Focus [2009] QBCCMCmr 32 (3 February 2009)

Last Updated: 9 March 2009

REFERENCE: 0789-2008

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	12996
Name of Scheme:	Focus
Address of Scheme:	114 The Esplanade SURFERS PARADISE QLD 4217

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

Focus Owners Limited, the owner of lot 2 and service contractor and letting agent for the scheme

I hereby order that the application for an order to appoint an administrator is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0789-2008

“Focus” CTS 12996

BACKGROUND

The Focus scheme has been the subject of many applications to this office. During the period since June 1997 to the present, no less than 29 applications have been lodged, including 14 in the last two years alone. The scheme is also currently the subject of litigation in the Commercial and Consumer Tribunal (CCT) (application number KC005-08).

FOL is an Australian public company limited by guarantee, which company is the licensee for providing certain services to the scheme pursuant to an agreement dated 12 October 1979 (the agreement). Prior to this time, FOL states that the management rights were owned by a party independent of the body corporate. The performance of their duties is stated to have been regarded as so unsatisfactory that the lot owners decided to purchase the management rights for themselves. The lot owners at the time formed the Focus Owners Unit Trust (“the Trust”) and FOL, the trustee of the trust. A unit in the trust may be purchased by any lot owner who wants to be part of FOL. Currently, 68 of the 125 lot owners own a unit in the Trust and are entitled to vote at general meetings of FOL.

Much of the disputation in the scheme’s recent past is related to differences between two distinct factions within the body corporate, those owners who are part of FOL and those who are not. It appears that, for the last couple of years, the committee has comprised a majority of owners who are not part of FOL.

Previous adjudicators’ decisions have established the following:

• FOL is a “service contractor” (section 15 of the Act)[1];
• “Executive officers” of FOL are ineligible to be committee members by virtue of section 11(2)(b) of the Accommodation Module. Any other person who is an “associate” (within the meaning of section 309 of the Act) is also ineligible[2].
• Any decision regarding FOL shall only be made by the body corporate in general meeting, and in accordance with the applicable requirements of the Act and regulation module[3].
  

It is relevant to note that at the time this application was lodged, the composition of the committee was as follows:

Committee Composition prior to AGM of 26 November 2008

Position	Appointee
Chairperson	Lex Bell
Secretary	Steven Stojanovic
Treasurer	Dean Anderson
Ordinary Member	Colin Strain
Ordinary Member	Gary Hendrick
Ordinary Member	Marie Valerie Vlaskalic
Ordinary Member	Michael Anderson

Since the AGM of 26 November 2008, the committee has comprised:

Committee Composition following AGM of 26 November 2008

Position	Appointee
Chairperson	Lex Bell
Secretary	Steven Stojanovic
Treasurer	Lorraine Bryant
Ordinary Member	G Curcic
Ordinary Member	Dragan Mitic
Ordinary Member	Marie Valerie Vlaskalic
Ordinary Member	R Glading

A further dispute resolution application (reference 1050-2008) has been lodged challenging the validity of the committee appointed at the AGM of 26 November 2008. That dispute is yet to be determined.

APPLICATION

This is an application made on 15 September 2008 by Focus Owners Limited (FOL), the owner of lot 2 and letting agent and service contractor for the scheme against the body corporate of Focus CTS 12996 (the body corporate) for an order that an Administrator be appointed.

The grounds to the application consist of 180 numbered paragraphs which allege various wrong doing by the (now previous) committee and/or body corporate to the following effect:

• Withholding Payments for Services by FOL

It is alleged that the body corporate has breached its agreement with FOL by withholding payment to FOL for services provided by FOL since August 2007 to the present, which fees are said to be due and owing to FOL under the agreement.

• Attempted Appointment of Building Manager

It is alleged that, pursuant to the terms of the agreement, FOL is required to appoint a manager to be responsible for the performance of the obligations of FOL. In April 2007, the body corporate intended to appoint a caretaker to carry out maintenance duties at the scheme. On 27 April 2007, FOL put the body corporate on notice that any attempts to either terminate or frustrate the agreement, or to appoint a superfluous caretaker, would be resisted by FOL through legal proceedings.

• Security Contractor

It is alleged that, pursuant to the terms of the agreement, FOL is responsible for engagement of independent security contractors on behalf of the body corporate to perform security services at the scheme. At a committee meeting held on 28 April 2007, the committee resolved to engage Mrs Sutcliffe to provide security services for an amount which exceeded the committee’s spending limit. FOL continued to engage an independent security contractor up until 21 December 2007, when two directors of FOL were able to obtain an assurance from the secretary of the body corporate that their security contractor could be relied on by FOL to meet its responsibilities under the agreement. The committee continues to engage Mrs Sutcliffe and has exceeded its spending limit in doing so in the vicinity of some $50,000. FOL claims an amount of $44,175.20 from the body corporate, for the cost of security services between 17 May 2007 to 23 December 2007 which FOL had arranged, believing that Mrs Sutcliffe initially intended to exclude FOL apartments from the security services.

