Magnetic International Resort Hotel [2009] QBCCMCmr 310 (21 August 2009)

Last Updated: 28 September 2009

REFERENCE: 0775-2009

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	22894
Name of Scheme:	Magnetic International Resort Hotel
Address of Scheme:	61 Mandalay Avenue Nelly Bay Magnetic Island Qld 4819

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Halmarn Pty Ltd, the owner of Lots 97, 99 and 100

I hereby order that the application for an interim order by Halmarn Pty Ltd, the owner of Lots 97, 99 and 100 against the body corporate for Magnetic International Resort Hotel community titles scheme 22894 that the Body Corporate cannot rely upon any resolution on Motion 23 on the agenda of the Annual General Meeting scheduled to be held on 22 August 2009 until the final determination of this application, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0775-2009

“Magnetic International Resort Hotel” CTS 22894

The scheme
“Magnetic International Resort Hotel” community titles scheme 22894 is subject to the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module).

Application
This application made on 18 August 2009 is by Halmarn Pty Ltd, the owner of Lots 97, 99 and 100 (Applicant) against the Body Corporate seeking: to invalidate Motion 23 on the agenda of the Annual General Meeting scheduled to be held on 22 August 2009 (AGM); and that the explanatory note accompanying Motion 23 is factually incorrect, misleading and invalid.

The Applicant has sought an interim order that the Body Corporate cannot rely upon any resolution based on Motion 23 at the AGM until the final determination of this application.

The Applicant provided a copy of the notice of the AGM dated 30 July 2009 which includes:

• Motion 23 proposed by the committee: “That the Body Corporate terminate the Caretaking Agreement with Halmarn Pty Ltd...by serving notice...with termination to be effective three business days from the date of service...”
• An explanatory note: “The Body Corporate is entitled to terminate the Caretaking Agreement...pursuant to clause 9 in circumstances where the Caretaker is guilty of Gross Misconduct and/or Gross Negligence...”
  

The Applicant seeks an interim order on the basis that the application raises serious concerns about the procedural and substantive validity of Motion 23 and if the order was not granted, there would be immediate and severe consequences to the Applicant.

The Applicant provided a copy of an envelope addressed to HM Flannery and date stamped 30 July 2009 stating it contained the notice of the AGM. The Applicant also provided a copy of a record of voting outside a committee meeting dated 31 July 2009 which determined that the committee would include a motion and explanatory note on the agenda of the AGM (Motion 6). The wording of the motion and explanatory note reflect the wording stated in Motion 23 and its accompanying explanatory note.

The Applicant submits the committee had not authorised the inclusion of the Motion prior to the notice of the AGM being distributed to lot owners, and that the notice must have been prepared without committee approval. The Applicant states that it was not advised of the proposed resolutions contained in the abovementioned record in breach of section 54(1)(a) of the Accommodation Module as there is no suggestion there was any emergency applicable to the vote. The Applicant submits the explanatory note contains several factually incorrect, misleading and defamatory statements. The Applicant provided a response to statements contained in the explanatory note. The Applicant says the Body Corporate issued a Remedial Action Notice dated 31 July 2009 to be responded to by 14 August 2009 and a Notice to Remedy Breach dated 31 July 2009 to be responded to by 21 August 2009, and that it responded to the Notices on 14 August 2009.

Jurisdiction
In accordance with section 247 of the Act, the Commissioner for Body Corporate and Community Management has referred the application to me even though affected persons have not been given notice of the application or afforded an opportunity to make submissions about the application.

Section 276(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances to resolve a dispute, in the context of a community titles scheme, about a claimed or anticipated contravention of the Act; or the exercise of rights or powers, or the performance of duties, under the Act. Section 279(1) provides that an adjudicator may make an interim order “if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates”.

Investigation
In accordance with the investigative powers of an adjudicator stated in section 271 of the Act, on the date the application was made, I invited submissions from the committee regarding the interim order application, and a copy of the application was provided to Statewide Strata and Body Corporate Services (Body Corporate Manager) for distribution to committee members.

