Booval Court [2011] QBCCMCmr 57 (16 February 2011)

Last Updated: 18 March 2011

REFERENCE: 0941-2010

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	4614
Name of Scheme:	Booval Court
Address of Scheme:	44 Bergin Street BOOVAL Q 4304

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

Larry Stumer, the owner of unit 6

I hereby declare that the committee was not authorised by any valid resolution to install new letterboxes following the destruction of the old letterboxes by the storm of November 2008. I further declare that motion 3 at the extraordinary general meeting of 31 August 2010 proposing reinstatement of the brick letterboxes was lost. I further order that, within the next three months, the body corporate must resolve either to retain the existing letterboxes or install new letterboxes. I further order that, within the next three months, the body corporate must decide on fencing to replace the fencing that was destroyed by the storm. I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0941-2010

“Booval Court” CTS 4614

Introduction

Booval Court is a complex containing fifteen residential units. In November 2008 an unusually large storm hit the Booval area. In excess of 200mm of rain fell in a few hours. Storm water flooded ground floor units and garages within Booval Court, destroyed fencing around the complex, and knocked over the brick letter boxes.

Larry Stumer, the owner of lot 2, says the body corporate has failed in its responsibility to replace the letter boxes and fencing that was destroyed by the storm. Don Twine, the chairperson at the time, says the committee replaced the letterboxes after discussing a couple of quotations members had obtained. Further, Mr Twine says the committee was planning to build a new fence but Mr Stumer objected to the proposed fence because it would be different from the original fence.

The key issue in dispute is the design and location of the letterboxes. Mr Stumer says metal letterboxes installed by the committee were a temporary solution and that owners have since voted that brick letterboxes should be rebuilt in the original location. Mr Twine says the letterboxes installed by the committee are a permanent solution. Further, Mr Twine disputes Mr Stumer’s claims and says owners actually voted against the body corporate building new brick letterboxes in the original location.

The disputed vote occurred at an extraordinary general meeting on 31 August 2010. The minutes of this meeting indicate a poll vote of 33 lot entitlements against 32 lot entitlements favoured the reinstatement of brick letterboxes. However, one of the owners, Mr Abbott had changed his vote during the meeting and there is a question regarding how Mr Abbott’s vote should be counted. I will determine the validity of this vote with reference to the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module).

Submissions

Following the procedures set out in the Act, the Commissioner invited each owner to make a written submission regarding this application. The Commissioner also invited the committee to make a written submission.

Submissions have been received from the committee and from Mr Kennewell, Mrs Walker, Mr and Mrs Fleming and Mr Twine. Mr Stumer has provided a detailed reply to these submissions.

It seems reasonable to accept that:

• Shortly after the flood, the committee verbally approved a quote for new metal letterboxes at a cost of $1,592.80 and the insurance assessor approved this quotation.
• Mr Stumer thought these letterboxes were a temporary solution that had not been paid for by insurance and put forward a motion that new letterboxes be installed with money to be sourced from the insurance payout. This motion of 29 August 2009 was lost with only three votes in favour and five votes against.
• Apparently due to Mr Stumer obtaining a quotation for building new brick letterboxes at a cost of $3,996.72, the insurer offered to pay the body corporate a further $2,403.92. This amount was the calculated as the difference between the cost of replacement brick letterboxes and the amount already paid for the installation of the metal letterboxes.
• On 5 August 2010, Mr Twine signed a release on behalf of the body corporate accepting the further $2,403 from the insurer.
• On 31 August 2010, owners voted on whether to apply this insurance payout to reinstate brick letterboxes. Owners were also asked to vote upon whether the additional spending necessary should come from the sinking fund or a special levy. The result of this vote is in dispute.
  

On 26 October 2010 an adjudicator made an interim order at the request of Mr Stumer to prevent the body corporate from reinstating the fencing at the front of the scheme. This order was made after submissions indicated the proposed fencing would hinder or prevent the installation of new brick letterboxes in the original location.

The question currently needing to be determined is whether owners have voted to require the committee to reinstate the brick letterboxes in the original location. If so, the committee will need to remove the existing metal letterboxes and install new brick letterboxes. If not, there is still a question about whether the installation of the metal letterboxes was properly authorised.

Analysis

Validity of the resolution to restore the brick letterboxes

At the extraordinary general meeting of 31 August 2010, motion 3 read:

3) Complete Insurance Repairs. Ordinary Resolution proposed by L Stumer

Motion with Alternatives

That the Body Corp apply the insurance payout to the reinstatement of the brick letterboxes as per the Paul Smith Carpentry Quote and that the balance of letterbox funding $1,592.80 be sourced from:

Alt. a) The Sinking Fund

OR
Alt. b) Via Special Levy 7 lot entitlement $111.49 per lot. 6 lot entitlement $95.57 per lot.

Note: If you vote YES for Motion 3, you need to Vote for Alt. A or Alt. B.

