Diamond Cove [2010] QBCCMCmr 51 (9 February 2010)

Last Updated: 23 March 2010

REFERENCE: 0630-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	3353
Name of Scheme:	Diamond Cove
Address of Scheme:	16-18 Crescent Avenue MERMAID BEACH QLD 4218

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

Matthew Hall, the Owner of lot 53

I hereby order that the application for the following order: That the budgets and levies noted in the minutes of the AGM held on 18 February 2009 be overturned and that the increase in levies be voted upon again as necessary. Is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0630-2009

“Diamond Cove” CTS 3353

Application

Diamond Cove Community Titles Scheme (Diamond Cove) is a 70 lot scheme under the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Accommodation Module) Regulation (Accommodation Module). The scheme is designed for residential purposes and lot boundaries are designated under a building units plan (now known as a building format plan).

This application is by Mr. Matthew Hall, the owner of lot 53 who is seeking the following order:

That the budgets and levies noted in the minutes of the AGM held on 18 February 2009 be overturned and that the increase in levies be voted upon again as necessary.

Background

In support of the application the applicant has made the following submissions:

• Following the last AGM levies increased from $889 (or $711 if paid by the due date) to $1,516 (or $1,213) if paid by the due date) which the applicant equates to a 80% increase over the previous year;
• The increase is attributable to a deficit in the administrative fund following payment of the caretakers’ salaries which increased from approximately $68,000 to over $95,000;
• The applicant believes that the administrative fund has been mismanaged and that the committee is unable to forecast and budget correctly;
• it is improper for the resident caretaker to request an increase in remuneration after signing the caretaking/ management agreement when there this increase can only be met by an increase in the body corporate levies;
• levies were increased owing to a “pool pump room replacement but the body corporate has not produced quotations or other supporting documentation to indicate why the increase was necessary and similarly, the minutes of the meeting fail to indicate why the increase was necessary.
• With such a dramatic increase in levies, the committee should have made provision for payments by instalments or “payment plans”;
• The minutes of the meeting indicate that only 21 lot owners voted upon this motion and of those, there were 3 votes in opposition to the motion;
• Overall, he believes that the budget and levies are unreasonable and requests
  • (i) that the levies be reduced ; and
  • (ii) a new vote be undertaken;
• The body corporate committee has also proposed that remote control garage door openers in garages of the townhouses. He believes it is improper for the body corporate to meet the costs of installing remote control garage door openers in garages of the townhouses as the garage doors are not part of the common property.
  

Submissions

Pursuant to section 243 of the Act, all lot owners and the Body Corporate were invited to make submissions regarding the application.

The following submissions were made on behalf of the body corporate in accordance with a resolution of the committee dated 18 September 2009:

• Diamond Cove consists of 70 lots on a Building Format Plan and includes grounds with a swimming pool and gated security access;
• The Caretaking Service Contractors were appointed under a Caretaking Agreement dated 24 February 2004 commencing on 1 July 2004 for a period of 10 years;
• At an EGM held on 23 April 2008, the body corporate considered a motion to increase the remuneration of the caretaking service contractor. This motion was placed on the agenda by the caretaking service contractor resolved by 20 votes in favour and 17 against, with one abstention, to increase the caretakers’ remuneration to $95,175 plus GST. This motion was placed on the agenda by the caretaking service contractor pursuant to section 67 of the Accommodation module regulation which provides that any lot owner may place a motion on the agenda. The applicant did not seek to have this resolution overturned;
• The applicant is seeking to overturn resolutions 5 & 6 carried at the 2009 AGM regarding the Administrative & Sinking Fund Budgets and Contributions for the period 1/12/2008 to 30/11/2009;
• The applicant first queried the outcome of the AGM on 31/7/2009, which was more than 4 months after the meeting was held;
• 22 of the 70 lot owners were present at the AGM and this was sufficient to constitute a quorum;
• Both resolution 5 (Adoption of Administrative Fund Budget and Contributions) & 6 (Adoption of Sinking Fund Budget and Contributions) were carried with 18 votes in favour and 2 votes against
  • The applicant was one of the two persons who voted against the two motions;
• Pursuant to Chapter 7, Parts 1-3, of the Accommodation Module regulation 2008, the body corporate is required to budget for and levy against its anticipated liabilities for any specified period;
• The budgets presented at the AGM complied with the statutory duty imposed on the obligations imposed upon the body corporate and included amounts for the increased remuneration under the Caretaking Agreement;
• The submissions by the applicant are contrary to the legislation as the budgets and levies need to be raised to meet the body corporate’s anticipated liabilities for any given period;
• Contrary to the submissions by the applicant, section 67 of the Accommodation Module provides for an owner (including a Caretaking Service Contractor who owns a lot in the scheme) to submit motions to a general meeting;
  • The committee has complied with the legislation and its statutory obligations;
• The legislation does not provide for payment plans but any owner experiencing difficulty with payment of levies could make application for a “Scheme of Arrangement – Payment Plan” to meet their obligations. Levies are spread out over 4 quarters to minimise the impact on owners;
• In a Circular dated 22 June 2009, the Body Corporate manager (BCS), acting on behalf of the committee, that in a building format plan the obligation of the body corporate to maintain the garage door and fittings extends only so far as fittings in place when the body corporate came into existence. Accordingly, any additions such as roller door motors should be considered to be improvements and therefore would need to be installed by lot owners at their own cost after first obtaining permission from the body corporate.
• There is no dispute by the applicant regarding the validity of the meeting or motions presented;
• Section 242 of the BCCM Act limits the time in which to challenge a resolution of a meeting to 3 months.
  

