Thorstan [2009] QBCCMCmr 313 (25 August 2009)

Last Updated: 28 September 2009

REFERENCE: 0556-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	19445
Name of Scheme:	Thorstan
Address of Scheme:	38 Short Street STANTHORPE QLD 4380

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

Alison Rial, the Owner of lot 7

I hereby order that the 2009 Annual General Meeting for the Thorstan Body Corporate shall be called and held within three months of the date of this order. I further order that the Annual General Meeting shall be called and held in accordance with Chapter 4 of the Body Corporate and Community Management (Standard Module) Regulation 2008 (the Standard Module). I further order that the notice of the meeting shall be in accordance with section 70 of the Standard Module and shall be accompanied by such documents as are required by the Standard Module, including the following documents: ballot papers (referred to in section 22 of the Standard Module); administrative and sinking fund budgets (referred to in section 139 of the Standard Module); accounts for the last financial year (referred to in section 154 of the Standard Module); summary of insurance coverage (referred to in section 177 of the Standard Module)

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0556-2009

“Thorstan” CTS 19445

Application

Thorstan consists of 10 lots on a Standard format plan (previously known as a Group Title Plan) and is regulated by the Body Corporate and Community Management (Standard Module) Regulation 2008.

The requested outcomes are:

• That the Thorston body Corporate be declared dysfunctional;
• An audit of the books of the body corporate;
• Appointment of a professional body corporate manager;
• Establishment of a sinking fund;
• Change of insurance company .
  

Background

The applicant is the owner of lot 7 and states that when she purchased her property in 2003 she was advised that there was no body corporate in place. The applicant also believes that 7 out of the 10 lots are owned by a Mr. Geoff Silcock and a Ms. Mary Byrnes although my inquiries indicate that the 7 lots are owned by Granite Belt developments Pty. Ltd., a company associated with Mr. Geoff Silcock and a Ms. Mary Byrnes.

The applicant is aware of only one annual general meeting since 2003 which was held at 4pm on 5 May 2008. The applicant was unable to attend and after the meeting received an account for $1310 being for levies dating back to 2003. the applicant also received an account for $780 being the estimated levies for the 2008/ 2009 financial year. The applicant has sought clarification as to how the amount of $1310 was calculated and at the date of the application did not believed that this amount could be verified from source documents such as invoices and receipts. Although the owner of lot 9 has accepted that $1310 is her share of expenses for the period 2003 to 2008 and is paying off this amounts in instalments, another lot owner has refused to pay these amounts.

The applicant also claims that a cheque for $390.60 payable to a firm named “Stanglass Stanthorpe” was banked by Mr Silcock into his bank account and that he advised the applicant that this amount was deducted from the sums in dispute.

Attached to the application was a copy of the minutes of the 2008 AGM which included the following:
“Granite Belt developments has been funding the body corporate for the last couple of years to the extent of $9180. If this remains as a contribution by them for the 7 units they own , then a contribution by each of the other 3 units of $1310 would equalize this to the end of the financial year.”

“Expected annual cost for the body corporate are around $6500
A. Ground Maintenance $1450
B. Building Insurance $2200
C Pest Control $700
D Electrical Repairs $1000
E Plumbing Repairs $1000”

“$15 per week or $780 annually for the body corporate levy would comfortably cover this and leave a little in reserve. Mary is to prepare invoices for the $1310 contribution immediately and the invoices for the annual levies will be sent out on 1 July each year.”

Pursuant to section 243 of the Act I invited submissions from all lot owners.

The owner of lot 9 made the following submissions:

• She has lived on site since the complex was built and is therefore aware of expenditure on the following:
  • - lawnmowing;
  • - outdoor lighting;
  • - pest control
  • - electrical repairs
• The above services have to be paid for by lot owners as there is no mystery benefactor;
• As the developer, and then as a director of a company which owns 7 of the 10 units, Mr Silcock has attended to payment of all expenses and originally sought a contribution of $4 per week from all lot owners;
• However prices for services have increased over the last 10 years and there is now a need to provide for additional items such as water supply and sinking fund contributions;
• Every lot owner should pay their fair share of the expenses;
• Annual general meetings have been held but the applicant lives in Brisbane and it is difficult to set a time and date that pleases every lot owner;
• Appointment of a manager would not resolve the problems associated with lot owners not wanting to contribute to the running costs of the body corporate;
• Lot owners who are able to obtain a more competitive quote for insurance coverage should submit the quote to the body corporate;
• Perhaps there should be better communication between all lot owners and provision for attending meetings by telephone link.
  

