Tarcoola [2009] QBCCMCmr 242 (29 June 2009)

Last Updated: 31 July 2009

REFERENCE: 0538-2009

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	13453
Name of Scheme:	Tarcoola
Address of Scheme:	81-85 Langshaw Street NEW FARM QLD 4005

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Bruce Taylor, the Co-owner of Lot 19

I hereby order that the application for the following interim order: I am seeking an interim order to put the works and the collection of the special levy on hold until a final decision is made. The resolution is motion no. 3 from the EGM held on 21/03/09. is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0538-2009

“Tarcoola” CTS 13453

Tarcoola community titles scheme 13453 (Tarcoola) consists of 24 lots and common property. The Community Management Statement (CMS) for Tarcoola indicates that the Body Corporate and Community Management (Standard Module) Regulation 2008 (Standard Module) applies to the scheme. Department of Natural Resources Mines and Water records show the scheme is registered as Building Units Plan 1657.

INTERIM APPLICATION

This is an application for interim orders lodged by Bruce Taylor, Co-owner of Lot 19 (applicant) on 10 June 2009 under the Body Corporate and Community Management Act 1997 (Act).

The applicant seeks an interim order against the Body Corporate for Tarcoola (respondent) in the following terms:

I am seeking an interim order to put the works and the collection of the special levy on hold until a final decision is made. The resolution is motion no. 3 from the EGM held on 21/03/09.

The application also seeks the following final order:

I would like Motion 3 from the EGM dated 21/03/09 overturned.

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 have provided the Body Corporate Committee with a limited opportunity to make a written submission in response to the interim application. The Committee made a submission in due course.

Prior to the receipt of the submission, I also requested additional information from the applicant, pursuant to section 271 of the Act. I requested the full architectural report and minutes of the 28 June 2008 annual general meeting (AGM) which were provided. The applicant also provided additional grounds for his application, including photographs of the scheme. In addition I requested the full notice for the Extraordinary General Meeting (EGM) for the Body Corporate held on 21 March 2009. The applicant advised that he did have this notice but, on request, the Body Corporate Manager (BCM) for the scheme provided these documents.

The information provided by the applicant was only received today and so there was insufficient time for this to also be provided to the Committee for further comment. However this is not required pursuant to section 247, will not offend natural justice principles, and the Body Corporate will be able to respond to the additional information prior to the consideration of the final orders.

MATTERS IN DISPUTE

This application relates to Motion 3 considered at the EGM on 21 March 2009, regarding painting and rendering of the scheme. The circumstances of the dispute are as follows:

The notice of meeting for the EGM was issued on 25 February 2009. It included Motion 3 which sought an ordinary resolution “that the Body Corporate approve the painting and rending of the building as per attached quotes”. It provided two alternatives for this work, being a quote from Opat Painters and Maintenance Pty Ltd in the amount of $133,693 and a second from Rochelle Painting Pty Ltd for $109,912. Each option proposed the cost of the works be funded party from the sinking fund and partly from a special levy. The explanatory note for the motion states:

“Structural Engineer – Roy Hoskins has inspected the building and has checked both quotes from Opat Painting & Maintenance and Rochelle Painting and have recommended that we accept the quote from Opat Painting & Maintenance as what they propose will solve many of our problems, they are licensed specialists in concrete cancer repairs, this was approved in principal at AGM 28/6/2008.”

The minutes show Motion 3 was approved with 15 votes in favour, 4 against and no abstentions. The minutes then indicate a resolution that the Body Corporate approve the Opat quote. However the minutes do not indicate the voting in respect of the two alternative quotes. The minutes also note that the motion would have passed as a special resolution.

The applicant says that on 15 March 2009, shortly before the EGM, the Committee circulated a memorandum regarding Motion 3. It said owners should have a look at the building before voting on the motion and refer to the ‘endless bubbles of concrete cancer’. It says if the concrete cancer goes untreated the building will become unsafe and unsaleable, and also that by law owners are responsible for keeping the building safe and in good repair. The memo further says that the motion was approved in principle in 2008 and that the building has not been repainted since 1998.

