Rosebank [2009] QBCCMCmr 406 (20 October 2009)

Last Updated: 10 June 2010

REFERENCE: 0514-2009

ORDER OF A REFEREE

MADE UNDER PART V

BUILDING UNITS AND GROUP TITLES ACT 1980

Name of Plan:	Rosebank
Number of Building or Parcel:	3033
Address of Parcel:	Hope Island, QUEENSLAND

TAKE NOTICE that pursuant to an application made under sections 76 and 77(1) of the Building Units and Group Titles Act 1980 by Laurel Millist, a co-owner of lot 147

I hereby declare that the 7 proxy votes cast in respect of lots 8, 48, 49, 99, 113, 116 and 117 at the Extraordinary General Meeting on 15 May 2009 were invalid and are to be disallowed on the grounds that the exercise of these proxies by an employee of Cambridge Management Services involved of a breach of section 50A of the Building Units and Group Titles Act 1980. I further declare that the proxy vote exercised in respect of Lot 5 at the Extraordinary General Meeting on 15 May 2009 was valid and should be allowed. I hereby order that the body corporate is to conduct a recount of votes cast at the Extraordinary General meeting held on 15 May 2009 and to notify all lot owners of the outcome of the recount in due course. I further order that the body corporate is give all lot owners reasonable notice of the time and place that the recount is to occur, allow lot owners to witness the re-count and allow lot owners to raise any additional concerns which they may have regarding the validity of the votes cast. The above order was appealed to the Southport Magistrates Court on 11 November 2009, the appeal ref no is:5279-09/10-10.

STATEMENT OF REFEREE’S REASONS FOR DECISION - 0514-2009

“Rosebank” CTS 0

Rosebank is a residential body corporate forming part of Hope Island Resort which was developed under the Integrated Resort Development Act and is therefore regulated by the Building Units and Group Titles Act 1980. In total there are 144 lots within this residential body corporate.

APPLICATION

The applicant is the owner of lot 147 and submitted this dispute resolution application under the Building Units and Group Titles Act 1980 on 2 June 2009 and subsequently submitted further information in support of the application. . The application relates to an Extraordinary General Meeting for Rosebank held on 15 May 2009.

The orders sought are:

“1. That 7 proxy votes cast in respect of lots 8, 48, 49, 99, 113, 116 and 117 exercised by an employee of Cambridge Management Services Pty. Ltd. (CMS), Natasha St. Ange, and used at the Rosebank EGM to vote for motions to approve two new 10 year contracts with CMS, be disallowed on the grounds of a breach of clause 50A of the Building units and Group Titles Act 1980;
2. That the proxy vote exercised in respect of Lot 5 and signed by proprietors of that lot be allowed;
3. That there be an urgent re-count by independent scrutineers, of the votes cast at the Rosebank EGM held on 15 May 2009, as the vote count recorded and reported to that meeting was inconsistent with the voting papers”

BACKGROUND

The Integrated Resort Development Act 1987 (IRDA) provides the legal structure for the Hope Island Resort. Registration of the initial plan of survey resulted in the creation of the Primary Thoroughfare Body Corporate (PTBC) and subdivision of residential areas resulted in the creation of the Principal Body Corporate (PBC), itself a member of the PTBC, and a number of residential bodies corporate which became members of the PBC. Rosebank is one of these residential bodies corporate that is a member of the PBC.

The applicant states that she attended the Extraordinary General Meeting of Rosebank GTP 3033 on 15th May 2009 which was held to consider motions to approve a new 10 year management agreement between the Rosebank body corporate and Cambridge Management Services (CMS) and a 10 year management agreement between the Principal body corporate and Cambridge Management Services (CMS).