• Misleading Conduct

It is submitted that Committee explanatory material included with the Notice of an Extraordinary General Meeting distributed to owners on or about 16 July 2007 was deliberately misleading in that the committee represented that it had received independent information that the bundling of services provided to the body corporate would create a costs saving. The management report on Focus dated March 2007 and provided by Building Management Consultancy and Services was completed on the direct instructions of Nimal De Silva and was paid for by the body corporate. Nimal De Silva previously had a cleaning contract with the body corporate that was terminated due to unsatisfactory performance. It is submitted that the committee failed to explain the existence and significance of the agreement to the body corporate members and knowingly allowed the body corporate members to rely upon a report which it knew had been compiled based solely on the instructions of an unrelated third party. Further, FOL submits that the packaged contract proposed by Nimal De Silva would not have resulted in a saving to the body corporate, even if FOL’s services had been terminated.

• Engagement of Sigiri

It is submitted that the committee appears to have committed to a long term contract with Silvacare Australia Pty Ltd/Nimal De Silva, trading as Sigiri at a cost of $12,500 (plus GST) per month and, in so doing, has not only exceeded its spending limit, but acted expressly against the wishes of the body corporate, as expressed in Motion 11 of the 2007 AGM which was defeated by a vote of 32 for and 44 against. Although the committee claims that Sigiri is engaged on a month to month basis, $150,000 for the maintenance contract related to Sigiri has been budgeted. Despite a search of body corporate records, FOL has been unable to obtain any evidence, such as committee resolutions, that the committee re-engages Sigiri on a monthly basis and therefore believe that Sigiri is engaged on a permanent basis.

• Engagement of Alana De Silva

On 30 May 2008, it is submitted that the committee resolved to engage the services of Alana De Silva as the “Building Maintenance and Contracts Coordinator”. The services carried out by Alana De Silva are similar to the services required to be carried out by FOL. In addition, these services were to be included in the contract proposed to be entered into by the body corporate at the 2007 AGM (motion 11). Effectively, the committee is engaging Sigiri and Alana De Silva at a cost of $1,500 per month on terms that are less commercial than those previously contemplated by the committee and rejected by the body corporate at the 2007 AGM. These services are carried out at no additional charge by FOL, pursuant to the terms of the agreement. FOL submits that the body corporate was already incurring monthly expenses greater than the spending limit, by its employment of Sigiri. With the additional costs of Alana De Silva, the body corporate is incurring further unnecessary costs. Further, it is submitted that the body corporate has contravened the agreement by appointing Alana De Silva to liaise with FOL, as the agreement requires a member of the committee to represent it in the day-to-day communications with FOL.

• Attempted Removal of FOL from the Licensed Area

The agreement provides FOL with an exclusive use area in the foyer of the building. The reception and offices of FOL were originally located in the Licensed Area designated on the Second Schedule of the agreement (“the Original Licensed Area”). However, due to renovations carried out on the foyer area, the Licensed Area was relocated to its present location in 1980 (“the Current Licensed Area”). The committee currently claims that FOL has no right to use the Current Licensed Area as it is not in the location of the Original Licensed Area. FOL submit that the committee has no authority to relocate FOL’s Current Licensed Area.

• Refurbishment of the Foyer

On 30 May 2008 the committee resolved to obtain a design to refurbish the foyer area at a cost of $7,500. It is submitted that this was contrary to the defeat of motion 10 at the 2007 AGM. On 23 July 2008, after resolving to obtain a design for the refurbishment and incurring $7,500 in expenses, the committee resolved not to take any further action in relation to the foyer area.

While FOL supports the need to refurbish the foyer, it submits that the committee has incurred an unnecessary expense of $7,500 and has created a concept that is unnecessarily expensive because of its determination to downsize and relocate FOL’s facilities and create a separate office for the body corporate in the foyer area.

• Spending Over Spending Limit – Car Park

It is submitted that the committee has engaged various contractors to carry out major changes to the grounds adjoining the main entrance to the building including the removal of a garden at the front of the building to make room for short term car parking, the construction of a gate at the entrance to the visitor car park and other significant landscaping and paving works. The total cost of this project is in the order of $40,000 which is greatly in excess of the committee spending limit. There has been no special levy raised to fund this project and no motion considered by the body corporate in general meeting. Further, it is submitted that the committee did not obtain council approval, which FOL claims was necessary.

