Couran Cove Resort Community Body Corporate v The Proprietors of Couran Cove Resort Broadwater Villas [2023] QSC 133 [2023] 26 QLR

SUPREME COURT OF QUEENSLAND CITATION: Couran Cove Resort Community Body Corporate v The Proprietors of Couran Cove Resort Broadwater Villas GTP 106807 [2023] QSC 133 PARTIES: In the matter no 7113 of 2022 COURAN COVE RESORT COMMUNITY BODY CORPORATE MCP 106571 (plaintiff/respondent) v THE PROPRIETORS OF COURAN COVE RESORT BROADWATER VILLAS GTP 106807 (defendant/applicant) In the matter no 601 of 2021 COURAN COVE RESORT COMMUNITY BODY CORPORATE (plaintiff/respondent) v THE PROPRIETORS - COURAN COVE RESORT ECO LODGES (defendant/applicant) FILE NOS: 7113/22 & 601/21 DIVISION: Trial PROCEEDING: Application ORIGINATING COURT: Supreme Court DELIVERED ON: 23 June 2023 DELIVERED AT: Brisbane HEARING DATE: 5 June 2023 JUDGE: Freeburn J ORDER: 1. The applications in proceedings 7113 of 2022 and 601 of 2021 are dismissed. 2. I will hear the parties on the issue of costs. -- 1 of 28 -- 2 CATCHWORDS: REAL PROPERTY – STRATA AND RELATED TITLES – BYLAWS – STAY OF PROCEEDINGS – where the applicant applies for a dismissal or stay of proceedings – where the applicant contends that the lawyers acting on behalf of the head body corporate do not have authority to act on the basis that the annual general meeting was a nullity – whether the applicants were financial and able to vote at an annual general meeting – whether the annual general meeting is a nullity on the grounds that the applicants were disqualified from voting – whether the head body corporate’s committee comprised of people who were/are not “electable persons” Authorities Body Corporate and Community Management Act 1997 Building Units and Group Titles Act 1980 s 172(9) Building Units and Group Titles and Other Legislation Amendment Act (No 28) 2022 Mixed Use Development Act 1993 ss 166C, 172, 174, 177, 185, 186, 214A, 214E Blatch v Archer (1774) 1 Cowp. 63, 65; 98 ER 969 Cathedral Place Community Body Corporate v The Proprietors Cathedral Village BUP 106957 (2020) 6 QR 211 Couran Cove Resort Community Body Corporate MCP 106571 v The Proprietors of Couran Cove Resort- Broadwater Villas GTP 106807 [2022] QSC 247 Danish Mercantile Co Ltd v Beaumont [1951] Ch 680 Morat Pharmaceuticals Pty Ltd v Hoft Pty Ltd [2014] QCA 319 Ox Operations Pty Ltd v Land Mark Property Developments (Vic) Pty Ltd [2007] FCA 1221 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 Proprietors Cathedral Village Building Units Plan No 106957 v Cathedral Place Community Body Corporate [2013] QCA 264 Re Ryde Ex-Services Memorial and Community Club [2015] NSWSC 226 SBA Properties Ltd v Craddock [1967] 1 WLR 716 The Proprietors Cathedral Village BUP 106957 v Cathedral Place Community Body Corporate [2020] QCA 240 COUNSEL: M Steele KC, with A White for the plaintiff/respondent in proceedings 7113 of 2022 and 601 of 2021 P Hastie KC for the defendant/applicant in proceedings 7113 of 2022 and 601 of 2021 -- 2 of 28 -- 3 SOLICITORS: SCAS Law for the plaintiff/respondent in proceedings 7113 of 2022 and 601 of 2021 LawSolve (formerly ActiveLaw) for the defendant/applicant in proceedings 7113 of 2022 and 601 of 2021 REASONS PART A: INTRODUCTION [1] There are two applications before the court. The first is an application by the defendant, The Proprietors of Couran Cove Resort - Broadwater Villas GTP 106807 (Broadwater) in proceeding BS 7113/22 for the dismissal or alternatively a stay of that proceeding commenced and prosecuted by Couran Cove Resort Community Body Corporate (CBC). That application also seeks an order that the solicitors for the plaintiff/CBC pay the costs of the proceedings and the costs of the application. The second is a similar application brought by the defendant, The Proprietors of Couran Cove Resort - Eco Lodges GTP 106783 (Eco) in proceeding BS 601/21 commenced by CBC. [2] The nub of both applications is that the lawyers purporting to act on behalf of the CBC have no authority to do so. [3] This dispute is part of a wider dispute which has been the subject of earlier decisions of this court.1 [4] CBC is constituted under the Mixed Use Development Act 1993 (the MUD Act). There are six members of CBC, with differing voting rights, namely: (a) Lot 1 – Resorts (Developments) Pty Ltd with 50 lot entitlements; (b) Lot 2 – Couran Cove Resort – Marine Apartments with 1152 lot entitlements; (c) Lot 3 – Couran Cove Holdings Pty Ltd with 20 lot entitlements; (d) Lot 4 – Couran Cove Resort – Lagoon with 400 lot entitlements; (e) Lot 5 – Couran Cove Resort – Broadwater Villas (Broadwater) with 216 lot entitlements; (f) Lot 6 – Couran Cove Resort – Eco Lodges (Eco) with 1400 lot entitlements. [5] Each of those members are body corporates constituted under the Building Units and Group Titles Act 1980 (BUGTA).2 1 See, for example, Couran Cove Resort Community Body Corporate MCP 106571 v The Proprietors of Couran Cove Resort-Broadwater Villas GTP 106807 [2022] QSC 247. 