It was noted that an employee of CMS, Ms Natasha St. Ange, held proxies for 7 lot owners and that these proxy votes were used to vote in favour of each of the motions. The applicant believes that this use of proxies constitutes “a serious breach of section 50A of the BUGTA Act” and that the acceptance of the proxy votes as legitimate votes enabled the passage of the above motions. The applicant goes on to state that a “correct re-count of the votes cast and recorded by CMS” shows that the results were as follows:

Motion	Yes	No	Abstain
1	44	27	19
2	48	40	2
3	48	39	3
4	46	40	4
5	46	40	4
6	46	40	4

However, the applicant goes on to state that if the seven proxy votes were disallowed as they should be, this would result in the defeat of motions 4, 5 and 6.

The applicant also refers to disallowance of a proxy vote cast on behalf of the owners of lot 5. Although this vote was disallowed by CMS on the grounds that the person to whom the proxy had been given had not counter signed the proxy form., the applicant believes that there is no requirement in the BUGT Act for the proxy form to be signed by the person appointed as proxy.

Subsequently, on 20 July 2009, this Office received further material from the applicant regarding proxies granted by the owners of lots 113 & 116 who reside in Singapore. The applicant states that on 18 August 2008 the owners received an email message from Mr Jose St. Ange seeking their proxy votes for the 2008 AGM. The owners gave their proxies to Mr St Ange and it is alleged that Mr St. Ange transferred these to his daughter, Natasha. They subsequently received a letter dated 27 April 2009 from Mr St Ange advising them of the need to vote upon the proposed management agreements and suggested that they vote personally as “the matter was too important for them to vote by proxy”. As they did not fill out the voting papers they did not expect that any votes would be recorded in respect of lots113 &116, but Natasha St Ange voted on their behalf as their proxy. It is alleged that at least 2 of these proxies were therefore signed over to Natasha without the consent or knowledge of the lot owner. It is also alleged that the body corporate has been inconsistent in deciding which votes should be accepted and which votes should be rejected. For example a proxy given to Dr Millist was ruled invalid because it was not signed by Dr. Millist.

The applicant then refers to circumstances regarding the 2008 AGM, which resulted in lodgement of a dispute resolution application with this Office (Ref 728-2008). In submissions regarding that application it is alleged that Mrs Michelle St Ange stated that Mr St Ange had not solicited proxies but rather, Natasha had accepted a number of proxies from close friends, neighbours and associates. The applicant states that the above material shows that Mr. St Ange actively sought to be appointed as proxy for a number of absentee owners.

Pursuant to section 73 of the Building Units and Group Titles Act, the body corporate committee, and all lot owners apart from the applicant, were invited to make submissions in response to the application.

Submissions made on behalf of the body corporate committee included the following:

• The applicant is seeking to have the 7 proxy votes cast by Ms Natasha St Ange disallowed on the grounds of a breach of clause 50A;
• Natasha St Ange previously held proxies for the 7 owners prior to being an employee of CMS as recorded in the minutes of the AGM on 25 August 2008. She was employed by CMS on a casual basis from 20 April 2009 to 26 June 2009 and she does not have a financial interest in the proposed new Administration and Management Agreements put to the Rosebank Extraordinary General Meeting held on 15 May 2009;
• The agenda for the EGM was posted to owners on 14 April, prior to the engagement of Ms St Ange;
• The agreements considered by the Rosebank Body corporate were not to the benefit of CMS as CMS stands to lose substantial benefits as a result of the body corporate entering into the new agreements;
• Ms Natasha St Ange did not stand to benefit personally from the prescribed arrangements to which the motions related and therefore did not have a financial interest in the prescribed arrangements;
• At the EGM on 15 May, the Chairperson invited persons from the floor to nominate as scrutineers for the purpose of validating voting papers and proxies and the counting of all votes cast on each motion;
• The chairman asked those present if they had any objection to the two individuals being appointed as scrutineers and no one objected;
• The appointees were Messrs Meijer & Walesby. They went through all voting papers, proxies, and nominations of company nominees and confirmed their validity or otherwise. They then counted the votes for and against, confirmed and signed the voting register as a true and correct record. On these results the motions would have been carried even if the disputed proxy votes were disregarded;
• Schedule 2, Part 2 (8) and (12) state “At a general meeting the chairperson may appoint persons as scrutineers who shall be entitled to inspect all voting papers and ballot papers furnished to the secretary of the body corporate under section 5(b) and relating to business at that meeting”

“The declaration of the chairperson of the result of the voting on any motion submitted at a general meeting of the body corporate, otherwise than on a poll, shall be conclusive without proof of the votes recorded for or against the motion.”