• Excessive Sinking Fund Expenditure

At 31 August 2007, the sinking fund balance was $581,601.76. The balance at 29 July 2008 was $191,381.10. The sinking fund forecast prepared by Rider Hunt in 2001 indicated that the sinking fund balance should be approximately $798,005 (including GST) at 31 August 2008. It is submitted that the committee has incurred debts, and spent more than the budgeted amount as follows:

• Buildings and grounds expenditure has been $17,262.73; there was no amount budgeted for this expenditure;
• The pathway, driveway and parking expenditure has been $14,534; there was no budgeted amount for this expenditure;
• Landscaping expenditure has been $22,787.65; the budgeted amount was $6,000.
• Plant and equipment expenditure has been $45,125.57, the budgeted amount was $15,000;
• Security and intercom system expenditure has been $80,121.99; the budgeted amount was $70,000.
  

It is further submitted that the committee has also carried out unapproved works in apparent preparation for an independent services contractor. A new shed has been constructed and modifications made to the plant area in the rear of the amenities building.

• Administrative Fund Accounts

It is submitted that the Administrative Fund Statement of Income and Expenditure for the period 1 September 2007 to 29 July 2008 evidences that the committee has been authorising unreasonable expenditure in relation to the administrative fund. The statement does not include the payments owing to FOL or the additional security costs incurred by FOL. Unreasonable expenditure includes the following:

• Insurance expenditure of $105,328.95; budgeted amount of $60,000;
• Security expenditure to date has been $60,422.41; budgeted amount was only $60,000 (for the 12 months to 31 August 2008);
• Legal fees expenditure has been $14,033.36 even though the budgeted amount was $5,000. In addition, the committee has resolved to engage Gall, Stanfield & Smith for general advice on their position with FOL. The minutes do not specify that a quote has been obtained, nor do the minutes specify a limit on the amount that may be incurred.
  
• Occupational Health & Safety

It is submitted that the committee has failed to comply with certain fire safety requirements as identified by the Queensland Fire and Rescue Service; failed to action a report from Otis Elevators in relation to the lifts and, in or about June 2008 when the locks were changed on the gates to the swimming pool area and grounds in readiness for the introduction of the FOB system, padlocked the gate which provides access to the Esplanade. It is alleged that it took repeated requests before a key was made available to FOL for the use of residents and guests.

• Nimal De Silva & Alana De Silva

It is submitted that Nimal De Silva and Alana De Silva have, at times, engaged in intimidation of FOL staff and discrimination against letting owners. It is further submitted that Nimal De Silva has often engaged in unnecessarily rude correspondence with members of FOL.

• Control of Keys and Fobs

It is submitted that the committee have allowed the once tight control of the keys as previously exercised by FOL to be compromised. The control of the keys to the letting pool apartments is now in the hands of Alana De Silva who is an independent contractor merely employed on a month to month basis. FOL has been advised that they have to order keys through the body corporate managers, a process which can take up to a week to get replacement keys.

It is submitted that, while FOL strongly supports the introduction of FOBs, the committee has made Alana De Silva responsible for the issuing of the FOBs and Alana De Silva has challenged FOL’s right to represent the letting owners without obtaining specific authorities from each letting owner. FOL also has a concern with the design of the FOB system, namely that FOBs provided to lot owners do not permit them to access the common property on each level other than the level on which their lot is located.

• Committee Meetings

It is submitted that there are frequent resolutions of the committee which are passed outside of committee meetings. Lot owners are not provided with notice of these resolutions, other than as attachments to the minutes of normal committee meetings when those minutes are mailed out. The effect being that resolutions often do not become known to lot owners for more than a month after they have been passed and acted upon.

Further, it is submitted that observers are excluded from committee meetings when sensitive issues such as the committee’s intentions and actions relating to the agreement are being discussed.

• Creation of Sub-Committee

It is submitted that the creation of a sub-committee consisting of persons who are not committee members to advise the committee in relation to the foyer renovations is contrary to section 10 of the Accommodation Module. It is further alleged that one member of the sub-committee, Alana De Silva, is ineligible for committee membership and has a conflict of interest in being on the sub-committee in that she is remunerated for her role for consulting with contractors used at Focus.

• Improper Conduct of Committee Members

It is submitted that individual committee members have breached the Code of Conduct applicable to voting committee members in various different ways:

• Mr Dean Anderson by allegedly physically assaulting the FOL appointed building manager of Focus;
• Mr Lex Bell, a lawyer, by failing to take any action in relation to the alleged assault;
• Mr Colin Strain, by engaging in activity alleged to constitute a nuisance to members of the body corporate and staff employed by FOL;
• Mr Steven Stojanovic, by issuing a breach notice against FOL in October 2007 which is alleged to have been baseless.
  
