommodation Module, provided that they comply with the requirements of section 54. These requirements include that when notice of the motion is given to committee members, advice of the motion must be given at the same time (or as soon as reasonably practicable in an emergency) to owners, and the motion must be confirmed at the next meeting of the committee. Pursuant to section 55, within 21 days of deciding on a motion voted outside a Committee meeting, the Committee must give owners a ‘full and accurate record’ of the motion, which includes the date notice of the motion was given, the names of the Committee members to whom notice was given, the words of the motion, the names of the Committee members who voted on the motion, and the number of votes for and against the motion.
The Body Corporate has confirmed that the relevant minutes were not issued and that this was an oversight. They advise that this will be corrected and the minutes distributed to owners. Had the applicant first raised the matter with the Committee it may well have been that the issue could have been resolved without recourse to this Office. Moreover, it is not necessarily the case that the failure to issue proper advice and records of flying minute motions would invalidate the motions.
Pahl and Strata Sphere
The Body Corporate has said that Pahl is no longer engaged as a consultant to the scheme and the Body Corporate will not be expending any further funds for her services in that capacity. Therefore, in the absence of any evidence to the contrary, it does not appear that an interim order is warranted in respect of expenditure on Pahl.
However the Body Corporate has apparently entered into an Administration Agreement with Strata Sphere pursuant to the disputed Motion 8. Subject to that agreement they have and presumably propose to continue incurring costs in respect of that agreement. As outlined above, I am concerned about the Body Corporate continuing to incur expenditure in respect of an Agreement that prima facie appears to be authorised by an invalid resolution. However, for the reasons outlined above, I am not satisfied on balance that it is appropriate to make an interim order preventing the Body Corporate to expend funds pursuant to the purported agreement until a final determination can be made on the validity of the resolution authorising the agreement.
Work on individual lots
Section 168 of the Accommodation Module sets out the obligations of owners to maintain their lot. Section 157 of the Accommodation Module provides that the Body Corporate is responsible for the maintenance of common property. Under section 20 of the Act utility infrastructure providing utility services in a scheme is considered common property, unless it is utility infrastructure that is solely related to supplying services to a lot, and is within the boundaries of the lot, and is not located in a boundary structure. There will be a factual question to determine in this dispute as to whether the work which appears to relate to utility infrastructure was the responsibility of the Body Corporate or individual owners.
Further, even if the work was the responsibility of the Body Corporate, there are issues of notice. Section 163 of the Act provides for a person authorised by the Body Corporate to enter a lot to inspect it (to determine if work required with the body corporate is authorised or required to carry out is necessary) or to undertake work that the Body Corporate is required or authorised to carry out. Except in case of emergency, the authorised person cannot enter the lot until a reasonable time after at least seven days written notice has been given to the owner or occupier of the lot.
If work was not the responsibility of the Body Corporate, the Body Corporate arguably could not enter a lot to undertake an inspection or work without the authority of the owner except if the Body Corporate is empowered to undertake the work pursuant to section 171 or 172 of the Accommodation Module, with regard to the carrying out work which an owner or occupier has failed to undertake or to remedy defective building work carried out for an owner.
As such there do appear to be questions requiring investigation about whether work undertaken was necessary and the appropriate solution to any potential concerns, whether any necessary work was the responsibility of the Body Corporate or individual lot owners, whether the work and expenditure was properly authorised by the Body Corporate or Committee as appropriate, and whether the Body Corporate gave or was required to give notice to lot owners or occupiers before entering lots.
The issue then is whether an interim order is warranted. I note that the issue of the downpipes has been raised another dispute resolution application in this Office[12] which is currently the subject of an attempted conciliation and that the outcome of that conciliation may progress the issue as it affects this dispute. However, that application relates to only the downpipe issue and not the sewerage, and only the downpipe issue as it relates to one lot, and I do not see that there is any basis to dismiss the interim order sought because the conciliation application is on foot. The applicant suggests that further work is being undertaken, which is why she seeks and interim order, although no details or evidence is given. The Body Corporate does not comment on this. If in fact the Body Corporate has no plans to undertake any work on individual lots, then there can be no inconvenience suffered by the Body Corporate in making the interim order sought.
