Merrimac Heights [2010] QBCCMCmr 22 (18 January 2010)

Number of Scheme:	19563
Name of Scheme:	Merrimac Heights
Address of Scheme:	10 Bourton Road MERRIMAC QLD 4226

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Kosta Jovanovic, Chairman and Secretary of the scheme

I hereby order that the application for an order

An interim order is requested that in the event that this application is not finally determined before the holding of the extraordinary general meeting on 19 January 2010, then the meeting be adjourned pending the final determination of this matter.

is dismissed.

Merrimac Heights community titles scheme 19563 (Merrimac Heights) consists of 152 lots and common property. The Community Management Statement (CMS) for Merrimac Heights indicates that the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module) applies to the scheme.

This is an application for interim orders lodged by Kosta Jovanovic, Chairman and Secretary of the body corporate and Co-owner of Lot 33 (applicant) on 4 January 2010 under the Body Corporate and Community Management Act 1997 (Act).

The applicant seeks an interim order against the Body Corporate for Merrimac Heights (respondent) in the following terms:

In accordance with section 247 of the Act, the Commissioner for Body Corporate and Community Management has referred the application to me to decide whether the nature or urgency of the circumstances of the application warrant an interim order. The Commissioner has referred the application notwithstanding that affected persons have not been given notice of the application or afforded an opportunity to make submissions about the application[1]. In the circumstances, I have provided the Body Corporate Committee (committee), P & K Henderson, R Davies and Short Punch and Greatorix Lawyers with a limited opportunity to make a written submission in response to the interim application. Submissions were received from the committee and Short Punch and Greatorix Lawyers, on behalf of Peter and Keiren Henderson and Robyn Davies.

This application seeks that the extraordinary general meeting (EGM) scheduled for 19 January 2010 be adjourned pending a final order of the dispute. The circumstances of the dispute are as follows:

The EGM scheduled for 19 January 2010 was requisition pursuant to section 65 of the Accommodation Module. The EGM voting paper contains three motions; a motion to confirm the previous general meeting minutes, a motion to remove the existing committee and appoint a new committee and a motion to terminate the caretaking agreement.

The applicant disputes motion 2 (Motion 2) of the EGM scheduled for 19 January 2010 which seeks the removal of the current elected committee and the appointment of a new committee. The applicant argues that Motion 2 is invalid for the following reasons:

A submission was also received from the committee supporting the application. The committee make the following comments:

Further, a submission was received from Short Punch and Greatorix Lawyers, on behalf of Peter and Keiren Henderson and Robyn Davies, opposing the application. This submission makes the following comments:

I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.[2] 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

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

An order may require a person to act, or prohibit a person from acting, in a way stated in the order.[3] An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate.[4]

Section 279(1) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances of the application.

At this time, I am concerned with the application for an interim order and the threshold issue of whether interim orders are warranted. An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates.[5] Any order granted must be just and equitable in the circumstances.[6] The examples in section 279 of the Act indicate the usual circumstances where an interim order might be made and are in the nature of injunctive relief. While it is not possible to define the range of matters that might be the subject of an interim order, an applicant needs to establish that the circumstances warrant an interim order. An interim order will not be made if the only urgency relates to an applicant’s desire to resolve or expedite the matters in dispute, or where the nature of the circumstances are such that the matter is not capable of being dealt with in the context of an interim order.

It is not appropriate to consider the substantive issues in the application in detail at this time. But to determine whether it is just and equitable to grant interim relief, it is relevant to briefly consider the issues raised in the application. As an interim order can be considered on an ex parte basis, an adjudicator must be satisfied that the application raises serious legal questions and that the balance of convenience between the parties justifies injunctive relief. That is, an adjudicator must balance the inconvenience of granting relief now if final orders are ultimately refused against the inconvenience of refusing relief now if final orders are ultimately granted. Of particular relevance is evidence that an interim order is necessary to prevent serious or irreparable harm.