2 BUGTA has been superseded by the Body Corporate and Community Management Act 1997 (BCCM Act) but BUGTA continues to apply for the operation of the MUD Act: see s5A of the BUGTA. -- 3 of 28 -- 4 Background [6] The problems started at an Annual General Meeting of CBC on 14 December 2021.3 The minutes of the meeting disclose that representatives of each of the six lots were at the meeting – which was conducted by videoconference. Also in attendance was Ms Charlotte Divall of SSKB, the Community Manager. [7] The chairperson, Mr David Rosenblum (the representative of Lot 1) asked if Broadwater and Eco were “financial”. Ms Divall advised that they were not. She said there were amounts on the aged balance list for both Broadwater and Eco. And so, Mr Rosenblum, the chair, declared that both Broadwater and Eco were not financial and were not entitled to vote or to participate in the meeting. [8] The representative for Broadwater, Mr Matthew O’Connor, advised that Broadwater Villas was technically financial and was able to vote and called for a poll on every motion. The chair, Mr Rosenblum, advised that the meeting was not accepting votes from Lot 5. [9] Eco’s representative, Mr David Bowden, advised that he would be casting votes. Mr Rosenblum advised that votes would only be taken from financial members, and it was noted that these would be Lots 1 and 3. [10] The AGM then proceeded with resolutions passed on the votes of Lots 1 and 3. The first 11 of the resolutions passed at the AGM appear to be conventional resolutions. Resolutions 12 to 15 imposed special levies. The resolutions passed at the AGM were as follows: 1. Confirmation of previous minutes; 2. Adoption of financial statements for the year ended 28 February 2021; 3. The financial statements for the year ending 28 February 2022 are to be audited; 4. KPMG was to be appointed to audit the financial statements for the year ended 28 February 2022; 5. The administrative fund budget and contributions be $3,443,258 and $3,787,583 respectively for the year 1 March 2021 to 28 February 2022; 6. The sinking fund budget and contributions be $202,316 and $222,547 for the year 1 March 2021 to 28 February 2022; 7. The utility infrastructure administrative budget and contributions be $2,076,259 and $2,283,885 for the year 1 March 2021 to 28 March 2022; 8. The utility sinking fund budget and contributions be $500,000 and $550,000 for the same year; 3 Broadwater’s submissions say that this was a “purported meeting” but the idea that there was no actual meeting was not pressed. -- 4 of 28 -- 5 9. The community facility fund budget and contributions be $1,130,936 and $1,244,029 for the same year; 10. Insurance proposed by SSKB be ratified; 11. An administration agreement be entered into with SSKB (as Community Manager). 12. An administrative fund special levy to be raised for $4,791,617 and $5,270,779 to satisfy a Supreme Court judgment against CBC from service providers; 13. An administrative fund special levy to be raised for $4,100,928 and $4,511,021 to satisfy a Supreme Court judgment against CBC from service providers; 14. An administrative fund special levy to be raised for $454,545 and $500,000 for legal fees for defending Supreme Court matter 601/21 (i.e. one of these two proceedings) between CBC and Eco Lodges; 15. A utility infrastructure administrative fund special levy to be raised for $90,909 and $100,000 for gas works. [11] Four committee positions were voted on. Again, the votes of Mr O’Connor for Broadwater and Mr Bowden of Eco were disallowed. Mr Rosenblum was elected chairperson and treasurer. Mr Horowitz was elected to the positions of secretary and ordinary committee member. [12] The following year there was another AGM – which followed a similar pattern – on 11 November 2022. [13] On 1 December 2022 amendments to the MUD Act came into effect.4 The amendments confined persons who were eligible to be appointed as