The applicant says the basis for seeking an interim order is heritage and conservation grounds, the architect’s report, and the Committee conduct. He raises the following specific objections:

­ The names of all Committee members are included on the memo, but the applicant, who is a Committee member, says that he and one other Committee member opposed the motion and were not aware that the memo had been circulated.
­ The Committee members involved have misled owners as to the reason for the rendering of the building, and scared owners with the use of the term ‘concrete cancer’.
­ While the Committee members involved claim the work is urgent, the Architect’s Report specifically said it was not urgent.
­ The Committee commissioned an Architect’s report but have disregarded it.
­ The proposal in Motion 3 was not recommended by the Architect’s Report. The applicant has phoned the architect and engineer directly and neither agrees with the proposed work.
­ There have been claims that the balconies are deteriorating because of high pressure steam cleaning. The applicant has resided at the scheme for 10 years and no such cleaning has occurred. The Architect’s Report did not identify any deterioration in the brinks other than a black mildew or mould which required cleaning.
­ There have been claims that the ‘miami stone’ has caused concrete cancer. This is unfounded as the Architect’s Report noted that 80% of the cancer was on the lower two eastern balconies with no Miami stone.
­ The total cost to repair the ‘concrete cancer’ is $5,900 but the proposal is for $136,000.
­ The Committee members involved are in effect seeking a face-lift for the building which would not have been passed as such because it is unnecessary expenditure.
­ Sanding back and rendering the them is not the Architect’s advice. It is defacing the scheme.
­ The proposal would result in the loss of an iconic and noted example of 1970’s architecture. The Body Corporate’s stated aim is to preserve Tarcoola as a good example of its type.
­ The Committee has breached the Code of conduct for committee voting members.

The applicant says that he is seeking the support of other owners to requisition another EGM. However he is concerned that the Body Corporate could act to implement the resolution before this meeting can be held. He is concerned about the financial implications of this decision on owners, and believes it is reckless spending.

The Committee submission opposes the application and includes the following:

­ A decision to proceed with rectification work was made ‘in principal’ at the AGM of 28 June 2008 when motions regarding resurfacing, painting and other maintenance were withdrawn in lieu of further investigations by an engineer because of the poor condition of the building.
­ The building has not been painted in 11 years and owners at the 2008 AGM agreed that concrete cancer and balustrade corrosion should be rectified before resurfacing and painting.
­ The Committee spent 9 months investigating this matter. After the EGM it engaged an architect to advise on the state of external surfaces and make recommendations on maintenance (dated 11 August 2008).
­ The Committee then obtained quotes for the rectification work and painting and engaged an engineer to advise it on the suitability of quotes received to perform rectification work on handrails and balustrades. The engineer advised the Opat quote was acceptable.
­ On 19 February the Committee finalised the proposal for building maintenance.
­ All owners have received copies of Committee minutes, reports and quotes prior to the EGM. Therefore all owners were fully aware of all aspects of the proposal.
­ The applicant was a voting member of the Committee throughout this time but failed to attend any Committee meetings or offer any contribution or comment on this matter.
­ The first instalment of the special levy was due on 1 May 2009 and all but one owner has paid. The second instalment is due on 1 July 2009.
­ The successful contractor has received a work order and expects to commence work shortly after the final instalment is paid in July 2009.
­ The applicant claims he has support from 25% of lot owners to request another EGM to overturn Motion 3. However the BCM has received no such notice.
­ A motion to overturn Motion 3 would require an ordinary resolution which seems unlikely.
­ The circular sent by the Committee on 15 March 2009 was in response to enquiries from owners and sought to encourage owners to support the motion.
­ A special levy is sought because sinking funds are insufficient, not because of any urgency.
­ The Committee disputes that it is seeking $136,000 to rectify the cancer problem and says the quotes clearly outline the scope of the works and that the repair of the concrete cancer is just one aspect of the rectification works proposed prior to painting.
­ It has at all times been clear that the rectification of the concrete cancer and corroded balustrades was a preliminary step to the main objective of resurfacing and painting.
­ The Opat quote dated 25 March 2008 provided by the applicant is not relevant to the dispute. The quote accepted by the EGM was the Opat quote dated 12 February 2009.
­ The application is misleading, vexatious, without substance and misconceived. They argue the applicant has provided incomplete or irrelevant documents in his grounds, has failed to procure the claimed support of other owners; and has not familiarised himself with all the information provided by the Committee prior to the EGM. They assert he has lodged the application without reasonable grounds in an attempt to avoid payment of the special levy.
­ The Body Corporate argues that an award of costs of $2,000 be made against the applicant.

