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FKP Residential Developments Pty Ltd v The Body Corporate for Ridges Peregian Springs & Ors [2015] QCATA 141 (23 September 2015)

Last Updated: 9 October 2015

APPEARANCES and REPRESENTATION (if any):

REASONS FOR DECISION

[1] FKP Residential Developments Pty Ltd is the developer of Ridges Peregian Springs. It is a layered body corporate scheme, with a principal body corporate (Ridges Peregian Springs) and subsidiary bodies corporate. Because the development is staged, FKP retains effective control of the principal body corporate.
[2] The residents are dissatisfied with some of the decisions of FKP and/or the principal body corporate. Because of that dissatisfaction, there have been a number of applications to the Adjudicator of the Commissioner for the Body Corporate and Community Management. Relevantly:

1. In application 48/15, the subsidiary bodies corporate applied for orders relating to the eligibility of certain people to be members of the principal body corporate committee and an order that, until final orders were made, the committee not put into effect any decision unless the impugned members refrained from voting. On 29 May 2015, the Adjudicator found that the nominated people were ineligible to be voting members of the committee.
2. In application 586/15, the subsidiary bodies corporate again applied for orders relating to the eligibility of committee members and an order that the principal body corporate call and hold an general meeting within three months of order. The Commissioner has referred that application to Departmental Adjudicators for a decision. Orders have been made for the filing of material, the last date for which is October 2015.

100. In application 694/2015, the subsidiary bodies corporate applied for an order that an extraordinary general meeting held on 18 August 2015 be cancelled and that the principal body corporate be restrained from acting on any committee meeting resolutions pending a decision in application 586/15. The Adjudicator dismissed the application to cancel the EGM but restrained the principal body from acting on any resolution passed at that EGM.

4. In application 750/15, the principal body corporate applied for a variation to the Adjudicator’s orders in 694/15. The application was dismissed.

[3] FKP wants to appeal the decisions in 694/15 and 750/15. The appeal is of right[1]. FKP says that the Adjudicator erred in conflating the eligibility provisions for committee meeting membership and voting with the provisions that relate to general meetings. To decide whether FKP is correct in its submissions, I have to consider the legislative framework of the Body Corporate and Community Management Act 1997 (Qld) (BCCM Act) and the Adjudicator’s reasons for decision. Because FKP was represented at the appeal hearing, and the subsidiary bodies corporate were not, I required FKP to fairly point out any flaws in its case. I will consider these submissions last.