Conclusion
In respect to the various disputed motions at the AGM of January 2009 the applicant has raised some issues that prima facie indicate some merit. The validity or otherwise of matters can be properly investigated in the course of the interim order. However, the majority of those matters are, for the reasons outlined above, either not urgent or not otherwise suitable for an interim order. For example, if no resolution has been passed by a general meeting, an adjudicator cannot make an interim order preventing a resolution from being carried out.
Based on the Body Corporate’s submission, it does not appear that the Committee intends expending further funds on Pahl as a consultant. However the Body Corporate has apparently entered into an Administration Agreement with Strata Sphere pursuant to the disputed AGM Motion 8. I am concerned about the continued expenditure on Strata Sphere pursuant to a agreement signed in reliance on a motion which, prima facie, appears to be invalid. However, I am satisfied that the balance of convenience is in favour of the Body Corporate being able to retain the assistance of a BCM until the matter can be finally determined.
Nothing in this order prevents the Body Corporate from voluntarily calling an EGM prior to the resolution of this application to reconsider or ratify any AGM motions that are genuinely in doubt, particularly the appointment of the BCM. This is certainly not mandatory, however the Body Corporate may consider this as a potential means of expediting the resolution of some issues.
In regard to the resolutions passed in February 2009 outside of Committee meetings, the Body Corporate has provided the resolutions and undertaken to distribute them to all owners. It would appear that this will resolve the matter. If the applicant has some further genuine concern it can be addressed in the final order, providing the issue is within the scope of the original application.
Finally, I do have concerns that work may gave been conducted on utility infrastructure within lots without notice to owners and occupiers and, possibly beyond the authority of the Body Corporate. Although it is not clear that further work is planned, the Body Corporate has not indicated that there would be any inconvenience to the Body Corporate from making the interim order sought and if no work is planned then there could be no adverse impact. Therefore, while of course the Body Corporate must comply with the requirements of section 163 of the Act in any event, I consider it is appropriate in the circumstances to make an interim order preventing further work being undertaken on individual lots, including utility infrastructure within a lot, unless there is a genuine emergency or the Body Corporate obtains the prior written consent of the lot owner. If an issue arises that would mean that the interim order causes significant inconvenience to the Body Corporate, it can apply for a variation of the interim order.
Effect of an Interim Order
The matter will now proceed in accordance with the usual processes undertaken by this Office.
I note that the respondent has argued that the application should be referred for conciliation in the first instance. Given their apparent willingness to conciliate the dispute, and given that at least some aspect of this application may well be able to be progressed through conciliation, I will in the first instance refer the application back to the Commissioner to consider referring the application to the Conciliation Service.
If the conciliation does not proceed or is unable to resolve any or all of the matters in dispute, the final orders will be investigated, including calling of submissions from all affected parties.
All parties should note the provisions of section 279(2) of the Act, which provides that:
(2) An interim order—
(a) has effect for a period (not longer than 1 year) stated in the order; and
(b) may be extended, varied, renewed or cancelled by the adjudicator until a final order is made; and
(c) may be cancelled by a later order made by the adjudicator; and
(d) if it does not lapse or is not cancelled earlier, lapses when—
(i) the application is withdrawn; or
(ii) the commissioner gives the person who made the application a written notice under section 241 rejecting the application; or
(iii) a final order is made by an adjudicator to whom the application is referred.
I have provided that this interim order has effect for a period of not longer than three months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This Office will not automatically renew an interim order and the order will automatically lapse upon a final order being made or this application being withdrawn.
[1] Section
247(3) of the Act
[2] Interim order
for Isle of Palms Resort [2009] QBCCMCmr 67 (26 February 2009), Reference
0067-2009
[3]
0430-2009
[4] See
sections 227, 228, 276 and Schedule 5 of the
Act
[5] Section
276(2) of the
Act
[6] Section
284(1) of the
Act
[7] Section
279 of the Act
[8] Section
276 of the Act
[9] See the
definition of ‘relevant limit for major spending’ in the
Accommodation Module
Dictionary.
[10]
Isle of Palms Resort [2008] QBCCMCmr 264 (5 August 2008) –
reference 0380-2008
[11] See the
definition of ‘relevant limit for committee spending’ in the
Accommodation Module Dictionary pursuant to the
Body Corporate and Community
Management (Accommodation Module) Regulation 1997 which had effect until 30
August 2008.
[12]
Reference 0480-2009
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