Wynyard Estate [2010] QBCCMCmr 16 (13 January 2010)

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

Zinaida Grebeneva and Peter Wood, the owner and occupier respectively of Lot 17

I hereby order that the body corporate for Wynyard Estate CTS 34055 shall not act upon nor take steps to put into effect Motion 9 “Appointment of Body Corporate Manager” purportedly passed at the Annual General Meeting of the body corporate held on 17th November 2009 for the reasons set out herein;

I further order that the application for an interim order that Capitol Body Corporate Administration is appointed as an administrator prior to the final determination of this application is dismissed.

I further order that this interim order expires when a further interim order is issued, or when the application is finally determined or discontinued, or upon the expiry of 12 months from the date of this order, whichever is the earliest.

This is an application dated 1st December 2009 and amended on 17th December 2009 by Zinaida Grebeneva and Peter Wood (the Applicants) owner and occupier respectively of Lot 17, against the body corporate for Wynyard Estate CTS 35055 (the body corporate) as follows –

The Applicants also sought an interim order that the outcomes of Motions 1, 4, 5, 6, 9, 10, 11, 12, 13, 14, 15, 16 and 17 of the annual general meeting held on 17th November 2009 not be put into effect, nor any action taken in respect of any agreements signed and bills issued pursuant to those motions, pending final determination of this application.

The Applicants also sought to appoint Capitol as an administrator pending final determination of this application.

“Wynyard Estate” CTS 34055 is a community title 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). There are 66 lots 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)).

Section 247(3) of the Act allows the Commissioner to refer an application to an adjudicator for consideration for an interim order even though proper notice of the application has not been given to the body corporate or other affected persons, and despite the fact that parties to the application have not been given an opportunity to make a submission about the matters in dispute.
It seems to me that the Act allows this process because applications for interim orders often relate to emergency or otherwise urgent circumstances, where it is simply impractical or impossible to allow a period for submissions prior to the consideration of the application for interim orders. It is also relevant that generally the purpose of an interim order is simply to maintain the “status quo” of a situation, and not finally to resolve the matters in dispute.

Section 279(1) of the Act allows an adjudicator to issue an interim order in response to an application “if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates”. Read together with section 247(3), section 279(1) appears to allow an adjudicator to issue an interim order without any reference to other parties to the dispute.

Notwithstanding that the Act allows for interim orders to be issued without reference to other parties, I am of the view that when possible, it is far preferable and more consistent with the principles of natural justice, to allow affected persons to make a submission about an application (even if the time allowed for submissions is necessarily brief) prior to the determination of an application for an interim order. I therefore sought submissions from the body corporate by close of business on 5th January 2010.

The Applicants say that they submitted eight motions to the annual general meeting held on 17th November 2009 (AGM). This annual general meeting had been re-convened following an adjudicator’s order made on 25th August 2009 that the annual general meeting proposed to be held on 26th August 2009 was invalidly convened as lot owners were not invited to make submit motions owing to a mail-out error on the part of the body corporate manager’s agent.

On receipt of the agenda the Applicants noted that their motions had been placed after the committee motions, even though some of them concerned the same subject matter and should have been listed as motions in the alternative. Some of their motions were also not distributed with the same wording as that proposed by the Applicants. The wording of the motions and the wording of the explanatory notes submitted by the Applicants were also separated on some of the proposed motions. Another motion had a word missing, and there were misprints in the submitted text.

As a result lot owners had “no clear understanding what they are supposed to vote for...”

Motion 1, “confirmation of minutes” contained an error as to the date, in that the date of the previous meeting was given as 26th August 2009, when that was the date of the annual general meting which was cancelled by adjudicator’s order. The date was corrected in the minutes, and the correction not noted. The Applicants say that this motion “was dishonest and should have been ruled out of order....”

Motions 4 and 10 were “appointment of auditor” and should have been in the alternative; Motions 5 and 12 were “adoption of administrative fund budget” and should have been in the alternative; Motions 6 and 13 were “adoption of sinking fund budget” and should have been in the alternative; Motions 9 and 11 were “appointment of a body corporate manager” and should have been in the alternative.

Motion 14, “financial books and records”, Motion 15 “termination of caretaking and letting agreements”, Motion 16 “breach of by-laws: garden damage” and Motion 17” breach of by-laws: lawn damage”, motions proposed by the Applicants, were all ruled out of order by the body corporate manager allegedly on receipt of legal advice. The Applicants were refused sight of the legal advice because the advice was alleged to be private and not obtained by the body corporate.

Motions 11, 15, 16 and 17 were also split from their explanatory content; were not recorded word for word; had their titles changed; a key word was missing; and there were “numerous misprints and errors.