• Previous Order of Adjudicator

Comments of the adjudicator in order 0241-2008 are referred to and reference made to Focus [2008] QBCCMCmr 190, FOL submitting that despite being placed on notice that it needed to pass a resolution for the engagement of Sigiri, or to call a meeting in order to readjust or exceed the budgets, the committee has failed to change their actions or heed the advice of the earlier adjudications.

FOL concludes by submitting that, on the basis of the information provided, it would be just and equitable to appoint an Administrator to the body corporate.

JURISDICTION

“Focus” CTS 12996 is a community title scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module). There are 125 lots in the scheme created under a Building Unit Plan of subdivision.

The current Accommodation Module commenced on 30th August 2008, replacing the previous Accommodation Module that operated from July 1997 (Previous Module). A number of provisions of the Accommodation Module are the same, or substantially the same as provisions in the Previous Module despite the provisions having different section numbers. These provisions are generally to be dealt with as replacements of the similar provisions of the repealed legislation and anything done under the Previous Module will not generally be affected by the commencement of the present Accommodation Module (sections 207 -214, section 20 Acts Interpretation Act.). Where relevant, references will be made to the Previous Module in parentheses after the current module reference.

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

1. 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)).

This is a dispute between the owners of a lot and the body corporate concerning alleged contraventions of the legislation and comes within the dispute resolution provisions of the Act (see ss.226, 227 & 228).

SUBMISSIONS

In accordance with section 243 of the Act, a copy of the application was provided to Strata-Jem Pty Ltd, the body corporate manager, with an invitation to all owners (excluding the applicant) and the committee to respond to the matters raised in the application. A total of nine submissions were received; eight from individual owners and one from the committee.

Of the nine submissions made, the detail provided in one was so scant that I could not regard it as either supporting or opposing the order sought. I considered three to be generally supportive of the application, highlighting what appears to be a complete breakdown in relationship between the committee and FOL. The remaining five were opposed to the appointment of an administrator. Those individual owners made submission to the following effect:

• A previous committee comprised of a majority of FOL directors transferred money from the sinking fund to the administrative fund;
• Reference is made to the improvements made in the last year under the leadership of the existing committee, including the treatment of concrete cancer, new FOB system, new garage doors to the garage and visitors area, new retaining walls, parking spots and garden beds, tiling to the BarBQ area, new fridges, shades over the pool, etc;
• The lodgement of this application was a ploy in FOL’s election campaign;
• If there is dissatisfaction with committee members, this can be expressed at the AGM (this has since been held) via a democratic process.
• Any appointment of an administrator should only be made in very serious circumstances, which do not exist here.
• Issues raised in the current application under the headings “Management Agreement”, “Withholding Payments for Services by FOL”, “Attempted Appointment of the Building Manager” and “Security Contractor” are all the subject of the application by FOL to the CCT. It is not appropriate that these issues be considered by the adjudicator for the simple reason that they are the subject of proceedings to be determined in the CCT.
  

The committee made detailed submission to the following effect:

• When the agreement was executed 29 years ago, almost all lot owners in the Focus building were members of FOL and held units in its unit trust. At that time, the interests of lot owners and FOL coincided. Over the years, fewer and fewer lot owners have been members of FOL and holders of units in its unit trust. The interests of the lot owners and FOL have diverged.
• In a little over two years, there have been five building managers at Focus appointed by FOL. In only one case did FOL consult any member of the body corporate committee as to the suitability of the appointee, the wages to be paid by the body corporate or the hours to be worked.
• In the lead up to the 2007 AGM, FOL supported for election to the committee a number of candidates. There were two very distinct groups – those whom FOL supported and those “independent” candidates who sought control of the body corporate affairs by the committee. The latter group was markedly successful and those supported by FOL were generally unsuccessful. Some of those unsuccessful candidates have renominated for election at the 2008 AGM, apparently with support once more from FOL.
• This application was filed in October 2008 in the common knowledge that the 2008 AGM was due to be held in November 2008 and that fresh elections would then occur for committee positions. The timing of this application is a deliberate attempt by FOL to use the adjudication process as an electioneering ploy.
• Though the application seeks appointment of an administrator, no information has been received by the body corporate as to the consent of a qualified appointee or the likely costs of an administrator’s services to lot owners.
• Specific submission was made in specific response to the application, as follows:
  
• Withholding Payments for Services by FOL

The matters regarding FOL’s claim for payment are already in ‘dispute’ in another jurisdiction (CCT). The body corporate has not refused to pay to FOL the monies found to be lawfully payable to it. However, it disputes the quantum of FOL’s claim.