The following submissions were made on behalf of the owner of lot 1, Mrs. Beikoff:

• The complex was built around 1994 and the developer continued to own all lots with the exception of lots 1 and 9. In 2003 the applicant purchased lot 7;
• The body corporate was previously operational with the owner of lot 1 as the treasurer and the owner of lot 9 as secretary;
• Originally levies were paid, banked and applied to expenses as they arose;
• However the owner of the other lots was often late in paying fees and difficult to contact;
• In 2003 the owner of lot 1 resigned as treasurer and handed responsibility to Mr Silcock;
• Since that time she has maintained the interior and exterior of her unit and arranged for individual insurance coverage.
• She had concerns about potential damage from the root system of a large gum tree in the front garden and in the absence of a reply from Mr Silcock paid $600 to have the tree removed;
• Mr Silcock called a meeting for 5 May 2008 although he was unable to attend although Ms Byrne attended and the meeting was conducted informally without following proper meeting procedure regarding such matters as voting upon motions;
• At the meeting Ms Byrne presented a document showing expenditure for the period 2003 to 2008;
• However she believes that there is insufficient supporting documents such as invoices and receipts;
• She has paid the amount of $780 but not the requested sum of $1,130 (sic);
• There has been no advice received as to how the $780 was spent and therefore, she has refused to make further contributions;
  

Mr Silcock and Ms Byrne made the following submissions:

• They are the owners of Granite Belt Developments Pty. Ltd. which owns lots 2, 3, 4, 5, 6, 8 and 10;
• They are aggrieved by the accusations made against them as they have sought to minimise costs and maintain harmonious relationships with other lot owners;
• They have not passed on many of their costs to other lot owners;
• Mr Silcock has suffered serious health problems which have prevented him from attending to body corporate affairs for a lengthy period;
• The amount of $1310 was a “catch up” for a period of 4 years and equates to a body corporate fee of less than $6.30 per week;
• During that period Granite Belt Developments Pty. Ltd. paid body corporate expenses of $9180.31 and in April paid $2,363.40 to NEIB Insurance Brokers and $39.55 to Ergon;
• Accounts have been prepared as at 30 June 2009;
• The applicant’s accusations are inaccurate and defamatory;
• The applicant has failed to participate in the affairs of the body corporate and has rented her unit to inappropriate tenants;
• Granite Belt Developments Pty. Ltd. has absorbed a number of expenses normally borne by the body corporate;
• The relationship with Mrs Beikoff and Mrs Spicer have always been positive ;
• The applicant has not made any request for a meeting;
• The last AGM was scheduled for the Labour Day long weekend;
• A list of expenses was sent to the applicant and where possible, copies of invoices;
• Mrs Beikoff has given a Power of Attorney to her son who has received invoices etc relating to the payment of $1310 but has not stated whether he proposes to pay the $1310;
• Previously, Lot 7 has housed a number of inappropriate tenants who have caused a disturbance and/ or damaged common property;
• Insurance is arranged through a broker who obtains quotes to find the best value insurance policy. Thorstan has previously been insured with Suncorp and Westfarmers but the applicant is welcome to obtain other quotes and to present these to the body corporate;
• The cheque from the insurer was made out to Thorston Body Corporate and therefore banked into that account;
• The applicant failed to forward a copy of the claim to the body corporate;
• The owner of lot 1 had a tree removed without obtaining required permission from local and State government authorities;
• The offer by the applicant to pay $1300 less $471.90 i.e. $808.10 has never been actioned by the applicant even though she has the body corporate bank details.
• Mr Beikoff has held an EPA for his mother for the last 15 years but failed to inform the body corporate of this until 2008;
• Mrs Beikoff has been the source of many complaints within the scheme as a result of:

- refusing to allow a blue care vehicles to enter the site to provide routine assistance to an elderly couple;

- refusal to allow grocery deliveries to other elderly occupants;

