Royal Pines Resort [2010] QBCCMCmr 509 (11 November 2010)

Last Updated: 13 December 2010

REFERENCE: 1013-2010

INTERIM ORDER OF A REFEREE

MADE UNDER PART V

BUILDING UNITS AND GROUP TITLES ACT 1980

Name of Plan:	Royal Pines Resort
Address of Building or Parcel:	Queensland

TAKE NOTICE that pursuant to an application made under section 77(1) and 76(2) of the Building Units and Group Titles Act 1980 by the Royal Pines Resort Principal Body Corporate

I hereby order that the application for the following interim orders: That pending the finalisation of this Application the PTBC be restrained from implementing the resolution purportedly passed at the PTBC's EGM held on 27 October 2010; and If the PTBC has implemented the resolution purportedly passed at the PTBC's EGM held on 27 October 2010 then it is to withdraw the application filed with the Minister pursuant to that resolution. is dismissed.

STATEMENT OF REFEREE’S REASONS FOR DECISION - 1013-2010

“Royal Pines Resort” CTS 107007

APPLICATION

Royal Pines Resort is an approved resort established under the Integrated Resort Development Act 1987 (IRDA). The Royal Pines Resort Primary Thoroughfare Body Corporate (PTBC) is an entity established by section 102 of the IRDA. The Royal Pines Resort Principal Body Corporate (PBC) is an entity created by virtue of section 139 of IRDA.

This application was made by the PBC (applicant) on 1 November 2010, pursuant to the resolution of the PBC Committee passed outside a committee meeting on 29 October 2010. The application is brought against the PTBC (respondent) and seeks the following interim orders:

That pending the finalisation of this Application the PTBC be restrained from implementing the resolution purportedly passed at the PTBC's EGM held on 27 October 2010; and

If the PTBC has implemented the resolution purportedly passed at the PTBC's EGM held on 27 October 2010 then it is to withdraw the application filed with the Minister pursuant to that resolution.

The application also seeks the following final order:

That the resolution purportedly passed at the PTBC's EGM held on 27 October 2010 be ruled invalid.

JURISDICTION

IRDA is one of a number of pieces of legislation defined as a ‘specified Act’ under section 326 of the Body Corporate and Community Management Act 1997 (BCCMA). Section 325(2)(a) of the BCCM Act provides that the previous Building Units and Group Titles Act 1980 (BUGTA) continues to apply to plans registered under the BUGTA for a specified Act.

Part 5 of the BUGTA concerns disputes, and sections 75 to 94B provide for orders by a referee. Section 77(1) of BUGTA provides general powers of a referee to make orders, as follows.

77 General powers of referee to make orders

(1) A referee may, pursuant to an application of a body corporate, a body corporate manager, a proprietor, a person having an estate or interest in a lot or an occupier of a lot in respect of a parcel, make an order on any person entitled to make an application under this subsection or on the chairperson, secretary or treasurer of the body corporate for the settlement of a dispute, or the rectification of a complaint, with respect to the exercise or performance of, or the failure to exercise or perform, a power, authority, duty or function conferred or imposed by this Act in connection with that parcel.

Section 76 of BUGTA also provides for the making of interim orders:

76 Interim orders

(1) In this section —

interim order means an order made under subsection (2).

(2) Where an applicant for an order under section 77(1) states in his or her application that the applicant requests an interim order, the referee may, if the referee is satisfied on reasonable grounds that, by reason of the urgent circumstances of the case, the referee should do so—

(a) make, under this subsection, any order that may be made under section 77(1) with respect to the application; and

(b) before the expiration of 3 months from the date on which it takes effect and upon a further request made by the applicant, renew an interim order that is in force by serving notice in accordance with subsection (6) that the order is renewed.

(3) An interim order may be made or renewed notwithstanding—

(a) that any power or duty of the referee under section 73(1) has not been exercised or performed with respect to the application; or

(b) where the referee has given written notice of the application under section 73(1)(c)—that any time specified under section 73(1)(d) or (e) in that or any further notice has not expired.

(4) An interim order made pursuant to an application for an order under section 77(1) ceases to have effect—

(a) at the expiration of 3 months from the date on which it takes effect or, where the referee has renewed the interim order, at the expiration of 6 months from that date; or

(b) where the interim order is revoked by a tribunal under section 107(1)(c) or by the referee under subsection (5)—when it is so revoked; or

(c) where—

(i) the referee makes an order under section 77(1) with respect to the application; or

(ii) the referee dismisses the application; before the interim order ceases to have effect under paragraph (a) or (b), when the order is made under section 77(1) or the application is dismissed, as the case may be.

(5) The referee may revoke an interim order and, if the referee does so, the referee shall serve notice in accordance with subsection (6) that the order has been revoked.

