Swell Residences [2009] QBCCMCmr 69 (27 February 2009)

Number of Scheme:	36211
Name of Scheme:	Swell Residences
Address of Scheme:	1 Ocean Street BURLEIGH HEADS QUEENSLAND 4220

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

I hereby order that the application for declaratory orders as follows-

“that it is not in the best interest of the body corporate for the work to be left in an uncompleted state and the amount of spending required to have all work completed represents an emergency for the purpose of section 149(1)(c). If payment is not made immediately the Body Corporate may be sued and warranties may be voided;
that the current committee may authorise completion of works and pay the Contractor all monies payable to him without any liability to the current Committee members.”

are dismissed.

This is an application dated 3rd February 2009 and amended on that day, on 19th February 2009, 13th February 2009 and 17th February 2007, by the body corporate for Swell Residences CTS 36211 (the body corporate) for declaratory orders as follows -

“Swell Residences” CTS 36211 is a community title scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management 9Accommodation Module) Regulation 2008 (Accommodation Module). It is a subsidiary scheme under a principal scheme “Swell Principal Body Corporate.” There are 82 lots in Swell Residences, created under a Building Format Plan of subdivision.

Section 149(1)(c) Accommodation Module allows an adjudicator to authorise spending above the relevant limit of committee spending if satisfied that the spending is to meet an emergency. The application is one for emergency relief and foregoes the requirement of section 243(1) Act that written notice of the application must be given to each affected person who then must be invited to make submissions in accordance with section 243(2)(b) Act. An “affected person” is one who would be directly and materially affected by the outcome sought[1], for example, lot owners in the scheme.

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

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

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

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

(ii) the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

At a committee meeting on 20th January 2009, the committee authorised John McDonald (Mr McDonald) the chairman to make this application. The committee was newly elected on 22nd December 2008, and has since found out that the previous committee had approved work for an amount “in excess of $34,500 for security systems” equipment as well as spending $18,000 on security systems in the financial year ending 30th September 2008. The new committee believes that the former committee had no authorisation from the body corporate to spend these sums on security equipment. On 12th December 2007 the body corporate had in fact rejected a motion to spend $12,650 plus GST to supply and install an intercom system to five doors from Surfside Security Systems (Surfside). A contingent motion for spending $29,850 plus GST on an access control system to doors and gates was ruled out of order at the same meeting. Mr McDonald thinks that some of the same work now being carried out was the work rejected by the body corporate in December 2007.

The new committee does not know whether the majority of the body corporate would approve this work but is bound by the contract entered into between the body corporate’s previous committee and Surfside. The caretaker for the scheme has advised the committee that the security systems work is almost completed.

He also puts forward in this application a statement of income and expenditure for the period 1st October 2007 to 30th September 2008 showing that $18,452.22 was spent on an item “Security system/Equipment” ($13,000 budgeted) and that for the period 1st October 2008 to 31st December 2008 - the sum of $2380 was spent on Security System/Equipment ($19,500 budgeted for the year.)

On 13th February 2009, I asked the Applicant if he could clarify certain points of his application, and also sought from the body corporate manager, Ernst Body Corporate, copies of the ledger relating to invoices for security equipment. From Surfside, I sought copies of all invoices outstanding and demands for payment. Further information was received on 17th and 18th February 2008.

In addition to the invoices mentioned, Surfside provided a copy of Invoice 55326 headed “final invoice” dated 28th January 2009 for completion of all works on quotations 4290/1, 4290/3, 4290/B2, 4290/B3, and 4290/2 in the sum of $6452.00 +$645 ($7097); and Invoice 55734 dated 12th February 2009 for the supply only of 180 HID key fobs “as quoted” $2,172.00 plus GST $217.20. ( $2,389.20)

These additional invoices total $9486.20, making the total outstanding to Surfside, $37,499.24.