• The chairman rules upon the validity of the voting papers and proxies, not the body corporate manager as claimed by the applicant;
• Schedule 2, Part 2 (7) provides that “The Chairperson of a body corporate shall preside at a general meeting of the body corporate at which the chairperson is present and in the chairperson’s absence from any such meeting the persons present at that meeting and entitled to vote on motions submitted at that meeting may elect a person present at the meeting and the person so elected shall, while the person is so presiding, be deemed to be the chairperson of the body corporate”;
• The proxy form distributed with the agenda and voting papers specifically requires that both the proxy giver and receiver signs to confirm same.
  

In response to the additional information submitted by the applicant on 20 July 2009, Mrs. Michelle St. Ange provided additional information which included the following:

• Her family owns 5 homes in the resort and is therefore as entitled as any other lot owner to have a an opinion as to its future;
• Natasha St Ange worked for CMS for a few months to help out during a busy period, and then went to Europe on 30 June 2009;
• They deny the accusation made by the owners of lots 113 & 116. Although Mr St Ange previously acted as their proxy, he subsequently notified them that he could no longer act as their proxy because he was an employee of Mirvac, although his daughter, Natasha St. Ange would be able to act as their proxy;
• Mrs. St. Ange provided a copy of the form nominating Natasha St. Ange as proxy, which was faxed to the owners of lots 113 & 116 for their signature. Also attached was a copy of the same form after it had been signed and dated by the lot owners. The form reads:
  

“We, Chew Lai Leng & Manjit Singh proprietors of lots 113 & 116 appoint Natasha St. Ange as proxy to vote on our behalf at all general meetings held before Dec 2009 unless we serve you with a prior written withdrawal of appointment

Dated at Singapore on 18-8-08”

• Natasha St. Ange submitted a voting paper for the EGM and all valid proxies were noted on the voting paper although proxy votes from lots 100 & 19 were not exercised as the proprietors of those lots had lodged voting papers;
• Following receipt of correspondence from the owners of lot 113 & 116, it was not intended that proxy votes would be made on behalf of Ms. Lai Leng & Mr. Singh, but the St Ange family had to travel overseas immediately following the death of a close family member, and the Chairman was not advised as intended;
• On 22 July 2009 Ms Natasha St Ange notified the body corporate that she was no longer proxy for any lot owners.
  

Submissions were made by three lot owners who opposed the application. Their submissions include the following:

• The St. Ange family are generally well regarded in the resort and they believe that the family is being victimised by people who want to change the management company;
• The majority of residents want CMS to remain as the manager;
• Proxies have been given to the St. Ange family because owners respect their judgement;
• The St. Ange family own a number of properties at Hope Island resort so it is in their own interests to act for the benefit of the resort as a whole;
• Natasha St. Ange is a recently qualified engineer who was between jobs between mid-April so she spent a brief period working for CMS during a particularly busy period;
• The majority of residents were in favour of the new contract with CMS rather than the previous contractual arrangements which would continue in perpetuity;
• A small group of residents are determined to undermine any type of arrangement between the body corporate and CMS irrespective of the consequences.
  