(6) A notice of the renewal or revocation of an interim order shall be served—

(a) except as provided in paragraph (b), on the body corporate for the plan to which the order relates; or

(b) where the order requires a person to do or refrain from doing a specified act—on that person.

(7) A person shall not in, or in connection with, a request for an interim order or for the renewal of any such order, make a statement that the person knows is false or misleading in a material respect.

Maximum penalty for subsection (7)—6 2/3 penalty units.

Section 179A(1) of IRDA provides that a dispute about the operation of the IRDA or the rights and obligations of persons under IRDA may be dealt with under part 5 of the BUGTA. Section 179A(1) includes exclusions but these do not apply in this case. In addition, pursuant to section 179C, a referee may not decide an application unless satisfied that the applicant has made reasonable attempts to resolve the dispute by ‘internal dispute resolution’.

Section 77(1) of BUGTA essentially provides for disputes involving parties within a body corporate. Therefore it would not cover disputes between two bodies corporate, unless those bodies corporate be imputed with the role of a proprietor or proprietors within an overarching body corporate. Having regard to the definition of ‘subsidiary body corporate’ in the Schedule 7 Dictionary in IRDA, the PBC is a subsidiary of the PTBC. Therefore, for the purposes of section 77(1) of BUGTA, a dispute between the PBC and PTBC can be treated as a dispute between a proprietor and a body corporate[1].

The PTBC has disputed that the PBC has “an estate or interest in a lot”. However, that element of section 77(1) relates only to “a person having an estate or interest in a lot” other than a proprietor, who is identified earlier in the list of allowable applicants.

Prima facie, I am satisfied that I have jurisdiction to determine this application. But there are further jurisdictional issues relating to specific grounds in dispute that I will discuss further below.

PROCEDURAL MATTERS

Under section 76(3) of BUGTA a referee may make interim order notwithstanding that notices have not been issued pursuant to section 73(1)(c) and (d) of BUGTA inviting submissions. This application was received on 1 November and, after further information was requested and received from the applicant, I invited a submission on the application from the respondent on 2 November for one week.

On 4 November the solicitors for the PTBC wrote requesting an extension of the time for a submission, noting that the PTBC would need to convene an EGM to obtain approval for the expenditure on legal fees to respond to the application. At my request, the PTBC was verbally advised that the extension would be approved if the PTBC could give a written undertaking not to act on the disputed resolution until the interim order was determined. The PTBC verbally advised that it could not give this undertaking as in fact the application had been made to the Minister on 1 November. It further noted that the Minister was aware of this application. In the circumstances, and noting that interim orders may be made ex parte, I was not satisfied that it would be appropriate to further delay the consideration of the interim. However, at the PTBC’s further request I allowed a brief extension until 10 November.

A submission was received in due course from the PTBC.

MATTERS IN DISPUTE

This application relates to Resolution 2 passed at the PTBC’s Extraordinary General Meeting (EGM) on 27 October 2010. The resolution agreed to make an application to amend the approved scheme of development for Royal Pines Resort. The PBC seeks to invalidate this resolution. The circumstances of the dispute, based on the material provided to date, are as follows:

Lot 103, which is within the PBC’s precinct, is owned by the company Royal Pines Projects Pty Ltd (Projects). Projects is seeking the amendment of the approved scheme to change the precinct boundary between Lot 103 and adjacent ‘farm land’, which is also owned by Projects. On 1 April 2010 Projects wrote to the PTBC requesting that it make an application to the Minister to amend the approved scheme.

Part 2, Division 2 (sections 9-14) of IRDA provides for the amendment of an approved scheme. Section 9 provides that:

9. Application for amendment of approved scheme

(1) An application for amendment of an approved scheme may be made to the Minister by the primary thoroughfare body corporate or, if that body has not been incorporated, by the applicant.

(2) To remove any doubt, it is declared that an application may be made under this division to amend an approved scheme by varying the boundaries of the site of the approved scheme.

Section 10 of IRDA sets out a process for members to be notified of the proposed application and given the opportunity to make a written submission. Section 11 provides the requirements for the application to the Minister. Under section 12 the Minister must consider the application and give it to the Governor in Council who then, under section 13, may approve (conditionally or otherwise) or refuse the amendment. Section 13A and 14 provide for minor variations of site boundaries.

On 9 June 2010 the PTBC executive committee apparently resolved to process the application in accordance with the legislative requirements. On 30 June 2010 the PTBC sent out a notice of the proposed amendment and inviting comments by 13 August. Another notice was sent on 2 August with a clearer copy of the summary of the proposed changes and extending the time for comments to 17 September 2010. Various communications occurred between the parties and on 15 September the PBC made a written submission opposing the amendment.

