Los Monteros [2009] QBCCMCmr 420 (27 October 2009)

Last Updated: 13 November 2009

REFERENCE: 0663-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	12873
Name of Scheme:	Los Monteros
Address of Scheme:	282 Marine Parade LABRADOR QLD 4215

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

Paul and Elizabeth Thatcher, the Owners of lot 9

I hereby order that the application for the following orders: That Melissa Pahl of Strata Sphere Management Pty Ltd be appointed as Administrator to the scheme to manage all the affairs of the body corporate and that the Administrator be granted exclusively all the powers, functions and responsibilities of the committee and each executive member of the committee for a period of 12 months. That the Administrator will hold those powers exclusively for the period of the administration but cannot delegate those powers to any person. That the Administrator shall be authorised to adopt an administrative fund budget for the current financial year including those amounts necessary to meet the costs of their appointment as Administrator and to levy contributions based on that budget. That the Administrator shall obtain quotes for an engagement of an appropriately qualified Contractor to undertake within three months of the date of this Order for repairs and maintenance necessary to ensure the building is in good and structurally sound condition. That the Administrator may raise a special levy to fund all costs of the repairs that cannot be met by the sinking fund for the purposes of such repairs. That the Administrator is authorised to engage Leary & Partners to undertake a sinking fund forecast for the Body Corporate in accordance with their quotation of Monday, 9 February 2009 for an amount of $647.00. That the Administrator shall be authorised to adopt a sinking fund budget for the current financial year and to levy contributions based on that budget. is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0663-2009

“Los Monteros” CTS 12873

APPLICATION

This is an application by the owners of lot 9, Paul and Elizabeth Thatcher (the Applicants), against the Body Corporate for “Los Monteros” (the Respondent), seeking the following orders:

1. That Melissa Pahl of Strata Sphere Management Pty Ltd be appointed as Administrator to the scheme to manage all the affairs of the body corporate and that the Administrator be granted exclusively all the powers, functions and responsibilities of the committee and each executive member of the committee for a period of 12 months.
2. That the Administrator will hold those powers exclusively for the period of the administration but cannot delegate those powers to any person.
3. That the Administrator shall be authorised to adopt an administrative fund budget for the current financial year including those amounts necessary to meet the costs of their appointment as Administrator and to levy contributions based on that budget.
4. That the Administrator shall obtain quotes for an engagement of an appropriately qualified Contractor to undertake within three months of the date of this Order for repairs and maintenance necessary to ensure the building is in good and structurally sound condition.
5. That the Administrator may raise a special levy to fund all costs of the repairs that cannot be met by the sinking fund for the purposes of such repairs.
6. That the Administrator is authorised to engage Leary & Partners to undertake a sinking fund forecast for the Body Corporate in accordance with their quotation of Monday, 9 February 2009 for an amount of $647.00.
7. That the Administrator shall be authorised to adopt a sinking fund budget for the current financial year and to levy contributions based on that budget.
   

The Applicants provided grounds which were to the following effect:

• The Applicants purchased their lot in late 2007.
• At the 2007 Annual General Meeting (AGM), one of the Applicants, Liz Thatcher, was appointed as an ordinary committee member. From that time, Mrs Thatcher undertook various inspections of the premises and noted substantial issues of damage to common property that required repair, areas where the scheme was not compliant with fire safety regulations and a number of other relevant areas of concern. Those issues were raised with the remainder of the committee who decided not to take any action apart from the replacement of the fire reels. Further, it appeared to Mrs Thatcher that there were substantial areas of non-compliance with the Act. Despite raising those issues in correspondence and directly on a number of occasions with the Chairman and Secretary, the Body Corporate has taken no action to remedy those issues and in fact the Chairman has stated that they do not intend to alter their practices that have been carried out over the last 20 years.
• Mrs Thatcher resigned as a member of the Committee in November 2008.
• The Applicants brought a conciliation application before the Commissioner in January 2009. No agreement was reached during the conciliation and on 23 April 2009 the Conciliator issued a Certificate of Conciliation to this effect.
• The Body Corporate does not prepare or maintain an annual budget for either administrative fund fees or sinking fund fees in accordance with the Act and the Module.
• There is no budget set for the coming financial year or a reporting of the performance of the Body Corporate compared to previous years’ budget.
• The sinking fund levies are not based on any sinking fund forecast or any financial information regarding anticipated expenses. The Body Corporate collects an annual amount from owners and if insufficient funds are held, the Body Corporate calls an EGM for each item of expenditure.
• The Body Corporate does not comply with section 114 of the Module in that it does not fix by ordinary resolution the contributions to be levied on owners of each lot on the basis of its budgets.
• Levies appear to be set on an ad hoc basis.
• At the AGM held in February 2009 relating to the 2008 financial year there were no levies struck and the Body Corporate determined to defer any discussion on levies until further quotes were obtained for other rectification works to be performed at the scheme. As at 17 July 2009, the Applicants have not been advised of the calling of a meeting to strike levies for the present financial year. There is uncertainty as to whether there are in fact any current levies payable in relation to the present quarter for administrative fees.
• The building is in a state of disrepair and the Committee are not dealing with any repair issues in a timely manner if at all. Present issues of concern include 2 rusted balcony roof supports on the top level of the building that require replacement; rotted timber fascia; water damage to unit 10 stemming from roof leaks; rusted guttering around the entire roof area; corroding and leaking front windows; decaying external brickwork and grout; and exterior common property areas require painting. These matters have been in issue since the Applicants purchased their unit and despite their efforts referenced in the letters attached to the application, the Body Corporate has not taken steps to engage repairers or raise funds to pay for the anticipated costs.
• The building was underinsured by around $1 million prior to July 2009. The Committee is not disclosing required details for insurance as required by the Module.
• The Body Corporate has refused to engage a quantity surveyor to audit the building and establish a sinking fund forecast plan.
• The Notice of AGM for 2009 does not comply with section 70 of the Module in that it did not contain a proper agenda of motions to be considered at the meeting, did not have a voting paper for all open motions to be decided at the meeting and did not contain or be accompanied by any other document as required under the Act such as budgets, accounts or disclosure of insurance detail. Further, the agenda did not include any of the statutory motions to be considered at the meeting. Further, six motions which were submitted by the Applicants for inclusion on the agenda for the AGM, despite complying with the Module in terms of the timing of their delivery, were not included on the agenda and no explanation was given as to why they were excluded.
• The Applicants believe that there is a continuing and significant breakdown in the functioning of this scheme and submits an administrator ought to be appointed to the scheme in order to remedy the substantial breaches under the Act and Module, and to properly establish the financial and administrative foundations for the scheme.
  

JURISDICTION

“Los Monteros” was registered as a building units plan (now known as building format plan) of subdivision on 29 September 1976 comprising 12 lots and common property. The scheme is regulated by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (the Standard Module).

This is a dispute between the owners of one lot and the body corporate and comes within the dispute resolution provisions of the Act (see sections 226, 227 & 228).

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

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

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

(c) a claimed or anticipated contractual matter about-

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

(ii) the 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)).

SUBMISSIONS

In accordance with section 243 of the Act, a copy of the application was provided to the Secretary, Mr Stephen Dann, who was required to distribute it to all owners of lots (excluding the Applicants) and the Committee, with an invitation to respond to the matters raised in the application.

A total of eight submissions were received.

The owner of lot 1 submits:

• He opposes the first three outcomes sought by the Applicants on the grounds that for many years the Committee has operated to the satisfaction of most owners, the majority of whom are live in day to day residents. Also the cost of such administration would be a burden to many of the retiree/pensioner owners.
• He opposes the fourth outcome sought on the basis that the wording implies that any repair work can proceed without regard to cost and without any consultation with the owners.
• He believes there is some merit in the fifth, sixth and seventh outcomes sought, providing the Committee, rather than an Administrator attend to them. A building of 33 years facing salt water is likely to have maintenance issues and it’s wiser to have a “check up at the doctors rather than call for an ambulance”.
• He proposes that:
  1. The Committee appoint a suitably qualified person/s to inspect and report on :

(a) maintenance issues including compliance with GCCC and/or fire or safety regulations;

(b) estimated costs arising therefrom

2. The Committee either prepare a sinking fund forecast (for 9 years) or appoint a suitably qualified person/s such as a quantity surveyor to prepare such a forecast.
3. The Committee call for a special meeting of owners to discuss and vote on any action required.
   

The owners of lot 2 made submission to the following effect:

• They have lived in their unit for the past ten years and have been involved with the Committee over that period. They are both happy and pleased with the way the Committee run their yearly business and are happy to let things continue as they are.
• The rusted roof supports were replaced before the application was lodged.
• The rotted timber fascia was treated when it was last painted.
• In relation to the water damage to lot 10, two loose tiles were replaced.
• Five quotations in relation to the rusted guttering have been obtained, to be presented at the next meeting in August.
• The front windows are not corroding. The leaking is caused by exceptional winds (110km) and rain (88mm over two days).
• The “decaying” brickwork was re-pointed 18 months ago.
• The exterior common property will need painting in approximately two years, according to a professional painter.
• The building is in fine shape considering its age of 37 years.
• As for the continuing complaints by Mrs Thatcher regarding levies and body corporate fees, all residents spoken to remain content with the existing arrangement. They do not need to be told by some expensive engineer what needs to be done, as they are not blind.
• Over the years they have been living there, the Body Corporate has raised special levies when needed for replacement of storm water pipes with copper, replacement of submergible water pumps, also for stormwater and partly rusted rear stairs, support beams, also fire hoses and fire escape lights replaced.
• The forecasting for each year is done by the treasurer and is usually correct and is monitored by the chairman who is a qualified accountant.
  