Further, the AGM was “ conducted in a very strange way” with the chairperson Ivan Draganic (Mr Draganic) not chairing the meeting, and not speaking at all. The meeting was chaired by the body corporate manager, and no questions were invited, and no new business sought, when the Applicants wanted to discuss other matters.

The body corporate manager sought to sabotage the best interests of the body corporate. The Applicants are of the view that the body corporate manager has breached the code of conduct for body corporate managers. Adding this to the body corporate manager’s “double failure” to call the annual general meeting correctly, an administrator should be appointed to convene and hold an annual general meeting correctly. The body corporate has wasted time and money on trying to hold annual general meetings. The body corporate and the body corporate manager are not capable of complying with the legislation. Capitol should be appointed in the interim, pending the final outcome sought which is that Capitol will be appointed to convene an extraordinary general meeting so that specific business might be decided by the body corporate properly.

The body corporate submitted that Mr Draganic now holds all executive positions on the committee. It says that the annual general meeting on 17th November 2009 was attended only by the Applicants, the on-site manager, Mr Draganic and the body corporate manager. Because there were no committee members attending and the chairperson, then Paul Ratcliffe, was not present, the body corporate manager had to open and chair the meeting.

Mr Ratcliffe did not appear at the meeting and Mr Draganic was elected in all three executive positions, even though he says he was not really prepared for this.

It says that Motion 14 was ruled out of order on consideration of legal advice from Hynes Lawyers that it was “ unenforceable, unintelligible and does not state who is to check the records, when they are to be checked, and what they are checking for.”

Motion 15 was ruled out of order on consideration of the same legal advice that it “fails in all necessary respects as it conflicts with the legislation, is unlawful and unenforceable.”

Motion 16 was ruled out of order as there was no evidence that garden damage was caused by the on-site manager/letting agent, and minimal damage done.

Motion 17 was ruled out of order as the claim “is highly exaggerated and there is no evidence of the damage and if there is some times a little, the lawn does repair itself in time.”

The body corporate says that the Applicants did not get enough support for their motions, and they should accept the body corporate’s decisions.

In this matter, the Applicants have demonstrated clearly, and there is no dispute by the body corporate, that Motions 4 and 10, 5 and 12, 6 and 13, and 9 and 11 were motions which contained the same subject matter. The chairperson of the annual general meeting held that the latter of each of these pairs of motions was “out of order” as the first of each pair had “already decided the matter.”

It is for this reason that the legislation particularly requires that where two or more motions propose “alternative ways of dealing with the same issue”[1], that they are set out to be voted on as “motions in the alternative.” The wording for a motion in the alternative is particular, and care should be taken to make sure the two motions are set out in accordance with the legislation. The legislation requires that explanatory notes are sent out telling owners how to vote for a motion in the alternative. (Section 70 Accommodation Module)

The “motion in the alternative” is a keystone in the legislation’s aims to provide fairness and transparency. So much so, that section 70(5) Accommodation Module, sets out as follows –

“If more than 1 motion about the same issue is listed on the agenda, or stated in a voting paper, for the meeting, all motions about the issue are void.”

Motions 4 and 10 do not appear to me at this first consideration to be true “motions in the alternative” in that Motion 4 proposed a named auditor be appointed, and Motion 10 proposed that “no particular auditor” be appointed. In other words, Motion 10 was not about choosing an “alternative” named auditor, but simply encouraging a “no” vote for Motion 4, or support for Motion 3. It is difficult to imagine how it could have been framed as a vote in the alternative.

I am also not satisfied that the Applicants were, at Motions 12 and 13, proposing “alternative ways of dealing with the same issue”, in relation to the budget. What they suggested was that the same base amount be adopted, $114,510.00, but less 10% and that owners pay 10% less in contributions “ in accordance with section 138 Accommodation Module.”

In order to submit a budget in the alternative, a lot owner would, in my view have to draft each item of the budget with an estimate of spending against it. Section 137 Accommodation Module states that the administrative fund budget must contain estimates for the financial year and cover the cost of maintaining common property, insurance and other expenditure of a recurrent nature; and that the sinking fund budget must allow for raising a reasonable capital amount to cover the next 9 years of anticipated expenditure of a capital or non-recurrent nature, periodic replacement of major items and other expenditure that should reasonably be met from capital.

Any lot owner may propose an alternative budget, and if he or she did so, it should be voted upon as a motion in the alternative. However, all the Applicants have proposed is that the body corporate adopt the committee’s budget but pay 10% less, not explaining where the 10% saving is to be made. If the body corporate simply paid 10% less against the committee’s estimates, then the body corporate would end up with a shortfall of 10%.