A number of lot owners made submissions opposing the application and these included the following:

• There is sufficient detail in the budget papers approved at the last AGM to explain the increased levies for the periods June 2009 to August 2009 and September 2009 to November 2009;
• All owners were sent copies of voting papers for the AGM and all lot owners had an opportunity to vote;
• The levies for December 2009 to February 2010 are substantially less as the deficit has now been remedied.
  

Submissions by lot owners in support of the application included the following:

• Their fees are higher than fees charged in other schemes;
• They do not understand how the Caretakers’ fees can increase without providing additional services;
• The increase was voted upon by a small number of owners.
  

Jurisdiction

I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.[1]

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

(c) a claimed or anticipated contractual matter about -

(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)).

Determination

The applicant has disputed the validity of resolutions 5 and 6 which were carried by a majority of votes at the last AGM. Motion 5 related to the adoption of the administrative fund budget and the fixing of administrative fund contributions for the coming year, while Motion 6 related to the adoption of the sinking fund budget and the fixing of sinking fund contributions for the following financial year.

As noted above, a major cause of the deficit was an increase in the remuneration of the Caretaking Service Contractor resulting from a resolution of an EGM held on 23 April 2008, whereby the body corporate resolved by 20 votes in favour and 17 against, to increase the caretakers’ remuneration from approximately $68,000 to in excess of $95,000 per annum.

It should be noted that section 242 of the Body Corporate and Community Management Act 1997 limits the time in which to challenge a resolution of a meeting to 3 months, unless an applicant is able to show good reason for waiving compliance with this statutory time limit.

While my initial observation was that there were no exceptional circumstances for extending the 3 month limitation period, I nevertheless decided to consider the application, submissions and relevant body corporate records in detail.

I have perused the budget papers for the period 1/12/07 to 30/11/08 and note the following:

• Overall, budgeted expenditure for the financial year ended 30/11/08 was $158,645 and actual expenditure was $182,026 resulting in a deficit of $23,381;
• Budgeted expenditure on caretaking fees for the financial year ended 30/11/08 was $67,130 and actual expenditure was $87,319 resulting in a deficit of $20,189;
• Budgeted expenditure on fire protection for the financial year ended 30/11/08 was $500 and actual expenditure was $3,515 resulting in a deficit of $3,015; and
• Budgeted expenditure on electrical repairs for the financial year ended 30/11/08 was $1,500 and actual expenditure was $3,622 resulting in a deficit of $2,122.
• After allowing for a number of items where the actual expenditure was less than budgeted expenditure, the overall deficit for the year was $23,381.47.
  

It is evident to me that the deficit in body corporate funds was the result of events outside the control of the body corporate committee. Further, as the only source of funds for the body corporate is contributions from lot owners, the only means available to the body corporate to meet the deficit was to increase levies payable by lot owners.

