Broadbeach Motor Inn [2009] QBCCMCmr 57 (20 February 2009)

Number of Scheme:	16849
Name of Scheme:	Broadbeach Motor Inn
Address of Scheme:	40 Surf Parade BROADBEACH QLD 4218

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

I hereby order that the application for orders

“ - That Motion 11 of the November 11 AGM be overturned.
- That at least two quotations be sought for replacement of balustrades and repair to the roof and car park ventilation and that a reasonable levy be introduced to pay for this in 2009.”

is dismissed, for the reasons attached hereto.

This is an application dated 9th December 2008 and amended on 15th December 2008 by Kim Parker and George Parker (the Applicants) co-owners of Lot 3 in the scheme against the body corporate for Broadbeach Motor Inn (the body corporate) for orders as follows –

At an extraordinary general meeting of the body corporate held on 10th February 2009, Motion 11 of the general meeting of 11th November 2208 was rescinded. The first outcome sought has therefore been achieved.

“Broadbeach Motor Inn” CTS 16849 is a community titles scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module). The Applicant says that there are 97 lots in the scheme but there appear to be only 65 lots in the scheme, ranging from Lot 3 – Lot 67, according to the automated titles system internal community titles scheme search statement available from the Department of Natural Resources and Water. The lots are created under one Building Unit Plan of subdivision and one Building Plan of re-subdivision.

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)).

The Applicants say that they purchased Lot 3 on 1st September 2008. On 7th October 2008 the committee resolved to put a motion to a forthcoming general meeting to raise a special levy of “3,000,000.00” over twelve months in order to fund repair works as recommended in a building maintenance audit, commencing with replacement balustrades. When the Applicants saw the minutes they telephoned the body corporate manager believing the sum to be a typographical error. The body corporate manager told them that the sum of $3 million was not an error, but that it would be reasonable to expect that the “spending would realistically be staged over a period of time.”

The agenda for the annual general meeting (AGM) on 11th November 2008 included a motion to raise a special levy of $34,020.62 per lot in 2009 in four instalments for building maintenance. There were no quotations for the work attached, nor was there any information about the work.

The Applicants attended the AGM where they discovered that one lot owner, Moishe Gordon (Mr Gordon) the caretaking service contractor, owns “a 60% lot entitlement” in the scheme. Mr Gordon was in possession of a building report from Buildcheck but had not circulated it with the notice of the AGM “as he did not wish to place owners who might have wanted to sell their units in a position where they would have to declare a possible encumbrance if they had known about the report.” Mr Gordon was concerned about the building and the urgent need to raise $3 million for repairs. He was also concerned about his liability for public safety of the body corporate and himself “as owner of the management rights.”

As there was only one copy of the building report circulating, the Applicants were not able to read the report at the meeting.

The vote was carried 38 -11 with 2 abstentions. At the conclusion of the meeting, Mr Gordon said that a developer wished to purchase the building and that with an encumbrance of $34,020.62 per lot “none of us would be able to sell our units, and that like him, we should prepare to accept the offer.” He apologised to recent owners who stood to “lose more than anyone.”

After the meeting, the Applicants read the Buildcheck report and noted that it did not recommend spending $3 million, but that new balustrading was required as a matter of urgency. The repair option for full replacement of the balustrading was $427,800, which could be reduced to $300,000 if aluminium was used instead of aluminium and glass. It appears to the Applicants that $1,226,000 of the $2.7 million repair estimate involved total replacement of windows and doors in the “entire block.” $700,000 of this is the responsibility of lot owners and not the body corporate.

The Applicants drew up a “recommended Schedule for repairs” for the committee based on the Buildcheck report (Attachment H of the application) from which they worked out that the urgent spending on the safety issues highlighted by Buildcheck was for the balustrades and the car park ventilation budgeted by Buildecheck at $445,740, being a contribution of $4,595.26 per lot entitlement, paid quarterly @ $1148.82. They pointed out that the roof and the asphalt was “important spending” to be undertaken after that, and that “longer term spending” included the podium deck. They said: “ It is certainly not necessary to replace all the windows and doors of units – these are the responsibility of lot owners unless they are situated between a lot and the common property – in this case only the sliders on the western walls.”

They say that there was no reason for $3 million to have been raised as a matter of urgency. “People at the AGM were expected to vote on something that they knew nothing about and were given no time to read. Separate and detailed quotes were not obtained...”