The information sent to members indicated, in part, that there would be an aggregate reduction in the residential precinct of about 4,400m2 (0.2%); a new secondary thoroughfare buffer to replace the existing buffer; no change in residential density for the new Lot 104; and no change in body corporate levies.

At the EGM on 27 October the PTBC passed the following motion by ordinary resolution:

The Royal Pines Resort Primary Thoroughfare Body Corporate makes application to amend the approved scheme for Royal Pines Resort under section 9 of the Integrated Resort Development Act 1987, in the form of the tabled application, together with any comments received from its members pursuant to section 11 of the Integrated Resort Development Act 1987

Resolution 3 agreed to instruct the PTBC solicitors to lodge the application with the Minister for Infrastructure and Planning, and Resolution 4 agreed that Projects would pay the costs of the application. The minutes also record concerns raised by the PBC’s nominee at the meeting and his protest at the Lots 2 and 4 nominees voting despite a conflict of interest. Motion 5 which was submitted by the PBC, and sought to defer the making of the application until a reply was received to a letter from the PBC dated 5 October 2010, was withdrawn as being no longer required.

Club Resort Holdings Pty Ltd (known as RACV) owns Lots 2 and 4 and has the significant majority of the voting entitlements for the PTBC. The PBC says that RACV has ‘inexplicably’ exercised its vote in favour of Projects. It believes RACV may have a contractual obligation to support Projects, and says RACV has repeatedly failed to deny this. The PBC is also concerned that the PTBC has been represented by the same solicitors as Projects.

The PBC objects to the amendment of the scheme on the basis that it would have serious adverse affects on the PBC. They have argued that:

­ Projects may not develop the farm land adjacent to Lot 103 for many years, and so it is unnecessary and premature to rearrange the boundary until Projects decides what commercial outcome it wants for that land.
­ The amendments will extinguish a strip 100m long and 2m wide of Secondary Thoroughfare, which would reduce the boundary of the Western precinct by 10%. An appropriate authority with statutory powers is the only party who has the power to resume this section abutting Ashmore Road, subject to compensating the PBC for its loss.
­ The amendment would extinguish owners’ right of way over the Secondary Thoroughfare, which is conferred by section 100(1) of IRDA.
­ The amendment would result in the boundary with the farm land being brought closer (by 100m) to the Lakeview lots. This will significantly affect the amenity of those lots when the farm land is developed, which the owners of those lots could not have reasonably foreseen.
­ The area of Lot 103 would decrease by 39% without any decrease in the number of units planned. This will increase the density of the development.
­ The 18 lot entitlement of the new Lot 105 will result in significant change to the residential density and the size and quality of the dwellings likely to be constructed, which will have an adverse impact on the amenity of the adjacent area.
­ Unless Projects agrees to reimburse the PBC for the reasonable and necessary costs of establishing, fencing, illuminating and securing the new 2m Secondary Thoroughfare buffer, the Eastern and Western Residential Precinct owners will have to fund these costs.

The PBC argues that the Governor in Council does not have the power or jurisdiction to approve an amendment which extinguishes the PBC’s title to part of the secondary thoroughfare. In addition, they say the variations in the Lot 103 boundaries are not of a minor nature and the notices issued misrepresented to members that the application was a minor variation to the site boundaries. The PBC asserts that the EGM resolution should be invalidated because the PTBC is not acting reasonably; the resolution is a fraud on a power; and the resolution is ultra vires.

In regard to their claim that the PTBC is not acting reasonably, the PBC argues:

­ The obligation to act reasonably exists in section 102(5) of IRDA (which provides that the PTBC do all things reasonably necessary for the control, management and administration of the primary thoroughfare) and in section 116(1)(a) (which requires the PTBC to control, manage and administer the primary thoroughfare for the benefit of its members).
­ The adverse affects of the amendment upon the PBC would be so detrimental that no member of the PTBC acting reasonably could vote in favour of the resolution.
­ Acting unreasonably cannot be for the benefit of owners.
­ This is no different to the principle in section 94(2) and 152(1)(a) of BCCMA.