The committee submit Motion 23 was subject to a committee resolution passed on 30 July 2009. The committee says the Body Corporate Manager had verbal confirmation of all committee members on 30 July before printing the agenda of the AGM with 3 of the 4 voting members of the committee voting in favour of Motion 6 on this date pursuant to section 54 of the Accommodation Module. The committee provided a copy of the written votes for Motion 6 from Richard Cooper, Thomas Maher and Lynette Cupit-Smith dated 30 July. It says the Body Corporate Manager has advised that the record of voting was inadvertently dated 31 July; the date the record was forwarded to lot owners. It submits the Applicant was not required to vote on the Motion as it does not have a vote on the committee. The committee states that Motion 23 was validly included on the agenda of the AGM and that any non-compliance with the regulation was merely technical, and that the Applicant would need to show detriment or severe prejudice; something which the Applicant does not specify.

The committee argue that if the Applicant asserts the detriment will be the termination of the Caretaking Agreement then the dispute would be about a contractual matter and an adjudicator does not have jurisdiction. It submits the allegations raised by the Applicant about the explanatory note to Motion 23 relate to a dispute about a claimed or anticipated contractual matter about the engagement of a person as a service contractor, a matter that can only be determined under section 149B of the Act by specialist adjudication or under the Commercial and Consumer Tribunal Act. The committee state that if the Applicant has a dispute about the existence or otherwise of any gross misconduct, the application should be dismissed as an adjudicator does not have jurisdiction to determine the dispute. It says the real nature of the dispute relates to a matter that falls within section 149B; the Applicant should be making the appropriate application under that section so that proper enquiry can be conducted with respect to the alleged breach of the Caretaking Agreement. The committee submit that for these reasons, the interim order cannot be supported by the second outcome.

Determination
Given section 279(1) of the Act, it is necessary to determine at the outset whether, because of the nature or urgency of the circumstances relating to the application, an interim order is in fact necessary or appropriate. The examples included in the Act under section 279(1) are suggestive of the usual circumstances where an interim order might be made. Both examples are in the nature of injunctive relief. Whilst the range of matters which might be the subject of an interim order is not capable of definition, the Applicant does need to establish that the circumstances of the application warrant the making of an interim order.

The AGM is scheduled to be held tomorrow. The Applicant has explained the consequences should Motion 23 be passed. In my view, the Applicant has demonstrated urgent circumstances to warrant consideration of the interim order application.

To assist me in determining whether to grant relief at this stage, before full and final consideration of all the issues raised, I consider it relevant to briefly consider whether the Applicant raises any serious legal question that will need to be determined. If a serious legal question is raised, then it may be appropriate to make an interim order to attempt to preserve the integrity of the matters in dispute pending the final determination.

The Applicant has raised a question about the authority to include Motion 23 on the agenda of the AGM. It is apparent this Motion was submitted by the committee.

The copy of the record of voting pursuant to section 54(1) of the Accommodation Module provided by the Applicant suggests the committee decided to submit a motion in the form of Motion 23 after the notice of the AGM had been given to lot owners. The committee has made submissions and provided material indicating that it resolved to submit the motion on 30 July 2009.

A body corporate must hold and conduct meetings in the way prescribed under the Accommodation Module (s 104(1), Act). A motion for consideration at a general meeting may be submitted by the committee and if submitted, it must be included on the next general meeting agenda on which it is practicable to include the motion (s 67(1) and (2), Accommodation Module). The notice of a proposed general meeting must contain an agenda which includes the substance of motions submitted by the committee for consideration at the meeting and be accompanied by a voting paper/s for motions to be decided (s 68(3) and 74(2), Accommodation Module). If a motion is submitted by the committee, the voting paper must state that the motion is submitted by the committee (s 69(5)(a)(iii), Accommodation Module).

It would seem a motion submitted by the committee requires the requisite authority. The procedures of a committee are stated in the Accommodation Module (s 101(1), Act). The committee may make a decision at a committee meeting (s 44 to 52, Accommodation Module) or by voting outside a committee meeting (s 54). In this case, voting occurred under section 54. Unless it is an emergency (which is not being claimed), a motion is decided by the committee under this provision “if a majority of all voting members of the committee entitled to vote on the motion agrees to the motion” (s 54(1)(b)).