On 26th November 2008, the Applicants went to the committee meeting, and Kim Parker, now secretary, raised the issues of concern on motion 11. She asked the chairperson Gary Smith why two quotations for all works the subject of the levy had not been obtained, and why the windows and doors had been added in as needing immediate repair when this was not evident from the report, and these are the responsibility of lot owners. The chairperson replied that he felt under pressure to act in order to limit the legal liability on the body corporate. There was no satisfactory response about the reason that two quotations had not been sought, although the committee resolved to seek two quotations for the balustrading and for “immediate repair to faulty leaking windows and/or roof.” The committee also resolved 5 – 0 to hold an extraordinary general meeting “most likely” on 10th February 2009 “ to rescind Motion 11” and to discuss other maintenance issues.

The Applicants are concerned that the urgent levy was “ voted through to allow a developer to use ... as leverage in convincing lot owners that they needed to sell up in a Deed of Put and Call.” Mr Gordon presented to some lot owners after the meeting a draft contract between Ardea Developments Pty Ltd (Ardea) and the lot owner which offered to Ardea the grant of a two year “put and call option” provided that Ardea obtained executed deeds from all lot owners by 21st January 2009. The Applicants do not believe that any owners took up the contracts. Clause 5.5 provided that Ardea would be responsible for paying any special levies raised at the meeting of 11th November 2008 or passed after the date of execution of the contracts. The Applicants believe that Ardea is a company owned by or connected with Mr Gordon, and that the object is to pull down and redevelop the building rather than use any levies for repairs.

Applicant Kim Parker provided further material in the application. She sent a letter to some owners on 5th February 2009 advising that the Buildcheck report is now in conflict with a report by GK engineers (GK), which firm was authorised by a vote outside a committee meeting at a cost of $1600. GK says that the balustrades should be repaired and could last another 4 years with repairs.

In accordance with section 243(2)(b) Act, submissions were invited from all lot owners.

Susan and Kenneth Woolley, co-owners of Lot 19, said that the situation borders on fraud. They believe that the committee was “coerced” into voting for a special levy of $3 million in the “mistaken belief relayed by Mr Gordon and supported by the engineer from Buildcheck that repairs were essential for OHS standards.” At the AGM, Mr Gordon told attendees that they had two choices: either pay the $34,000 (sic) or accept the offer to sell to “the developers” who he had worked so hard to find. He said that the offer represented $34,000 in effect that that offered to lot owners. Mr and Mrs Woolley feel this was an attempt to scare lot owners. Mr Gordon said he wanted “out” of this scheme. Mr and Mrs Woolley then received an offer “so below market value as to be an insult to our intelligence.”

Ashley Gorton, (Dr Gorton) owner of Lots 16 and 26, says that when he was shown the report at the meeting he was told that he could no longer sell without mentioning its contents, about which he had no idea previously. He disputes almost all of the Buildcheck conclusions. He says that Buildcheck could not have assessed his balustrade unless they had obtained illegal access to his unit and that it has condemned a style rather than the substance. He believes that repairs can be made without total replacement. In conclusion he says that everything has been greatly exaggerated, he believes in order to scare owners into selling.

Michael Rootes, owner of Lot 39, believes that the motion was passed “to force us to sign the contracts from Ardea Developments Pty Ltd.” There is maintenance work to be done but to put a motion for $34,020.62 to be paid in one year is unreasonable and “ is only a ploy by the Gordon Group to force the unit owners to sell at a reduced price.”

Carl and Shirley van Ristell, co-owners of Lot 40, say that the passing of Motion 11 was unreasonable and was done hurriedly. They believe that the developer who is interested in “purchasing the building had some influence in the motion being passed so hurriedly, and we feel most of the unit owners would not have passed a motion to pay out the amount....if given the correct information...” There should be a second and perhaps a third estimate carried out before one is chosen. Such a large sum should not be paid out in one year.

Christopher Scally, owner of Lot 22, says that there should have been two competitive quotations, and that the timing of the builder’s report to the meeting was questionable. “[O]ne owner’s over-riding opinion in what appears to be proceeding with undue haste on an OH&S issue should be tempered by a third party’s professional opinion.” He accepts that maintenance is required but that it should be staggered over a number of years.

David and Audrey Isherwood co-owners of Lot 62 say that at no time prior to receiving the minutes of the committee meeting of 7th October 2008 had there been correspondence identifying the requirement of unit owners to raise a special levy for $3 million. It had been decided to commission Buildcheck to do a report, but the report had not been tabled, nor had a copy been seen by lot owners. They did not get a copy of the report until after the AGM when Motion 11 had been passed. The report outlines two items of emergency expenditure, the balustrades and the exhaust system in the carpark, and suggests a priority list regarding repair/replacement including timing and funding be drawn up. He says the previous committee’s decision to raise the levy to approve presentation of Motion 11 contravenes the legislation because two quotations should have been obtained. He says the costs are unreasonable and will create a burden on all lot owners.

