Pacific Beach Apartments [2009] QBCCMCmr 519 (23 December 2009)

Last Updated: 3 March 2010

REFERENCE: 1041-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30749
Name of Scheme:	Pacific Beach Apartments
Address of Scheme:	Cnr. Gold Coast Highway & Second Avenue PALM BEACH QLD 4221

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

R Bevington, the Owner(s) of lot 10

I hereby declare that the purported annual general meeting of Pacific Beach Apartments held on 17 November 2009 was void and of no effect. I further order that Body Corporate Choice Pty Ltd (appointee) is authorised to call, hold and chair an annual general meeting (meeting) of the body corporate for Pacific Beach Apartments. I further order that this authorisation: Commences on 5 January 2010 and ceases after three months from that date unless altered by a subsequent order of an adjudicator. Further, the authorisation will cease immediately upon the appointment of a committee if that occurs earlier; Allows the appointee to perform obligations of the committee or any member of the committee in respect of the calling, holding and chairing of the meeting. In particular, the appointee is to prepare proposed budgets for adoption by the body corporate at the meeting, submit motions as reasonably necessary, and prepare the minutes of the meeting; and Is subject to the appointee, as far as practicable, following the procedures in the Standard Module governing giving notice for and holding an annual general meeting. In particular, a notice requesting nominations for committee positions and submission of motions for consideration at the meeting must give owners at least three weeks to submit their nominations and motions. However, the giving of notices and the holding of the general meeting need not coincide with the end of financial year date of the body corporate. I further order that Strata & Community Management Services Pty Ltd (SCMS) must provide all books and records of Pacific Beach Apartments (including electronic) to the appointee as soon as possible after the commencement of the appointment.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 1041-2009

“Pacific Beach Apartments” CTS 30749

Application

Pacific Beach Apartments Community Titles Scheme (Pacific Beach) is a 16 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module).

This order and reasons for decision replace an earlier order made on 21 December 2009 on an application by Robert Bevington, owner of lot 10 (applicant) against the body corporate for Pacific Beach (respondent) and correct, under the ‘slip rule’, an error in the scheme name contained in the second paragraph of the order. The order and reasons otherwise remain the same.

Decision

Investigation and Submissions

Submissions

The main grounds in support of the application, provided on behalf of the applicant were to the effect that the annual general meeting called for 17 November 2009 was invalid as it failed to include various motions submitted by owners.

A submission from the body corporate manager, Strata & Community Management Services Pty Ltd (SCMS) was to the effect that:

• All correspondence was forwarded to the secretary before preparation of the agenda;
• The scope of the body corporate manager’s agreement does not cover the cost of including motions submitted by owners on the agenda. These motions are charged at an additional rate;
• Only the motions approved by the secretary were included on the agenda;
• The name of an auditor was not included as the secretary is an auditor so any auditor chosen could be considered to be an associate of the secretary and for the same reason it would be unprofessional for the body corporate manager to source a quote for someone to check the body corporate manager’s accounting; and
• There is no section of the legislation that requires a motion relating to insurances except at the first annual general meeting. The disclosure requirements relating to the insurances were satisfied by including a copy of the insurances with the explanatory schedule.
  

A submission from the secretary at the time was to the effect that after the agenda was sent out five owners requested the agenda be changed to include twelve additional items. This was the first actual request, to his knowledge, that the five owners specifically requested items be placed onto the agenda.

All owners were given an opportunity to provide written submissions. The main submissions by owners were to the effect that:

• The body corporate has been non existent and the applicant appears to be trying to improve things;
• Quotations have been obtained for maintenance upon request but these quotations were then ignored;
• The body corporate manager was rude, abrupt and failed to provide basic documentation when requested. The body corporate manager and secretary failed to call an extra meeting to appoint members to the committee and allowed only one person on the committee;
• I have already notified the Justice Department of my opinion of SCMS and just hope that something can be rectified; and
• The applicant has lived in the apartments for ten months and acted consistently outside the legislation including with tree removal, demanding documents from SCMS, attempting to bully owners into leaving the complex.
  