In regard to the claims of a fraud on the power, the PBC argues:

­ The exercise of votes by the RACV in favour of the resolution was a misuse of that voting power, being a purpose not connected with the proper administration of the primary thoroughfare such that it was a fraud on the power.
­ The doctrine of fraud on a power was established in Houghton and Anor v Immer (No. 155) Pty Ltd[2] which referred to the capacity for relief in equity where a power is “...duly exercised according to the terms of it; but there is some bargain behind, or some ill motive, which renders the execution fraudulent...”. Further case law on the doctrine is provided.
­ RACV’s conduct in exercising its vote has been to secure a result which “...does not fairly arise out of the subjects dealt with by the power and is outside and even inconsistent with the contemplated objects of the power (Hougton)”.
­ Reference is made to a decision of an adjudicator under BCCMA considering this doctrine[3].
­ While IRDA and BUGTA do not contain the same legislative power as BCCMA to make an order that is “just and equitable”, a Referee has extensive powers to make orders under section 77 and 78 of BUGTA and the orders sought are within the scope of those powers.
­ While the PBC does not have any documented proof of the existence of the contract, it does have a genuine belief that it exists; RACV has refused to deny its existence; and the Referee has the power to compel the delivery of the contract under section 78(1)(b) of BUGTA.

In regard to the claims that the resolution was ultra vires, the PBC asserts that:

­ Under section 102(5) of IRDA the PTBC has the powers, authorities, duties and functions conferred and imposed on it under IRDA and shall do all things reasonably necessary for the control, management and administration of the primary thoroughfare.
­ The resolution seeks to alter the boundaries of the PBC and its subsidiary, Lot 103.
­ A resolution under section 9 of IRDA is restricted to varying the boundaries of the site of the approved scheme, not the internal boundaries of the PBC or a subsidiary body corporate.
­ It could not have been the intention of the legislature to permit section 9 to be used to alter PBC land without restraint and contrary to the wording in section 9.

Specifically, in regard to the interim order sought:

­ It is expected that the EGM minutes would be sent on 1 November 2010 and that the application would be made to the Minister as soon as those minutes were received.
­ An urgent order is needed to prevent the PTBC from acting on the EGM resolution.
­ The applicant has submitted a prima facie case as to why the resolution is invalid.
­ Damages would not be an adequate remedy if the resolution remained valid, as the Minister could alter the boundaries which would result in a loss of space and amenity which could not be compensated for by money.
­ The balance of convenience favours maintaining the status quo to prevent serious and irreparable harm to the PBC and its subsidiaries. There is no indication of any harm that would be caused to the respondent.
­ The PBC has at all times acted in good faith, with repeated polite requests for information.

The PBC seeks an interim order that the PTBC not implement the disputed resolution, or, if it has been implemented, that the application to the Minister be withdrawn.
It ultimately seeks the invalidation of the EGM resolution. It also seeks the opportunity to file revised submissions, as it says it has not had the time to review all aspects of the matter or collate all material supporting its position. It particularly submits that it would be beneficial if RACV was compelled to produce any contract requiring it to support Projects.

Interim submission

The interim submission from PTBC opposes the application and asserts that the Referee does no have jurisdiction or power to make the orders sought. The submission includes the following:

­ The PTBC is required to lodge and process an application from a member to amend the approved scheme in the manner prescribed in sections 9-14 of IRDA.
­ The PTBC has followed the process in the IRDA and also has consulted with the Department of Infrastructure and Planning (DIP). DIP has approved the drafting of the application in principal and the PTBC has notified DIP of the progress of the application.
­ The PBC has made a submission in relation to the amendment application which has been provided to the Minister as required. Those submissions must be considered by the Minister.
­ There is no express or implied right or power of the Referee to intervene in or circumvent the operation of sections 9-14 of IRDA.
­ Under section 76(2) of BUGTA, the Referee must be satisfied on reasonable grounds that an interim order is warranted by the urgent circumstances. This has not been established particularly as the PTBC has simply taken the steps that it is required to.
­ Pursuant to section 77(1) of BUGTA, the PBC owns and controls the secondary thoroughfare but does not have an interest in other land forming part of the approved scheme and has no ability to interfere in the proper carrying out by the PTBC of the PTBC’s express duties and functions. Accordingly the application should be struck out for want of jurisdiction.
­ The applicant may be trying to refer to conflicts of interest at an executive committee level, but there is no legal concept of conflict at a properly convened meeting of members of the PTBC. The executive committee had no meetings in relation to the application to amend the approved scheme to which this application refers.
­ For that reason the actions and motivations of RACV are irrelevant.
­ Another member of the PTBC other than RACV voted in favour of the resolution.
­ The application to amend the approved scheme does not contain a provision or requirement for access through PBC’s land for future residents or business on Lot 13. This claim has not been particularised and cannot be logically interpreted. Lot 103 already has lawful access to the existing secondary thoroughfare.
­ The proposed amendment comprises an adjustment to the boundary between two lots.
­ The land in question is in the residential precinct and so commercial uses are not permitted.
­ Particulars of the alleged adverse affects on the PBC have not been provided.
­ There is no legislative requirement that the PTBC must act reasonably in processing an application to amend an approved scheme, or that members must act reasonably when voting at a properly convened meeting.
­ Section 116 of IRDA provides for the duties of the PTBC but does not contain obligations of reasonableness or objectivity.
­ The PTBC has and will continue to act reasonably in processing the amendment application.
­ Any implied allegation of impropriety or failure to follow due process by the PTBC is denied.
­ The resolution was only the formal process to lodge an application to amend the approved scheme, and was not a resolution to alter the boundaries.
­ If, as the PBC alleges, the PTBC must not progress an application to amend the approved scheme, it would mean that IRDA removes all land in an approved scheme from town planning laws, which was never the intention.
­ IRDA came into existence before BCCMA and the principles or provisions in BCCMA cannot be implied into IRDA without specific legislative amendment.
­ The doctrine of fraud on a power has no application in this dispute as the PTBC was simply acting in compliance with its obligations under IRDA.
­ Section 10 of IRDA expressly allows the PTBC to lodge an application to amend an approved scheme even if the subject of the application does not relate to primary thoroughfare.
­ Section 13A of IRDA was included in the 2009 amendments to IRDA at the express request of Projects, after extensive submissions to the Minister and DIP, and following industry consultation including from the PBC.
­ The PBC is not an ‘affected landowner’ for the purpose of section 13A(4) but was given an opportunity to participate in the process which it did.
­ Section 13A and 14 expressly allow the amendment of the site and precinct boundaries.
­ There have been multiple applications to amend approved schemes which have been gazetted where the amendments do not relate to primary thoroughfare.
­ The PBC resolution purporting to authorise this application was invalid as there is no power under IRDA or BUGTA for members to meet by way of a flying minute.
­ The PBC’s executive committee have purported to engage and incur expenditure on a law firm to apply to the Referee, without proper authority pursuant to section 163 of IRDA.
­ Some of the detail of the preliminary information in the application is disputed.
­ The respondent does not understand some of the arguments and allegations raised by the PBC and says they are not particularised. As such they cannot comment on them further.
­ The application is a mischievous attempt to frustrate the application to amend the scheme.
­ The Minister and Governor in Council have the authority and responsibility to consider and process the application, and their powers cannot be challenged in this manner.
­ No person is affected by lodging the application with the Minister as the requested amendment only becomes effective when the amendment is approved and gazetted.

DETERMINATION

At this time, I am concerned with the threshold issue of whether interim orders are warranted in this application. In general the purpose of an interim order is to maintain the status quo in regard the matters in dispute until the substantive issues can be properly investigated, particularly with all affected persons being given the opportunity to make a submission. The onus is on an applicant to establish that the circumstances of the dispute warrant 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, a referee must be satisfied that the application raises serious legal questions and that the balance of convenience between the parties justifies injunctive relief. That is, a referee 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.

Serious legal issues

I will briefly consider each of the grounds upon which the applicant bases its claims that Resolution 3 at the EGM of 27 October 2010 should be invalidated.

While I consider that I have scope to determine whether the PTBC could validly pass a resolution to make an application to the Minister under section 9 of IRDA, I do not consider that I have any jurisdiction to consider the merit of any such application. Sections 9 to 14 of IRDA set out a clear legislative process for applications for amendments to the approved scheme to be considered by the Minister and determined by the Governor in Council. It is for the Minister and the Governor in Council to determine whether they have jurisdiction to make the proposed amendment, whether the application complies with the legislative requirements; and whether the application should be approved or refused. It would be highly inappropriate for me to interfere with that process.

Unreasonableness

The PBC argues that effect of the amendment to the scheme is so detrimental that the PTBC acting reasonably could not decide in favour of it. They argue that the obligation to act reasonably exists in sections 102(5) and 116(1)(a) of IRDA.

My provisional view is that there is no general obligation in IRDA that the PTBC must act ‘reasonably’ in undertaking its duties under the legislation or in making or not making decisions[4]. I have difficulty with interpreting the reference to doing all things “reasonably necessary” (in section 102(5) of IRDA) as imparting a positive obligation to make objectively reasonable decisions. Providing that it complies with the requirements of IRDA and any other applicable legislation or regulations, and exercises it decision-making power lawfully, arguably a PTBC decision will be valid and enforceable notwithstanding that it may be seen as objectively unreasonable.

However, a decision of the PTBC that is not “for the benefit of its members” pursuant to section 116(1)(a) of IRDA, may be beyond the PTBC’s powers. That said, section 116(1)(a) refers only to the control, management and administration of the primary thoroughfare. Section 116 of IRDA sets out numerous other duties of the PTBC and there is no similar obligation expressed in the section that those other functions must be done for the benefit of the PTBC members. For example, section 116(1)(m) provides that the PTBC must implement the decisions of the PTBC, but there is no specific requirement that such decisions must be for the benefit of the owners.

