No. 10 [2010] QBCCMCmr 549 (8 December 2010)

Number of Scheme:	13941
Name of Scheme:	No. 10
Address of Scheme:	10 First Avenue BROADBEACH QLD 4218

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

I hereby order as follows-

that the single motion purportedly passed at a meeting called in the minutes “emergency meeting of the body corporate” held on 29th November 2010 not be put into effect until determination of this dispute; and
that if carried at the extraordinary general meeting on 9th December 2010, neither Motion 2 nor Motion 3 or either of them shall be put into effect until determination of this dispute.

This is an application dated 1st December 2010 and amended on 2nd December 2010 by Imogene Connell, (the Applicant) owner of Lot 1, by her Attorney Christine Connell, against the body corporate for No 10 CTS 13941 (the body corporate) for orders as follows –

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 7th December 2010.

The Applicant says that this application is linked to application number 0795-2010 lodged by her in August 2010. An interim order was made in that application on 25th August 2010. The interim order postponed any action by the body corporate on two motions proposed to the annual general meeting on 25th August 2010 for collecting “special levies” for legal fees. The Applicant’s argument was that the legal fees were incurred by owners Jeff Conen (Mr Conen) and Mary Cooper (Ms Cooper) who between them own the other three lots in this four-lot scheme, and were not authorised by the body corporate.

On 1st October 2010, Mr Conen, without the approval of the body corporate, instructed lawyers Mills Oakley to act on behalf of the body corporate to prepare submissions in application 0795-2010.

On 16th November 2010, the Applicant received notice for an extraordinary general meeting to be held on 9th December 2010. Motions 2 and 3 on the agenda are respectively to levy a special contribution to pay for the legal fees of Mills Oakley, and to authorise the engagement of Mills Oakley.

On 24th November 2010, the Applicant wrote to the body corporate manager asking for motions 2 and 3 proposed for the general meeting to be held on 9th December 2010 “to be rescinded” until the current file 0795-2010 had been decided.

On 30th November 2010, the body corporate manager forwarded to the Applicant a copy of the minutes of an “emergency meeting” held at Mr Conen’s Sydney residence. The meeting was attended by Mr Conen and Ms Cooper. G. Shadforth, who is described in the minutes as secretary, “could not be contacted”. The Applicant says that G. Shadforth is the attorney of Ms Cooper, and a tenant of Mr Conen’s, and has no voting rights. This emergency meeting was convened without any notice to the Applicant or members of the committee, Christine Connell being a member of the committee.

There was one motion voted on, and this was to authorise the engagement of Mills Oakley to respond to the Applicant’s letter of 24th November 2010, and to charge Mills Oakley’s fees to the body corporate.

Application 0795-2010 is to determine if Mr Conen and Ms Cooper acted as individuals in incurring legal costs, and they are the respondents in that application. Until that matter is decided, the body corporate should not be responsible for their legal representation.

The body corporate referred to its submission made on 7th December 2010 in matter 0795-2010. It also said that by Motion 2 of the EGM, the body corporate is seeking to cure the alleged defect that is the basis of complaint by the Applicant in file 0795-2010, that is, it is “seeking the approval by ordinary resolution to retain lawyers.” The aim is to avoid further dispute. The Applicant is trying to prevent the body corporate from preparing replies in matter 0795-2010. It is contrary to section 273 Act to prevent the body corporate from seeking legal assistance.

The Applicant does not point to any defect in the manner in which the meeting has been called or in the form of the resolution. The Applicant is simply trying “to stymie” the conduct of the body corporate’s affairs without grounds. Her position is “contradictory and untenable.”

In respect of the emergency meeting, it says that this was an emergency meeting of the committee which arose out of a need for the body corporate to prepare replies to a letter dated 24th November 2010 from Mr Das, the co-Attorney of the Applicant. Section 54(1)(a) Standard Module provides that a resolution of the committee “is valid in an emergency context... when notice of the motion is given to all committee members as is practicable to contact....” The meeting was called as a matter of urgency, and complied with section 54 Standard Module in all regards. The motion passed therein was therefore valid.

The Applicant would have been precluded from voting because of a conflict of interest as described in section 53 Standard Module. “Putting her on notice of the meeting would have been practically redundant because she could not vote.” The body corporate manager was informed immediately of the decision which was not concealed.

It seems to me that the file 0795-2010 is linked to this new application. The dispute in this matter is the subject of motion 2 and motion 3 on the agenda for the extraordinary general meeting convened for 9th December 2010. The subject matter of those motions is the provision of legal services to the body corporate for the preparation of “a reply submission” in application 0795-2010 brought by the Applicant, and the levying of a special contribution at $200 per lot entitlement to pay legal fees, which are not to exceed $10,000. Motion 3 is to allow Mr Conen to liaise with the lawyers and give instructions.

The “emergency meeting” held on 29th November 2010 is also in dispute as to its validity, and the validity of the motion purportedly passed at it, which was for the body corporate to engage lawyers to reply to a letter from the Applicant about Motion 2 and Motion 3.

An application for an interim order is in the nature of an injunction to the civil court registry An applicant for an interim order must demonstrate that there is a serious legal issue to be determined, and that prima facie, the applicant has a good case, that is, on the evidence so far considered, the applicant has a good chance of succeeding with the claim at final order. Interim orders are in the nature of “holding orders” to maintain the status quo until the final issues in dispute have been better explored and all relevant parties have had the opportunity to make submissions.