• Attempted Appointment of Building Manager

Over approximately 30 years of the currency of the agreement, the requirements of Focus have altered. In particular, FOL ceased to carry out most of the duties listed under the heading “Duties of Licensee” in the agreement. Many of the services listed under that heading were let to contract. Those contracts were directly between the body corporate and the contractor and the body corporate made payment direct to the contractor. Examples are gardening, cleaning and handy man services. Other services not contemplated by the agreement such as provision of on-site security, were also the subject of contracts directly between the service provider and the body corporate. Until October 2005, the personnel comprising the directors of FOL and the committee were substantially identical. There is therefore some blurring of what comprised the actions of FOL and the body corporate. The body corporate had received Exhibit C from FOL. It took note of the content, and ensured that in its public advertisement and information to tenderers, the body corporate stipulated that none of the services to which the agreement applied would be included in the duties of the proposed caretaker.

• Security Contractor

There is no provision in the agreement as asserted by FOL, whereby FOL was to be responsible for the engagement of independent security providers. On 29 April 2005, with no objection from FOL, the body corporate entered into a contract with National Safety and Security Services (NSSS) for provision of on-site security for a term of 2 years. At the end of that time, it was necessary for the body corporate to take steps to ensure the building remained protected. NSSS agreed to carry on temporarily on a week to week basis after expiry of its contract until an alternative security provider could be put in place. When this occurred, NSSS were directed to cease. The new service provider was engaged to provide the same hours of on-site security as the previous security provider. No statements were made by the body corporate that the new security provider would exclude units in the FOL letting pool. The new security provider was engaged to provide and did provide at all times the same range of services as its predecessor.

It was a matter of mirth to some and embarrassment to others that two separate security providers attended for work each evening at Focus. The position of the body corporate was that if FOL wished to engage and pay for additional security to sit in its office area that was a matter entirely for FOL. At about December 2007 and January 2008 the retention by FOL of the former security provider at Focus abruptly ceased. This coincided with the cessation of a Mr Cecco (a long associated of the then directors of FOL) to be involved in the business of NSSS.

It was the intention of the body corporate to recall tenders for security once the ‘fob’ system of operation of communal doors and gates was in operation, as this system was designed to reduce security costs substantially. For various technical reasons outside the control of the body corporate, full implementation of the fob system was delayed until July 2008. Then the fob system could be implemented, the body corporate called tenders, and the appointment of a security contractor will be placed before the AGM on 26 November 2008. (See motion 11 of minutes of 2008 AGM where Paradise Security were appointed)

Engagement by FOL of the former security provider was unnecessary and merely reflected the choice of FOL that Mr Cecco should control security at Focus. The body corporate is emphatically resisting FOL’s claim for $44,175.20 for a second security service.

The financial accounts for the years ended 2006, 2207 and 2008 show that there has been an overall reduction in security costs. The new service provider charges $179 less each week than NSSS did.

• Misleading Conduct

The committee did believe, in July 2007 when the body corporate manager distributed material for the EGM, that there was a reasonable saving to be made with the packaging of various contracted services at Focus. The body corporate manager advises there has been a probable saving of approximately $12,000 per annum, but that is hard to substantiate because of lack of detailed information from previous years.

The committee emphatically denies that it misled the body corporate. The committee openly and formally engaged Mr De Silva to prepare a report. With the concurrence of the committee, Mr De Silva produced a report substantially prepared by Building Management Consultancy and Services on the subject.

• Engagement of Sigiri

The body corporate did engage Sigiri as a contractor on a monthly basis to carry out cleaning and maintenance of the pool area and spa. Handyman services and gardening were also included. Sigiri’s engagement followed resolutions of a general meeting on 7 August 2007 and the meeting’s approval of a ‘bundling’ together of these services. That resolution was the subject of an interim order on 7 December 2007 but was until that date, regarded by the committee as an effective expression of the views of owners. The services Sigiri was engaged to perform were not functions carried out at any relevant time by FOL.

The motion regarding contractual arrangements put to the AGM on 21 December 2007 related to a contract having a three year term. There was no motion that the service of Sigiri or the De Silva family be terminated. After that motion was defeated, the committee accepted that owners did not wish any service provider to have a contract for a lengthy term. There is no basis for the assertion that the services of Sigiri and the De Silva family should have been terminated forthwith. There was a need for continuation of essential services to Focus. The services being provided by Sigiri and the De Silva family were of good quality and were satisfactory to the great majority of owners. The committee proceeded on the basis that it was in order for Sigiri to continue on a month to month basis until a final determination. A final determination was made on 5 June 2008. Since that time, Sigiri has continued on a month to month basis to ensure continuity of performance of the essential services at Focus. Promptly after 5 June 2008, the committee resolved to call tenders for the provision of cleaning, gardening and similar services for consideration at a general meeting. However, FOL served an application to the CCT seeking certain orders which, if granted, would be in conflict with the letting by the body corporate of a tender for the relevant services. Because the matters are sub judice, the body corporate was stopped from proceeding lest it be in contempt of the CCT. The body corporate has filed a defence to FOL’s application to the CCT and has also filed a counter-claim seeking a declaration as to use of common property by FOL and seeking an accounting of monies of the body corporate received by FOL.

