Marina Waters [2012] QBCCMCmr 20 (16 January 2012)

Last Updated: 20 January 2012

ADJUDICATOR’S ORDER
Office of the Commissioner
for Body Corporate and Community Management

CITATION:	Marina Waters [2012] QBCCMCmr 20
PARTIES:	Chris Tegan and George Gillett (applicants) The body corporate for Marina Waters (respondent) All owners (affected persons)
SCHEME:	Marina Waters CTS 33740
JURISDICTION:	Sections 227(1)(b) and 229(3)(a) of the Body Corporate and Community Management Act 1997 (Qld) (Act), applying the Act and the Body Corporate and Community Management (Standard Module) Regulation 2008 (Standard Module).
APPLICATION NO:	0788-2011
DECISION DATE:	16 January 2012
DECISION OF:	P Dowling, Adjudicator
CATCHWORDS:	ADMINISTRATOR – whether an administrator should be appointed. ss 276 and 301, Act

ORDERS MADE:

I hereby order that: (1) Challenge Strata Management is appointed as administrator to call, hold and chair a general meeting (‘the meeting’) of the body corporate for Marina Waters within three months of the date of this order. (2) The administrator shall hold the appointment for the period beginning from the date of this order until the close of the meeting. I further order that for the purposes of the Act, the meeting shall be deemed to be an annual general meeting of the body corporate for 2011 and, unless otherwise provided for in this order, shall be called and held in accordance with the Act and the Standard Module. I further order that for the purpose of calling, holding and chairing the meeting, the administrator shall have all the powers of the chairperson, secretary and treasurer of the body corporate, and of the committee, except the powers to further delegate any of those powers to another person. I further order that the administrator shall be authorised to incur expenditure on behalf of the body corporate only where necessary for the calling and holding of the meeting, or where otherwise authorised by this order, or for expenses that must necessarily be met and are capable of being authorised and incurred by a committee under the legislation. I further order that unless otherwise agreed by the body corporate and the administrator, the administrator’s fees and outgoings for this appointment are to be paid by the body corporate based on its reasonable costs of undertaking the administration as detailed in its letter to ABKJ Lawyers dated 22 September 2011.

REASONS FOR DECISION
Introduction

[1] The applicants are concerned about the administration of the body corporate. They seek the appointment of Challenge Strata Management as administrator to perform the obligations of the body corporate and the committee, and to carry out the functions of each executive member of the committee for the period of time determined by an adjudicator.

Jurisdiction

[2] After receiving the application, the commissioner invited submissions about the matters raised in the application from the other lot owners, the committee and the body corporate manager (s 243, Act). Submissions were made by Anna Ribic (the owner of Lot 4 and the co-owner of Lots 1, 2 and 7). The applicants made a written reply to submissions.
[3] The commissioner has referred the application to departmental adjudication (s 248, Act). An adjudicator may make an order that is just and equitable in the circumstances to resolve a dispute about a claimed or anticipated contravention of the Act; or the exercise of rights or powers, or the performance of duties, under the Act (s 276(1), Act). An adjudicator may make an order appointing an administrator to perform obligations of the body corporate, its committee, or a member of the committee under the Act (s 276(3) and s 23, schedule 5, Act).

Analysis
Annual general meetings

[4] The applicants submit the body corporate did not hold an annual general meeting within three months of the end of the last financial year which they claim was 30 June 2011. An annual general meeting must be held within three months after the end of the scheme’s financial year (s 66, Standard Module).
[5] The applicants’ submissions have not been disputed by Anna Ribic.
[6] The annual general meeting is the starting point for making body corporate decisions. At this meeting the body corporate (amongst other things): reviews the previous year’s financial management, considers adopting budgets and fixing contributions to be paid by lot owners to pay its anticipated liabilities and expenses for the next financial year, reviews its insurance obligations, and chooses a management committee (ss 13(1) and 76(3), and dictionary, Standard Module).
[7] The failure to call and hold an annual general meeting is a significant consideration in an application of this nature, particularly when there is not material indicating the body corporate has otherwise been administered in accordance with the legislation. For example, there is no evidence a committee has been elected or that a body corporate manager has been engaged in its place. It is submitted that the owners of Lots 1, 2, 4 and 7 are the body corporate manager. Anna Ribic does not dispute this statement.

Body corporate management

[8] There is, however, no evidence the body corporate has engaged the owners of Lots 1, 2, 4 and 7 as the body corporate manager either in the circumstance where there is a committee or where there is no committee (ss 119 and 120, Act). It is not demonstrated these owners have been engaged by the body corporate pursuant to sections 58 and 59 of the Standard Module or sections 114(2) and 116 of the Standard Module.
[9] The applicants state the body corporate manager has not been providing a report to the body corporate as required by section 62 of the Standard Module and has not expended money in accordance with section 62(2)(d) and (3). The section 62 report is only needed if the body corporate manager is engaged to carry out functions of the committee and the executive members of the committee (s 120, Act). As I have said, there is no evidence the body corporate manager has been engaged on this basis. I am not satisfied from the material that section 62 applies in the circumstances.

