Lakelands Signature Living [2009] QBCCMCmr 412 (22 October 2009)

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

I hereby order as follows

that a notice of an interim contribution dated 2nd September 2009 was invalid since it failed to comply with section 142 Body Corporate and Community Management (Standard Module) Regulation 2008;
that a new notice for an identical sum of an interim contribution shall be issued by the body corporate within three weeks of the date of this order failing which owners who have paid against the invalid notice may seek reimbursement of their interim contribution;
that any new notice of interim contribution provides notice of at least 30 days before payment is due and otherwise complies with section 142 Body Corporate and Community Management (Standard Module) Regulation 2008;
that the votes of lots 4, 6, 7, 17, 21, 28, 33, 53, 54, 61, 64 and 69, and any other lot owner who voted at the extraordinary general meeting of 28th September 2009 but whose vote was not counted for the reason that such owner had not yet paid the interim contribution dated 2nd September 2009 must now be counted in the voting for that meeting and votes recorded on a corrected tally sheet;
that the minutes for the extraordinary general meeting of 28th September 2009 are to be re-written to reflect the corrected votes of those lot owners mentioned at item 4, and redistributed to all lot owners within one month of the date of this order.

This is an application dated 8th October 2009, and lodged on 13th October 2009, by David Wilman, and Carole McFeat (the Applicants) owners respectively of Lots 70 and Lot 69 against the body corporate for the scheme (the body corporate) for orders as follows –

On 16th October 2009 and 20th October 2009, the Applicants contacted this Office requesting an amendment to the interim outcomes sought regarding the body corporate entering into an agreement for the laying of cables for a new block of units within the scheme land, as builders were about to commence and the Applicants did not wish to hinder this work, nor the contracts for sale of the new units. The Applicants therefore asked to have removed from their application for interim orders, Motions 11 to 16 of the extraordinary general meeting held on 28th September 2009.

On 19th October 2009 Chris Hicks, a signatory to the application, asked for his name to be removed from the application for an interim order. He does not therefore appear as an applicant at this preliminary stage of the application.

“Lakelands Signature Living” CTS 32269 is a community title scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (Standard Module). There are 72 lots in the scheme.

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

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

(ii) the authorisation 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)).

Section 247(3) of the Act allows the Commissioner to refer an application to an adjudicator for consideration for an interim order even though proper notice of the application has not been given to the body corporate or other affected persons, and despite the fact that parties to the application have not been given an opportunity to make a submission about the matters in dispute. It seems to me that the Act allows this process because applications for interim orders often relate to emergency or otherwise urgent circumstances, where it is simply impractical or impossible to allow a period for submissions prior to the consideration of the application for interim orders. It is also relevant that generally the purpose of an interim order is simply to maintain the “status quo” of a situation, and not finally to resolve the matters in dispute.

Section 279(1) of the Act allows an adjudicator to issue an interim order in response to an application “if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates”. Read together with section 247(3), section 279(1) appears to allow an adjudicator to issue an interim order without any reference to other parties to the dispute.

Notwithstanding that the Act allows for interim orders to be issued without reference to other parties, I am of the view that when possible, it is far preferable and more consistent with the principles of natural justice, to allow affected persons to make a submission about an application (even if the time allowed for submissions is necessarily brief) prior to the determination of an application for an interim order.

Submissions on the interim orders sought were invited from the committee and the body corporate manager Sargeant Strata Pty Ltd.

The Applicants says that the body corporate withheld voting rights from several owners at the extraordinary general meeting held on 28th September 2009 (the EGM). The body corporate claimed that these owners owed a body corporate debt because they had not paid an interim contribution which had been issued 26 days before on 2nd September 2009 and contained no “specified date for payment.” The EGM had been called principally to set budgets and contributions.

The Applicants are aware that until the budgets are approved the scheme is in a difficult financial position and they do not want to see the scheme unable to pay bills. They therefore seek and order that the interim contribution notice is re-issued swiftly with a specified date for payment and that owners who were adjudged “unfinancial” be given the opportunity to vote on those motions put to the EGM.

