Swell Residences [2009] QBCCMCmr 45 (10 February 2009)

Number of Scheme:	20859
Name of Scheme:	The Groves No. Three Minyama
Address of Scheme:	4 Longwood Street MINYAMA QLD 4575

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Marilyn Rodgers, the Owner of Lot 62

I hereby declare that the Body Corporate Committee had no authority to give consent on behalf of the Body Corporate for The Groves No. Three Minyama to the Commercial and Consumer Tribunal application (reference KL011-07) brought by Ray Shaw, and that any purported consent was at all times void.

I further order that the Body Corporate for The Groves No. Three Minyama shall provide a copy this order and the statement of reasons to all owners in the scheme within seven (7) days of the date of this order.

The Groves No. Three Minyama community titles scheme (The Groves No. Three Minyama) consists of 68 lots and common property. The community management statement (CMS) for The Groves No. Three Minyama indicates that the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module) applies to the scheme. Department of Natural Resources and Water records show the scheme is registered as Group Titles Plan 1935.

Pursuant to the Body Corporate and Community Management Act 1997 (Act), this application was made by Marilyn Rodgers, Owner of Lot 61 (applicant) on 5 February 2008. The applicant sought the following order against the Body Corporate for The Groves No. Three Minyama (respondent):

A declaration that the letter of 16/11/2007 from North Coast Body Corporate Management on behalf of the Body Corporate was not authorized by the Body Corporate in Accordance with the Act.

Under section 243 of the Act, a copy of the application was provided to the Body Corporate, with an invitation to the Committee and all owners to respond to the matters raised by the application. Submissions were made by the Committee and five other owners. The applicant inspected the submissions received but did not make a written reply.[1]

A dispute resolution recommendation was made referring the dispute to departmental adjudication.

The application relates to an application in the Commercial and Consumer Tribunal (CCT) to adjust the lot entitlements for the scheme[2], and the purported consent of the Committee to that application. The facts of the dispute, as outlined in the application and submissions can be summarised as follows.

On 17 October 2007 the Body Corporate held an Extraordinary General Meeting (EGM) for the purpose of considering a motion to adjust the contribution schedule of lot entitlements for the scheme so that each lot would have one contribution lot entitlement. The motion was listed as a resolution without dissent and was lost, with 29 votes in favour and 16 against.

The motion was submitted by the Committee and the explanatory note said “Legislation suggests that lot entitlements must be equal, unless there is reason for them not to be equal...” and that “...the Committee cannot see a reason why unit owners are not paying an equal amount in contributions...” The covering letter with the notice of meeting, signed by the Body Corporate Manager (BCM), Leigh Stonehouse of North Coast Body Corporate Management Services, said that if the motion was lost the Committee had agreed that an application to amend the lot entitlements would be made to the CCT.

On 23 October 2007 an application was made to the CCT by Ray Shaw, the Body Corporate Secretary. The CCT forwarded a Respondent’s Kit and Defence and/or Counterclaim form to the Body Corporate.

On 6 November 2007 the CCT correspondence was forwarded to every owner by the Body Corporate with a covering note indicating that every owner other than Shaw was classified as a respondent. Several owners attempted to file a defence to the CCT application. However the CCT advised the Body Corporate that only the Body Corporate was required to file a defence as the respondent was the Body Corporate and not individual lot owners.

On 16 November 2007 the BCM wrote to the CCT advising that “...the Body Corporate Committee agree entirely with the facts contained within Mr Shaw’s application, as well as the order sought by Mr Shaw.” The letter nominated Matthew Hamilton as a representative of the Body Corporate and said the Body Corporate did not require further time to lodge defence. The letter was apparently sent in line with a resolution of a ‘special’ committee meeting held that day which was signed by five Committee members (excluding Shaw). The resolution referred only to the Committee and not the Body Corporate. The minutes say Shaw took the minutes but had no participation.

On 20 November 2007 the CCT made an order in respect of the application. In part the order said “By consent, the Contribution Lot Entitlement Schedule is adjusted as of 21 November 2007 so that the respective lot entitlements are equal.” The order noted that the respondent Body Corporate did not contest the application and agreed with the orders sought. In light of the CCT order the Body Corporate has taken steps to record a new CMS with the new lot entitlements, and an adjustment to contributions is to be included in the 2008 budget.