Financial management

[10] However, the applicants are particularly concerned about a number of other financial management issues. They say bank statements indicate the body corporate manager has used body corporate money for personal expenses. The applicants submit the body corporate has not kept proper accounting records and has not prepared statements of accounts for the financial years ending 30 June 2008 through to 2011 in accordance with 154(1) of the Standard Module, and the body corporate has failed to consider auditing the accounts in accordance with section 155 of the Standard Module.
[11] With respect to expenditure, the applicants claim there are entries in the bank statements from September 2009 to September 2010 of expenditure not properly incurred and possibly being a misappropriation of body corporate money. They submit a reconciliation of the bank statements and invoices given to them by the body corporate manager suggests body corporate money has been spent on personal expenses of the body corporate manager and was not properly incurred. The applicants state a reconciliation of the bank statements and contributions paid by lot owners suggests the owners of Lots 1, 2, 4 and 7 have not paid contributions.
[12] Anna Ribic submits body corporate money has not been used for personal use, the owners of Lots 1, 2, 4 and 7 have paid $5000 in contributions to the body corporate and they have paid more contributions than other owners, including for extra expenses.
[13] In reply, the applicants submit the bank statements do not detail a contribution by the owners of Lots 1, 2, 4 and 7 of $5000, Anna Ribic has not substantiated submissions that the owners have paid more contributions than other owners, and there is no evidence of any such payments in the bank statements.
[14] The question of the use of the body corporate monies is not, of itself, a basis for appointing an administrator in the circumstance where there is no evidence the applicants have sought to have the matter dealt with internally by for example, proposing that the body corporate consider a motion to appoint a person to audit particular accounting records. The applicants have raised concerns based on their investigations which, in the absence of a proper examination, may or may not be justifiable. The applicants may be entitled to be concerned when there is no evidence the body corporate has considered having the annual statements of accounts audited. The body corporate must have the accounts audited unless it resolves otherwise (s 155(1), Standard Module). The body corporate must consider a motion about auditing the accounts at each annual general meeting (s 76(3)(a), Standard Module).
[15] It is also a relevant consideration that the applicants have, without question from Anna Ribic, claimed the body corporate has not kept proper accounting records. There is no evidence that, for the last four financial years, the body corporate has prepared proper statements of accounts, given these statements to owners and considered motions at annual general meetings to approve the statements (ss 76(3)(a) and 154, Standard Module).
[16] Further, the body corporate may only levy contributions on lot owners pursuant to section 141 of the Standard Module. Ordinarily, the body corporate, at an annual general meeting, decides the contributions to be levied on the basis of administrative and sinking fund budgets prepared in accordance with section 139 of the Standard Module. Contributions are levied on, and paid by, each lot owner (ss 142 and 145, Standard Module). Submissions suggest the owners of Lots 1, 2, 4 and 7 has not paid contributions on a basis decided by the body corporate. Anna Ribic submits a payment of $5000 was made to the body corporate. She has not provided any evidence this payment was made by the owners and that it related to an amount levied by, or owed to, the body corporate.

The appointment of an administrator

[17] I am satisfied from submissions that the body corporate has not done some things in accordance with the legislation. The question is whether it is demonstrated it is necessary in the circumstances that I appoint an administrator.
[18] In Surace v Commisso [2009] CCT KA002-09, the Commercial and Consumer Tribunal (the previous appellate jurisdiction for an order made by an adjudicator) stated (paragraph [44]) the appointment “of an administrator...is a significant step since it takes responsibility for the conduct of the affairs of the body corporate out of the hands of the committee and vests it in the administrator. An applicant must therefore demonstrate to the required standard that such a step is appropriate. Typically, without attempting to be exhaustive, there will be evidence that the body corporate is so dysfunctional that it cannot operate properly within the statutory framework that governs it, or that there is a well founded suspicion, on the part of an applicant for appointment of an administrator of financial malpractice within the body corporate, or that there is conduct that amounts to undue oppression in the conduct of its affairs.”
[19] Applying Surace, I am satisfied from the material the appointment of an administrator is necessary.
[20] The applicants refer to the owners of Lots 1, 2, 4 and 7 as the body corporate manager. Yet there is no evidence these owners, either individually or together, have been or continue to be, properly engaged by the body corporate as body corporate manager. There is no evidence the body corporate has held annual general meetings, or that these meetings have been held, in accordance with the legislation. Neither is there any material demonstrating that a committee has been elected or that a body corporate manager has been properly engaged in its place. The applicants have also raised a number of significant considerations in relation to the financial management of the body corporate.
[21] I am satisfied from submissions that a person needs to be appointed as an administrator. I am not satisfied from submissions that this person could be an owner or a person who may be a body corporate manager. Even if one or both owners of Lots 1, 2, 4 and 7 are engaged as the body corporate manager, this arrangement does not prevent a person being appointed as administrator.
[22] The applicants have submitted that Challenge Strata Management be appointed as administrator. Anna Ribic has not questioned this nomination. No other owners made submissions. In this circumstance, I consider it is appropriate to appoint Challenge Strata Management.
[23] The applicants have asked for a period of appointment determined by me. In my view, it is appropriate a period be given to enable the administrator to call, hold and chair an annual general meeting of the body corporate. The primary purpose of this meeting is to deal with those matters, such as statutory motions and the choosing of a committee, which must be included on the agenda of an annual general meeting. However, the meeting may consider any other motion properly submitted.
[24] I consider it is appropriate to also make provision for remunerating the administrator. The order may fix the administrator’s remuneration which is to be paid out the body corporate funds (s 301(4)(c) and (5), Act).
[25] It will be a matter for the body corporate to decide arrangements with respect to its ongoing management.