Additional submissions were subsequently made about various matters that were not the subject of the original application. These included allegations from the applicant that the entire contract for SCMS was not forwarded with the agenda for the 2008 annual general meeting, that SCMS was neglectful in its duties by allowing a committee consisting of only one person and not calling an extraordinary general meeting to fill the vacancies, and that the renewal date for the contract roll over was the day before the annual general meeting so owners did not have an opportunity to review the contract.

A submission from Glen Parkes, the former secretary, was to the effect that he is still a committee member but the new secretary has sent a letter demanding SCMS release the body corporate records to allow the appointment of a new body corporate manager.

A submission from Donna, Neil and Mary Sugars alleges that the applicant has access to a $200 cash box and that he wants to use the funds to purchase light bulbs, pool filters and hoses when a maintenance man is already contracted to maintain the pool, building and gardens.

A further submission from SCMS says that the body corporate manager is not responsible for duties outside of what is agreed to in the contract, that the applicant does not have legal authority to control the records of the body corporate while an agreement is in place, and that the agreement has rolled over and is therefore current and legal.

Investigations

Based on the submissions provided I formed a provisional view that the body corporate had been effectively non existent since the 2008 annual general meeting. In particular, it was obvious that only Glen Parkes had been elected to the committee and that he had not complied with the requirement to call an extraordinary general meeting allowing for the appointment of additional committee members or a Part 5 engagement of a body corporate manager to carry out the functions of the committee (Standard Module 30, 31, 32). Instead, Glen Parkes appears to have acted without authority and unilaterally to issue instructions on behalf of the body corporate and SCMS appears to have followed these instructions despite SCMS being aware that Glen Parkes had no authority to act unilaterally for the body corporate. This appears to be an obvious contravention of the code of conduct for body corporate managers (Act, Schedule 2). If SCMS had informed Glen Parkes of the legislative requirements[1] and he had simply ignored them then this would also appear to be an obvious contravention of the Code of Conduct for voting committee members (Act, Schedule 1A).

This was of significant concern and I therefore wrote to all owners indicating my provisional view that an administrator should be appointed and inviting responses in respect of that view. I also attached a letter from the applicant that disputed the validity of the contract with SCMS and sought feedback on whether the terms of that contract were included with the agenda for the 2008 annual general meeting.

Responses from owners were to the effect that:

• Body Corporate Choice should be appointed as administrator because they have an office within 5 minutes walk and have a good name from people around Palm Beach;
• SCMS have not met their obligations and should be replaced. Body Corporate Choice is conveniently located and has a very good reputation;
• I am dissatisfied with SCMS and request Body Corporate Choice be appointed as administrator;
• I have had problems with correspondence and communication with SCMS, have been abused by their staff, had mail returned marked that a small item was misaddressed or some petty and easily fixed item that could have been rectified with a simple call or stroke of a pen, and SCMS operate on NSW time which is inconvenient. We have reason to believe that we did not receive a full copy of the terms and conditions of the SCMS agreement prior to the November 2008 meeting;
• Body Corporate Choice should be appointed and are prepared to communicate with the committee via email and set up direct debit payments for contractors. I have an unsigned 2008 management agreement but cannot confirm how I obtained it;
  

Letters from SCMS indicated that their office would be shut from 17 December 2009 until 5 January 2010 but responded to the provisional views to the effect that:

• Holding a new general meeting covering fresh nominations and budgets will only increase costs and the solution is to instruct a new extraordinary general meeting to be called just for motions that owners submit prior to the agenda being prepared;
• The full agenda for the 2008 annual general meeting did include the terms of the SCMS agreement as shown by the attached agenda;
• The records of the scheme do not indicate that any other owner was interested in becoming a member of the committee. As body corporate manager the company has no legal right to call an extraordinary general meeting at any stage without the instruction of the secretary or the committee;
• SCMS’s agreement is specific in relation to the initial term, provides for a yearly extension subject to the maximum term allowed by section 118(2) of the Standard Module, and SCMS will protect all its rights relating to the fees and charges payable under the contract until the contract is terminated.
  