The committee, in its draft budget, has budgeted an amount of $150,000 but not specifically related to Sigiri. Whoever is the contractor, the services are essential and a cost of this order must be included. The committee would be negligent to omit provision for cleaning, gardening and similar services in its budget.

• Engagement of Alana De Silva

The body corporate denies it had contravened the agreement by appointing Ms De Silva to liaise with the building manager. She is not performing liaison with FOL. FOL’s interpretation is a misconception. The chairperson of the committee is the official liaison with FOL. The sending of Building Manager’s Reports and details of required service providers to a particular person does not constitute negotiations with FOL.

• Attempted Removal of FOL from the Licensed Area

The area of foyer currently used by FOL bears no relationship to the area precisely delineated in the agreement. There is no record of any resolution of the body corporate allowing FOL the exclusive use of that part of the foyer presently occupied by it. In the proceedings before the CCT, the body corporate seeks orders that FOL cease using all parts of the common property not authorised for its use, including the foyer.

• Refurbishment of the Foyer

Notwithstanding the decision not to proceed with the plan and quotations presented to the 2007 AGM, it was felt, because of complaints and comments, that most owners did wish the foyer to be upgraded and would reconsider another plan. An amended plan was presented to the committee. The committee felt that a more imaginative and more striking plan was required and also that a small space in the foyer should be planned for a body corporate representative in case the body corporate terminated the limited reception services still provided by FOL for the body corporate.

All Trans Consultants provided a new design to the committee, which the committee intended to take to a general meeting. However, the body corporate received notice of action in the CCT. As the matter became sub-judice, the committee reluctantly postponed action pending the Tribunal’s decision.

The committee has not incurred unnecessary expense. It is the action of FOL which has rendered the committee unable to proceed at present.

• Spending Over Spending Limit – Car Park

The committee is aware of the provisions of section 149(2) of the Accommodation Module (section 101(2)). It appears that FOL regard all external work at Focus to be a single project. Because of the varied causations of the works, the body corporate contends that they do not form a ‘single project’ under the regulation. Further, the committee expenditure limit had been increased to $400 per lot, some years earlier at a general meeting.

• Excessive Sinking Fund Expenditure

The committee agree that expenditure from the sinking fund has exceeded budget, but not for the reasons stated by FOL. The Rider Hunt report referred to was completed in 2001 and did not contemplate concrete cancer (for which $400,000 has been spent to rectify) and was not adhered to by previous committees. Perhaps the report was wrong, but if so, so was the expected balance for the year end 2008. A copy of the 2008 financials was attached, along with further details of expenditure from the sinking fund.

• Administrative Fund Accounts

The accounts for the body corporate are on an accrual basis of accounting, not cash. The budget for insurance has not been exceeded. At the end of the 2006 year, the closing balance of the administrative fund was a deficit of $66,033.31; this committee managed to reduce the administrative fund contributions from $805,000 gross, to $770,000 gross, in the last two years, whilst still maintaining a surplus. At year end, the administrative fund has returned a surplus of $12,335.65. It is submitted that is good management. Security costs have previously been explained. All legal costs expended by the current committee in the financial year to 2008 have been properly authorised, and within the committee’s limit of expenditure. The financial statements are subject to audit and amounts claimed by FOL have been brought to account in the body corporate financial position.

• Occupational Health & Safety

Notice to remedy was received from the Queensland Fire Services, in July and there was some delay in actioning. However, all work was completed within the given time frame. As far as the committee is aware, there are no outstanding requirements of Queensland Fire Services.

Otis Elevators completed an Occupational Health & Safety report late 2007; the committee was unaware of that report until a follow up letter was received from Otis dated 27 March 2008. The body corporate replied on 4 April 2008. The committee has received information from Otis about immediate requirements, and allocations have been made in the 2008/2009 sinking fund budget for these works. Some of the actions are required over a five year term.

• Control of Keys and Fobs

Focus had long been plagued by sundry persons who had left the building having keys. Additionally, various persons had been authorised to order keys, adding to expense and making control difficult. The committee felt that better control was essential for the security of the building. Both FOL representatives and Sigiri representatives wished to have the exclusive authority to order keys. To avoid disputation, the committee resolved that the body corporate managers should order keys.