If an application to amend the approved scheme related to the control, management and administration of the primary thoroughfare, the obligation to act for the benefit of the PTBC members may well apply to the decision to make that application[5]. However, it is not apparent that the amendment currently proposed relates to the primary thoroughfare (as opposed to other aspects of the site) such that the obligation to act for the benefit of members applies in this case.

If the PTBC were bound by the obligation in section 116(1)(a) of IRDA when making this application under section 9, the next question would br whether the resolution of the PTBC to make the application was made for the benefit of the PTBC members or not[6]. It is arguable that an obligation to manage a common area for the benefit of members does not require that all actions and decisions benefit or even the majority of members. An action that might benefit the majority may be justifiable even if it inconveniences others. Conversely, a body corporate’s legislative obligation may serve to protect the interests of a minority even if it disadvantages the majority.

It will be a matter for determination in the final order application whether the PTBC had an obligation to act for the benefit of its members when deciding whether to make an application to the Minister and, if so, whether the decision to apply was for the benefit of members or not. While I note that the PTBC argues that it was required by IRDA to make the application, and in that respect it merely met its obligations rather than making a decision which could be seen as reasonable or unreasonable, I am not convinced that the legislation (particularly noting the word ‘may’ in section 9(1) of IRDA) does in fact mandate that the PTBC must progress any requested amendments.

The applicant indicates that the proposed amendment would have a significant detrimental affect. While reference is made to the loss of space and amenity, little detail is provided on how this would adversely affect the PBC and its members in practice. I note that previous approved amendments to the approved scheme have included changes to increase the density on the site, and to increase and decrease the size of various precincts. As such it is not apparent that the mere fact of a change in boundaries and density automatically generates an adverse impact.

For example, the PBC considers it is premature to rearrange the boundaries until the future plans for the adjacent farm land is determined, it has not explained how it would be disadvantaged by this boundary being reconfigured earlier. There is a suggestion that some PBC’s members may be affected by being closer to the development on the farm land, but it seems the nature of any such development is not known and so it is unclear what the impact would be. The PBC does not explain how the loss of a strip of secondary thoroughfare of itself is detrimental to the PBC and its members. It is also not explained why any increased in density would necessarily be unacceptable.

The alleged impacts of the amendment can be evaluated further in the course of determining the final order application, in the context of considering whether any decision was made for the benefit of owners (as distinct from the merits of the application itself, which is a matter for the Minister and Governor in Council alone). It may well be that the PBC has further argument and documentation on these issues.

However, for the purposes of determining whether an interim order is warranted, I am not satisfied that the applicant has yet demonstrated that the effects of the amendment would so detrimental that the PTBC could not reasonably have agreed to make the application to amend the approved scheme.

Fraud on a power

Fraud on the power is an equitable doctrine providing that "a person having a power, must exercise it bone fide for the end designed, otherwise it is corrupt and void"[7]. The doctrine "authorises intervention where the power is exercised in bad faith or for purposes foreign to the power"[8]. The PBC asserts in effect that the exercise of the votes by the nominees of RACV in favour of the resolution was a misuse of their voting power. They indicate that the vote was exercised because of a contractual relationship between RACV and Projects and that it was unconnected with the PTBC’s proper administration of the primary thoroughfare.

The PBC is unable to provide or confirm the existence of the contract which they suggest is the basis for the alleged fraud on the power. Further the PBC has presented little argument that any contractual relationship between RACV and Projects, whatever it may comprise, means that RACV’s nominees have acted with some improper motive or contrary to the proper exercise of their duty, rather than simply exercising the voting rights of a proprietor of the PTBC.

However there is a more fundamental difficulty with this ground of the application, which is whether a referee under BUGTA has any capacity to make a determination about the equitable doctrine of fraud on the power.

The New South Wales Court of Appeal has recognised that the doctrine of fraud on a power as being of general application and, specifically, as applicable to bodies corporate under the New South Wales Strata Titles Act 1973 and to the powers of owners exercised at general meetings.[9] Adjudicators determining disputes under BCCMA have considered but not conclusively determined whether they are empowered to make an order pursuant to this equitable doctrine[10]. To the extent that an adjudicator does have any capacity to consider this equitable doctrine, it would arguably be on the basis that an equitable jurisdiction has been enlivened by the obligation on an adjudicator to make an order that is “just and equitable in the circumstances”[11]

It has been argued that the Supreme Court has “jealously guarded its jurisdiction”[12] in regard to equity and, for example, that there would need to be a clear statutory conferral of power on the District Court before that court could grant equitable relief such as an injunction[13]. A member of the former Commercial and Consumer Tribunal (CCT) noted that, while adjudicators determining body corporate disputes under BCCMA were conferred with the power to make an order that is just and equitable in the circumstances, there was no similar power under the CCT legislation. The Tribunal concluded that the relevant legislation had not invested the Tribunal with the power to grant equitable remedies even when determining a body corporate dispute.