An additional letter was received from Glen Parkes seeking the removal of Mr Bevington and Ms Scott from the committee and alleging bullying and abuse of power by Mr Bevington and fabrication of records by Ms Scott.

Issues for determination

Summary of issues

The main issues for determination regarding the 17 November 2009 annual general meeting can be summarised as follows:

1. Was the meeting validly called?
2. Was there a failure to include motions submitted by owners?
3. Was there a failure to properly include all statutory motions?
4. Does the meeting need to be recalled?

Failure to validly call meeting

The 17 December 2009 annual general meeting could only have been validly called by the secretary or SCMS if they had been authorised by a resolution of the committee to call that particular meeting (Standard Module, 65(1)).

SCMS has made a number of submissions to the effect that certain things were not properly done in accordance with the legislation because SCMS could not act without proper authorisation. It therefore seems strange that SCMS attempted to call the annual general meeting at all as there was no valid committee to authorise SCMS to call the meeting.

Rather, as far back as November 2008, SCMS should have informed Glen Parkes of the requirement that he call an extraordinary general meeting as required by the legislation (Standard Module, 30). SCMC could then have assisted Glen Parkes to call this extraordinary general meeting so owners could appoint a proper committee or engage a body corporate manager to perform the functions of the committee.

Failure to include motions submitted by owners

The secretary must service a notice on all owners between three to six weeks before the end of each financial year requesting committee nominations and agenda motions (Standard Module 16, 69). A motion submitted by a member of the body corporate must be included on the agenda for an annual general meeting if received before the end of the financial year (Standard Module, 69). Otherwise, it must be included on the next general meeting agenda on which it is practicable to include the motion (Standard Module, 69).

The budgets for Pacific Beach indicate that the end of financial year was 30 September 2009. The applicant has provided me with a copy of a letter that satisfies me that the applicant sent twelve motions for inclusion on the agenda to the secretary on 30 August 2009. SCMS acknowledges that this letter was received. As a matter of law, these motions should have been included on the agenda for the annual general meeting of 17 November 2009 (Standard Module, 69).

I note that SCMS blames the secretary for not authorising its additional costs of typing these motions onto the agenda. It seems more likely than not that the secretary failed to do this. However, there is no indication that SCMS took any great effort to ensure the meeting was properly called in accordance with the legislation or inform the secretary of his legal obligations under the Act. The secretary is presumably a volunteer committee member whereas a body corporate manager is expected to provide a professional service. In particular, a code of conduct applies to both committee members and body corporate managers. The body corporate managers code of conduct includes requirements to have a good working knowledge of the Act, to act honestly, fairly and professional in performing functions, taking reasonable steps to ensure an employee complies with the Act, and acting honestly, fairly and professionally (Act, Schedule 2). It appears to be a breach of this code of conduct for SCMS to actively assist in the calling of a meeting that so obviously fails to comply with the legislation and it is no lawful excuse to say that this was justified because the cost of typing the motions submitted by owners had not been authorised. In fact the absence of functioning committee makes it difficult to see how any spending since November 2008 was properly authorised, including the cost of typing the four motions that the secretary purportedly unilaterally authorised.

Failure to properly include all statutory motions

The legislation requires that the agenda for an annual general meeting must include the substance of each statutory motion to be considered at the meeting (Standard Module, 76(3)(a)). A statutory motion is defined to include a motion "reviewing each insurance policy held by the body corporate" (Standard Module, Schedule). SCMS is therefore incorrect in asserting that there is no section of the legislation that requires a motion relating to insurances except at the first annual general meeting.

Further, the legislation requires that the motion for agreeing to an auditor must include the name of the auditor proposed (Standard Module, 155(3)). As SCMS indicates, it is correct that a member of the committee, a body corporate manager, or an associate of a member of the committee or body corporate manager can not be appointed as auditor (Standard Module, 155(5)). However, the suggestion by SCMS that the secretary could be considered to be an associate of every auditor and that it would be unprofessional for the body corporate manager to source a quote for someone to check the body corporate manager’s accounting is absurd. An associate is defined for the purposed of the act in section 309 of the Act. It would not be difficult for the body corporate manager and secretary to identify a qualified auditor who is not an associate of either of them.