On 25th August 2010, I made an interim order in file 0795-2010 that no action be taken on motion 16 or motion 17 if carried at the annual general meeting to be held on 8th September 2010, until final determination of that dispute. Motion 16 was to raise a levy by way of special contribution to repay Mr Conen and Ms Cooper for legal fees in respect of a sinking fund forecast. Motion 17 was to raise a levy by way of special contribution to repay Mr Conen and Ms Cooper for legal fees incurred by them in respect of a prior application to this Office lodged by the Applicant on 4th March 2009.

The Applicant does not allege any fault with the process of the preparation of the voting paper or the content of motion 2 and motion 3. She says that an interim order “is essential to halt the settling and issuing of notices for the special levy to pay for additional legal expenses” incurred by Mr Conen and Ms Cooper and charged to the body corporate, before the former application (0795-2010) is decided.

The “emergency meeting” is also an attempt to pre-empt the decision on Motion 2 and Motion 3 and give immediate authority to Mr Conen and Ms Cooper to engage lawyers to represent the body corporate.

The body corporate says it is trying to make sure that the body corporate does properly authorise the expenditure and is addressing the previous complaint of the Applicant.

My concern about motion 2, apart from its duality in purporting to engage lawyers and raising a special contribution in the same motion, is that it asks the body corporate to engage lawyers to make submissions in a matter (file 0795-2010) where Mr Conen and Ms Cooper are the respondents. No doubt, the argument will be that Mr Conen and Ms Cooper should not have been the respondents in that matter, and that it should have been the body corporate who was the respondent. But until that matter is decided, then what the body corporate is now doing is asking the body corporate to pay for lawyers in a dispute between owners in the scheme.

The reasonableness of such action must be questionable, and such action is probably also ultra vires, that is, it is probably beyond the power of the body corporate to authorise funds to be spent on owners’ personal legal matters, even if it wishes to do so.

I am not satisfied that motion 2 and motion 3 are at the least “reasonable” actions of the body corporate prior to the determination in file 0795-2010. The body corporate has a duty to act reasonably in everything it does in the administration of the scheme (see section 94 Act.)

In respect of the “emergency meeting”, the body corporate says that this was an emergency decision of the committee brought under section 54 Standard Module. The Applicant, who is a committee member, was not advised of the meeting because there was no point since she could not vote on the motion, having a conflict of interest in the motion.

This attitude must be deplored. Even if the Applicant as a committee member has, or has had, a conflict of interest, about which no submissions have been made, it is the duty of the body corporate to notify all committee members where practicable to do so. The Applicant might have wished to attend as is her right even if she could not vote. The question of conflict might also be levelled at the remaining owners in this small scheme, where each person wears more than one “hat”. There have been many orders made on the subject of “emergency” meetings, and the nature of the emergency must be real and immediate.

It is not evident from the minutes of the “emergency meeting” that it is a committee resolution brought under section 54 Standard Module. It finishes with the words: “This motion was passed by 78%” of the body corporate” which are not words generally apposite to a committee meeting. It is headed “Emergency Meeting of the Body Corporate...”

Further, sections 56 and 57 Standard Module apply even where the committee has made a decision under the “emergency provisions”. Meetings should be held within 15km of scheme land. (Section 46 Standard Module).

It seems to me that because the Applicant is in a position where she can provide only 22% of the vote, that the body corporate is willing to be cavalier about the provisions of the legislation because the part she plays is “practically redundant.”

The Applicant has persuaded me that prima facie there is a serious legal issue to be determined in that by proposing Motion 2 and Motion 3 to the EGM on 9th December 2010, the committee seeks to give authorisation to the body corporate to take certain actions which may be unreasonable, and/or unlawful.

Further, in respect of Motion 2, the amount of the “special levy”, the number of instalments and the date fixed for payment of instalments prima facie appears not to fulfil the conditions required by section 141(2) Standard Module.

The effect of these errors will be explored in the making of the final order. Whilst this matter and file 0795-2010 will be will be dealt with as related matters, submissions on the final orders sought will be invited from the body corporate which is the respondent in this matter. This is the legislated process.

I note that an extension of time until 31st January 2011 has been given for the respondents to make submissions in file 0795-2010. I shall fix the same date for final submissions in this matter (1117-2010) in the hope of expediting both files and minimising costs.

As I said in the interim order in file 0795-2010, the process of dispute resolution offered by this Office is intended to be a swift and affordable jurisdiction. There is no reason why owners or bodies corporate should not consult lawyers in order to obtain advice and/or to make submissions on their behalf but it is not “the norm”, and it is not necessary to the process. A decision by the body corporate to spend large sums on lawyers’ fees in a straightforward matter in this Office might be seen to be an unreasonable decision of the body corporate, and could be held to be invalid.

I therefore make the interim order in this application that if carried at the general meeting on 9th December 2010, neither Motion 2 nor Motion 3 are acted upon until determination of this dispute. In addition that the single motion of the “emergency meeting” held on 29th November 2010 is also not acted upon until the determination of this dispute.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

No. 10 [2010] QBCCMCmr 549 (8 December 2010)