Installation of the fob system was effected by a contractor. Ms Alana De Silva was responsible for implementation of the system. Some person answerable to the body corporate was required to oversee orders for fobs and their proper receipt by individual unit owners. The committee was not agreeable to the handing in bulk to FOL of fobs for all letting units at Focus. The body corporate contended that it should hand fobs directly to unit owners who should sign an appropriate receipt or to FOL if the unit owners gave them written authority for this to occur. The body corporate was unwilling to assume that FOL had authority. One of the purposes of the fob system is to enable cost saving by reduction of static security personnel. Restricting access to the particular level of an owner’s unit is part of this system and is adopted by most new high rise apartment buildings on the Gold Coast.

• Committee Meetings

Resolutions outside committee meetings are made strictly in accordance with the provisions of the Act. An apparent increase in the number of flying minutes is because the present chairperson insisted from his election that this procedure be used in place of an unauthorised practice of decisions being made by some committee persons and ratified at a later meeting. It is extremely rare for persons to be excluded from committee meetings. This has only occurred where there has been litigation with the parties concerned and then only when that litigation was discussed.

• Creation of Sub-Committee

The body corporate made an error of terminology by using the term ‘sub-committee’. Four ladies were appointed as a group of advisors to the male dominated committee on the issue of soft furnishing and liveable design. The appointed ladies had no powers and did not compromise a true sub-committee. At the time of appointment and at the time these ladies gave their advice, Alana De Silva was not employed as contract co-ordinator by the body corporate and had no conflict of interest.

• Improper Conduct of Committee Members

All committee members have copies of the Code of Conduct. The chairperson interprets that Code as applying to voting committee members whilst acting with some nexus to the body corporate and not while acting in a totally personal or private capacity. In relation to the alleged assault by Mr Anderson, the chairperson was not prepared to make any adverse judgement against Mr Anderson when the Code of Conduct did not apply, the facts were in great dispute and the Police were investigating.

So far as the committee is aware, FOL has not complained to it of the alleged conduct of Mr Strain. The body corporate is aware of a claim for defamation made against Mr Strain by a director of FOL. That is a defended suit in the District Court at Southport.

The body corporate confirms that Mr Stojanovic wrote letters as alleged and believes he was acting in the best interests of the body corporate, in view of ongoing disputation between FOL and the body corporate. The allegation that Mr Stojanovic breached the Code of Conduct is denied.

• Previous Order of Adjudicator

The matters referred to have been the subject of adjudication and have been resolved. The committee has taken the action required by the adjudicator.

The committee concludes its submission as follows:

The committee works diligently to deal with a large volume of work, meets regularly and exercises proper stewardship of body corporate funds. The affairs of the body corporate are being carefully managed. The committee is confronted with ongoing pressure by FOL to control what occurs at Focus, under guise of tenaciously adhering to a 30 year old agreement which is in many respects obsolete. There is ongoing friction with FOL since the committee has substantially comprised persons who have no duty to FOL and who seek to advance the body corporate’s interests. There are genuine reasons for believing that the spending limit of the committee was increased at a general meeting. Some of the expenditures complained of in the application were statutory requirements and are within the purposes of the exemption provided for in section 149(1)(d)(i) (section 101(1)(d)(i)). The existing committee will be replaced by a new committee (or re-elected) at the AGM on 26 November 2008. There is no need for appointment of an administrator, presumably at considerable cost.

Applicant’s Reply to Submissions

FOL exercised its right to inspect the submissions made and replied. FOL submit that the committee has breached the Act and regulations by failing to act in accordance with the decision of the body corporate, by spending unauthorised amounts of money on improvements which had not been approved and by failing to ensure that the sinking fund and administration fund were properly administered. Further, FOL state that the committee’ actions have been highly improper because it has unreasonably disregarded the opinion of owners and experts, it has continued to engage Sigiri, it has unnecessarily employed Ms De Silva, and it has treated FOL unlawfully. Several members of the 2007 committee were re-elected at the 2008 AGM, including the chairperson and secretary. FOL submits that it remains gravely concerned that the 2008 committee will continue to act in the same manner as the 2007 committee. Consequently, FOL submits that it is necessary that an Administrator be appointed to ensure that the sinking fund and administrative fund are properly accounted for, that excessive and unauthorised committee spending stops and that current issues between FOL and the body corporate are dealt with and finalised by an impartial party. FOL have nominated two possible administrators. Alternatively, FOL submits that the issues raised in the application should be considered by the Commissioner and that a declaration concerning the actions of the previous committee should be issued to ensure that the 2007 committee is held to account for their behaviour and that the 2008 committee properly understands the serious nature and responsibility of their positions.