There was no submission from the body corporate, other than a letter from the body corporate manager, Body Corporate Services, to say that the committee had not approved the draft submission prepared by the body corporate manager.

On 10th February 2009 I sought further information from the Applicants who responded on 11th February 2009. Motion 11 of the AGM has now been rescinded at an extraordinary general meeting held on 10th February 2009. Applicant Kim Parker says: “ ... unfortunately, lot owners appear to have taken their eye off the ball a bit, as well as feeling disempowered by the presence of Moishe Gordon at every committee meeting.”

In this matter the Applicants seek three outcomes, the first of which has been achieved by the body corporate voting on 11th February 2009 to rescind motion 11 of the AGM held on 11th November 2008. Motion 11 was a motion to raise a special contribution of $34,020.62 per lot with a view to raising $3,000,000 for repairs, following a maintenance report by Buildcheck.

This large special contribution had alarmed lot owners, who apparently had not seen the Buildcheck report at the time they were asked to vote. It appears that Mr Gordon, described as the “majority lot owner”, was instrumental in getting the motion passed, although owners present at the meeting felt pressed at the meeting by him to vote to raise the sum of $3 million relying on what he said the report contained.

It seems to me that lot owners should have voted against the motion as is their right, if they had not seen the report or were unsure of the recommendations or the extent of the repairs. Be that as it may, the majority owner might still have won the day.

It also seems to me that the committee at its meeting on 28th November 2008 has resolved to seek two quotations for the balustrading and for “immediate repair to faulty leaking windows and/or roof,” so that the second outcome sought by the Applicants has also been settled, and the committee is on its way to prioritising the repairs in manageable “financial portions.” Since the rescission of Motion 11, the body corporate will perhaps need to raise a “reasonable levy” to pay for the balustrading if there is not sufficient within the sinking fund, but there does not seem to be any dispute on this point. The body corporate is at liberty to raise a reasonable levy if required. This application perhaps, and the passing of time, has determined the issue and satisfied the outcomes sought. I therefore dismiss this application.

However, it appears to me that this is not only a matter about building repairs but about the empowerment of the committee and lot owners in a scheme where there is alleged to be a majority lot owner who might always cast the majority of votes, and I shall make some comments which I hope will be helpful to this body corporate.

In many schemes there is a majority lot owner, and the owner of several lots has a vote at a general meeting for each lot which it owns, as deemed a proprietary right.[1]
Some protection against domination is given to the committee however, ensuring that a majority lot owner might nominate a maximum of 3 committee members only where it owns more than 2 lots in a scheme of more than 7 lots. (Section 18(2)(b) Accommodation Module.) A lot-owner may nominate for committee membership only him/herself, another lot owner, or certain members of his/her family, his/her attorney, or “a director, secretary or other nominee of a corporate owner”. (Section 11(1)(b)(iii) Accommodation Module)

However, an owner who is a caretaking service contractor for a scheme is not eligible to be a voting member of the committee (section 11(2)(a) Accommodation Module) (although he or she is automatically a non-voting member of the committee) and neither is an associate of a caretaking service contractor eligible to be on the committee at all. (Section 11(2)(b) Accommodation Module.) “An associate” is defined by section 309 Act as follows –

(a) a relationship of a type to which this section applies exists between them; or

(b) a series of relationships of a type to which this section applies can be traced between them through another person or other persons.

(b) the relationship of ascendant and descendant (including the relationship of parent and child) or the relationship of persons who have a parent or grandparent in common;

(f) the relationship of persons, 1 of whom is accustomed, or under an obligation (whether formal or informal), to act in accordance with the directions, instructions or wishes of the other;

(g) the relationship of a corporation and executive officer of the corporation;

(h) the relationship of a corporation and a person who is in a position to control or substantially influence the corporation’s conduct.

(3) Despite subsection (2)(e) and (f), the owner of a lot in a community titles scheme and a letting agent for the scheme are not associated merely because of their relationship as owner and letting agent.

executive officer, of a corporation, means a person who is concerned with, or takes part in, the corporation’s management, whether or not the person is a director or the person’s position is given the name of executive officer.