JURISDICTION

I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.[2]

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 -

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

(ii) 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.[3] An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate.[4]

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 of the application.

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.[5] Any order granted must be just and equitable in the circumstances.[6] 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.

Serious legal question

The applicant raises several objections to Motion 3. I will address the key issues in turn.

Information provided to owners

Primarily the applicant argues that the Committee have misled owners into believing that the matter was urgent and has ‘scared’ them into voting for the motion. Taking in isolation, the circular of 15 March 2009 could potentially be seen as misleading, although arguably it refers generally to the Body Corporate’s building maintenance responsibilities and not just to the rectification of the concrete cancer. However, given all the material received to date, I have difficulty believing that owners having received previous minutes, quotes and reports would have thought that the intention of Motion 3 was only to rectify concrete cancer.

The applicant argues that while the work proposed will cost $136,000, the actual cost of the rectification of the concrete cancer issue is only $5,600. He says the remainder is simply a make-over or renovation. The applicant has referred to an out-of-date quote. The current Opat quote dated 12 February 2009 clearly shows that concrete spalling repairs are only one of a long list which comprises the scope of work.

Arguably a motion could only be overturned on the basis of misleading information if there was some evidence that some voters were actually misled, rather than just that voters could potentially have been misled. Further there may be a question of whether sufficient owners were actually misled to have changed the outcome of the voting. This is a question that requires further investigation, particularly by seeking the views of owners through submissions.

On this issue I refer the parties to a recent case[7] the District Court considered the validity of a motion, in light of claims that material circulated by the committee was misleading. His Honour Justice McGill (at para 50) said:

If there is a failure to give proper notice of the meeting, which may occur if the notice of the proposed resolution is misleading as to what is really proposed, or its effect and implications, then that may well impact on the validity of the resolution, because in such circumstances there was either no valid notice of the meeting or no valid notice of the proposed resolution.

After a discussion of case law relevant to the fiduciary duty of committees to make full and fair disclosure, His Honour noted (at para 70):

There is nothing in the cases which suggest any obligation to be “balanced” about an issue put forward; if the committee is proposing a course of action, it is entitled to support it vigorously, so long as the fiduciary obligation is not breached.

The question of whether or not Committee members have breached the Code of conduct could only be considered in the context of the consideration of a determination on whether in fact any information issued was misleading. Arguably there would also need to some evidence that the Committee had deliberately sought to mislead. However it does appear to have been unwise to include on a Committee circular the specific names of persons who had not actually agreed to issue the circular.

Heritage and conservation

The applicant asserts that Tarcoola has historical value and that the Body Corporate has a stated aim to preserve the building as an example of its type. However the applicant has provided no actual evidence that owners have expressed a desire or given a commitment to preserve the current architectural style or heritage elements of the scheme. Further he has presented no evidence to support his assertions that the scheme has any particular architectural or historical value, or of any external body’s requirements in regard to the protection of the scheme’s architecture. In addition, he has not provided any evidence to support his assertion that the proposed work will adversely impact on the architectural integrity of the scheme.

In the absence of any external obligations on the Body Corporate in regard to the conservation of the building, I would consider that it is entirely open to owners to choose to renovate their scheme, including altering the architectural style of the scheme.

Maintenance or improvement

The applicant asserts that aside from the work to rectify concrete cancer, the proposal in Motion 3 is an unnecessary face-lift for the building. However, on the face of it, the work encompassed by the Opat quote does appear to have significant maintenance elements. For example, the painting of a scheme that has not been painted for 11 years would prima facie be viewed as maintenance. The applicant has not clearly articulated what elements of the current Opat quote amount to ‘unnecessary’ improvements rather than maintenance which the Body Corporate is required to undertake pursuant to its obligations under section 159 of the Standard Module.