DETERMINATION

Adjudicators have held that an order appointing an administrator for a scheme is not made lightly. Generally, to be successful in an application for the appointment of an administrator, an applicant must demonstrate that the day-to-day administration of the body corporate has broken down irretrievably, and/or that the affairs of the body corporate are in such disarray as to warrant the appointment of an administrator. One of the secondary objects of the Act is “to balance the rights of individuals with the responsibility of self management as an inherent aspect of community titles schemes”. In my view the right of a body corporate to administer its own affairs should therefore only be disrupted in very serious circumstances.[4] In this case I am not satisfied that the appointment of an administrator is warranted for the following reasons:

• The level of support amongst owners for the appointment of an administrator does not appear to be strong. In a scheme comprising 125 lots, only nine owners made submission in response to the application. Only three of these submissions were generally supportive of the appointment of an administrator; six submissions (five from owners and one from the committee) strongly opposed the appointment of an administrator.
• At the time of making the application, the applicant did not nominate any administrator or provide any details such as written consent or quotations from any proposed administrator. Details of two persons nominated as possible administrators were only provided by FOL when they were responding to submissions made in response to the application. Owners therefore have not had the opportunity to view or comment on this information.
• The composition of the committee has changed since the application was lodged. At the AGM on 26 November 2008, four of the seven members of the 2007/2008 committee were replaced. I am aware that the composition of the 2008/2009 committee is the subject of another application being processed by this office and yet to be determined. FOL states in its response to submissions that it remains gravely concerned that the 2008/2009 committee will continue to act in the same manner as the 2007/2008 committee, but fails to substantiate this claim, other than to say that the chairperson and secretary remain the same. I regard the criticism made by FOL of the 2007/2008 committee as irrelevant to the 2008/2009 committee, with only three of the seven members of the 2007/2008 committee remaining in office.
• The body corporate has an active and functioning committee and engages the services of a body corporate manager. The body corporate holds regular meetings and maintains requisite insurance.
• The allegations brought against the body corporate and the committee in this application and forming the basis of FOL’s request for an administrator to be appointed have not been previously challenged or determined and are contested by the committee. Even in this application, FOL did not seek orders that would challenge the actions of the committee or the body corporate, for example, by seeking orders that particular motions of the 2007 AGM be enforced or that certain actions of the committee and/or body corporate were in breach of the legislation and/or unreasonable and should be invalidated. Only in its reply to submissions, did FOL purport to seek an alternative order to that of the appointment of an administrator. FOL at that late stage, submitted that the issues raised in the application should be considered by the Commissioner and that a declaration concerning the actions of the previous committee should be issued to ensure that the 2007 committee is held to account for their behaviour and that the 2008 committee properly understands the serious nature and responsibility of their positions. The application was not amended to reflect this and owners have not had the opportunity to view or comment on this request for additional orders.
• Many of the allegations brought against the body corporate and the committee are the subject of an application in the CCT which is yet to be determined. It would be inappropriate for me to make an order appointing an administrator on the basis of claims which are currently the subject of proceedings in the CCT and which are, at this stage, yet to be determined.
• Those claims brought by FOL against the committee and or the body corporate which are not the subject of proceedings in the CCT, I regard as largely unsubstantiated and contested by the committee. On the basis of the information supplied by the applicant and the submissions, I am not persuaded make findings against the body corporate as requested by FOL in its response to submissions.
• There is no evidence of any action having been taken by FOL in an attempt to resolve the problems it perceives with the administration of the body corporate itself. For example, there has been no attempt to remove committee members from their positions by the passing of an ordinary resolution at a general meeting of the body corporate. In my view, the failure to take any such action renders the application to appoint an administrator misconceived and premature, especially given that an AGM (where a new committee would be elected) was due to be called within weeks of the application being lodged.
  

The applicant has not persuaded me that the services of an administrator are either necessary or warranted. While FOL has alleged that some of the actions of the 2007 committee have been wrong, those actions have not been challenged through this office and many are the subject of current proceedings in the CCT. I do not consider it just and equitable to grant the order the applicant seeks. In the circumstances of this case I am not satisfied that the appointment of an administrator is warranted at this time.

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[1] Focus [2005] QBCCMCmr 569 (13 October 2005). It was unnecessary to determine whether FOL was also a “letting agent”, although the adjudicator commented that, prima facie, it appeared to be.
[2] Focus [2005] QBCCMCmr 569 (13 October 2005)
[3] Focus [2005] QBCCMCmr 552 (6 October 2005)
[4] Wilks Street Apartments [2007] QBCCMCmr 6