Ernst Body Corporate provided copies of the body corporate ledger showing payments made for security equipment including payments to Surfside and others for “security system/equipment” totalling $18,452.22 (and plus $1845.22 GST) between 1st August 2007 and 30th September 2008. Some of these payments appear to be instalment payments to Surfside eg: 30th April 2008 “progress payment” installation for all cabling for CCTV system in residential building; 30th May 2008 “final payment” supply and install CCTV system as per quote 2192-3581-1; 29th July “final invoice” supply and installation of CCTV system as quoted; 10th November 2008 “final invoice” supply and install 2 x cameras and cables as quoted. On 19th February 2008 the body corporate paid $4510 inclusive of GST for 164 key fobs to The Communications Company; and on 22nd May 2008 the body corporate paid Hardcore Concrete Cutting for making core holes, referenced as “ work required for new cameras (CCTV)”

In this matter, the committee is faced with invoices due and payable to Surfside, for security equipment and works done, which it cannot demonstrate from body corporate records have been authorised by the body corporate. The new committee was elected at the annual general meeting on 22nd December 2008.

It appears from looking at quotations and invoices from Surfside that throughout the previous year (December 2007 – December 2008), the committee was active in installing a CCTV system and seeking quotations for the supply and installation of a security intercom system.

It also appears that the former committee entered into an arrangement with Surfside that invoices would be issued for “progress payments” on total amounts owing, as the work was done. This makes it very difficult for any observer to match up quotations from Surfside with the invoices subsequently issued from Surfside.

I am advised by Edmund Claridades of Surfside that Invoice 55326 for $7097.20 inclusive of GST relates to unpaid sums in reference to quotation 4290 items “Quote 1”, “Quote 2” and “Quote 3”, (being referred to on that invoice as 4290/1,4290/2 and 4290/3); and to quotation 4290-B-REV3 items “Quote 1” and “Quote 2” (being referred to on that invoice as 4290/B2 and 4290/B3.) Invoice 55734 refers to quotation 4290-B-FOBS and is the full amount quoted on that quotation for FOB keys, $2389.20 inclusive of GST of $217.20. Mr Claridades advises that the FOB keys have now been provided and that as far as he is aware there are no works outstanding by his company save for training sessions in the use of the equipment.

Section 149 Accommodation Module regulates the restriction on spending by the committee.

(1) The committee may only give effect to a proposal involving spending above the relevant limit for committee spending for the community titles scheme if—

(a) the spending is specifically authorised by ordinary resolution of the body corporate; or

(b) the owners of all lots included in the scheme have given written consent; or

(c) an adjudicator is satisfied that the spending is required to meet an emergency and authorises it under an order made under the dispute resolution provisions; or

(2) For this section, if a series of proposals forms a single project, the cost of carrying out any 1 of the proposals is taken to be more than the relevant limit for committee spending if the cost of the project, as a whole, is more than the relevant limit.
(3) Section 150 applies to the proposal in addition to this section if—

(b) the proposal involves spending above the relevant limit for major spending; and

(c) the proposal does not involve spending mentioned in subsection (1)(c) or (d).

[Section 150 concerns the additional requirement to obtain two quotations where the spending proposed is a sum above the relevant limit for “major spending.”]

An adjudicator can authorise spending above the committee’s spending limit if it is to meet “an emergency,” (Section 149(1)(c) Accommodation Module). The type of emergency envisaged, and given as an example in the legislation, is where there is a burst water pipe or the committee must act quickly without time to call a general meeting.

Surfside claims the sum of $37,499.24 outstanding, although Surfside has made no move to demand payment with immediate effect. I note that on each of its invoices its terms are stated to be payment within 7 days, the earliest invoices outstanding dated 19th December 2008 and the latest dated 12th February 2009.

Section 310 Act protects contractors dealing with the body corporate. It states –
310 Protection of persons dealing with body corporate

If a person, honestly and without notice of an irregularity, enters into a transaction with a member of the committee for the body corporate for a community titles scheme or a person who has apparent authority to bind the body corporate, the transaction is valid and binding on the body corporate.

There is no evidence that Surfside had any notice of “an irregularity”, if such exists, about the lack of authorisation by the body corporate for the expenditure. Surfside is, on the face of it, entitled to be paid for work done and equipment supplied.

However, I have difficulty in finding that the situation is one which demonstrates “an emergency” at the present time. Mr McDonald has said that “if payment is not made immediately the Body Corporate may be sued and warranties may be voided.” There is no evidence that either of those situations is proposed by Surfside, certainly not imminently.

