Harrisfield Gardens [2009] QBCCMCmr 77 (3 March 2009)

TAKE NOTICE that pursuant to an application made under the abovementioned Act by the Body Corporate for Harrisfield Gardens

I hereby order that the application for an order:

That the Body Corporate Committee be granted permission to give emergency approval for the expenditure of approximately $18,920.00 inc GST for repairs to damage to the toilet and laundry areas in Lot 16 caused by termites.

is dismissed.

I further order that the Body Corporate for Harrisfield Gardens is authorised to consider a motion to approve expenditure for repairs to termite damage in Lot 16, and any other motions validly submitted, at an extraordinary general meeting that is held at least fourteen (14) days after notice of the meeting is given to the owners of lots.

Harrisfield Gardens community titles scheme 3262 (Harrisfield Gardens) consists of 20 lots and common property. The community management statement (CMS) for Harrisfield Gardens indicates that the Body Corporate and Community Management (Standard Module) Regulation 2008[1] (Standard Module) applies to the scheme. Department of Natural Resources and Water records show the scheme is registered as Building Units Plan 12350.

Pursuant to the Body Corporate and Community Management Act 1997 (Act), this application was made by the Body Corporate for Harrisfield Gardens (applicant) on 13 February 2009, pursuant to a resolution passed outside a Committee meeting on 27 February 2009. The applicant sought a declaratory order in the following terms:

Section 243A of the Act provides that the Commissioner may refer an application immediately to a dispute resolution officer, notwithstanding that affected persons have not been given notice of the application and invited to make submissions as would normally be required under section 243(1). This referral can occur when the Commissioner reasonably considers that the application relates to emergency circumstances and it is not appropriate to deal with the application as an interim order under section 247. The example of emergency circumstances provided in section 243A(1)(a) is whether the repair or replacement of a burst water pipe exceeds the Committee’s spending limit.

On receipt of the application the Commissioner’s Office requested certain further information about the application. This was received on 24 and 27 February 2009 and the application was then referred to me for determination.

The application relates to expenditure on repairs to termite damage in Lot 16. The circumstances of the dispute can be summarised as follows.

The application indicates that in mid 2008 the Owner of Lot 16, Jay Pyne, engaged MYD Constructions (MYD) to undertake repairs to his lot. It appears that MYD then identified termites and termite damage in the upstairs bathroom. On 16 July 2008 a pest inspection was undertaken by Natural Pest Control which confirmed the existence of termites, damage and water leaks.

After some communications between Pyne and the Body Corporate, the matter was considered at the Extraordinary General Meeting (EGM) on 1 October 2008. The EGM resolved to repair the termite damage to the floor and tiles of Lot 16, and accepted a verbal quote of $5,500 from MYD for the repairs. Two other quotes were not accepted. In addition, the meeting resolved that once the work in Lot 16 had progressed to a stage that the cause of the water damage could be ascertained, an independent contractor would be employed to inspect the damage to determine whether the cost of the water damage would be the responsibility of the Body Corporate or Pyne.

The Committee apparently decided that to determine whether the Body Corporate should accept liability for the repairs, it would engage an independent termite contractor to be on site when the repair work commenced. Accordingly, Amalgamated Pest Control conducted an inspection when work commenced on 7 November 2008 and confirmed that active termites were still present and that there was “extreme” damage to the upstairs bathroom. Subsequently treatment was undertaken to eradicate the termites from Lot 16. The Committee also accepted that the Body Corporate was liable for the termite damage[2].

The Body Corporate was provided with a quote from MYD Constructions dated 15 December 2008 for $18,920 (including GST) to replace the whole bathroom. The Body Corporate indicates that this amount includes the originally approved $5,500. The quote indicates that as the contractor can’t see the full amount of damage until all walls and ceilings are removed, the quote is an estimate based on the Amalgamated Pest Control report. On 2 February 2009 MYD confirmed the quoted amount, noting that it is an estimate only.

The application indicates that there was some animosity between the Committee, Pyne and MYD, with parties mistrusting the motives of others. They indicate that this prevented the matter being resolved more quickly. However the application says the Committee now accepts it is responsible for the termite related repairs. The application gives little other indication of why no action was taken after the MYD quote was received in December.

On 29 January 2009 solicitors for Pyne wrote to the Body Corporate asserting that the unit was unsafe and unfit for habitation. They noted that Pyne’s tenants had vacated on 1 November 2008 to enable repairs to be carried out and that he is losing rental income of $1,200 a month. The letter advised that if action was not taken expeditiously, Pyne would claim damages for his losses to date. The solicitors wrote again on 19 February 2009 indicated that they had received no response to the letter, noting that this application was to be lodged, and advising that no reply or an unsatisfactory reply to their correspondence would result in legal action being commenced.

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:

(b) the exercise of rights or powers, or the performance of duties, under the Act or the CMS; or

(c) 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.[4] An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate.[5]

The issue for consideration in this matter is whether it is appropriate in the circumstances to override the usual right of owners to vote on Body Corporate expenditure, and instead authorise the expenditure on the repairs notwithstanding that it has not been considered by owners.

Section 151-153 of the Standard Module provide for the control of spending by a body corporate. A committee is prohibited from authorising spending above the committee spending limit except in certain circumstances, including where an adjudicator is satisfied that the spending is required to meet an emergency and authorises it under an order[6].

The relevant limit for committee spending is the amount set by ordinary resolution of a general meeting or, if no amount is set, $200 per lot. In this scheme it is not apparent that a general meeting has changed the committee spending limit and so the committee spending limit is $4,000. The major spending limit for the scheme (assuming again that the default limit has not been altered by a general meeting) is $10,000[7].