committee members to those who: (a) qualified as an individual who was a member of the body corporate; and (b) were not disqualified because the person, the corporation or an associate of the person owed a “relevant body corporate debt” to the body corporate or an associated body corporate; and (c) were not disqualified because the person or the corporation, nor an associate of the person is a service provider for the body corporate or an associated body corporate. [14] A person who held office as a committee member on 1 December 2022, and who was not an “electable person” lost office and a vacancy occurred. [15] Broadwater Villas submits that Mr Rosenblum, Mr Horowitz and Mr Howard Cao, who replaced Mr Horowitz on the committee of CBC on 28 November 2022, are all disqualified from holding committee positions. They make a similar submission in 4 The amending Act is the Building Units and Group Titles and Other Legislation Amendment Act (No 28) 2022. -- 5 of 28 -- 6 relation to Mr Edmund Hampson who was appointed to CBC’s committee on 11 December 2022. [16] There are, therefore, two broad contentions. The first is that the committee was invalidly elected because Broadwater and Eco were denied a vote at the AGMs on 14 December 2021 and 11 November 2022. The second is that CBC’s committee comprises persons who were not, and are not, “electable persons” and that, by reason of s 186 of the MUD Act, their positions are vacant. For both reasons Broadwater contends that those purporting to exercise the powers of CBC’s committee had no such power and they were incapable of instructing CBC to commence these proceedings and to continue to prosecute these proceedings. [17] For those two broad reasons, it is contended by Broadwater that the proceedings brought by CBC ought to be dismissed or stayed. [18] It is necessary to deal with each of the two broad contentions. PART B: THE MEETINGS POINT The Meetings [19] A contested issue is whether Broadwater and Eco were “unfinancial” at the time of the meetings. The relevant provision is Part 2(6) of Schedule 2 to BUGTA. That provision is as follows: (6) Notwithstanding any other provision of this Act, at a general meeting of the body corporate a person shall not be entitled to vote in respect of – (a) any motion other than a motion which to be effective must be passed by unanimous resolution or resolution without dissent; or (b) the election of the chairperson, secretary or treasurer of the body corporate or the other members of the committee; unless – (c) all contributions levied and due and payable at least 30 days before the meeting in respect of the lot in respect of which the person is entitled to vote; and (d) any other moneys recoverable under this Act by the body corporate from the person or the proprietor of the lot at the date of the notice given under section 1(4); have been duly paid before the commencement of the meeting.5 [20] Therefore, the relevant question is whether, by the time the 2021 AGM commenced at 10.30am on 14 December 2021, Broadwater and Eco had paid all contributions 5 Part 2 of Schedule 2 applies by reason of s 172(9) of the BUGTA. -- 6 of 28 -- 7 levied and due and payable by them as at 14 November 2021 (i.e. 30 days before 14 December 2021) and had paid any other money recoverable under the Act.6 [21] Ms Divall of SSKB, the independent Community Manager, advised the chair, Mr Rosenblum, that Broadwater and Eco were “unfinancial”. The precise words recorded in the minutes of the AGM are that “there were amounts on the aged balance list for both [Broadwater and Eco]”. [22] There is no challenge to the chair’s ruling that Eco was “unfinancial”. At the time of the first AGM on 14 December 2021, Eco owed CBC something of the order of $8.2m.7 By the time of the second AGM on 11 November 2022, Eco owed CBC more than $16m. It follows that Eco was not entitled to vote at either AGM. [23] The real dispute is whether Broadwater was “unfinancial” at the time of the meeting. The Running Account [24] SSKB, as the Community Manager for CBC, managed a running account for Broadwater. A statement for the period 1 March 2021 to 17 June 2022 is in evidence. That statement reveals, as might be expected, debts for administrative and sinking fund levies as well as credits for payments. On 28 April 2021 three entries appear on the running account: Date Type Details Reference Debit Credit Balance 28/04/21 Other IR F&E Inv.8 30 M0000243 $36,547 $365,951 