- refusal to allow taxis to enter the grounds;

- intolerance of other occupiers’ visitors;

- complaints to a neighbour about light from his house entering her unit, leading to the neighbour building a new fence and seeking a contribution by the body corporate;

Damaging a community lighting switch;

• The body corporate has been in existence since construction was completed;
• Previously, when Messrs Spicer and Beikoff were committee members, they closed the NAB account owing to their dissatisfaction with recurring bank fees.
• They opened an account with Queensland Country Credit Union which does not have a cheque facility. Therefore many accounts were forwarded to Granite Belt Developments Pty. Ltd. for payment.
• The recurrent expenditure was for mowing which was undertaken by a contractor on an ad hoc basis. As this was not done on a routine basis, this inconvenienced tenants who wished to have their courtyards mowed;
• Prior to the contractual mowing arrangement, it was undertaken free of charge by Granite Belt Developments Pty. Ltd on a regular basis.
• At the 2003 AGM it was decided to suspend body corporate levies for at least 12 months as there were insufficient funds to carry on.;
• Internal maintenance is the responsibility of the owner;
• The complex is brick and therefore external maintenance is minimal;
• Responsibility for replacement of bulbs has not been discussed before although in some instances bulbs, drain cleaning removal of debris etc have been undertaken at his expense;
• At no time were the units left uninsured;
• Mrs Beikoff is responsible for insuring the contents of her unit but not the building. Duplication of insurance would not entitle her to claim on both policies in the event that her unit is damaged;
• Removal of the tree adjacent to lot 1 was not a body corporate responsibility because unit 1 was the only lot to benefit. It is unlikely that the tree roots would have affected the foundations of lot 1 having regard to the depth and design of the footings;
• At the meeting on May 5 2008, a “catch up” request, rather than a demand, was made
• Also at that meeting, it was agreed that a sinking fund be created with contributions of $20 per unit per week considered reasonable;
• Original receipts and other documents were available at the meeting and copies of the documents were sent to Mr Beikoff.
  

The applicant made the following submissions in reply:

• She has not received invoices or receipts for all items of expenditure e.g Tafe Course in 2003 - $497.50, Pest Control in 2005 - $330 & $190; electrical, plumbing & tiles in 2004-2006 - $660.26, insurance 2005-2007 45,005.25; Workcover 2005- $130;
• Although the lawn mowing was done cheaply by a pensioner, this does not excuse the need for a receipt;
• Mr Silcock has not arranged another meeting as requested;
• She believes that damage allegedly caused by her tenant was caused by tree roots;
• She does not believe that she should have paid for damage caused by flooding;
• She believes that a sinking fund is necessary to cover any emergency.
  

Jurisdiction

Section 276(1) of the Act provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about-

(a) a claimed or anticipated contravention of the Act or the community management statement; or

(b) the exercise of rights or powers, or the performance of duties, under the Act or the community management statement; or

(c) a claimed or anticipated contractual matter about-

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

(ii) the authorization of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

Determination

The outcomes sought by the applicant are:

• That the Thorston body Corporate be declared dysfunctional;
• Appointment of a professional body corporate manager;
• Establishment of a sinking fund;
• Change of insurance company .

I note that the applicant no longer requests an order that the “books” of the body corporate be audited.

This scheme, like any other community titles scheme, must comply with the provisions of the Body Corporate and Community Management Act and the applicable regulation module, in this case, the Standard Module Regulation. Once established as a community titles scheme, the owners of the lots are automatically members of the body corporate[1] . While this body corporate has operated on an informal basis for many years, the failure to comply with the statutory requirements of the Body Corporate and Community Management Act 1997 and Body Corporate and Community Management (Standard Module) Regulation 2008 has resulted in this current dispute. The purpose of having a regulatory regime in place is to ensure accountability and transparency in the operation of the body corporate.

I will now turn specifically to the requested orders.

There is no provision in the legislation to have a body corporate “declared dysfunctional” although an adjudicator may order the appointment of an administrator (who may be a body corporate manager) where it is clear that lot owners are incapable of conducting the affairs of the body corporate, or there is no lot owner willing to serve on the body corporate committee. However, such action is not taken lightly because the appointment of an administrator involves an expense to lot owners and can also deprive lot owners of certain statutory rights such as the right to nominate for committee membership.