Mt Stumer says:

• Only 6 voting papers were received before the meeting. The motions should have been passed solely on these votes but Mr Twine called an impromptu committee meeting that some other owners then attended in person.
• The motion was discussed from the floor and further written votes were accepted from the floor.
• He, Mr Stumer, requested a poll based on lot entitlements.
• The votes were counted and a declaration in favour of the motion passing was made. However, the chairperson made some submissions against the motion and the owner of unit 15 then asked to be allowed to change his vote.
• He, Mr Stumer, then verbally declared the motion as lost due to the owner of unit 15 saying he wanted to change his vote and changing his voting paper. However the owner of unit 15’s amended voting paper was still in favour of the motion even though this might not have been what that owner intended. He felt that the minutes must record what was actually written on the voting paper so the minutes therefore record that the motion was passed.
  

Mr Kennewell says the resolution should stand. He says that he did not attend the meeting but that no vote should have been allowed to be changed after the motion was declared as passed.

Ms Walker says the resolution was lost. She says that it only passed because a vote counted as a ‘no’ vote was recorded by Mr Stumer in the minutes as a ‘yes’ vote.

Mr and Mrs Fleming say the resolution was lost. They say there have been several votes on replacing the metal letterboxes with brick letterboxes and each time the vote has been defeated.

Mr Twine says:

• It is not correct to say only 6 voting papers were received by 31 August 2010. Four additional papers were handed to the secretary on the 31st in front of all present at the meeting, making 10 votes in all.
• He, Mr Twine, explained the history of the letterbox issues and told owners he had voted against motion 3 because owners had already rejected replacing the metal letterboxes;
• One owner said he wanted to change his vote. Mr Stumer said "as a matter of goodwill we will allow it" and handed back the voting paper to be changed.
• Every owner subsequently left the meeting believing that the motion was defeated with only 4 votes in favour and 6 votes against.
• However, the owner of unit 15 had inadvertently changed only the alternative section of motion 3 from ‘yes’ to ‘no’ instead of changing the main vote for motion 3 from ‘yes’ to ‘no’. Mr Stumer has therefore relied upon this vote to record in the minutes that the motion was passed.
• Mr Stumer has refused to ring this owner to clarify his intent and perpetuated this mistake in the minutes.
  

Based on these submissions, I will make some brief observations:

1. There was a physical meeting with at least 2 voters personally present as required by the legislation (Standard Module, 82(2)). It would not have been appropriate for Mr Stumer to have just relied upon written votes without this physical meeting.
2. Persons present at the meeting appear to have been properly given the option of voting by a show of hands or by submitting a written voting paper. Note that any written voting papers should be given to the secretary or chair at or before the start of the meeting (Standard Module, 87(2)). However, an owner can withdrawn their written vote at any time before the result of the motion was declared and vote as part of the show of hands (Standard Module, 86(4)).
3. A reasonable effort appears to have been made to call for a vote and declare the result of the voting. Note that the person chairing the meeting should call for a show of hands on each motion and declared the result based on this show of hands combined with the voting papers received and any proxies (Standard Module 87, 109). Any voter could request a poll vote so votes could be formally recorded in writing. This request for a poll would need to be made before the result of the next motion is declared. Or, if a poll is requested for the final motion on the agenda, the poll must be requested before the meeting ends (Act, 109). On a poll being conducted, votes for each unit would be recorded in writing and the motion will be passed if the total of the contribution schedule lot entitlements favour the motion (Act, 110).
   

There are some discrepancies in the submissions regarding exactly what happened, in particular it is not clear whether Mr Abbott changed his vote after the result had been declared on a show of hands or after the poll vote had been formally declared. While I am not satisfied any of the submissions are deliberately misleading, this meeting occurred some time before the submissions were made and it would not be unusual for each person's recollection to be biased towards what they wanted to believe. It seems likely the meeting was conducted fairly informally, that the result of the count was informally stated based on a show of hands, that Mr Abbott was then allowed to change his vote, and that Mr Stumer then formally declared the motion as lost. Finally, when preparing the minutes, Mr Stumer reviewed the voting papers and decided that the motion should be recorded as having been passed.

Despite the informal nature of the meeting and some apparent failures to strictly comply with the legislative procedures, it does seem owners were given a reasonable opportunity to express their preference regarding the motions listed. The objects of the Act include providing flexible and contemporary communally based arrangements for the use of land and recognise self management as an inherent aspect of community titles scheme (Act 2, 4). Courts have recognised that the very detailed provisions of the applicable regulations make it almost inevitable that there will be failures to comply with the regulations from time to time[1] and courts have always accepted that it is unlikely that it was a purpose of legislation that an act done in breach of a statutory provision should be invalid if public inconvenience would be a result.[2] I therefore consider it is not just and equitable to invalidate the entire meeting.

However, the question of whether motion 3 was passed or lost turns on the validity of the vote cast by Mr Abbott. Courts have held that the formal declaration at the meeting would not be conclusive if, as a matter of law, a different result should have been declared.[3] The present application raises a question of the legal validity of Mr Abbott’s vote. I consider that I should determine the validity of that vote as part of this application.