28/04/21 Other IR F&E Inv. 35 M0000244 $39,874 $405,825 28/04/21 Other IR F&E Inv. 38 M0000245 $39,874 $445,699 [25] On 12 August 2021 there is another item which is contested. These are also some receipts that are recorded: Date Type Details Reference Debit Credit Balance 12/08/21 Other Legal Levy Recovery M0000246 $179,771 - $433,200 24/11/21 Receipt Administration Fund R0000598 $85,730 $347,470 24/11/21 Receipt Utility Infras- Admis RA0000598 $51,403 $296,066 [26] Thus, as at the date of the meeting, the running account showed that Broadwater owed CBC the sum of $296,066. However, if the four disputed items (the amounts in bold above) are deleted the result is a nil balance.9 6 The latter requirement is not subject to a time limitation and so other moneys recoverable under the Act were required to be paid by the time of the meeting. 7 Exhibit DB32 to the affidavit of Mr Bender sworn on 31 May 2023. 8 The abbreviation “IR F&E” stands for the services provider Island Resorts (Facilities & Equipment). 9 For the moment I am using the expression ‘disputed’ items. However, there is a dispute as to whether in fact there was a dispute. -- 7 of 28 -- 8 [27] There are some curiosities. One is that it is unclear if any of the details of the disputes were put before Ms Divall of SSKB or the chairperson, either at the meeting or prior to the meeting. The Correspondence Prior to the AGM [28] The sequence is that the three new charges were added to Broadwater’s account on 28 April 2021. I was not referred to any contemporaneous dispute about those amounts. However, the claim for $179,771 was added to Broadwater’s account on 12 August 2021. A letter of 12 August 2021 from CBC explains the claim is as follows: The Community Body Corporate has suffered significant damage and costs as a result of the actions of the Broadwater Committee and it’s (sic) Chairman Matthew O’Connor. The acts that led to damage being suffered include, but are not limited to: An Unlawfully engaging Rod Johansson as legal counsel for the CBC, with full knowledge of the fact that Mr Johansson could not and should not be appointed. This has led to significant legal costs being unnecessarily incurred by the CBC. At the time of engaging Mr Johansson, Mr O’Connor was acting in his own capacity and in his capacity as Chairperson on and on behalf of the Broadwater Body Corporate and hence the Broadwater Body Corporate is liable for those actions. Pursuant to Community Body Corporate Property By laws 27.1, 27.3 and 1.2 the Broadwater Body Corporate is liable for damages caused, as are the individual committee members. Attached is the first of a number of debts owed to the CBC by Broadwater Body Corporate. The combined total of this is $179,771.20. This relates to legal fees incurred specifically as a result of the actions of Mr O’Connor in his capacity of Chairman of the Broadwater Body Corporate. These damages accrued at the time the act occurred and have been due since that date. This debt is due immediately to the CBC as the supplier invoices are past due. [29] Not much about that makes sense. First, the letter does not explain why, or how, Broadwater or Mr O’Connor could have engaged Mr Johansson as legal counsel for CBC. Second, if, as the letter asserts, Mr O’Connor was acting in his own capacity and for Broadwater, how could he retain Mr Johansson for CBC? Third, the by-laws give CBC a right to recover costs incurred by CBC in recovering levies or monies due and levied pursuant to the Act and the by-laws. The letter does not assert that the claim of $179,771 is for costs incurred in relation to recovery proceedings against Broadwater. Rather, the letter asserts the costs were incurred specifically as a result of the actions of Mr O’Connor in his capacity as chairman of Broadwater. [30] Included in the material are various legal costs invoiced by James Conomos Lawyers to CBC. The fee notes do not make entirely clear the broad character of the work -- 8 of 28 -- 9 performed by the lawyers. Suffice it to say that the impression gained from perusing the lawyers’ fee notes is that the lawyers’ role was to act for CBC in litigation commenced by a service provider, Island Resorts (Facilities & Equipment)10 against CBC. That does not appear to be a recovery proceeding commenced by CBC against Broadwater. [31] The letter of 12 August 2021 prompted a lengthy response. Broadwater’s solicitors wrote to CBC on 20 August 2021. The response runs