The legislative framework

[4] Chapter 3 Part 1 Division 2 of the BCCM Act deals with committees of bodies corporate. Section 101B provides that committee members are subject to the Code of Conduct. Chapter 3 Part 1 Division 4 of the BCCM Act deals with general meetings. There is no equivalent requirement for voting members to comply with the Code of Conduct. The provisions relating to the treatment of proxy votes in committee is different from the treatment of proxy votes at a general meeting.
[5] The bodies corporate are subject to the Standard Module. Chapter 3 of the Standard Module deals with committee meetings. Section 10 deals with the eligibility to be a voting member of the committee. A person is ineligible if the person is an associate of a body corporate manager, service contractor or letting agent[2]. Section 309 of the BCCM Act defines “associate”.
[6] Chapter 4 of the Standard Module deals with general meetings. Section 83 sets out the definition of a voter for a general meeting.
[7] If a person who honestly and reasonably believes that they are the committee for the body corporate makes a decision while acting as the committee, the decision is taken to be a decision of the committee despite a defect in the election of one or more of those persons[3]. A body corporate committee must put into effect the lawful decisions of the body corporate[4].
[8] An Adjudicator may make an interim order if satisfied, on reasonable grounds, that the order is necessary because of the nature or urgency of the circumstances to which the application relates[5].
[9] I am satisfied that, while there is clear legislative direction about an associate’s eligibility to be a member of, and vote at, a committee meeting, no such restriction applies to voters at a general meeting.
The Adjudicator’s findings – 694/15
[10] FKP has referred me to a number of paragraphs of the Adjudicator’s decision in which the error is apparent:
a) At [5], the Adjudicator stated that the “body corporate committee held an Annual General Meeting”.
b) At [8], the Adjudicator stated that the body corporate committee called for an EGM to vote on motions that will assign rights for service contracts, such contracts directly benefitting the three recently elected members who are ineligible to vote.
c) At [14], the Adjudicator recited the subsidiary bodies corporate’s submissions that the principal body corporate will continue to be entitled to make decisions at a general meeting provided the ineligible persons abstain from voting.
d) At [24], the Adjudicator found that she had the power to stop a committee who passes motions at a general meeting from acting on those motions if there is a dispute that requires investigation and resolution.
e) At [32], the Adjudicator found that she should exercise her discretion because, otherwise, motions passed might be acted upon when the motions were invalid if the three voting members were ineligible.
f) At [33], the Adjudicator determined that her orders would maintain the status quo so that the committee would not act on motions passed at a general meeting until the outcome of application 586/14.
[11] FKP points out that, even though the subsidiary bodies corporate applied to cancel the EGM, the Adjudicator declined to do so[6]. It submits, and I agree, that the logical conclusion from the Adjudicator’s decision is that the calling of the EGM was valid. The subsidiary bodies corporate have not appealed that decision although, as they pointed out at the hearing, they still have time to do so.
[12] If the sole ground of appeal on that issue is that the committee was not validly constituted, then s 100(4) is relevant. If a person who honestly and reasonably believes that they are the committee for the body corporate makes a decision while acting as the committee, the decision is taken to be a decision of the committee despite a defect in the election of one or more of those persons. The calling of the EGM must have been a decision of the committee to which s 100(4) responds. Despite any problem with the constitution of the committee, the decision to call the EGM was valid.
[13] It is clear to me that the Adjudicator based her reasoning on the presumption that an associate was not eligible to vote at a general meeting.
[14] Once an EGM is called, the role of the committee drops away. The decision making power shifts from the committee to the lot owners who are entitled to vote on each motion. As I have identified, the eligibility rules about associates that apply to committee voting does not apply to general meeting voting. Therefore, the Adjudicator erred in ascribing eligibility conditions to the voting rights at the EGM.
[15] Because the Adjudicator was in error, and eligibility was the only ground for the application by the subsidiary bodies corporate, it follows that the Adjudicator could not be satisfied, on reasonable grounds, that an interim order was necessary. The motions were validly passed. There was no basis for restraining the implementation of motions validly passed at the EGM.
[16] The Adjudicator has no other power to stop a committee from acting on particular motions. The Adjudicator certainly does not have a power to restrain action on a motion simply because there is a dispute that requires investigation and resolution[7].
[17] A lot owner who may have an interest in the outcome of motions presented to an EGM is not prevented from voting on those motions. I have already noted that committee members, not lot owners, are subject to the Code of Conduct which requires that conflicts of interest be disclosed. While residents in this development may consider such a declaration to be good practice for lot owners, if it is not a positive requirement, it is not a reasonable ground for restraining action on a motion passed at an EGM.
The Adjudicator’s findings – 750/15
[18] Again, FKP referred me to a number of paragraphs that demonstrate the Adjudicator’s error:
a) At [20], the Adjudicator stated that the findings in 586/2015 (whether the committee members were ineligible) will have a direct impact and bearing on the votes on motions at the August EGM and will determine whether if the motions are implemented and the service agreements are assigned.
b) At [26], the Adjudicator criticised the principal body corporate for calling an EGM and voting on motions by all committee members. The Adjudicator considered that a better course would have been to place important body corporate matters on hold until the determination of eligibility.
c) At [27], the Adjudicator recited the submissions by the subsidiary bodies corporate that the eligibility of the committee members would affect their ability to vote at the EGM.
d) At [30] the Adjudicator was not satisfied that the votes (at the EGM) were properly cast if it was found that they were not eligible committee members.
[19] Again, I am satisfied that the Adjudicator erred in applying the eligibility tests for committee voting to the voting regime for general meetings.
The flaws in FKP’s argument
[20] There were four possible flaws in FKP’s argument identified at the hearing.
[21] I have already disposed of the first in observing that a lot owner with an interest in the subject matter of a motion has no obligation to declare that interest when voting on the motion.
[22] The second flaw was whether the calling of the EGM was valid. As I have already identified, s 100(4) deals with that point.
[23] The third flaw was whether the voters at the EGM had provided the necessary notices under s 83(3) of the Standard Module. Because the lot owners were bodies corporate, they could only act through a representative. Under s 83(3) a lot owner must give the secretary of the body corporate a copy of the instrument by which the representative was appointed. I received evidence from the Bar Table, which was not contested, that the secretary did receive copies of the appropriate instrument.
[24] The final flaw is the application of s 83(2)(b)(iii) of the Standard Module. Where the lot owner is a corporation, a voter for a general meeting can be the corporate owner’s nominee[8]. Section 83(2)(b)(iii) prohibits the body corporate manager, a service contractor or letting agent from acting as the owner’s representative.
[25] It is necessary, however, to read that provision in context. Section 83(2)(b) has a number of parts. Firstly, the person has to be acting under a power of attorney. Secondly, the person is not the original owner, except if the power of attorney is given under ss 211 or 219 of the Act. Then, if the first two conditions are satisfied, the prohibition operates.
[26] There was no evidence that the voters were acting under a power of attorney. In fact, the evidence appeared to be that these individuals were nominated by the corporate owners. In the absence of such evidence, I do not see how s 83(2)(b)(iii) can operate to invalidate the voting rights of lot owners at the EGM.
[27] There is a further issue raised by the subsidiary bodies corporate. They say that I should not act on these interim orders because the Adjudicator has not yet handed down a decision in 586/15. For the reasons I have already given, the eligibility or otherwise of the committee members will not affect the validity of the motions passed at the EGM. Therefore, I see no good reason to wait for the Adjudicator’s decision.
Conclusion
[28] Because the Adjudicator was in error, the appeal should be allowed. Because the Adjudicator had no reasonable grounds for making an interim order, paragraphs [2] and [4] should be set aside.
[29] There is a further reasons to set aside the orders. The application before the Adjudicator was in the form of injunctive relief. Because it was heard and determined on an urgent basis, and without submissions from FKP, the Adjudicator did not turn her mind to the question of an undertaking as to damages.
[30] There is no undertaking offered. The assignment of the contracts is due today, 23 September 2015. FKP has flagged the possibility of a claim for damages from the assignees if the assignments are not perfected today. The assignees are acting pursuant to the contacts but, I understand, will not necessarily act in that way after today. The work needs to be done. The balance of convenience suggests that the assignments should proceed.

[1] Body Corporate and Community Management Act 1997 (Qld) s 289.

[2] Standard Module s 10(2)(b).

[3] BCCM Act s 100(4).

[4] BCCM Act s 101(2).

[5] BCCM Act s 279(1).

[6] Order 1.

[7] Reasons for decision at [24].

[8] Standard Module s 83(1)(b), (c).