The body corporate might call a general meeting with only 21 days notice. If, in the meantime, Surfside decides to take legal action, then the body corporate might ask Surfside or its lawyers to stay any further action until after the general meeting, and it would not be unreasonable for Surfside to do so if a meeting had already been called. Such action might also protect the body corporate in any future claim by Surfside for legal costs.

Putting the matter to a general meeting would also give the body corporate the opportunity, perhaps by a motion with alternatives, to decide how it should deal with the current problem. The body corporate might ratify the engagement of the contractors by the previous committee, and it follows that the body corporate would then pay Surfside what is owed; or it might decide not to ratify the decision but in any event to pay Surfside. This option leaves lot owners/the body corporate the opportunity to seek any legal relief available against individual committee members who engaged Surfside (and others) to install a CCTV and security system, without body corporate authorisation for the amounts expended, as claimed.

Such an action cannot be pursued in this Office. There is no jurisdiction under section 227 Act to determine a dispute between the body corporate and a former committee, or the body corporate and former committee members. Whilst a dispute between two lot owners is within the jurisdiction , as is a dispute between a lot owner and the body corporate, that, in my view, would not encompass a claim where the dispute concerned a lot-owner’s actions as part of the committee of the body corporate. A claim against former members of the committee for spending body corporate funds without authorisation would be made in the relevant civil court.

I have no jurisdiction to make a declaratory order to authorise payment of the sum apparently owed ($37,499.24), that is, to make an order which does not require submissions to be sought from the body corporate, unless the matter is “an emergency.” Further, if I was to authorise that payment, I might be taking away from the body corporate the right to a remedy for any unauthorised actions by former committee members. If an adjudicator retrospectively authorises the actions of the body corporate, the body corporate cannot then make a claim for the unauthorised actions of its committee.

In respect if the monies already paid to Surfside and other companies by the former committee, there is not enough information in the application or in further material from the body corporate manager, to demonstrate that such payments were all part of the same project and require retrospective authorisation. For example, part of the $18,452.22 (plus $1,845.22 GST = $20,297.44) spent in the financial year 2007 – 2008 included an amount of $4,510.00 (inclusive of GST) paid to The Communications Company for 164 x key fobs. These keys would at first sight appear to be part of a different system or project than that installed by Surfside. The latest invoice 55734 from Surfside is for 180 key fobs at $2,389.20. Without the sum of $4,510, the committee would have been within its spending limit for “a project” after 30th August 2008, ($16,400) but above it before that date ($10,250).

The mathematics to be done relating to the above might be academic in that it is clearly not in the nature of “an emergency” to authorise payments which have already been made.

The limit of committee spending prior to the amendments to the legislation in force on 30th August 2008 was an amount equivalent to the sum of $125 x the number of lots ($10,250) unless the body corporate had previously authorised the committee to spend up to a maximum of $450 x the number of lots in the scheme. Spending over the committee’s limit had to be authorised by a general meeting of the body corporate, or by all owners in the scheme giving written consent.[2]

The relevant limit of “major spending” prior to 30th August 2008, was a sum equivalent to $250 x the number of lots. “Major spending” required in addition that at least two quotations for the work proposed were put to a general meeting of the body corporate for a motion with alternatives to be decided.

From 30th August 2008, the limit of committee spending was increased to a sum equivalent to $200 x the number of lots ($16,400) or as set without limit by an ordinary resolution of the body corporate.

I regret that I am unable to make the order sought, in that whilst I am of the view that Surfside has presented its accounts for work done, and that the body corporate committee is anxious to pay its debts, in order to be successful in a declaratory order, the body corporate must demonstrate an emergency, which, happily for the body corporate, is not yet pending. Lot owners now have the opportunity to authorise payments themselves, and/or to enter into settlement arrangements with Surfside. If the body corporate at a general meeting comes to a decision which is thought unreasonable, the body corporate or a lot owner can at that stage make an application to this Office for relief, when a dispute has arisen.

[1] Dictionary Schedule 6 Act
[2] Section 101(1)(b) Body Corporate and Community Management (Accommodation Module) Regulation 1997

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Swell Residences [2009] QBCCMCmr 69 (27 February 2009)