Having viewed Mr Abbott’s amended voting paper, I have concluded Mr Abbott’s vote should not be counted as either for or against the motion. The voting paper shows that Mr Abbott circles ‘Yes’ in favour of the motion but then has amended his vote so that the voting paper cannot be read as being in favour of either of the alternatives listed. The legislation requires a person vote on a motion with alternatives by voting either "for the motion, by voting for the motion and for 1 of the alternatives listed under the motion" or "against the motion" (Standard Module, 72(3)). The explanatory material accompanying the voting paper is required to include an explanatory note to this effect (Standard Module, 73(4)). The voting paper in question contained a note stating "If you vote YES for Motion 3, you need to Vote for Alt. A or Alt. B". As Mr Abbott’s voting paper did not comply with these requirements his vote in respect of motion 3 is invalid. It should not be counted either for or against motion 3.

Therefore, there were only 9 valid votes cast on motion 3. Lots 1, 4, 5, 13 and 14 were against. Lots 2, 3, 6, and 9 in favour. Motion 3 therefore failed with 4 votes in favour to 5 votes against (or 26 in favour to 32 against, based on lot entitlements). I am therefore not satisfied that owners have passed any vote requiring the committee to remove the metal letterboxes and install new brick letterboxes.

Absence of resolution authorising installation of metal letterboxes

When the body corporate receives insurance money for damage to common property the body corporate must generally apply the amount as soon as practicable to the repair, reinstatement or replacement of the damaged property (Standard Module, 189).

There is room for debate regarding whether the committee contravened this section because the committee chose to install metal letterboxes in a slightly different location rather than exactly replacing the damaged brick letterboxes. However, the words "repair, reinstatement or replacement" indicate some latitude must be given in the application of insurance money. The courts have consistently recognised that replacement of dilapidated items by their modern equivalent can be treated as a repair rather than an improvement.[4] Letterboxes are functional in purpose and there is no evidence to indicate the old brick letterboxes were of particular aesthetic value to the scheme. I am therefore satisfied the new metal letterboxes were a repair or replacement of the damaged brick letterboxes and that section 189 of the Standard Module has not been contravened.

The metal letterboxes were, however, installed without the authorisation of a valid resolution of the body corporate. The cost of the letterboxes was below the relevant limit for committee spending of $3,000 so the committee could have passed a resolution authorising this expenditure. However, it was not sufficient for the committee to informally review quotations and verbally agree on the letterbox replacement. The committee should have at least passed a formal written resolution and given owners a copy of the minutes. This would have made owners aware of what the committee was planning to do and owners would then have had seven days to provide a notice of opposition to the resolution if they did not agree with what the committee proposed (Standard Module 56, 57).

Issue with the insurance money that is left over

There is a potential ambiguity as to whether, in the absence of a resolution without dissent to the contrary, section 189 of the Standard Module requires the body corporate to apply the whole amount received from the insurer to repair, reinstatement or replacement of the damaged property. In the present situation Mr Stumer argues the metal letterboxes are not as nice as the original brick letterboxes and the committee should have initially sought enough from the insurer to install new brick letterboxes. However, there will also be occasions when a modern equivalent can suitably replace an old structure. The purpose of the section appears to be merely to require the body corporate to repair, reinstate or replace the damaged property. If the body corporate has replaced the damaged property and there is money left over then it does not seem that this section requires the body corporate to perform a second or more expensive replacement of the property.

It would be arguable any left over money cannot just be put into the body corporate’s general funds or spent on any other purposes unless owners authorise that by resolution without dissent (Standard Module, 189(2)(a)). Having said this, if the majority of owners are satisfied with the repair or replacement performed by the body corporate it would seem unreasonable for a minority to refuse to allow the remainder of the funds to be spent on something else (Act, 94(2)).

Conclusion

There is no valid body corporate resolution either authorising the metal letterboxes or requiring reinstatement of the brick letterboxes. It is therefore appropriate to require the body corporate pass a resolution within the next three months to either retain the existing letterboxes or install new letterboxes.

The committee could simply decide to authorise the existing metal letterboxes, subject to owners providing a notice of opposition or requiring a meeting at which owners can vote to override the committee decision. However, there is some debate about whether most owners are happy with the current letterboxes or would prefer to install brick letterboxes. Another general meeting allowing all owners to vote on this issue might therefore be the best way of finally resolving this question.

As the fencing to be reinstated will depend on the decision made regarding metal letterboxes or brick letterboxes, I will also require the body corporate to make a decision on this fencing.

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[1] Wei-Xin Chen v Body Corporate for Wishart Village CTS 19482, Appeal 4080 of 2000, District Court Brisbane, 29 May 2001.
[2] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at paragraph 97.
[3] Re Caratel (New) Mines Ltd [1902] 2 Ch 498; Cullen v Galloway Cattle Society of Australia Inc (1998) 27 ACSR 648.
[4] Morcom and Ors v Campbell-Johnson and Ors [1955] 3 All ER 264