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Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders |
Last Updated: 24 October 2011
ADJUDICATOR’S ORDER
Office of the
Commissioner
for Body Corporate and Community Management
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CITATION:
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No. 10 [2011] QBCCMCmr 439
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PARTIES:
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Imogene Connell (applicant) by her attorneys Dean Das and Christine
Connell
The body corporate for No.10 CTS 13941 (respondent)
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SCHEME:
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No. 10 CTS 13941
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JURISDICTION:
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Sections 227(1)(b) and 229(3)(a) of the Body Corporate and
Community Management Act 1997 (Act), and the Body Corporate and
Community Management (Standard Module) Regulation 2008 (Standard
Module).
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APPLICATION NO:
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1117-2010 cross referenced with earlier application 0795-2010.
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DECISION DATE:
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5th October 2011
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DECISION OF:
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J.D.M.Underdown, Adjudicator
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CATCHWORDS:
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MOTIONS CARRIED AT GENERAL MEETING – whether reasonable- whether
compliant with legislation – effect of defects –
authorisation of
prior unauthorised action - “Emergency meeting” – whether
valid meeting of body corporate committee
or body corporate.
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ORDERS MADE:
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I hereby order as follows –
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REASONS FOR DECISION
[1] 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 Attorneys Christine Connell and Dean Das, against the body corporate for “No 10” CTS 13941 for orders as follows –
- That upon final resolution of adjudication application no. 0795-2010 Motions 2 and 3 of an extraordinary general meeting set for 9th December 2010 be invalidated with all legal costs incurred by J.Conen and M. Cooper to be borne by them as individuals; and
- that upon the final resolution of adjudication application no. 0795-2010 the committee meeting on 29th November 2010 convened outside of legislation and the motion passed at that meeting, be invalidated with all legal costs incurred by J.Conen and M. Cooper to be borne as individuals.
[2] The Applicant also sought interim orders as follows –
- that the issuing of notices for the “special levy” to pay for additional legal expenses incurred by J. Conen and M. Cooper is halted; and
- that Motions 2 and 3 of the extraordinary general meeting to be held on 9th December 2010 are not implemented if they are carried at the meeting;
- that the “emergency meeting” held outside of legislation on 29th November 2010 is invalidated; and
- that the motion to engage Mills Oakley lawyers not be implemented.
[3] On 8th December 2010 I made an interim order that the sole motion purportedly passed at an “emergency meeting” of the body corporate, held on 29th November 2010 that Mills Oakley lawyers be engaged to respond to a letter dated 24th November 2010 from the Applicant’s attorneys, and that the body corporate should pay for that service, not be put into effect until determination of this dispute;
[4] I also ordered that if carried at the extraordinary general meeting on 9th December 2010, neither Motion 2 nor Motion 3 should be put into effect until determination of this dispute. Motion 2 was to engage lawyers Mills Oakley in respect of making a submission in application 0795-2010 at a cost not exceeding $10,000 to be paid for by a special contribution of $200 per lot entitlement. Motion 3 was for Mr Conen to be authorised as the person to instruct the lawyers. Both motions were subsequently carried by 3 -1 votes at the meeting.
[5] This application and application 0795-2010 are now dealt with together.
JURISDICTION
[6] “No 10” CTS 13941 is a community title scheme governed by the Act and the Standard Module. There are only four lots in this scheme created under a building unit plan of subdivision. The Respondents own three of the lots between them, the Applicant owning the fourth lot.
[7] I am satisfied that this matter falls within the legislative dispute resolution provisions.[1] It is a dispute between a lot owner and the body corporate about the exercise of rights or powers under the Act.[2] An adjudicator’s order may require a person to act, or prohibit a person from acting, in a way stated in the order.[3] Further, an adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate.[4]
[8] 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)).
SUBMISSIONS
[9] The Applicant says that “on or before” 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, which had been filed by the Applicant in this Office on 19th August 2010. The Applicants provide a copy of a letter dated 1st October 2010 from Mills Oakley to this Office, saying that Mills Oakley had instructions from the body corporate to act in respect of the application “dated 20th August 2010”.
[10] On 16th November 2010, the Applicant received notice of an extraordinary general meeting to be held on 9th December 2010 (the EGM). Motion 2 on the agenda is to levy a special contribution to pay for the legal fees of Mills Oakley, and to authorise the engagement of Mills Oakley. Motion 3 proposes that chairperson Mr Conen will provide instructions to the lawyers.