Submissions were made by a number of lot owners in support of the application and included the following:

• Some residents believe that the body corporate committee bullies residents;
• Body corporate meetings are often held during working hours which precludes owners from attending;
• Its is believed that CMS is able to control body corporate voting owing to the number of proxies which it holds for absentee owners;
• CMS has made errors in counting of votes upon resolutions and these errors favour CMS;
• One lot owner does not believe that Mr. Allman has been validly appointed as secretary and treasurer in place of Mr. Beutel and also believes that another committee member, Mr Cummins is ineligible to be a member of the committee as he no longer owns a property within the resort;
• Members of the St. Ange family work for or have worked for Hope Island resort realty or CMS, both of which are owned by Mirvac;
• The BUGT Act does not require proxy votes to be signed by the proxy holder but only by the person granting the proxy;
• In some instances the wrong lot number was written on voting papers but the papers were nevertheless accepted by CMS;
• The counting of votes by CMS which simply declared that they had 50 YES votes across all motions. It is believed that this result was impossible because there were many abstentions but CMS counted the abstentions as “yes” votes;
• some voting papers have an incorrect lot number noted on them;
• it is believed that proxy votes by Natasha St. Ange were invalid and should be disallowed;
• it is believed that proxy votes by Dr. Millist was valid and wrongly rejected on the ground that it was not counter-signed;
  

In response to the above, the applicant made the following further submissions:

• S. 50A prohibits the use of proxy votes to vote upon a matter where the person exercising the proxy has a “financial interest” in the matter;
• She believes that being an employee of a firm which has a financial interest in a matter means that the employee also has a financial interest in the matter;
• It is therefore claimed that the 7 proxy votes received from Natasha St. Ange are invalid;
• It is untrue to say that CMS does not stand to benefit from the contracts;
• The 7 proxy votes should not have been accepted by CMS;
• The claim that even if the disputed proxies were deleted the motions would still be carried is not true because the removal of the 7 proxy votes and addition of proxy from lot 5 would change the result from a “yes” vote to a “no” vote;
• There is no statutory requirement for a proxy form to be signed by the person exercising the proxy;

JURISDICTION

The jurisdiction of a Referee under the Building Units and Group Titles Act 1980 (BUGTA) to make orders concerning Rosebank body corporate has been considered in previous orders. Specifically, where the registration of a plan for a body corporate has been for a specified Act, including IRDA, section 5A of BUGTA and section 325(2) of the Body Corporate and Community Management Act 1997 (BCCMA) provide that BUGTA continues to apply for that body corporate.

Section 77(1) of the BUGTA provides for the general power of a referee to make orders, being:
A referee may, pursuant to an application of a body corporate, body corporate manager, a proprietor, a person having an estate or interest in a lot or an occupier of a lot in respect of a parcel, make an order on any person entitled to make an application under this subsection or on the chairperson, secretary or treasurer of the body corporate for the settlement of a dispute, or the rectification of a complaint, with respect to the exercise or performance of, or the failure to exercise or perform, a power, authority, duty or function conferred or imposed by this Act in connection with that parcel.

The present application is by an owner against the Rosebank body corporate alleging improper use of proxies contrary to section 50A of. As a referee I am satisfied that I have jurisdiction to determine the present dispute.

DETERMINATION

The orders sought by the applicant are as follows:

“1. That 7 proxy votes cast in respect of lots 8, 48, 49, 99, 113, 116 and 117 exercised by an employee of Cambridge Management Services Pty. Ltd. (CMS), Natasha St. Ange, and used at the Rosebank EGM to vote for motions to approve two new 10 year contracts with CMS, be disallowed on the grounds of a breach of clause 50A of the Building units and Group Titles Act 1980;
2. That the proxy vote exercised in respect of Lot 5 and signed by proprietors of that lot be allowed;

3. That there be an urgent re-count by independent scrutineers, of the votes cast at the Rosebank EGM held on 15 May 2009, as the vote count recorded and reported to that meeting was inconsistent with the voting papers”

As stated above, the Building Units and Group titles Act 1980 (the Act) applies to this scheme. Part 5 of that Act concerns disputes and division 3 of Part 5 makes provision for orders by a referee. Within division 3, section 77 provides that a referee may on application of a body corporate or a proprietor in respect of a parcel, make an order for the settlement of a dispute, or the rectification of a complaint, with respect to the exercise or performance of, or the failure to exercise or perform, a power, authority, duty or function conferred or imposed by this Act in connection with that parcel.