Unlike the reference in BCCMA, there is no suggestion in any of the provisions IRDA or BUGTA of any conferral on a referee of a statutory or inherent power in regard to equity. Prima facie then, I am inclined to the view that I have no capacity to make a determination based on an equitable doctrine. This point may be argued further by the parties in respect of the final orders.

Although it is not specifically argued in the application as a ground in support of the invalidation of the dispute resolution, claims are made in the supporting documentation that two members of the PTBC (being the nominees of Lots 2 and 4) were disqualified from voting because of a conflict of interest because they are the nominees of RACV and because of the alleged contract requiring RACV to support Projects. The PBC claims that, as a result of this conflict, the RACV nominees are unable to objectively exercise the discretion conferred on the PTBC under section 9 of IRDA in the interests of the residential lot owners. This is related to the fraud on the power argument.

In this regard I note that a ‘conflict of interest’ arises when there is a conflict between a person’s personal interests and their required duties. While sections 126A and 161A of IRDA make provisions regarding conflict of interest by an executive committee member at the meeting of an executive committee, there are no such restrictions on proprietors voting at a general meeting. Proprietors voting at a general meeting do not owe a ‘duty’ to the body corporate. They are entitled to exercise their voting rights (including majority voting rights) in accordance with their own interests, including in a way that may directly or indirectly benefit them. Proprietors are not required to put the interests of other proprietors or the body corporate as a whole before their own interests when the vote[14].

Accordingly, it is not evident that there is any prima facie legal issue that the nominees of RACV should not have voted at the October EGM because of a conflict of interest.

Ultra vires

The PBC argues that the powers of the PTBC are limited by section 102(5) of IRDA, and appear to suggest that this is restricted to the control, management and administration of the primary thoroughfare. My preliminary view is that IRDA does not limit the PTBC only to the management of the primary thoroughfare. Section 102(5) provides that the PTBC shall have the powers, authorities, duties and functions conferred and imposed on it by or under IRDA and shall do all things reasonably necessary for the control, management and administration of the primary thoroughfare. As such it would seem that its responsibilities regarding the primary thoroughfare are in addition to any other responsibilities imposed by the legislation.

Section 9 clearly empowers the PTBC to make an application to amend the approved scheme and at this point I can see nothing the sections relating to such amendments, or in the general provisions of IRDA, that could be interpreted as implying that applications to amend the approved scheme can only relate to the primary thoroughfare.

The PBC also argues that section 9 of IRDA is restricted to varying the boundaries of the site of the approved scheme, not the internal boundaries of the PBC or a subsidiary body corporate. However, while section 9(2) confirms that an application may be made to vary the boundaries of the site, it is not immediately apparent that this could be interpreted as excluding any variations to internal boundaries. In fact, the specific reference to amendments to vary the boundaries of a precinct in section 14 of IRDA indicates that such internal boundary changes were specifically contemplated. Moreover, it would seem from the history of approved amendments to the scheme that there have been numerous previous changes to the size of different precincts and thoroughfares, which presumably included changes to boundaries within the site.

At this stage, then, I am not satisfied that the PBC has established a prima facie legal issue that the PTBC did not have the legislative capacity to make an application to the Minister to vary the external and internal boundaries of the approved scheme. Moreover, arguably the question of whether the application itself complies with the requirements of section 9 of IRDA would be a matter for the Minister to determine when considering the application. As previously noted, it would not be appropriate for me to interfere with that consideration.

Basis for an interim order

Primarily the PBC seeks an interim order that the PTBC not implement the disputed EGM resolution and not make the application to the Minister. The PTBC has advised that this has already occurred, in fact at the same time that this application was lodged, and so that order sought is no longer relevant.

In the alternative, the PBC requests an order that the PTBC be required to withdraw the application. However I doubt my capacity to make any such order. As the application has now been made I do not consider that I have any jurisdiction to interfere with the processing of that application, as provided for under the legislation, with the Minister and Governor in Council. Moreover, I note that section 6 of IRDA provides that an application may be varied by an applicant with the consent of the Minister. It is arguable then that the application could only be put on hold or withdrawn with the consent of the Minister. The PTBC asserts that the Minister is aware of this dispute. If the PBC is in any doubt on this point, they could take their own action to alert the Minister to the existence of the dispute. To my mind it is solely a matter for the Minister to determine whether it would be appropriate for him to defer his consideration of the application to amend the approved scheme pending any further determination on this dispute.