The Applicants wrote to the body corporate prior to the meeting, pointing out errors in the some of the motions for the EGM and objecting on 29th September 2009 to their votes being discounted. There was no response for the body corporate and the Applicants have not yet seen any minutes of this EGM.

They also say that the committee has exceeded the relevant limit of spending by entering into a gardening contract on a month-to-month basis at about $8,000 per month, until the contract can be approved at a general meeting. The committee appointed the gardening contractor at a committee meeting on 17th August 2009. At the EGM, the gardening contractor motion was not listed as a motion with alternatives. There were 19 motions put to the EGM.

In respect only of the interim outcomes sought, the body corporate says that the Applicants cannot amend their application to exclude certain motions, and continue to seek that the others are struck out. If all motions are “infected” by the refusal of the chairperson to allow “unfinancial” owners to vote, then all or none must stand.

It says that the interim contribution notice was issued pursuant to section 141(3) Standard Module and “was not ‘a contribution notice’ as defined in section 141(1) of the Module and it is to be dealt with in accordance with Section 141(4) of the Module.” Such an interim contribution notice is issued by the committee, and the procedure is “an emergency procedure requiring prompt payment” and the body corporate submits that such a notice “is not required to have all of the criteria of a “contribution notice” (as fixed by the body corporate) including a date for payment.”

It says that as such it is like an invoice from the body corporate to a lot owner and is not required to carry a date for payment, and creates a debt if it is not paid. “Indebtedness arises upon the raising of the levy, or invoice [and t]he date for payment is irrelevant.” On 21st September 2009 “at an informal meeting of the committee...it was observed that a number of lot owners had not paid the interim contribution.” The body corporate manager advised that owners who had not paid were not eligible to vote.

At the EGM all motions were “deemed passed.” The body corporate provides a copy of the voting tally and says that “the exclusion of seven negative votes” had no effect upon the result of all motions which were deemed passed at the meeting. If all motions are declared invalid and a new meeting required it would cause delay and considerable expense; interim contributions paid would have to be refunded; the body corporate would be in financial trouble. Furthermore, no prejudice has been suffered by any owner. It summarises that the application is frivolous and vexatious, misconceived and without substance. It seeks costs.

The body corporate manager Sargeant Strata Pty Ltd submitted that it was appointed at the EGM but now has the books and records of the scheme. The debt which caused the ineligibility of several owners to vote was an interim levy issued almost four weeks earlier to assist cash flow.

It says that the results of each motion would not alter even if the votes of those who were ruled ineligible were counted. It says there would be little point in putting aside these motions and reconsidering them which would just be costly and cause delay, preventing the body corporate from meeting its financial commitments and hindering management procedures. It would also be contrary to the wishes of owners as recorded in the EGM minutes. It supplied a copy of the EGM minutes and a copy of the voting papers for Lots 4, 6, 7, 17, 21, 28, 33, 53, 54, 61, 64 and 69 which lots it says were adjudged to be “unfinancial” and thereby disabled from voting at the time of the EGM.

The applicant Ms McFeat provided me with a copy of her “levy notice” dated 2nd September 2009.

The question of ineligibility to vote depends on whether or not lot owners owed a body corporate debt at the time of a general meeting pursuant to section 84(2) Standard Module. It is not argued in this matter that the lot owners whose votes were denied owed a debt other than the non-payment of an “interim levy”, dated 2nd September 2009 which in the case of the applicant Ms McFeat was for $544.23.

The notice of levy (levy notice) states that it is to be paid as approved at a committee meeting on 17th August 2009. It also states that the levy is issued under “section 141(3)” although it omits to say “section 141(3)” of what document. It does not provide a date for payment. It states that the sum would be credited to lot owners’ accounts when the levies are approved at the extraordinary general meeting on 28th September 2009.