[11] On 24th November 2010, the Applicant wrote to the body corporate manager asking for motions 2 and 3 “to be rescinded” until the current file 0795-2010 had been decided.
[12] 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 on 29th November 2010. The meeting was attended by Mr Conen and Mrs Cooper. G. Shadforth, who is described in the minutes as secretary, “could not be contacted”. This emergency meeting was convened without any notice to the Applicant or members of the committee, Christine Connell being a member of the committee.
[13] The one motion voted on at the “emergency meeting” 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.
Body Corporate’s submission
[14] At the interim order stage, 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.
[15] It says that 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.”
[16] 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, an 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.
[17] The Applicant would have been precluded from voting because of a conflict of interest as described in section 53 Standard Module. It says –
“Putting her on notice of the meeting would have been practically redundant because she could not vote.”
[18] Further, it says that the body corporate manager was informed immediately about the decision, which was not concealed.
[19] At the final order stage, submissions were invited from all lot owners, as well as the body corporate. The body corporate made a late submission on 1st February 2011 referring to its submission in file 0795-2010. Its submission was that all further submissions in relation to this application should be postponed until after the decision made in application 0795-2010.
[20] It says –
“Depending on the terms of the determination 0795-2010. it may be necessary for further meetings of the body corporate to be called for resolutions to be put under section 94 of the BCCM Act in relation to the retention of lawyers and other related and incidental matters.”
[21] It says that the respondent in application 0795-2010 should have been the body corporate and not Mr Conen and Mrs Cooper. It says it cannot determine the proper parties to this application until after the determination of application 0795-2010.
[22] I do not accept the body corporate’s submission that it is unable to make submissions in respect of the final outcomes sought in this application until the question of “who is the respondent” is settled in the earlier application. Whether or not the respondent was the body corporate or Mr Conen and Mrs Cooper in the earlier application, this application makes the body corporate the respondent. The body corporate has made interim submissions about that.
[23] I am of the view that whether or not the body corporate requires further meetings is irrelevant to the outcomes now sought by the Applicant. Section 94 Act requires the body corporate to act reasonably in the administration of the scheme, and is not therefore an enabling provision of the legislation, pursuant to which “resolutions” may be put.
[24] The Applicant exercised her right of reply on 2nd May 2011 after seeking an extension of time. The reply referred to the submissions in file 0795-2010, and to the reply made by the Applicant in that application.
DETERMINATION
[25] This application concerns two meetings. The EGM on 9th December 2010 and an ”emergency meeting of the body corporate” on 29th November 2010.
“Emergency meeting of the body corporate” on 29th November 2010
[26] As flagged in the interim order, the emergency meeting of the body corporate was flawed for the following reasons –
- It does not state that it was a meeting of the committee; nor that it was a decision made outside a committee meeting pursuant to section 54 Standard Module as submitted by the body corporate;
- Christine Connell, a committee member, was given no notice of the meeting contrary to section 45(1) Standard Module or section 54(2) Standard Module;
- Mr Shadforth, secretary, who is Mrs Copper’s representative on the committee, was not contacted;
- The minutes refer to the motion being “passed by 78% of the body corporate” which is not appropriate or relevant to a committee meeting where the votes are not representative of lot entitlements;
- It is not apparent that Mrs Cooper is a member of the committee, so if this was a “committee” meeting, there was not a quorum present pursuant to section 49 Standard Module[5];
[27] These failings are sufficiently severe in my view to make the “emergency meeting of the body corporate” a nullity. It was at best a meeting of two lot owners. There was therefore no authority given by the body corporate to engage lawyers Mills Oakley to respond to a letter dated 24th November 2010 from the Applicant’s attorneys.
[28] The letter of 24th November 2010 was addressed to the chairperson and concerned Motion 2 and Motion 3 of the forthcoming EGM.
[29] I find that the body corporate is not liable to pay fees to Mills Oakley in respect of work done to respond to a letter dated 24th November 2010 from the Applicant’s attorneys.
Motion 2 and Motion 3 of the EGM
[30] The EGM was held on 9th December 2010. Motion 2 sought approval of the body corporate to engage Mills Oakley lawyers in respect of a previously made application (0795-2010) by the Applicant, and to raise a special contribution for legal fees. The fees were said to be not more than $10,000. The special contribution was to be levied at $200 per contribution lot entitlement.