Section 138 exists merely to cover the situation where, at a general meeting the body corporate may decide to adjust the budget “to provide for spending, or remove amounts included in the proposed budget for spending” (Section 138(2) Accommodation Module) so that the motion will not fail if the budget ends up being 10% higher or lower than that proposed. The budget can be adjusted by up to 10% less only if a motion to approve the spending is stated in the agenda; and b) the spending is provided for in the propose budget but the body corporate does not approve the spending at the meeting.

However, it is arguable that Motions 5 and 6 are motions “about the same issue” and fall to be considered pursuant to section 70(5) Accommodation Module.

Motions 9 and 11 fall squarely in the alternative, both being to appoint a named body corporate manager. This example is given at section 70(1) Accommodation Module and must be regarded as a typical “motion in the alternative.” Motion 11 was not accorded this protection, quite wrongly.

It therefore seems to me that the Applicants would have success in seeking an order that Motions 9 and 11 are void, and that there is some merit in the remainder of the application.
In respect of Motions 14, 15, 16 and 17, when a chairperson rules a motion out of order, in accordance with section 79(2) Accommodation Module, the chairperson must give reasons for the ruling (which reasons are to be minuted) and, for a reason given that the motion, if carried would be unlawful or unenforceable for another reason, the chairperson must “state how the ruling may be reversed by the persons present and entitled to vote on the issue.” That is, the meeting may vote by ordinary resolution to disagree with the chairperson’s ruling.

The Applicants have provided a copy of the minutes of the AGM which show reasons for Motions 14, 15, 16 and 17 given as each being unlawful and unenforceable. It would seem unlikely that with only two voting owners in attendance at the meeting, Mr Draganic and Ms Grebeneva, that the meeting might have voted to overturn the chairperson’s ruling. However, I am unable to consider at this interim order stage, the effect of the failure to comply with a mandatory requirement of the legislation and the legality/enforceability of these four motions, that is, whether the mandatory requirement is affected by the fact that the chairperson may have been right in the original ruling.

For example, it seems to me in respect of Motion 15 that a body corporate may not vote to terminate a caretaking agreement or letting agreement without first having provided the contracting party with a remedial action notice. (Section 129 Accommodation Module and Part 5 Accommodation Module). And Motion 17 appears to seek a general policy be adopted that tenants damaging the lawn have money stopped from their bond monies, a practice not within the power of the body corporate.

It does not seem to me at this stage that the fate of these motions depends on exact wording, misprints and errors. The Applicants have not persuaded me that there is an urgent need to order that the outcome of these motions, that is, that they were “out of order”, should be “put on hold.”

Nor have the Applicants satisfied me that the date in the agenda on Motion 1, that of 26th August 2009 (in lieu of 28th August 2008) was anything but a typographical or clerical error. Owners are asked to vote on confirming the minutes of the last annual general meeting. As there were no minutes created for the annual general meeting proposed for 26th August 2009 but then cancelled, this can hardly be of any import.

In granting an interim order, the balance of convenience must be weighed, since it gives one party the power to stop another from continuing with its daily business prior to all the issues being fully considered and in some cases, all the evidence being heard. If the body corporate is stopped from proceeding with Motions 5 and 6 then it will be hampered in the collection of contributions, and in the administration of the scheme. I am of the view that the budgets can always be adjusted later if it is found that Motions 5 and 6 are to be held to be invalid. I will not therefore order that the body corporate does not, in the interim period, act on Motions 5 and 6.

However, the Applicants have persuaded me that there is a real likelihood that Motion 9 (and its corollary 11) will be void. I therefore order that the body corporate does not act on Motion 9 of the annual general meeting of 17th November 2009.

It follows that contracts made in reliance of a void motion are susceptible to avoidance in that there is no authority on the part of the body corporate for entering into such contracts. The Applicants have provided no evidence about any such contracts or “bills issued” but any action of the body corporate taken without authority is susceptible to invalidity.

In respect of the second interim outcome sought, the appointment of an administrator is not a suitable order for an interim order, which is in the nature of an injunction, or “holding order”. Submissions should be sought from lot owners on such an appointment which involves contracting to spend owners’ money with a third party. This part of the application is therefore dismissed.

This matter is now returned to the Commissioner pursuant to section 279(4) Act.

Number of Scheme:	34055
Name of Scheme:	Wynyard Estate
Address of Scheme:	90 Webster Road DECEPTION BAY QLD 4508

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Wynyard Estate [2010] QBCCMCmr 16 (13 January 2010)