The owners of lot 3 submit:

• They oppose the application and proposed outcomes and any order to appoint an administrator or paid body corporate managers.
• They have owned unit 3 for 30 years and never let; are happy with present management and policies, and how it has been run for the last 33 years.
• The majority of owners have recently indicated that they are happy with present management and policies and do not want the expense of the appointment of an Administrator, or paid body Corporate Manager.
  

The owner of lot 4 also made submission opposing the application and the outcomes sought, particularly any appointment of an Administrator, or paid body corporate managers. She states that the application is unnecessary, as anything that can be done by an administrator or body corporate manager can be done by the Committee without cost. The Applicants’ complaints could have been settled though proper channels at the AGM in January 2009 if they had accepted and agreed to the majority decision of the meeting.

The owner of lot 5 submits:

• He is a current committee member and has held a committee position for about 10 years.
• In that time, owners have always worked in harmony for the good of all with no private agendas. There has always been the ethos of keeping levies and costs to a minimum. To that extent a few owners voluntarily share the work load in the day to day operations of the complex. With fewer owner/occupied units, the load falls on only a couple of willing people to get by.
• The Applicants do nothing to assist in the day to day operation of the Body Corporate but complain and threaten the Committee at every turn. They bought their unit at a very reasonable price and are doing their best to have the rest of the owners foot the bill for improvements they desire before on-selling. It has been listed for sale for the majority of the time they have owned it.
• Regarding levies, he is very happy to leave the arrangements as they stand. The Chairman is an accountant and has held the position of chairman for more than 20 years. His estimates have always been accurate and like the majority of unit holders, he prefers to have special levies applied for major expenditures as and when required.
• Regarding the appointment of an outside party to run the body corporate, he does not know nor has he had any dealings with Melissa Pahl of Strata Management Pty Ltd. There would be numerous other qualified persons who he would find preferable in that position should that be the decision of this Office.
  

The owners of lot 7 made submission to the following effect:

• Do not agree with the appointment of an Administrator.
• Has lived in the units for 10 years and have at all times been satisfied with the way the Committee has run the Body Corporate.
• The 2 rusted balcony roof supports on the top level of the building and the rotted timber fascia have both been attended to and repaired and were done so before the application was made on 20 July 2009.
• In relation to the rusted guttering around the entire roof area, 5 quotes have been obtained and an EGM is being arranged for voting on this matter.
• In relation to the building insurance, the summary of replacement cost was obtained from Herron Todd White dated 21 November 2008 and additional cover was taken out on 23 December 2008.
  

The owner of lot 11 submits:

• She has lived in unit 11 for over 21 years. She feels that the various Committees have managed all the affairs of the Body Corporate professionally and successfully during that time. They are a small Body Corporate and she believes that the current Committee can implement or remedy any changes that are required. There is therefore no reason to appoint an Administrator.
• Considering the age of the building (33 years) and its proximity to salt water, it is in extremely good condition.
• The Applicants’ listed “issues presently of concern” have already been rectified or are currently in the process of being so. Sometimes, these matters do take a while, but that is not usually the fault of the Committee. Tradespeople are not always reliable, punctual or co-operative; sometimes just getting a quote is a lengthy process.
• Regarding levies, in the 21 years she has resided there and attended numerous AGMs and other meetings, she cannot recall any disputes or complaints about levies, whether it be administrative fees, sinking fund levies or the occasional special levy.
• She is appreciative of the work done by owners which enables all of them to enjoy low Body Cororate fees.
• She is satisfied with the way her Body Corporate operates and opposes the appointment of an Administrator. However, in the event that the decision is made to appoint one, she feels that the Administrator should not be nominated by the Applicant, but by the Committee after discussion with all owners.
  

The Committee made submission to the following effect:

• The application is strongly opposed; there is no dispute, or grounds, for it. The application is uncertain, unnecessary and the proposed outcome contrary to the wishes expressed by the Committee and majority unit owners at the AGM.
• All matters of concern to the Applicants are known to the Committee and all resident unit holders and have been finalised, or are being attended to, in the normal course of business, or were on the agenda for the EGM to be held in August 2009, when all quotes were to hand.
• All actions of the Committee and policies introduced are done with the consent and approval, or ratified, by majority unit owners at an AGM or EGM and no motion has been moved through the proper channels, or the Committee advised, to amend, or change the present policies, and/or management of the Body Corporate.
  