A perusal of the application and submissions indicate that the parties, including the current committee members, may not be fully aware of their obligations under the Body Corporate and Community Management Act 1997 and Standard Regulation Module. In particular, it would appear that:

• Annual General Meetings have not been called and held in accordance with the legislation (i.e. in accordance with sections 64 to 79 of the Body Corporate and Community Management (Standard Module) Regulation 2008).:
• annual budgets have not been prepared for both the administrative and sinking funds
• sinking fund contributions have not been calculated with regard to anticipated expenditure over the next 10 years and in accordance with a sinking fund budget; and
• concise annual accounts have not been prepared and presented to the body corporate in general meeting.
  

However, at this point in time I believe that it is possible for the body corporate to comply with its statutory obligations without ordering the appointment of an administrator. I propose to order that the current committee is to call the 2009 Annual General Meeting within 3 months of the date of this order. The AGM shall be called and held in accordance with the provisions of Chapter 4 of the Standard Module Regulation and at that meeting, the body corporate is required consider those matters required to be considered under the legislation including

• election of the committee;
• adoption of an administrative fund budget and a sinking fund budget for the financial year and fixing of contributions to be levied on the owner of each lot, based on such budgets, for the financial year.
• Accounts for the last financial year;
• Whether an auditor should be appointed; and
• Current insurance arrangements.

The body corporate may wish to consider a motion to appoint a body corporate manager to assist the committee or to attend to such matters as

• Calling meetings;
• Preparation of agendas & minutes of meetings;
• Preparation of budgets and accounts.
  

I suggest that the body corporate obtain quotes from a number of body corporate managers before making a decision as to whether or not it is “economic”.

The fact that a number of lot owners reside away from the site, this should not prevent their involvement in the affairs of the body corporate. Motions can be submitted by mail and similarly, lot owners can vote by way of ballot paper.

The next matter that I turn to is the applicant’s request for an order that the body corporate establish a sinking fund. While Mr. Silcock & Ms. Byrnes have advised that a sinking fund has been established, I note that there is no sinking fund forecast in existence and the sinking fund balance was determined by applying surplus funds for that purpose. The sinking fund is designed to facilitate, over a period of time, accrual of funds for all works of a capital/non-recurrent nature that are anticipated to be required in at least the next ten years. To avoid owners being inconvenienced by large special levies it is important that the body corporate identify the scheme’s predictable major/capital repairs. The body corporate must estimate the likely cost of each repair and how many years away the repair will be. A proportional amount of each expense must then be reserved towards each expense to ensure there are sufficient funds for each particular expense at the start of the year in which the expense is likely to be incurred. At each AGM owners need to adopt an appropriate sinking fund budget and to determine what contributes are required. I propose to order that the body corporate does this at the next AGM.

Finally, I note that the body corporate has paid for insurance coverage until April 2010 and that the coverage was arranged by a professional insurance broker. Given that insurance is provided by a third party insurance company and the broker receives a standard brokerage fee, I see no grounds to interfere with these arrangements, although, having regard to the quantum of the annual premium for the policy, I believe that the renewal of the insurance policy should be considered by the body corporate in general meeting in 2010. Lot owners will be able to submit quotations for insurance coverage prior to that meeting if they believe that they are able to secure insurance at a lower cost.

I believe that by holding an Annual General Meeting in accordance with Chapter 4 of the Standard Module, and presenting to that meeting such documents as administrative and sinking fund budgets and properly prepared accounts, the affairs of the body corporate can, at least prospectively, be placed on a proper legal footing and avoid many of the problems previously experienced. However, if it should become apparent that the body corporate is unable to conduct its affairs in accordance with the legislation and meet its statutory obligations, a further application can be made for the appointment of an administrator to this scheme. Such an application would need to be accompanied by quotations from persons suitably qualified to act as an administrator.

Finally, it is important for all lot owners to realise that expenses such as lawn mowing, insurance, pest control and supply of electricity to common property areas have to be met. All lot owners should take an interest in the operation of their body corporate and should submit alternative quotations for the supply of goods and services to the body corporate if they are not satisfied with current arrangements.

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[1] see s.31 of the Act