The applicant disputes the capacity of a single owner to change the lot entitlements of the entire scheme and disputes that the BCM’s letter to the CCT stating the agreement to the CCT application was authorised by the Body Corporate.

The submission from the Committee, signed by six Committee members, includes the following:

Four submissions from owners appear to support the application. Two express concern that they were not permitted to respond to Shaw’s application in the CCT and with the process generally. Two owners comment on the equity of the adjustments, with one believing that when he voted on the EGM motion he was misled by Shaw as to the legislative requirements. Another owner’s submission says she does not agree with the applicant, but gives no reasons.

Subject to the limitation on my jurisdiction in regard to lot entitlements and the decision and processes of the CCT, which I will comment on further below, I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.[3]

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 claimed or anticipated contravention of the Act or the CMS; or the exercise of rights or powers, or the performance of duties, under the Act or the CMS; or a claimed or anticipated contractual matter about the engagement of a person as a body corporate manager or service contractor; or the authorisation of a person as a letting agent.
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)).

The sole issue for consideration in this matter is whether, to the extent that the letter of 16 November 2007 purported to advise the CCT that the Body Corporate consented to Shaw’s application in the CCT, the BCM or the Committee had any authority to give that consent.

At the outset I will clarify that this application is not a dispute about the lot entitlements applying to this scheme. I have no jurisdiction to determine adjustments to lot entitlements. Moreover I have no capacity to intervene in the jurisdiction of the CCT to determine lot entitlement disputes, or the CCT’s decision or processes, and I have not been asked to. Accordingly it is not appropriate for me to consider the submission comments regarding the merits of the lot entitlements adjustment. However, to assist owners who appear to be confused by the information they have received from various sources on this issue I note some general information.

Section 48 of the Act provides mechanisms for the adjustment of lot entitlements where owners cannot reach agreement themselves. Section 48(5) and (6) of the Act provide that the order of the CCT or specialist adjudicator with regard to the contribution schedule must be consistent with the principle that: “...the respective lot entitlements must be equal, except to the extent that it is just and equitable in the circumstances for them not to be equal.” Section 49 outlines some of the considerations in determining just and equitable circumstances.

Only an owner may apply to the CCT or a specialist adjudicator for the adjustment of a lot entitlement schedule. The respondent to any such application must be the body corporate. If an owner applies to an order of a specialist adjudicator (who, pursuant to section 264 of the Act, must be agreed to and paid for by the parties) any other owner in the scheme can elect to be joined as a respondent. No such provision is included for a dispute before the CCT. I note that the explanatory notes for the amendment of this section in 2007 state[4] that:

However, the BCCM Act provisions relating to a lot owner joining a lot entitlement dispute and the responsibility for costs will not apply to an application made to the CCT as the CCT Act makes provision for the inclusion of parties and costs.[5]

It seems that confusion arose in this case because the Body Corporate (through the BCM or the secretary or other) forwarded the CCT application to all owners. Presumably this occurred because the process under the body corporate legislation is that applications must normally be forwarded to all owners with an invitation to make a submission, on the basis that all owners are affected persons. However this is not the case in the CCT where owners in a lot entitlement dispute would not be entitled to comment on the application to the CCT unless they are joined as a party to the dispute, despite the fact that they will be affected by any adjustment of lot entitlements.

The application is very limited in its arguments. However on the face of the material available the issue seems clear.

A body corporate can agree at a general meeting to alter its lot entitlements. However, as lot entitlements are contained in the CMS, the adjustment of lot entitlements requires consent to the recording of a new CMS. Pursuant to section 62 of the Act, the consent to record a new CMS requires a resolution without dissent. It is clear from the EGM of 17 October 2007 that the Body Corporate did not consent to the adjustment of its contribution schedule lot entitlements.