[31] Mills Oakley had already been engaged “on or before” the 1st October 2010 without the authorisation of the body corporate. The motion therefore was in part to approve the unauthorised engagement of the lawyers by an owner/the chairman; and to authorise the lawyers to prepare a submission in application 0795-2010. Mills Oakley in fact made a submission in respect of the interim application in that matter, ostensibly on behalf of the body corporate, on 23rd August 2010. The application was lodged on 19th August 2010.
[32] The Applicant now seeks to overturn Motion 2 because it will mean that the Applicant will have to contribute to legal fees for the body corporate to challenge her own application. In essence, the Applicant says that such a result is unreasonable.
[33] I do not find that such a proposition is in itself unreasonable. If a body corporate wants to engage lawyers to act for it in a dispute in this jurisdiction, then the other disputing party is likely to be a member of the body corporate and indirectly contributing to the legal fees from body corporate funds. However, in a four-lot scheme, it seems to me to be out of all proportion to be intending to spend up to $10,000 on lawyers in a jurisdiction which encourages speedy and low-cost resolution of disputes.
[34] However, I find that the relevant limit for major spending in this scheme is $4,400.[6] The engagement of any service provider for a sum greater than this therefore requires at least two quotations to be put to the body corporate pursuant to section 152(2) Standard Module.[7] Where the committee proposes the motion, the committee must provide the quotations. This was not done.
[35] I am of the view that the legislation intends that where a body corporate is to embark on large items of expenditure that at least two quotations are required so that owners can compare the costs, as any prudent homeowner would do. The failure to provide at least two quotations has in the past invalidated such a motion.[8] I find it unlikely that the body corporate would not have been able to find another lawyer to quote in this matter at a comparable, or lesser fee, especially a lawyer who practiced within Queensland. I would not be persuaded that no other lawyers could provide legal services in respect of this matter, such as is entertained by section 152(6) Standard Module (exceptional reasons).
[36] Mills Oakley was the committee’s choice (although this is not minuted) because that firm had already been wrongfully engaged by the chairperson. Whilst the body corporate is able to authorise retrospectively its own unauthorised action,[9] or ratify the action of a committee member or owner acting as its agent, I am of the view that the body corporate cannot ratify past wrong conduct with further erroneous conduct. For the reasons above, I find that Motion 2 is invalid and cannot be relied upon.
[37] In the interim order in this application, I was concerned that the body corporate was seeking to engage lawyers to respond to a dispute between individual lot owners. Mr Conen and Mrs Cooper and the body corporate together argued that the respondent in the earlier application should have been the body corporate.
[38] I accepted this view to some extent, in that I found that both Mr Conen and Mrs Cooper, and the body corporate were relevantly named as respondents in application 0795-2010.
[39] In Application 0795-2010 decided on today’s date, I said –
“Where there are only four lots in the scheme, the fifth entity of “the body corporate” might seem hard to grasp since owners will wear several “hats.” Indeed, it seems to be an underlying historical cause of dispute in this scheme that owners may claim to act as “the committee” or as “the body corporate” when this is challenged by another owner who alleges that the owner was acting for himself or herself alone.
........ The Respondents say that the body corporate has been able to instruct lawyers in this application to make submissions, and submissions are received in this application from the Respondents and from the body corporate. It is the subject of another dispute, 1117-2010, as to whether the body corporate has authorised the engagement of Mills Oakley lawyers in order to make submissions in this application.
I am of the view that a determination of this application will be made between the Applicant and the body corporate, since the final outcomes sought requires a ruling on the validity of motions put to a general meeting, or in the words of the Applicant, that Motion 16 and Motion 17 “are dismissed”. However, the Applicant also seeks outcomes that Mr Conen and Mrs Cooper “are held personally responsible for all costs legal or otherwise incurred to HerdLaw and HWL Ebsworth”. Mr Conen and Mrs Cooper are therefore relevantly named as respondents to this application.
I am satisfied that in practice, all owners, which together make up the body corporate, are aware of this application, and have had the opportunity of making submissions regarding it. I therefore do not propose to change the respondents to this application. The status or standing of all parties remains the same, and section 239C Act is not applicable.”