To the extent that work on the common property is an optional up-grade rather than necessary maintenance, there is a difference in the level of approval for the work. An improvement to common property must be approved pursuant to section 163 of the Standard Module. Given the cost involved, this proposal would require a special resolution if it involved an improvement rather than maintenance. However Motion 3, although only listed as an ordinary resolution, was passed by a margin that would have been sufficient to achieve a special resolution. Accordingly, it would seem that nothing turns on that question.

Expert advice

In addition, the applicant argues that the Committee’s proposed solution to the ‘concrete cancer’ problem is not the solution that the architects consider appropriate. The applicant has not substantiated this claim, or his claims that the architect and engineer have advised against the proposed project. This is a matter which would need further investigation.

It does appear that Body Corporate may not have fully adopted the architect’s recommendations, or is proposing work beyond the architect’s recommendations. This does not of itself mean that the Body Corporate’s actions are unreasonable or should be overturned. The Body Corporate may have justifiable reasons for taking a different approach. If the applicant were able to demonstrate that the proposed work is contrary to expert advice or is otherwise inappropriate for the scheme, such as providing an expert report, he may seek to have the motion rescinded by a future general meeting. Moreover, if he can demonstrate that owners knew or should have known that the proposal was contrary to such advice, a decision to proceed with the proposal in the face of such advice could potentially be overturned on the basis of being unreasonable[8].

Inconvenience from an interim order

The applicant refers to an architectural report which is dated August 2008. The Committee refers to a previous general meeting resolution on 28 June 2008. This history indicates that this matter is not urgent, or has not to date been treated as urgent by the Body Corporate. However, the Body Corporate has issued a work order and partially collected the special levy. An interim order would prevent them proceeding to engage Opat and could impact on the amount of the quote if there were a lengthy delay.

Conversely, if the Body Corporate were to proceed to engage the contractor, it would be very difficult to unravel the implementation of Motion 3 if the motion were ultimately invalidated.

Conclusion

On balance I am not satisfied that the applicant has presented sufficient evidence of genuine concerns relating to the validity Motion 3 considered at the EGM of 21 March 2009. The applicant has made numerous assertions which are currently largely unsubstantiated. Accordingly I have declined to grant an interim order at this time.

The applicant should consider the comments I have made. If he is unable to provide further substantiation of his allegations he may decide to withdraw his application. If he wishes to, I will provide him with an opportunity to present further evidence of his assertions. The application would proceed in accordance with the normal processes of this Office, including seeking submissions from all owners.

I would also note that nothing in this interim order prevents this issue being further considered by the Body Corporate. If the applicant obtains sufficient support to requisition an EGM under section 67 of the Standard Module, owners could consider whether they wish to rescind Motion 3.

I note that the Committee have called for the application to be dismissed with an order for costs. Section 270(1)(c) of the Act provides that an adjudicator may dismiss an application if satisfied that the application is frivolous, vexatious, misconceived or without substance. If an application is dismissed on that basis, section 270(3) empowers an adjudicator to award costs incurred by the respondent in defending the application without merit. Costs may be awarded up to $2,000 against the applicant. I am concerned that the applicant has not substantiated the order sought but I do not consider that I am able to make a determination under section 270(1)(c) until I finally determine the issues in dispute. Therefore, if the applicant chooses to proceed with this application I will consider the claim for costs in the final order.

---

[1] Section 247(3) of the Act
[2] See sections 227, 228, 276 and Schedule 5 of the Act
[3] Section 276(2) of the Act
[4] Section 284(1) of the Act
[5] Section 279 of the Act
[6] Section 276 of the Act
[7] Body Corporate for Palm Springs Residences CTS 29467 v J Patterson Holdings Pty Ltd [2008] QDC 300

[8] Pursuant to section 94(2) of the Act the Body Corporate must ‘act reasonably’ in performing its functions, including in making or not making a decision.