The applicant raises several objections to Motion 2 and the EGM scheduled for 19 January 2010. I will address the key issues in turn.

The applicant argues that Motion 2 is invalid because the proper procedures regarding the removal of committee members for a breach of the code of conduct pursuant to sections 34 and 35 of the Accommodation Module have not been followed. In this regard, the applicant states that a notice of the code of conduct breach has not been given to any voting member of the committee nor has an ordinary resolution been put to, or passed at, a general meeting to give a committee member a written notice as required under section 34 of the Accommodation Module.

Section 34 of the Accommodation Module states that if the body corporate believes a voting member of the committee has breached the code of conduct, “..the body corporate may decide, by ordinary resolution, to give the member a written notice...” regarding the breach (underlining mine). That member of the committee then has 21 days to respond to the notice.[7] Section 35 of the Accommodation Module states that if the body corporate gives a member of the committee a notice under section 34 of the Accommodation Module and the 21 day period for a response has ended, the body corporate must include on the agenda of the next general meeting a motion to remove the committee member. If the motion is passed by an ordinary resolution, the member will be removed from their position as a committee member.[8] Based on the evidence before me, I am satisfied that the 2-step procedure as set out under sections 34 and 35 of the Accommodation Module for the removal of committee members for a breach of the code of conduct has not been followed in this instance.

However, section 33(2)(f) of the Accommodation Module states that a committee member’s position becomes vacant if the member is “removed from office by ordinary resolution of the body corporate”. In the matter of Silverton,[9] Adjudicator Underdown considered the relationship between section 34 of the Accommodation Module (equivalent to the then section 25AA of the Standard Module) and section 33(2)(f) of the Accommodation Module (equivalent to the then section 25(2)(f) of the Standard Module). In that matter Adjudicator Underdown stated:

“Section 25AA is...permissive, in that the body corporate may put such a motion, if it believes that a breach of the code has occurred. It is not obligatory that it does so. The introduction of section 25AA on 1st July 2007 gave some teeth to the newly introduced Code, in that standards of behaviour for committee members were now set in the legislation. This required a balancing section as to what might happen if a committee member did not comply with the Code. It is still a matter for the body corporate to choose how to proceed.

The introduction of Section 25AA in 2007 did not diminish in any way section 25(2)(f), but provides a secondary process whereby the performance of committee members may be measured against the provisions of the code.

Therefore, it seems that section 34 of the Accommodation Module does not in any way diminish the procedures as contained in section 33(2)(f) of the Accommodation Module.[10] Rather, it seems that section 34 of the Accommodation Module merely provides a secondary process whereby the performance of committee members may be measured against the provisions of the code.

Section 33(2)(f) of the Accommodation Module (equivalent to the then section 25(2)(f) of the Standard Module), was also considered by Adjudicator Underdown in the matter of Silverton.[11] There the Adjudicator stated:

“Section 25(2)(f) states that a member’s position becomes vacant if the member is removed from office by ordinary resolution of the body corporate. Section 25(2)(f) is included in a list of other triggers for a vacancy to occur, for example, if a committee member misses 2 consecutive meetings without leave, or become ineligible to hold the position, for example by selling the only owned unit in the scheme. These triggers are “instant” in as much if one of the actions on the list at section 25(2)(f) occurs, then that person is no longer a committee member.

Section 25(2)(f) has long been relied upon as the process which may be used by the body corporate to remove a committee member from office if it is the wish of the lot owners at a general meeting to do so.[12] The section does not require any blame to be laid, or a case to be made out. It relies on the satisfaction of lot owners with their committee members, and gives a body corporate power to change or “spill” the committee during the scheme year. For example, a committee member may be removed from office by section 25(2)(f) if the committee member becomes incapable, perhaps through no fault of his or her own; or becomes ill or hospitalised for lengthy periods; or goes overseas, making it difficult for the committee to operate. None of these reasons requires any breach of conduct on the part of the committee member.