The Applicants, through their solicitors, exercised their right to inspect the submissions made and replied in some detail to each submission made, to the following effect:

In response to the submission by the owner of lot 1:

• The Applicants agree with the part of the submission that suggests that certain steps ought to be taken in relation to better planning regarding the maintenance issues, compliance with the GCCC and/or fire or safety regulations and that either the Body Corporate prepare a sinking fund budget or appoint a quantity surveyor.
  

In response to the submission by the owners of lot 2:

• The Applicants reject the baseless allegation regarding any “agenda” to control the building through the appointment of a manager. Melissa Pahl of Strata Sphere was recommended to the Applicants, but they do not know her.
• The Applicants’ desire is to have the Body Corporate overhauled in the sense that it needs to be brought into line with the requirements of the relevant legislation.
• In relation to the work suggested that has been undertaken the Applicants note:
  • The rusted roof supports replaced previously are noted in the Applicants’ initial submissions. There are two other roof supports that are rusted that require replacement.
  • The rotted timber facia that was “treated” was filled with bog some time ago but now needs further attention.
  • In relation to the rusted guttering, while again it is satisfactory that some action has been taken, the Applicants first raised in their report to the Committee of May 2008 that there was rusted guttering that required replacement. The Body Corporate has only now decided to put a motion to the members regarding works to be completed. Similarly, the rusted steel roof support posts were raised by the Applicants in December 2007 as an agenda item for the 2008 AGM, and in the Applicants’ report in May 2008. The Body Corporate has acted to repair two of the four rusted posts as an emergency repair in recent weeks.
• While it is suggested in the submission that the Body Corporate doesn’t need to engage an independent engineer to assess the issues with the building, clearly there is no planning for any sinking fund and there is no ability to act in a timely fashion, again borne out by the delay in the time that the guttering has been identified as in need of repair until the time that the matter is raised formally before the Body corporate.
  

In response to the submission by the owners of lot 3, nothing can be made of it.

In response to the submission by the owner of lot 4, while it is correct that anything that could be done by an administrator or a paid body corporate manager has or can be done by one of the Committee without cost, the difficultly arises in the fact that the Committee and Chairperson presently do not do those roles in accordance with the provisions of the legislation.

In response to the submission by the owner of lot 5:

• The Applicants deny that they have suggested they have friends or any other relationship with a Body Corporate management company, agents or staff. The two organisations who provided quotes as attached to the initial application were simply obtained from the phonebook and after recommendation from the Unit Owners Association.
• While it is irrelevant, the Applicants deny that the unit is for sale.
• The Applicants simply wish for proper administration of the Body Corporate to be undertaken and provided the person or company is suitably qualified and competent they really have no preference as to who that person may be.
  

In response to the submission by the owners of lot 7:

• Only two of four rusted balcony roof supports have been replaced. The reference to Item C having been attended to and repaired clearly is in error as item C is the rusted guttering around the entire roof area which is referred to as quotes having been obtained and an EGM being arranged for voting on that matter.
  

In response to the submission by the owner of lot 11:

• The numerous repair issues remain unattended to and without a sinking fund forecast there is no forward thinking for any future rectification of works which will be necessary given that the building is 33 years old and is in close proximity to salt water.
• It is irrelevant whether “no issue” has ever been taken in relation to levies. Any new owners moving into the building is entitled to be able to properly assess what the likely future expenditure in terms of sinking fund and administrative fund will be based on historical data as well as forecast budgets.
  

In response to the submission by the Committee:

• The bulk of the submission appears to be little more than a denial of any mistake or contravention of the Act.
• For the EGM, the material sent to owners again failed to comply with the relevant legislation. The attempt by the secretary/treasurer to address some of the issues in the voting paper still failed to adhere to the requirements of the legislation.
  

The Applicants’ position remains that the body corporate has failed to comply with fundamental obligations imposed by the legislation including the obligations to properly call and hold meetings, to properly record business of the body corporate and the failure to set and maintain any budgets for administrative or sinking funds. The Applicants believe the only proper course is for an Administrator to be appointed to remedy these failures and ensure future compliance with the legislation.

DETERMINATION

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.