I have therefore concluded that the agenda for the annual general meeting failed to include a statutory motion to review the insurances as required by the legislation and failed to properly include a statutory motion to appoint an auditor as required by the legislation.

Does the annual general meeting need to be recalled?

There has been no proper committee or functioning body corporate for Pacific Beach since November 2008. The purported annual general meeting of November 2009 was called without proper authority and with obvious failures to comply with the legislation.

The courts have commented that non-compliance with the regulations that is of an insubstantial nature should not be allowed to imperil the actions of bodies corporate or their committees.[2] The intention behind the relevant provisions of the Regulation Modules appears to be that, as with the traditional rules of meeting procedure, these provisions enable a meeting to proceed in an orderly fashion so as to ascertain the will of owners on each proposal but are not a series of mandatory rules that invalidate all of the proceedings of the meeting if one essential step is not followed.[3] However, the non-compliance in this instance was significant particularly as the meeting was not properly authorised and failed to include a large number of motions submitted by owners.

In the circumstances, the meeting should be declared void and a new meeting should be held. As the body corporate has effectively been non-functional for over a year it is appropriate to appoint an administrator to call a proper annual general meeting to put the body corporate back on a proper legal footing. Based upon submissions from owners and concerns expressed regarding SCMS it is appropriate to appoint Body Corporate Choice Pty Ltd to perform this role.

Other matters

A challenge has been made to the validity of appointment of SCMS but there is nothing provided in the submissions that satisfies me that the appointment was not valid. In particular, it seems more likely than not that a copy of the proposed terms of the agreement was attached to the agenda for the November 2008 annual general meeting.

A number of submissions also claim that SCMS has not properly carried out its functions. However, any questions of whether or not the body corporate should terminate its agreement with SCMS are not properly the subject of the present dispute. If the owners want to obtain the services of another body corporate manager instead of or in addition to SCMS then appropriate motions can be submitted for the annual general meeting. In particular, it is not a matter for me to determine the validity of submissions indicating that some owners wish to terminate the body corporate’s contract with SCMS on the basis SCMS has not performed its obligations to the standard expected of an ordinary skilled body corporate manager. It would be first a matter for a vote on whether the majority of owners support the body corporate terminating the contract or not. Then, any dispute between the body corporate and SCMS would be a contractual matter determinable before the Queensland Civil and Administrative Tribunal (Act, 149B).

Similarly, the submissions from Glen Parkes seeking the removal of Mr Bevington and Ms Scott from the committee and alleging bullying and abuse of power by Mr Bevington and fabrication of records by Ms Scott are not properly the subject of the present dispute. Obviously any bullying or fabrication of records is a serious matter. Such matters would be the subject of a separate application before this office, although one consequence of declaring the purported annual general meeting void is that these persons have been removed from office on the basis as the purported committee elections were also void and of no effect.

Conclusion

For these reasons, I will declare the meeting void and appoint an administrator. I note that SCMS are closed until 5 January 2010 so I will commence the appointment from that date to ensure that SCMS can provide the books and records to the appointee soon after the commencement of the appointment.

---

[1] Or if he was otherwise aware of these requirements.
[2] Wei-Xin Chen v Body Corporate for Wishart Village CTS 19482, Appeal 4080 of 2000, District Court Brisbane, 29 May 2001.
[3] Refer Johnson v Beitseen (1989) 41 IR 395 at 415. As to ascertaining the intention of the legislature in circumstances that would traditionally be described as ascertaining whether rules are mandatory or merely directory, see Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at paragraphs 91 to 93. Note that section 242 of the Act effectively deems a meeting to be valid if there is no challenge to the validity of the meeting within the appropriate time limit. Also, as section 72 of the Standard Module, section 70 of the Accommodation Module and section 39 of the Commercial Module specifically provide an action is void for failure to comply with those sections, it may be implied that non-compliance with other sections will not automatically render the resulting resolutions void in the absence of a similar explicit statement.