The motion stated to be authorised by the committee on 31 July 2009 must be included on the agenda of the next general meeting on which it is practicable to include the motion. Given the date of the notice given to lot owners, there is a question as to whether the AGM was the next general meeting. However, I am satisfied from the committee’s submissions that three of the four voting members agreed in writing with Motion 6 on 30 July 2009; the date of the notice of the AGM. It would seem the decision had effect on this date. In the circumstances, there is nothing to suggest that it was not practicable to include the motion on the agenda of the AGM.

The Applicant also submitted that it did not receive notice of the motions determined on 31 July 2009 even though it is a non-voting member of the committee. The committee have not contested this submission. Unless there is an emergency, notice of a motion to be decided under section 54 must be given to all committee members (s 54(1) and (2), Accommodation Module). However, I do not consider the defect in not giving notice of the motions voted on 30 July 2009 to a non-voting member of the committee warrants making the interim order. In my view, this non-compliance is of an insubstantial nature in the circumstance where the Applicant was not entitled to vote on the motion and there is nothing to suggest the motion was not passed by a majority of voting members entitled to vote (Chen v. Body Corporate for Wishart Village Cts 19482 4080 of 2000 at paragraph 27).

Given the explanatory note, it would seem the Body Corporate proposes to terminate under clause 9 of the Agreement. Section 122(1) of the Act provides that the Accommodation Module may prescribe consequences of not complying with requirements with which the service contractor or letting agent must comply and particular circumstances under which the engagement or authorisation may or may not be terminated despite anything in the engagement or authorisation. Part 5 of chapter 6 the Accommodation Module provides for the grounds on which a body corporate may terminate a person’s engagement as a service contractor or authorisation as a letting agent and the steps the body corporate must follow to terminate the engagement or authorisation (s 126, Accommodation Module). The body corporate may terminate under the Act; or by agreement or under the engagement or authorisation (s 127, Accommodation Module).

The Applicant has not argued that the Body Corporate, through its committee did not comply with the termination provisions of the regulation before deciding to submit the disputed Motion. For example, it is not contended that the Body Corporate had to comply with the preliminary procedures stated in section 129 of the Accommodation Module before considering a termination motion, or that the Body Corporate is wrongly claiming that it has complied with these procedures. In this regard, I note that the committee also decided on 30 July 2009 to serve a remedial action notice on the Applicant, a decision which has not been challenged. The Body Corporate claim an entitlement to terminate pursuant to a clause of the Agreement. The Applicant has not contested the right of the Body Corporate to proceed on this basis. For the purposes of determining the interim order application, I am satisfied the committee could submit the Motion.

The Applicant also raised questions about the explanatory note to the Motion saying it contains incorrect, misleading and defamatory statements. The committee argue that a dispute about the explanatory note is about a claimed or anticipated contractual matter about the engagement of a person as a service contractor, a matter that cannot be determined by department adjudication (the term ‘contractual matter’ is defined in schedule 6 of the Act to include termination of the engagement or authorisation). In this circumstance, the dispute could only be determined by specialist adjudication under chapter 6 or under the Commercial and Consumer Tribunal Act 2003 (see definition of ‘complex dispute’ - schedule 6, s 149B and 229(2), Act).

In my view, a department adjudicator could determine a dispute about the validity of a resolution passed at a general meeting where for example, there was improper notice of the meeting or the resolution. The inclusion of improper explanatory material about a motion could be a reason for such a finding. With respect to Applicant’s claims about the material, it is instructive to briefly consider findings in the Commercial and Consumer Tribunal and the District Court about explanatory material.