I am not persuaded on the material before me that the appointment of an administrator is warranted in this particular case. It has been held that the very detailed provisions of the regulations make it almost inevitable that from time to time there will be non-compliance. Equally though 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.[1] In any event, the Applicants have not sought to challenge the validity of any particular meeting of the committee or the body corporate or any resolutions passed therein, but rather, seek to appoint an Administrator at the outset. In my view such action would be an overreaction to what I consider to be relatively minor non-compliance with the legislation, which can be rectified.

I have identified the following practices of the body corporate that I do not consider to be strictly in accordance with the legislation and which the body corporate should seek to rectify:

• It does not appear that notice of general meetings is given in strict accordance with section 70 of the Standard Module. The voting papers do not appear to be compliant with section 71 of the Standard Module.
• Motions are recorded in the minutes of general meetings as having been moved by someone, seconded by someone and then the result is stated to be “carried”, but specific voting results are not recorded. The chairperson is required to declare the result of voting on motions at meetings by stating the number of votes cast for the motion, the number of votes cast against the motion and the number of abstentions from voting on the motion. These numbers must be recorded in the minutes of the general meeting (section 93(1), (2) & (3), Standard Module). A voting tally sheet recording certain specific information must also be kept (see section 93(4) Standard Module).
• The body corporate must adopt an administrative and sinking fund budget each financial year (section 139(1) Standard Module). The budgets forecast anticipated expenditure. They form the basis for setting the annual contributions payable by the owner of each lot to the administrative and sinking funds (Section 141(1) Standard Module). The sinking fund budget must cover a period of at least ten years (see section 139(3), Standard Module). The committee must prepare the proposed budgets for the consideration of owners at each AGM (section 139(5) Standard Module). A copy of the proposed budgets must be included in the notice of an AGM. This does not, at present, occur. It does not have to be a difficult exercise to prepare budgets in accordance with the legislation. The budgets for the next financial year can be based on actual expenditure for the last financial year, with any necessary adjustments. It is not necessary to engage a professional quantity surveyor to prepare a sinking fund forecast, however, some attempt must be made to reasonably estimate anticipated expenditure of a capital nature over a ten year period.
• The contributions toward the administrative and sinking funds are not set in accordance with the legislation. Section 141 of the Standard Module requires the body corporate to fix, by ordinary resolution in general meeting, the contributions to be levied on the owner of each lot for the financial year on the basis of its budgets.
• The committee does not give a copy of the minutes of each committee meeting to all owners, as required by section 55 of the Standard Module. I note the body corporate’s attempt at its most recent EGM on 6 September to avoid the need to do this, although the motion was subsequently withdrawn. This is a mandatory requirement of the legislation and it is not open to the body corporate to attempt to pass a resolution avoiding it.
• Motions submitted by owners must be included on the agenda of a general meeting in accordance with section 69 of the Standard Module. While I concede that the six motions submitted by the Applicants by letter dated 20 December 2008 that were excluded from the agenda of the next general meeting, were not worded as motions and may well have not been enforceable, the committee should have included them on the agenda of the next general meeting agenda on which it was practicable to do so. The chairperson has power to rule motions out of order at a meeting if the motions, if carried, would conflict with the Act, regulation, by-laws, or a motion already voted on at the meeting, or would be unlawful or unenforceable for another reason (section 81, Standard Module).
  

The Applicants allege that the body corporate is not complying with its legislative responsibility in section 159 of the Standard Module to maintain common property in good condition. However, I am not persuaded on the material before me that the body corporate is failing to comply with its legislative obligation in this respect.

While I acknowledge that there is some evidence of non-compliance with the legislation, it appears that the body corporate is continuing, for the most part, to meet its legislative obligations. It holds AGMs and although those AGMs are not held strictly in accordance with the legislation, their validity has not been challenged through this office. Nor have any specific actions of the committee or the body corporate sought to be challenged. The body corporate maintains adequate insurance, has a bank account, an elected committee, and holds regular meetings. While not appearing to budget specifically in accordance with the legislation, it sets annual contributions for the administrative and sinking funds and raises extra funds as required. I have not been supplied with any evidence that the common property is not being maintained in good condition. Further, I have no evidence that the body corporate is unable to meet its financial obligations as and when they fall due.

While dismissing the application for an administrator, I would like to strongly encourage the body corporate to rectify the matters outlined above at its earliest convenience. I would expect that for the next general meeting of the body corporate, proposed budgets for the sinking and administrative funds would have been prepared and that the meeting is called and held in accordance with the legislation. The Information Service can be contacted on 1800 060 119 for general information on the legislation in relation to the convening of general meetings and setting of budgets.

ORDER

For these reasons I have made the order above.

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[1] Wei-Xin Chen v Body corporate for Wishart Village [2001] District Court (Brisbane) 4080 of 2000