The body corporate argues that section 141(3) Standard Module does not require the notice of contribution to state a date on which it must be paid, since the aim is for the committee to strike a levy for an immediate injection of funds which will later be credited to any contribution payable by a lot owner after a budget is approved at a general meeting. It differs in that respect from section 141(1) and section 141(2) Standard Module which require the body corporate by ordinary resolution to decide on the amount of the contribution or special contribution, the number of instalments and the date by which each instalment should be paid.

This argument has some merit in that any owner receiving the levy notice would perhaps note that in order to be refunded the sum, say of $544.23, he or she should have paid that sum by 28th September 2009, the date of the general meeting. On the other hand, owners might have thought that the sum would simply be added on to whatever was decided at the general meeting. Owners are not generally familiar with the contents of the Standard Module, and rely on the body corporate manager and the committee for particulars of management. In any event the Standard Module was not referred to.

Owners might also have referred to the minutes of the committee meeting of 17th August 2009, but they would be none the wiser if they had. Motion 2 of that meeting provides only the same information as was in the levy notice.

However, the overwhelming argument against the body corporate’s submission is that section 142(1) Standard Module requires that a notice of contribution payable is given “at least 30 days” before the date for payment. In that way, a notice of contribution is not the same as an invoice given by the body corporate. It is specifically required to have a written notice of its due date given to lot owners. Part 3 is headed “Contributions levied by body corporate” and I do not find that the word “contribution”, which is not defined, requires different notice criteria as to whether it is fixed by the committee and is an ‘interim contribution’ or is fixed by the body corporate and is a ‘contribution’ or a ‘special contribution’. All ‘contributions’ require that written notice of them is given 30 days in advance to the lot owner.

Section 142(1)(c) Standard Module requires that the notice gives “the date on or before which the contribution or instalment of contribution, must be paid.” I am of the view that such date cannot be prior to the elapsing of 30 days. For a notice sent on 2nd September 2009 therefore, at best, the payment would not become due until 2nd October 2009, arguably 3rd October 2009 if it is argued that “30 days notice” means “clear days.” In any event, requiring payment by 28th September 2009 does not give the notice required by section 142(1) Standard Module.

It has been held in Wei-Xin Chen -v- Body Corporate for Wishart Village [4] that the very detailed provisions of the Standard Module make it almost inevitable that from time to time there will be non-compliance with it. At the same time, the provisions of the Act make it clear that non-compliance of “an insubstantial nature” will not be allowed to imperil the actions of bodies corporate or their committees, particularly in the instance of committees where actions are taken bone fide. However, the question of whether a legislated requirement is mandatory or merely directive has been recently explored[5], with it being said that the “better test” for determining the validity of an action which has not been complied with, or only partially complied with, is to “ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid... In determining the question of purpose, it was further held that regard must be had to “the language of the relevant provision and the scope and object of the whole statute.”[6]

It is my view that a failure to comply with section 142(1) Standard Module has the capacity to render any action taken in reliance of a defective contribution notice, invalid. The effect of the failure to give sufficient notice of a contribution is liable to have disastrous effects resulting in a severe miscarriage of justice. Where the result is that possibly thirteen owners have been disenfranchised, it is a breach which cannot go unremedied.

The body corporate says that no harm has been done because even if the disenfranchised owners’ votes had been counted, the results of voting at the EGM would have been the same. It seems to me from a brief study of the documents before me including the minutes of the meeting and the voting papers of thirteen owners provided by the body corporate, that this is correct. However, I note that of the thirteen owners whose voting papers were provided to me, in fact 6 of them, Lots 7, 17, 21, 28, 62 and 69, are all recorded on the tally sheet as being “financial” and their votes apparently counted.

I have not yet received submissions from all owners, who will be invited to make submissions before the final order. Whether or not owners have in fact been disadvantaged may be an immaterial consideration where a body corporate has committed a breach which denies lot owners their legislative rights.

At this stage, it is incumbent on the Applicants to show that there is a serious matter for consideration, and that on the balance of probability, they would succeed in obtaining the final outcomes sought. This is to be balanced against the inconvenience which may be caused to the body corporate, if the interim outcomes sought are made.