The MYD quote is above the committee and major spending limits. This means that, pursuant to section 152 of the Standard Module, the spending proposal must normally be approved by an ordinary resolution at a general meeting at which owners have been given at least two quotes for the work with the notice of meeting. However, if for exceptional reasons it is not practicable to obtain two quotes, a single quote must be obtained and accompany the notice of meeting.

It seems only one quote for this work has been obtained. The application gives no indication of why no further quotes have been obtained, despite three quotes being obtained for the October EGM. If MYD has already partially progressed the work (beyond, for example, merely removing walls, floors or bathroom fixtures to enable a better assessment of the extent of the problem) it may be less practical to change contractor mid project. However, even if two quotes were not strictly necessary under section 152, they would arguably be desirable to assist owners to assess this significant expenditure. Moreover, I note that the quote from MYD provides no detail or breakdown of the work which comprises the $18,920 estimate.

The fundamental issue in this application is whether the circumstances amount to an emergency which justify the usual decision-making processes of the Body Corporate to be by-passed.

It is beyond the scope of this application to consider issues of the responsibility for the termite infestation and resulting damage. This matter is no longer at issue between the parties. However it appears – although the application gives very little detail – that previous dispute on this matter may be the reason why the Committee failed to reach an earlier decision on liability or failed to act on its decision earlier.

Clearly it is undesirable and inappropriate for Lot 16 to be left vacant for now over four months while the matter remains unresolved. Where the Body Corporate has accepted responsibility for the repairs, it appears unreasonable to put Pyne in the position of losing significant rental income because the Body Corporate has failed to act reasonably in undertaking the repairs in a timely manner. It may well be appropriate for Pyne to seek to recover his losses from the Body Corporate if the Body Corporate has no reasonable justification for its delays. However, I am not satisfied that these circumstances amount to an ‘emergency’.

Lot 16 is apparently vacant and I have been provided no evidence that there is any risk to the health and safety of any person that could occur while the matter waited for normal general meeting approval. Similarly I have been given no indication that there is any nuisance that is being caused to any owner or occupier from the damage, other than the obvious inconvenience to Pyne.

Furthermore, I have no evidence that any further delay in the repairs risks further damage to Lot 16 or any other part of the scheme. The application indicates that the termites have been treated and so it is not apparent that further termite damage is expected.

The primary justification in the request to effectively remove the usual right of owners to vote on expenditure is the threat of legal action. Certainly further delays will result in further losses for Pyne and expose the Body Corporate to increased costs from such legal action. While I appreciate the desirability of mitigating the losses to Pyne and any potential further liability for the Body Corporate, I am not satisfied that this of itself is sufficient to constitute an emergency. Little information has been given to explain the Committee’s failure to call a general meeting to consider the quote as soon the quote was received, or as soon as the Committee decided to accept liability (whenever that was), or as soon as the threat of legal action was received. If action had been taken at each of those times the matter should already have been able to have been resolved. I do not consider that the purpose of the emergency expenditure provisions is to reduce the financial impact of any inaction by a body corporate or a committee, but rather to enable expenditure to be incurred urgently in circumstances where a genuine emergency exists.

Moreover, the applicant has failed to advise (despite a request) when MYD can actually commence the work. Therefore, it is not clear that making the order sought will necessarily ensure the work can be commenced any sooner that would be the case if a general meeting was now convened.

On balance I am not satisfied that the circumstances as described in the application amount to an emergency that would warrant an adjudicator overriding the normal decision-making processes of the Body Corporate. I consider that owners should be entitled to consider and vote on the proposed expenditure in accordance with the normal requirement of the legislation.

The Body Corporate must now act expeditiously. To the extent that the Body Corporate accepts it is responsible for the repairs, it must comply with its legislative responsibility to effect the repairs as soon as possible. An EGM should be convened as soon as practical with an agenda including a motion to consider the MYD quote (and, if appropriate, any alternative quotes).

While I have found that the circumstances do not justify me authorising the MYD quote as emergency expenditure, I do consider it appropriate to order that this necessary EGM can be held with a shortened notice period. This may enable the matter to progress somewhat more quickly. Normally the notice period for a general meeting is 21 days[8], however I shall make an order authorising an EGM that is held 14 days after notice of the meeting is given. Depending on the time taken to prepare the agenda and meeting notices, and whether alternative quotes are required or desirable to be sought, the EGM could be held in less than three weeks. Within this time the Committee could contact owners to ensure that they understand the issue before voting and also liaise with MYD to ascertain a likely start date in the event that their quote was accepted.

[1] As of 30 August 2008 the new Standard Module came into force, replacing the Body Corporate and Community Management (Standard Module) Regulation 1997 which applied until that date.

[2] The application does not indicate when this decision was made or provide minutes of any meeting recording the decision.
[3] See sections 227, 228, 276 and Schedule 5 of the Act
[4] Section 276(2) of the Act
[5] Section 284(1) of the Act
[6] Section 151(1)(d) of the Standard Module

[7] The definition of the major spending limit set the limit (where no amount has been set by a general meeting) as the lesser of $1,100 x the number of lots (which in this case would be $22,00) or $10,000, whichever is less
[8] Section 74 of the Standard Module

Number of Scheme:	3262
Name of Scheme:	Harrisfield Gardens
Address of Scheme:	11 Smith Road WOODRIDGE QLD 4114

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Harrisfield Gardens [2009] QBCCMCmr 77 (3 March 2009)