In Batwing Resorts Pty Ltd v Body Corporate for Liberty CTS 27241 [2008] CCT KA004-08, Dorney QC stated:

• “Given the width of “explanatory material”, provided it is otherwise “permitted” under section 40C(8) (s 71(8)), it is able to be of unlimited width and unconfined as to the information it contains, using “information” in a broad sense, although constrained as to being “explanatory” [45].
• “...provided what was found to be objectionable...is not contained within the prohibition of what constitutes an “explanatory note” and is not within what constitutes an “explanatory schedule”, then it does not matter...what was its content (since it purports to be “explanatory”)” [46].
• “...there is no express or implied statutory obligation to present “both sides of the argument” (whatever that means in practical terms) in the “explanatory material” [56].
• “...it is not sufficient merely to find that the “misleading” information, in the absence of any other contradictory material (when in fact, as analysed, there was), was persuasive in favour of an affirmative vote. What needs to be considered is whether there was some breach of the relevant provisions such that, for instance, the Adjudicator was empowered to make an order under section 276, including one mentioned in Schedule 5...“ [66].
  

In Body Corporate for Palm Springs Residences CTS 29467 v J Patterson Holdings Pty Ltd [2008] QDC 300, McGill DCJ stated:

• “...I cannot understand why the notice (of a general meeting) should be required to be balanced ...I cannot see anything in the regulation which requires the submitter of the motion to include in the explanatory note arguments against the motion as well as arguments in favour of it, so as to be balanced, and such a proposition strikes me as not supported by anything in the legislation or the general law.” [31].
• “...lot owners...are expected to make up their own mind as to whether they will support the motion or not, and ordinarily those opposed to the motion, like those supporting it, have the opportunity to persuade, and the task of persuading, those lot owners to vote in favour the position they advocate. The mere fact that the committee was on one side can hardly be a basis of rendering that process unbalanced and unfair, and therefore incapable of producing a valid result. The respondent cannot complain that it was deprived of the opportunity to present its case on the basis that it chose not to present it.” [40].
• “I can find nothing in the Act or regulation which required the committee of the body corporate when proposing a resolution of this nature, to set out arguments against the resolution, or to disclose that the factual matters asserted by the committee were disputed by the respondent, or anyone else.” [49]
• “There is certainly an obligation to give proper notice of what is actually to be considered by the meeting, and to point out the relevant consequences of the approval of the resolution. 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.” [50]
• “The fiduciary duty (of a committee) is a duty to provide such material information as will fully and fairly inform members of what is considered at the meeting...The information is to be such as will enable members to judge for themselves whether to attend the meeting and vote...” Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at p 466 [61].
• The court added at p 468: “The need to make full and fair disclosure must be tempered by the need to present a document that is intelligible...likely to assist rather than to confuse...The need for the applicants to establish the materiality of errors and omissions is an important step in the proof of their claims.” [62]
• “An expression of an honest opinion upon...a matter does not amount to misrepresentation or even inaccuracy if the opinion, even if wrong, is accurately stated as an opinion”: Peters’ American Delicacy Co Ltd v Heath [1939] HCA 2; (1939) 61 CLR 457 [66].
• A distinction should be made “between disclosing material disadvantages known to the committee which would not have been obvious to the lot owners if they supported the proposal (which was required) and setting out arguments against the proposal (which was not required). 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”. [73]
  

The committee has formed a view about breaches of the Caretaking Agreement. The committee has explained this view in the notice of the AGM. There is nothing to suggest the opinion expressed to owners is for example, different to that expressed to the Applicant. While the Applicant disagrees with the reasoning submitted by the committee, the committee is not required to present balanced arguments to owners. In my view, the committee has put a proposal with supporting arguments to owners. The intent of Motion 23 is clear and the Motion has been properly submitted as requiring an ordinary resolution (s 127(2), Accommodation Module). It is a matter for owners as to whether they will support the proposition. To the extent the explanatory note would constitute improper notice of the AGM or the Motion, I do not consider the Applicant has raised a serious question to be determined.

To the extent the Applicant questions the capacity of the Body Corporate to terminate the Agreement for the reasons stated in the explanatory note, I agree with the committee; these matters could only be determined under the Act as a ‘complex dispute’.

For these reasons, I have dismissed the application for an interim order.