The body corporate says that to find in favour of the Applicants will cause delay and further expense. Certainly it is likely that another general meeting would have to be held requiring notice of 21 days, and attendant costs.

The Applicants have, after lodging this application, requested that motions 11 – 16 inclusive be released from the interim outcome sought, so that the body corporate may meet its liabilities under external contracts. As the body corporate notes, to allow some motions to go ahead and not others, when the validity of all motions is in doubt, might be taken to demonstrate a lack of credibility in the Applicants’ case.

However, I appreciate that the Applicants have sought a remedy where they saw an injustice, as they are entitled to do, and that as neighbours in a body corporate they are anxious not to disrupt further on-going building work by their actions. They are in an invidious position not of their own making. The Applicants may make what application they see fit.

There is little evidence of the “erroneous details” in the motions which the Applicants would like corrected. They point to the gardening contract as requiring a motion in the alternative. The motion was put forward as the raising of “special purpose levy” for gardening/maintenance, and is not a motion to engage a specific gardener for a specific sum. A motion with alternatives is required if two motions propose alternative ways of dealing with the same issue. It may be that Motion 18 submitted by the owner of Lot 61 (and ruled out of order by the chairman) has some relevance to this point, but the Applicants have not made this out.

Other evidence of the Applicants is persuasive and not disputed by the body corporate. What is argued here is a question of law.

Just on balance, I am of the view that in the financially straightened circumstances of this body corporate that it would not be in its interest to hold another general meeting, or to hold Motions 1 – 10 invalid. This would leave the body corporate without a budget and without a body corporate manager. However, whether 7 owners, or 13 owners, or more, were disenfranchised simply because of non-payment of the interim contribution notice, their votes must now be counted and the minutes re-written and redistributed. The tally sheet must also be corrected.

I note that the voting tally shows a symbol “NE” for “not entitled to vote” but that this abbreviation was not used on the tally. Instead, in a column headed “status” against the word “financial” the words “Yes” or “No” are recorded. Of the 72 lot owners, 54 were recorded as “unfinancial” and out of those not one of them was recorded as having cast a vote. The lot owners known to have cast votes but been believed to have been “unfinancial” have “DNV (did not vote)” against their lots and names. This is incorrect. Their votes were not counted.

However, in respect of the notice for interim contribution, the convenience of the body corporate is outweighed by the need for natural justice, adherence to the legislation and transparency.

I order that the notice of contribution dated 2nd September 2009 was invalid since it did not comply with section 142 Standard Module. However, I appreciated the concern of the body corporate and if a new notice of interim contribution is to be issued there is no need to reimburse owners who have paid against the notice dated 2nd September 2009 provided that any new notice is issued within three weeks of the date of this order, and gives at least 30 days for payment. Any owners who have already paid, might for example, have it noted on the new notice that they may disregard it. If a new notice is not issued within three weeks then it is up to owners to seek reimbursement of any payment already made against the invalid notice.

Finally, I note that the committee has held “informal committee meetings” and comment that there is no such thing available to the committee. A committee meeting must be held in accordance with the legislation. A casual meeting of all members of the committee, whilst to be encouraged, is a simply a gathering of neighbours at which no body corporate business may be approved.

This application is now referred back to the Commissioner in accordance with section 279(4) Act.

[1] Amendment requested by fax dated 16th October 2009 and signed by the Applicants and Chris Hicks.
[2] As above
[3] As above
[4] [2001] District Court (Brisbane) 4080 of 2000
[5] Silva Care Australia Pty Ltd , Gunadam Pty Ltd & Sirichandra Pty Ltd –v- Body Corporate For Indigo Blue Beachside Residences [2009] CCT KC003-07
[6] Tasker –v- Fulwood [1978] 1 NSWLR 20 approved by the High Court in Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 194 CLR 355

Number of Scheme:	32269
Name of Scheme:	Lakelands Signature Living
Address of Scheme:	QUEENSLAND

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Lakelands Signature Living [2009] QBCCMCmr 412 (22 October 2009)