The committee member is of course entitled to lobby against the motion and to seek support, and the motion may be put by an aggrieved lot owner or a group of lot owners, or by the committee. It is up to lot owners to vote as they think fit.”

I have been provided with no information to suggest that Motion 2 is contrary to the requirements contained in section 33 of the Accommodation Module. Further, in regards to the purported ‘removal of the entire committee’ in Motion 2, I note the following passage:

“It is...within the contemplation of the legislature that the entire committee might be removed from office. There is no prescribed way of doing this other than by ordinary resolution at a general meeting. There is nothing in the legislation that requires that each member of the committee is removed one by one, or that prevents several members at once, or all members of the committee, from being removed.”[13]

Accordingly, without further investigation and information, I am not sufficiently satisfied that Motion 2 is in breach of sections 33, 34 or 35 of the Accommodation Module.

Further, the applicant argues that the requisitioned EGM scheduled for 19 January 2010 should be adjourned because the caretakers canvassed support to requisition the EGM by telephoning investor owners who were in their letting pool and sending an email dated 19 November 2009 headed “SIGNATURE REQUIRED’ and addressed ‘Hello Investor’.

Nothing under the Act prevents an owner lobbying or seeking support for their desired outcome. However, an owner is not allowed to mislead other voters into supporting their particular cause. Arguably a motion could only be overturned on the basis of misleading information if there was some evidence that some voters were actually misled, rather than just that voters could potentially have been misled. Further, there may be a question of whether sufficient owners were actually misled to have changed the outcome of the requisition for an EGM. This is a question that requires further investigation, particularly by seeking the views of owners through submissions.

Another argument submitted by the committee is that the correct procedures for nominating committee members has not been followed as the caretakers, in selecting the committee as listed in Motion 2, have not given the current committee any option of nominating for the new committee. Rather, all owners should have been equally invited to nominate for the committee positions.

Section 37 of the Accommodation Module, states that if a committee member is removed from office by an ordinary resolution of the body corporate, the body corporate may, at the general meeting where the resolution is passed appoint a person who is eligible to be a member of the committee to fill the vacancy. Section 37(2) of the Accommodation Module, states that it is not necessary for the body corporate to conduct an election to make a committee appointment. Therefore, it seems that unlike committee elections at an AGM it is not necessary to hold elections for committee membership. This position is further supported by the matter of Coronaton Gardens,[14] where the Adjudicator stated, “under section 25B Standard Module,[15] any eligible person may be “appointed” to the committee at the general meeting to fill a vacancy. There is no specified procedure for making the appointments at the general meeting held under section 25B Standard Module but there is no need to hold an election...” If owners are unhappy with individuals who are nominated for the committee, owners are at liberty to vote against Motion 2.

Further, the applicant argues that Motion 2 is not valid as Karl Gray and Stefan Astwick, who are nominated as treasurer and ordinary member of the ‘new’ committee respectively, have not consented in writing or otherwise to become members of a ‘new’ committee. I have been provided with insufficient evidence to support the applicant’s assertion that to date, neither Karl Gray nor Stefan Astwick, have accepted nomination for election to the proposed committee as set out in Motion 2. This is an issue which requires further investigation, particularly by seeking the views of the owners involved through submissions.

However in any event, as Karl Gray and Stefan Astwick are but two of seven individuals nominated for committee membership pursuant to Motion 2, even if Motion 2 is passed and their committee nominations are later found to be invalid, the committee will still have a quorum[16] and thus be able to fill any subsequent committee vacancies under the Act.[17] Accordingly, despite the applicant’s arguments regarding the validity of the nominations of Karl Gray and Stefan Astwick, I am not satisfied that this question in and of itself renders it necessary to make the interim order sought.