The first matter for consideration is the argument that 7 proxy votes cast in respect of lots 8, 48, 49, 99, 113, 116 and 117, exercised by an employee of Cambridge Management Services Pty. Ltd. Natasha St. Ange, to vote for motions to approve two new 10 year contracts with CMS, should be disallowed. In this regard, section 50A of the Building units and Group Titles Act 1980 provides as follows:

50A Certain voting by proxy etc. restricted

(1) At any meeting of the body corporate, a person who has a financial interest in a prescribed arrangement or a proposed prescribed arrangement, is not entitled to vote as proxy for another person (other than a person who is the person's co proprietor or co mortgagee) or as company nominee of a corporation (other than a corporation where the company nominee is the majority shareholder or all of the shares are held by the family of the nominee or by the nominee and the nominee's family) upon a motion relating to that prescribed arrangement or proposed prescribed arrangement.

(1A) For the purposes of subsection (1)--

family means the spouse, parent, brother, sister or child of the company nominee.

(2) For the purposes of subsection (1), if a person or the person's spouse--
(a) owns shares (whether beneficially or otherwise) in a company; or
(b) is a member of a firm; or
(c) is a director or employee of a company or of a firm;

that stands to be benefited directly from the prescribed arrangement or proposed prescribed arrangement to which the motion relates the person shall be taken to thereby have a financial interest in that prescribed arrangement or, as the case may be, proposed prescribed arrangement.

Put simply, the practical effect of section 50A is that a person is not entitled to vote as a proxy upon a motion relating to that “prescribed arrangement” if they have a “financial interest” in the “prescribed arrangement”.

The first matter for determination is therefore whether the “Residential Body Corporate Agreement” (Motion 4) and “Management Agreement” for the Principal Body Corporate (Motion6) with Cambridge Management Services are caught by the definition of “prescribed arrangement”. The term “prescribed arrangement” is defined in section 7 of the Act in the following terms:

“prescribed arrangement” means any agreement or arrangement (including an arrangement set out in the by-laws in respect of the plan) between—
(a) in the case of a registered lot—the body corporate or the original proprietor and any other person; or
(b) in the case of a proposed lot—the original proprietor and any other person; being an agreement or arrangement—
(c) by instrument in writing appointing, pursuant to section 50, a body corporate manager; or
(d) for the carrying out of any of the duties of the body corporate under section 37(1)(a), (b) (c); or
(e) entered into pursuant to section 37(2)(a), (b), (c), (d) or
(e) or section 38C; or
(f) for the protection of the parcel, any part thereof or of the security of the occupants of the lots; or
(g) for the conduct of a business upon the parcel (whether upon a lot or the common property) of letting of lots on behalf of any proprietors of lots; or
(h) under which the rights of the proprietor of a lot are or are likely to be affected to a material extent.

I believe the contracts referred to in motions 4 & 6 at the EGM of the body corporate held on 15 May 2009, are both caught by the above definition of “prescribed arrangement”. However this does not necessarily mean that the requirements of the section are satisfied. The applicant must show that the person voting as a proxy has a financial interest in the prescribed arrangements before the section will operate to prevent their exercising any proxy vote.

In this regard, subsection 50A (2) provides that “For the purposes of subsection (1), if a person or the person's spouse--
(a) owns shares (whether beneficially or otherwise) in a company; or
(b) is a member of a firm; or
(c) is a director or employee of a company or of a firm;

that stands to be benefited directly from the prescribed arrangement or proposed prescribed arrangement to which the motion relates the person shall be taken to thereby have a financial interest in that prescribed arrangement or, as the case may be, proposed prescribed arrangement.
Both of the contracts referred to above involve the engagement of Cambridge Management Services and it is not disputed that at the time of the EGM, Ms. Natasha St. Ange was an employee of Cambridge Management Services. Although I have been advised that Ms. Natasha St. Ange was employed by CMS for a short period of time in a junior position, subsection 50A(2) of the BUGT Act specifically deems a person to have a financial interest in a prescribed arrangement if they are an employee of a company which stands to benefit from the arrangement.