As noted above, a major cause of the deficit was an increase in the remuneration of the Caretaking Service Contractor resulting from a resolution of an EGM held on 23 April 2008, whereby the body corporate resolved by 20 votes in favour and 17 against, to increase the caretakers’ remuneration from approximately $68,000, to in excess of $95,000 per annum. This was a decision that was outside the jurisdiction of the committee and was made by the body corporate in general meeting. The relevant motion was placed on the agenda by the Caretaking Service Contractor in accordance with section 67 of the Body Corporate and Community Management (Accommodation Module) Regulation 2008 which provides as follows:

67 Opportunity to submit agenda motions
(1) A motion for consideration at a general meeting of the body corporate may be submitted at any time by—
(a) a member of the body corporate; or
(b) the committee.
(2) If a motion is submitted, including by a member of the body corporate in response to an invitation under subsection (5), it must, subject to subsections (3) and (4), be included on the
next general meeting agenda on which it is practicable to include the motion.
(3) A motion submitted by a member of the body corporate maybe included on the agenda for an annual general meeting only if the secretary receives the motion before the end of the body
corporate’s financial year immediately preceding the meeting.
(4) However, a motion of a following type must not be included on the agenda for a general meeting if the motion’s inclusion would result in the body corporate considering a motion of that type more than once in a financial year for the body corporate—
(a) a motion proposing that a regulation module be applied to the community titles scheme that is different from the regulation module identified in the scheme’s community management statement;
(b) a motion proposing that the remuneration paid to a particular service contractor be changed;
(c) a motion proposing that the engagement of a person as a service contractor, or the authorisation of a person as a letting agent, be amended if, as a result of the amendment, the engagement or authorisation would include a right or option of extension or renewal.
(5) If a notice is forwarded to members of the body corporate inviting nominations for committee member positions to be filled at an annual general meeting of the body corporate, the members must also be invited to submit motions for inclusion on the agenda for the meeting.

I note that although notice of the meeting was issued to all lot owners, only 37 lot owners voted upon the motion and the result of the vote was 20 votes in favour and 17 votes against. Nevertheless, this was sufficient to constitute a quorum in accordance with section 80 of the
Body Corporate and Community Management (Accommodation Module) Regulation 2008
which provides as follows:

80 Quorum for general meetings
(1) A voter is taken to be present at a general meeting if the voter is present at the meeting personally, by proxy or by written or electronic voting paper.
(2) A quorum at a general meeting is at least 25% of the number of voters for the meeting, except that—
(a) if the number of voters for the meeting is 3 or more, 2 voters must be present personally; and
(b) if the number of voters for the meeting is fewer than 3, there is a quorum if at least 1 voter is present personally.
(3) If there is not a quorum within 30 minutes of the time scheduled to start the meeting, the meeting must be adjourned to be held at the same place, on the same day and at the same
time, in the next week.
(4) If at the adjourned meeting a quorum is again not present within 30 minutes of the time scheduled to start the adjourned meeting, the persons present (whether personally or
otherwise) form a quorum if—
(a) the chairperson is present personally; or
(b) the chairperson is not present personally, but a body corporate manager, exercising the powers of the chairperson under an authorisation given by the body corporate, is present personally.
(5) Despite subsection (3), if it is not practicable to hold the adjourned meeting at the same place, it may be held at another place if all owners of lots are advised personally or in writing of the new location before the adjourned meeting is to start.
(6) For this section, 2 or more co-owners of a lot are counted as 1 voter.

In my view the resolution to increase the remuneration of the body corporate manager and the resolution to increase administrative fund levies were valid decisions of the body corporate.

Finally, it is important for all lot owners to take an interest in the affairs of their body corporate and take the time to vote upon motions put to general meetings. I have noted that a number of lot owners who made submissions in support of the application, also admitted that they did not vote on the subject resolutions. Given that all lot owners have an opportunity to participate in body corporate decision-making, it is disingenuous for those lot owners to complain about the above resolutions when they failed to attend either meeting or lodge a written vote. Further, if any lot owner is dissatisfied with the performance of the current committee they are able to nominate for election to the committee at the next AGM.

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[1] See sections 227, 228, 276 and Schedule 5 of the Act