Another argument submitted by the applicant regarding the validity of Motion 2 and the proposed EGM is that the conduct of the caretakers in canvassing support for a meeting to consider the removal of the committee is unconscionable conduct. In this regard, the applicant states that the body corporate and the caretakers are currently in dispute concerning the validity of a landscape maintenance agreement and the caretakers’ performance under the caretakers agreement. Consequently, the applicant states that the caretakers, by requisitioning the EGM are exerting undue influence on, or using unfair tactics against the body corporate and owners to exercise their rights to contest the existing disputes with the body corporate. Further, the committee state that Motion 2, if successful, will effectively disarm the body corporate during the upcoming Supreme Court action.

Pursuant to section 65 of the Accommodation Module, an EGM must be called if it is requisitioned by at least 25% of the lots included in the scheme. I have been provided with no information to suggest that the EGM scheduled for 19 January 2010 was not validly requisitioned. Further, as stated above, an owner is entitled to ‘rally’ or ‘seek support’ for their desired outcome. The fact that this interim application may or may not affect any previously existing dispute between the body corporate and the caretakers, does not in and of itself, render the caretakers’ conduct in requisitioning the EGM as unconscionable. Based on the evidence before me, I have been provided with insufficient information to make a finding regarding unconscionable conduct or undue influence at this stage. Further, I am not satisfied that this question in and of itself renders it necessary to make the interim order sought.

In considering whether to grant the interim order sought, it is relevant to balance the inconvenience of granting relief now if final orders are ultimately refused against the inconvenience of refusing relief now if final orders are ultimately granted.

In this regard, Short Punch and Greatorix Lawyers (SPG), on behalf of Peter and Keiren Henderson and Robyn Davies, state that if the EGM were delayed it would cause significant inconvenience, expense and delay for owners. Further, SPG state that Motion 2 has been incorporated into the EGM agenda with the support of in excess of 25% of lot owners and therefore should be able to be voted on by individual owners as they see fit.

On the other hand, the applicant and the committee argue that Motion 2, if successful, may affect the body corporate during the upcoming Supreme Court action.

On balance I am not satisfied that the applicant has presented sufficient evidence of genuine concerns relating to the validity of the EGM scheduled for 19 January 2010 or Motion 2 to warrant the adjournment of the EGM or postponement of the implementation of Motion 2 pending the final order. Accordingly I have declined to grant an interim order at this time.

However, it should be noted that if Motion 2 is passed and a lot owner believes a decision of the new committee contraventions the BCCM Act or the scheme’s CMS, that lot owner is at liberty to lodge a dispute resolution application with our Office regarding the disputed decision.

EFFECT OF AN INTERIM ORDER

The matter will now proceed in accordance with the normal processes undertaken by this Office, including the calling of submissions from all affected parties. A final order to the application will be made in due course.

[1] Section 247(3) of the Act.
[2] See sections 227, 228, 276 and Schedule 5 of the Act.
[3] Section 276(2) of the Act.
[4] Section 284(1) of the Act.
[5] Section 279 of the Act.
[6] Section 276 of the Act.
[7] Section 34(1)(c) of the Accommodation Module.
[8] Section 35(3) of the Accommodation Module.
[9] Silverton [2008] QBCCMCmr 213 (25 June 2008).
[10] This conclusion is also supported by Attenborough 4 [2007] QBCCMCmr 659 (23 November 2007).
[11] Silverton [2008] QBCCMCmr 213 (25 June 2008).
[12] 0601-2000 Magic Mountain Apartments; 0525-2003 Centrepoint; 1024-2007 Coronaton Gardens.
[13] Coronaton Gardens [2008] QBCCMCmr 75 (4 March 2008).
[14] Coronaton Gardens [2008] QBCCMCmr 75 (4 March 2008).
[15] Now section 37 of the Standard Module or section 37 of the Accommodation Module.
[16] See section 49 of the Accommodation Module.
[17] See section 38 of the Accommodation Module.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Merrimac Heights [2010] QBCCMCmr 22 (18 January 2010)