It is obvious that the Committee supported the application to the CCT and foreshadowed its lodgement prior to the EGM. The applicant in the CCT matter was the Committee secretary. However individual owners were not joined as defendants and so the only defendant was the Body Corporate. As such the issue here is that the CCT apparently requested a defence or argument from the Body Corporate, as the respondent, and not from just the Committee. In this regard it is important to note that “The Body Corporate ... is a legal person separate from its members, and more importantly, from its committee.”[6]

I accept that the BCM’s letter only said that the Committee agreed with the order sought by Shaw, and that the Body Corporate did not require further time to file a defence. It is of course a matter for the CCT to determine whether the BCM’s letter purported to consent to the application on behalf of the Body Corporate or merely expressed the view of the Committee alone. But it appears from CCT order that the CCT interpreted the letter as a response on behalf of the Body Corporate.

I am not aware whether the application to the CCT included the information that the Body Corporate had just refused to consent to the lot entitlements adjustment. While it is a matter for the CCT (or any decision-maker hearing an appeal of the CCT order) to consider, it could be argued that the Committee misled the CCT in implying that the respondent Body Corporate did not object to the adjustment of lot entitlements when in fact the Body Corporate had in effect expressed its objection at the EGM a month before.

Regardless of the position of the members of the Committee, in making its response to the CCT it could be argued that it was incumbent on the BCM or Committee to advise the position of the Body Corporate, and not just the Committee members, on the matter. Pursuant to section 101(2) of the Act the Committee must put into effect the lawful decisions of the Body Corporate. The EGM did not make a decision on lot entitlements as such, but rather refused to decide to adjust them. However it arguably follows that a committee, as the administrative arm of a body corporate, can not purport to agree to something that the Body Corporate at a general meeting clearly did not agree to. To the extent that the Committee was acting on behalf of the Body Corporate in responding to the application to the CCT, I am the view that the Committee had no authority to deviate from the position taken by the Body Corporate at the EGM.

More fundamentally, pursuant to section 100(2) of the Act and section 26 of the Standard Module, a Committee has no power to make decisions on behalf of the Body Corporate that are restricted issues for the Committee.

Under section 26(d), a matter that may only be determined by a resolution without dissent of a body corporate is a restricted issue for the committee. Accordingly, a committee has no power to make a decision to adjust lot entitlements. I consider that this extends to a decision agreeing or consenting to a lot entitlements adjustment. While the Committee did not specifically resolve to adjust lot entitlements, any purported consent to or refusal to defend the application in the CCT had that effect or had the likelihood of having that effect given there was no other defendant. Accordingly, I am of the view that purporting to consent to the adjustment of lot entitlements (if was what the Committee sought to do), was a restricted issue beyond the power of the Committee.

Moreover, restricted issues include decisions to change the rights, privileges and obligations of the owners of lots in the scheme. A decision not to defend (or to consent to) any legal proceeding against a body corporate has the likelihood of resulting in a consent order or a default judgement. To the extent that a default judgement or consent order would change the rights, privileges and obligations of the owners, by adjusting their lot entitlements, any decision not to defend or to consent to the CCT application would again be a restricted issue for the Committee.

I have serious reservations about the processes of the Committee in regard to its purported resolution of 16 November 2007.

The Committee said it did not have time to properly convene a meeting to enable a response by 22 November 2007. It is unclear why this was the case when the Body Corporate received notice of the CCT application at least by 6 November 2007, allowing some 16 days. Moreover the CCT clearly flagged the potential to obtain an extension of time. Notice of a Committee meeting must be given 7 days before the meeting, or 2 days before if the reduced notice period is agreed to at the previous meeting or by all members in writing.[7]

Despite the fact that all Committee members were apparently able to meet in person, it seems the Committee decided to consider the issue of the CCT application under the auspices of section 35 of the Standard Module for voting outside committee meetings. These processes are commonly used for ‘flying minutes’ in an emergency or when committee members are unable to meet in person within a reasonable timeframe to consider Body Corporate business.

Under this process notice of the motion to be considered must be given to all committee members (or as many as practicable in an emergency) and advice of the motion must be given to owners at the same time or as soon as practicable afterwards. In this case it seems no prior notice was given to Committee members. They were simply asked (at some unspecified time) to attend a meeting and were presented with the motion at the meeting. Advice of the motion was never given to owners as required by section 35(3).