Even if I considered that I had the authority to make the interim orders sought, I am not satisfied that the applicants have sufficiently demonstrated the merits of their arguments for me to determine, at this time, that there is a serious legal issue in question. While there is no indication that there is any particular urgency regarding the application from the PTBC’s perspective, that in itself is not sufficient basis to grant the orders sought when the applicant has not yet made out a prima facie case.

Additional issue

The application notes that it would relevant for the determination of the dispute if an order was made compelling RACV to produce any contract which requires it to support Projects. The application claims that a referee has the power to compel the delivery of the contract under section 78(1)(b) of BUGTA.

Section 78(1)(b) of BUGTA allows a referee to make an order requiring a party to do or refrain from doing a specified act to which the application relates. RACV is not a party to this dispute, and at this stage has not been provided with the opportunity to comment on the application. Moreover, the existence of or production of the contract is not the subject matter of this application – rather it is potential evidence that the PBC seeks to support its arguments regarding the validity of the EGM resolution. In addition, the contract relates to the applicant’s arguments of fraud on the power and my preliminary view is that I have no jurisdiction to consider that equitable doctrine.

Section 76 of BUGTA allows a referee to make an interim order when the applicant states in their application that they request an interim order. However, in this application the PBC has not specifically sought an order that RACV be required to produce the contract.

For those reasons I do not consider that there is any basis for me to make an order requiring the production of any contract between RACV and Projects. If, during the course of considering the final order application it became apparent that any such contract was necessary to the determination of the application consideration could be given to seeking it pursuant to section 73(1)f) of BUGTA which provides that the referee “...may make such other investigations with respect to the application as the referee thinks fit...”. However on the material provided to date it is not evident that there is sufficient basis to obtain any such document.

Conclusion

At this time I am not satisfied that the applicant has demonstrated that there is a serious legal issue to be determined that would warrant the making of the interim orders sought. Moreover, as the PTBC has already lodged an application to amend the approved scheme with the Minister pursuant to a resolution at the EGM on 27 October 2010, I do not consider that I have any jurisdiction to interfere in that legislative process by requiring the withdrawal or deferral of that application. Accordingly I have dismissed the application for interim orders.

The applicant may wish to review its application, including in light of the information provided above. If the applicant wishes to proceed with the application I will, as they have requested, provide them with a further opportunity to file revised material. Submissions would then be sought on the final order application.

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[1] I note also that section 106(8)(k) of the IRDA provides that the BUGTA schedules relating to meetings are to be construed as if the PBC were a proprietor.
[2] Matter No Ca 40764/96 [1997] NXWSC 608 (4 December 1997)
[3] 25 Queens Road [2008] QBCCMCmr 255 (28 July 2008)

[4] As is required of bodies corporate under section 94(2) of BCCMA.

[5] I note that in Sanctuary Cove Principal Body Corporate [2009] QBCCMCmr 312 (24 August 2009) [p.23-24 in particular] I determined that the decision of the Sanctuary Cove Principal Body Corporate to deal with (in that case transfer) part of the secondary thoroughfare pursuant to section 63 of the Sanctuary Cove Resort Act 1985, was subject to the general obligation in section 33 of that Act (similar to that in section 116 of IRDA) that the principal body corporate shall control, manage and administer the secondary thoroughfare for the benefit of its members.

[6] In Sanctuary Cove Principal Body Corporate [2009] cited above [p.25-26 in particular] I outlined relevant case law regarding the test of “for the benefit of” in section 33 of the Sanctuary Cove Resort Act 1985.

[7] Aleyn v Belchier [1758] EngR 208; (1758) 28 ER 634, cited in One Park Road [2005] QBCCMCmr 21 (12 January 2005)

[8] LGSS Pty Ltd v Egan [2002] NSWSC 1171, cited in One Park Road [2005] above

[9] Handley JA in Houghton [1997] cited above. See also Young v Owners – Strata Plan No 3529 (2001) 54 NSWRL 60. It is noted that these cases have related to minority rights to use common property.

[10] For example One Park Road [2005] QBCCMCmr 21 (12 January 2005) and 25 Queens Road [2008] QBCCMCmr 255 (28 July 2008)

[11] Section 276(1) of the BCCMA

[12] Sandmoon Pty Ltd v Body Corporate for South Pacific Noosa Apartments CTS 26117 [2008] CCT KC008-08

[13] Startune Pty Ltd v Ultra-Tune Systems (Aust) Pty Ltd (1991)(1) Qd R 192, cited by Thomas in Sandmoon [2008] above
[14] This is discussed in the context of BCCMA in 25 Queens Road [2008] QBCCMCmr 255 (28 July 2008)