Cambridge Management Services has argued that it does not stand to benefit from the contractual arrangements. Both the Principal Body Corporate Management Agreement and the Rosebank Body Corporate Management Agreement involve a substitution of existing contracts. It is argued that the new agreements are more favourable to the Principal Body Corporate and the Rosebank Body Corporate, with reduced levies payable and therefore CMS does not stand to benefit directly from the engagement of Cambridge Management Services. With respect, I believe that such an interpretation is untenable. The agreement entered into between CMS and the PBC involves payment of $60 per lot entitlement per annum while the agreement between CMS and the Rosebank Body Corporate involves payment of $990 per lot per annum. Clearly, CMS stands to benefit from each agreement which took effect following termination of existing agreements.

The next matter which I turn to is the proxy which was granted to Dr. Millist by the owner of lot 5.
I understand that the proxy vote cast on behalf of the owners of lot 5 was declared invalid on the grounds that the person to whom the proxy had been given had not counter signed the proxy form. The applicant maintains that this vote was valid as there is no requirement in the BUGTA for the proxy form to be signed by the person appointed as proxy. In response the body corporate has submitted that the vote was invalid because “the proxy form distributed with the agenda and voting papers specifically requires that both the proxy giver and receiver signs to confirm same”.

In my view the requirements for a valid proxy are contained in clause 15 of Schedule 2 to the Building Units and Group Titles Act 1980 which provides:

Appointment of Proxy

(1) An instrument appointing a proxy shall be in writing under the hand of the person making the appointment or the person’s attorney, and may be either general for a particular meeting.
(2) A proxy need not be a proprietor.

I have examined a copy of the subject proxy form and note that the owners of lot 5 have appointed Warren Millist as their proxy to vote on their behalf at “all general meetings held during the rest of the body corporate’s financial year”. The proxy form is dated 18 April 2009 and is signed by both co-owners of lot 5. Accordingly, I believe that this proxy meets the above requirements for appointment of a proxy and that the proxy vote exercised in respect of Lot 5 was valid .

Finally, the applicant has sought an order that there be an urgent re-count by independent scrutineers, of the votes cast at the Rosebank EGM held on 15 May 2009, as the vote count recorded and reported to that meeting was inconsistent with the voting papers.

Having regard to my findings that 7 proxy votes were wrongly included and one proxy vote was wrongly excluded, I believe it is appropriate for me to order that the body corporate is to conduct a recount of votes cast at the Extraordinary General meeting held on 15 May 2009 and to notify all residents of the outcome of the recount in due course.

While the applicant has sought the appointment of “independent scrutineers” to conduct a recount of the votes, I believe that a more practical and expedient outcome would be achieved by ordering that the body corporate is to notify all lot owners of the time and place that the recount is to occur, to allow lot owners to witness the counting of the votes and to allow lot owners to raise any additional concerns which they may have regarding the validity of the votes cast.

I therefore propose to make the following orders:

• that the 7 proxy votes cast in respect of lots 8, 48, 49, 99, 113, 116 and 117 at the Extraordinary General Meeting on 15 May 2009 were invalid and should be disallowed on the grounds that the exercise of these proxies by an employee of Cambridge Management Services involved of a breach of section 50A of the Building units and Group Titles Act 1980;
• that the proxy vote exercised in respect of Lot 5 was valid and should be allowed.
• That the body corporate is to conduct a recount of votes cast at the Extraordinary General meeting held on 15 May 2009 and to notify all lot owners of the outcome of the recount in due course;
• the body corporate is to give all lot owners reasonable notice of the time and place that the recount is to occur, allow lot owners to witness the re-count and allow lot owners to raise any additional concerns which they may have regarding the validity of the votes cast.