Section 36 of the Standard Module requires that a copy of any resolution voted on outside a committee meeting to each Committee member and owner within 21 days of the passing of the resolution. The section requires record of the resolution must include the date the notice of the motion was given, the names of the Committee members to whom the notice was given, the words of the motion, the names of the Committee members who voted and the number of votes for an against the motion. The BCM advises that the resolution was never distributed to owners.

Pursuant to section 35(6) of the Standard Module, a motion voted on outside a committee meeting must be confirmed at the next Committee meeting, with those minutes distributed to all owners in due course. Minutes of meetings include “the words of each question decided”. The BCM claims that the resolution of 16 November 2007 was ratified at the Committee meeting on 17 December 2007, with the minutes distributed on 21 December 2007. However these minutes only include a dot point under ‘General Business’ which said “During 2007, there was several “Unofficial Committee meetings together with a number of Flying Minutes”, enacted and these were reviewed at this General Committee Meeting and were officially ratified.” This is entirely unsatisfactory, particularly when the resolution itself had not been distributed. At the very least the text of the each resolution purportedly ratified should have been included.

Under section 37 of the Standard Module a resolution passed outside a committee meeting may only be carried out if no notice of opposition to the resolution is received within seven days of the copy of the resolution being given to each owner under section 36. In this case the Committee acted on the resolution immediately, with the BCM letter to the CCT apparently sent on the same day as the resolution rather than waiting seven days after the resolution was given to all owners.

The provisions outlined have two important roles. They ensure that all owners are fully informed of Committee processes and have the opportunity to lodge a notice of opposition to a resolution[8] before it is carried out. They also provide transparency, and verify before and after resolutions are passed that purported decisions actually occurred when and how it is claimed that they occurred.

In this case there were numerous procedural failings, most fundamentally that owners did not receive any indication of the Committee consideration of the issue or decision, despite there being a requirement for notification at three different stages. The applicant has not specifically challenged the Committee resolution (presumably initially because she did not know it existed). As he issue does not affect my decision I will not pursue this matter. However I suggest the Committee pay much greater attention in future to ensuring that proper notice is given to owners of Committee meetings, motions, resolutions and minutes.

It may well be that in writing its letter to the CCT of 16 November 2007, the BCM and/or the Committee were simply expressing the view of the Committee alone and were not purporting to consent to the CCT application on behalf of the Body Corporate. However, the Committee clearly decided not to defend or oppose the application, despite it being contrary to the position of the Body Corporate taken at the EGM.

To the extent that the 16 November 2007 letter to the CCT sought to consent to the application on behalf of the Body Corporate, or was interpreted as such, I consider that it is clear that the Committee had no authority to give such consent. Consent to an adjustment of lot entitlements could only be given at a general meeting by resolution without dissent and it is unequivocal that the Body Corporate failed to consent to any adjustment of the lot entitlements at its EGM on 17 October 2007. Similarly, to the extent that the Committee resolved not to defend the CCT application, I consider that their decision affected the rights and obligations of owners and as such was beyond the authority of the Committee to decide.

In light of my findings, I consider it is appropriate to make a declaratory order that the Committee had no authority to consent to the CCT application and that any purported consent was void. To assist all owners in understanding the circumstances of this matter I have also ordered that a copy of this order and reasons be provided to all owners. The parties may wish to seek private legal advice regarding their capacity to pursue this issue in light of my order.

[1] See sections 246 and 244 of the Act respectively
[2] CCT reference KL011-07
[3] See sections 227, 228, 276 and Schedule 5 of the Act

[4] Explanatory notes for the Body Corporate and Community Management and Other Legislation Amendment Bill 2006, page 8

[5] Section 53 of the of the Commercial and Consumer Tribunal Act 2003 allows the CCT, of its own initiative or on application from a party, to include a person as a party to the proceeding for various reasons including that their interests are affected by the proceedings.

[6] Hall DCJ in The Body Corporate for "The Dorchester" CTS 10749 v Taylor and Anor, District Court Appeal 177/1999 (Unreported)
[7] Section 28 of the Standard Module
[8] See section 37 of the Standard Module

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Swell Residences [2009] QBCCMCmr 45 (10 February 2009)