From documents provided to me by the body corporate manager, I am satisfied that the caretaking service contractor for the scheme is Gordon Group Investments Pty Ltd. Gordon Group Nominees Pty Ltd owns 22 lots in the scheme, (although the Gordon Group may have interests in other company owners eg Gordon Bourke Street Pty Ltd which owns 3 lots.) Gordon Group Nominees Pty Ltd may only nominate for committee membership, a director, secretary or other nominee of that company. If that person is an “associate”, as defined above, of Gordon Group Investments Pty Ltd, that person is prevented from being eligible. Such a person should not be on the committee.

This is a matter for the body corporate to investigate and if there is a dispute about whether a particular person is eligible for committee membership, that may be decided by this Office on the usual evidential burden being satisfied by the claimant, to the required standard, that is, on the balance of probabilities.

A member of the committee must disclose to a committee meeting a direct or indirect interest in an issue, if the interest would conflict with the appropriate performance of the committee member’s duties about the consideration of the issue, and is not entitled to vote on such an issue. (Section 53 Accommodation Module.)

Only committee members are entitled to attend a committee meeting. The caretaking service contractor is a non-voting member of the committee but employees of the caretaking service contractor are not. It would be up to the committee, by majority vote, if it wishes any other party to be invited to committee meetings (Section 51(1)(b) Accommodation Module.) Any lot owner may give 24 hours notice that he/she would like to attend a committee meeting (Section 51(2) Accommodation Module) but may not speak unless invited to do so. (Section 51(5)(b) Accommodation Module.)

Further, the Code of Conduct for Body Corporate Managers and Caretaking Service Contractors at Schedule 2 of the Act sets out standards of behaviour for caretaking service contractors as if those terms were incorporated into the terms of the caretaking/letting agent contracts. (Section 118(2) Act.) Amongst other provisions, the caretaking service contractor must not engage in fraudulent or misleading conduct in performing its functions; and must not engage in unconscionable conduct in performing its functions; and must keep the body corporate informed “of any significant development or issue about an activity performed for the body corporate.”

The second protection that lot owners may have against domination by a majority lot owner is that it may be able to demonstrate in an application to this Office that the motion passed at a general meeting is not a “reasonable decision” of the body corporate, or is “fraud on the minority” which is a claim for equitable relief. The body corporate has a duty to act reasonably in everything it does (Section 94 Act) and amendments to the legislation suggest that section 94 Act includes a decision made at a general meeting and not just relating to the administrative functions of, or decisions made by, the committee. What is or is not reasonable will depend on the circumstances of the particular scheme. For example, it may be unreasonable to refuse to maintain a building where the body corporate has an obligation under the legislation to maintain common property; but an obligation on owners to raise $3 million in one financial year for repairs might be seen as unreasonable.

Submitters say that Mr Gordon put pressure on them to sign contracts giving an option to sell to a development company and that the repair bill passed on 11th November 2008 was aimed to deter any other buyers. On the subject of threats, duress, and anonymous correspondence to prospective purchasers (as claimed in an email dated 16th February 2009 from the Applicants to this Office) lot owners may like to take legal advice, since these matters are not within the jurisdiction of this Office. Such behaviour, if proved however, might become evidence of the “unreasonableness” of any motion passed by the body corporate in any application to this Office; or be evidence of a “fraud on the minority” which may evoke the equitable jurisdiction of this Office.

Finally, all lot owners have a right to inspect and have a copy (on payment of the relevant fee) of any reports commissioned by the body corporate or any records of the body corporate. (Section 205 Act and Sections 202 and 203 Accommodation Module.) This includes the roll of owners and the details of company nominees, and the nominations for committee. A nomination for a candidate for election to the committee must contain the candidate’s residential or business address and the category in which he or she holds the position. (Section 19(2)(d) Accommodation Module).

It appears to me that the current committee is now acquiring knowledge and working together with lot owners to meet the challenges which this scheme has. This Office has a free Information Service on 1800 060 119 and offers numerous Fact Sheets available in hard copy and on-line. There is also on-line training available on the website www.bccm.qld.gov.au for any interested person but particularly aimed at committee members. I encourage all committee members and lot owners to be involved with the administration of the scheme particularly the maintenance of the buildings; to put motions to general meetings; to vote at general meetings; to ask to see copies of reports; and to query anything which they do not understand. The lot-owners make up the body corporate, and active participation by lot-owners will play a large part in preventing one lot-owner from dominating proceedings.

[1] Dindas & Anor –v- Body Corporate for One Park Road CTS 2114 & Anor [2006] QDC 302 at 39

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Broadbeach Motor Inn [2009] QBCCMCmr 57 (20 February 2009)