[40] I have today finalised application 0795-2010 and made an order invalidating the carriage of Motion 16 and Motion 17 of an annual general meeting which was adjourned until 8th September 2010. This is an order invalidating resolutions carried by the body corporate. I did not make any orders against Mr Conen or Mrs Cooper, but held that the body corporate was not liable to pay lawyers’ accounts which were submitted as documents in that application. The order was therefore made as between the applicant and the body corporate.
[41] In the interim order, I also flagged that I had concerns about the effectiveness of the “special levy”. I am satisfied that I am able to change a contribution to be levied on lot owners if I find it is unreasonable in amount or in the way it is to be paid.[10]
[42] Section 141(2) Standard Module says-
(2) If a liability arises for which no provision, or inadequate provision, has been made in the budget, the body corporate must, by ordinary resolution—
(a) fix a special contribution to be levied on the owner of each lot towards the liability; and
(b) decide whether the contribution is to be paid in a single amount or in instalments and, if in instalments, the number of instalments; and
(c) fix the date on or before which payment of the single amount or each instalment is required.
[43] It seems to me that Motion 2 failed to fix the date on which the levy should be paid, stating instead that it be paid “on demand to the Treasurer”. Further, section 142(1) Standard Module requires that the body corporate must give at least 30 days’ notice to an owner before the payment of a contribution is required.
[44] The two items are separate, the notice being required even after the date is known to owners by being stated in the motion. It seems to me that the legislature is anxious that owners are given warning of a special contribution being required and then further given notice so that they are able to arrange funds. These funds are in addition to the usual body corporate fees, so it is reasonable that the body corporate makes owners aware of this obligation by flagging it twice.
[45] I find that this part of the motion is also defective, if it could stand without the first limb of the motion. The “special levy” therefore is also of no effect and was invalidly raised by the carriage Motion 2.
[46] I find that Motion 3 falls with Motion 2, since the body corporate has not made a decision to engage Mills Oakley at Motion 2.
CONCLUSION
[47] I have found that the “emergency meeting” was not compliant with the legislation in respect of either a committee meeting or a general meeting of the body corporate, and was invalid.
[48] I have found that Motion 2 of the general meeting of 9th December 2009, by which the body corporate committee purportedly sought to authorise the engagement in August 2010 of lawyers Mills Oakley by Mr Conen, the chairperson, to respond to the Applicant’s application to this Office, was also defective to the extent that it was invalid. Motion 3 falls accordingly.
[49] Application 0795-2010 concerned the same course of behaviour, the engagement of lawyers HerdLaw and HWL Ebworth by Mr Conen, purportedly on behalf of the body corporate, without the authorisation of the body corporate.
[50] Mr Conen has plainly said that since he owns two lots, and Mrs Cooper, whom I believe to be a relation, owns the third lot, there is little point in asking the Applicant to vote on any motion whether at committee level or at the level of a general meeting, since her vote will be irrelevant.
[51] This attitude is transparent in the circumstances of this dispute, and in dispute 0795-2010. Further disputes in this scheme may be avoided if the owners and the body corporate act as separate entities, and the committee proceeds by way of properly convened meetings. The engagement of lawyers by one owner or one committee member without the prior and/or proper authorisation of the committee or the body corporate cannot be supported, and without such authorisation, those engaging the lawyers run a real risk that they will end up paying for them.
[1] See sections
227, 228, 276 and Schedule 5 of the
Act
[2] Section
276(1)(b) Act
[3]
Section 276(2)
Act
[4] Section
284(1) Act
[5] A
quorum consists of at least half of the voting members of the
committee.
[6]
Schedule to Standard Module – definitions - “relevant limit of
major
spending”
[7]
Section 152(2) Standard Module
[8] Royal Palm [2008] QBCCMCmr 428 (18 November 2008); Beaches Surfers Paradise [2011] QBCCMCmr 268 (27 June 2011)
[9] William Clemens and Geoffrey Charles Henville and Silvia Trankalis and Edgewater Gardens, District Court (Southport), 665/2000, 25 October 2001 Hall DCJ; Warren v Body Corporate for Buon Vista CTS 14325 [2007] QCA 160
[10] Schedule 5 Act Item 11
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URL: http://www.austlii.edu.au/au/cases/qld/QBCCMCmr/2011/439.html