to 16 pages. Broadwater and Mr O’Connor disputed any liability to CBC for the four disputed amounts. Various demands were made, including that the claims be withdrawn. [32] The response noted that the pleadings in the litigation brought by the service providers and being defended by James Conomos Lawyers on behalf of CBC, did not join Broadwater or Mr O’Connor and did not refer to any unpaid levies owed by Broadwater or Mr O’Connor. [33] There is no evidence of a response to that letter. It is perhaps remarkable that a letter disputing any liability, in considerable detail, did not prompt a response or even a terse rejection. The absence of a response, and the nature of the claim, makes it difficult to conclude that there was a genuine dispute. There was, at best, a claim that makes little sense, a detailed rejection of that claim, and no further debate. [34] On 28 September 2021 Broadwater sent an email (or letter) to “All members of the CBC excluding Matthew O’Connor”. That email (or letter) is as follows: “RE: RESPONSE TO DEMAND We write to you on instruction of the Body Corporate Couran Cove Resort Broadwater Villas. In response to your demand to the Broadwater Villas Body Corporate for an amount of $179,771.20 our lawyers Active Law wrote to you on 20 August 2021 disclaiming this charge. As no response was received by Monday 23rd August 2021, Broadwater Villas advises that this invoice will be removed from the accounts of the Couran Cove Resort Community Body Corporate immediately as this was not a valid invoice and should not be charged to Broadwater Villas. Also please remove the three invoices #0243, #0244, #0245 totalling $116,300 which are also invalid as there is no agreement in place to justify these invoices. Once our CBC invoices hub is rid of these illegal charges we will immediately pay the balance of our account to the CBC $137,133.” [35] It was a bold threat – only once the disputed items were removed from the running account would the undisputed amounts be paid. Ultimately though, the undisputed amounts were paid so that, by the time of the meeting on 14 December 2021, only the four disputed amounts remained unpaid. 10 The abbreviation for Island Resorts (Facilities & Equipment) is “IR F&E”. That is the abbreviation used in the running accounts quoted above. -- 9 of 28 -- 10 [36] It will be noticed that the second-last paragraph of the communication on 28 September 2021 refers to three invoices numbered #0243, #0244, #0245 totalling $116,300. These are the three invoices added to the Broadwater account on 28 April 2021. It is necessary to explain, to the extent possible, those invoices. The Caretaking Invoices [37] The invoice summaries and invoices underlying the charges added on 28 April 2021 have been produced. Invoice 30 is an invoice from Island Resorts (Facilities & Equipment) to Broadwater directly dated 10 October 2019. The description in the invoice is: Caretaking fee for the period 1.6.19 – 30.9.19 Administration $3,765.94 Cleaning, Gardening & Grounds $12,033.60 Fire Protection & Security $6,188.76 Pest control $688.33 Repairs & Maintenance $2,497.33 Waste $8,050.66 [38] With GST of $3,322 the total for that invoice comes to $36,547. [39] Invoice 35 is in a similar form with an identical date but comprises a caretaking fee for the next three-month period – from 1 October 2019 to 31 January 2020. The total is $39,874. [40] Invoice 38 is in a similar form but is dated 17 February 2020. It is a caretaking fee for the period 1 February 2020 to 31 May 2020. The amount is $39,874. [41] In those forms the three invoices are claims by Island Resorts (Facilities & Equipment) from Broadwater – although in each case the address of Broadwater is stated to be care of Ms Divall at SSKB.11 [42] The invoice summary lists each of those three invoices, and claims the total of $116,295 by 29 April 2021, and says in each case: Refer to attached invoice issued by Island Resorts (Facilities & Equipment) invoice reissued via Couran Cove Community Plan MCP 106751 per Committee instruction 27/04/2021. Original due date 10/10/2019 and is now overdue. The invoice date on this invoice is computer generated and not reflective of the actual date. [43] There is no explanation for this mess. The three invoices are, firstly, directed by the service provider to Broadwater. Then, CBC appears to have gathered up the three invoices and claimed payment for itself from Broadwater. The basis for that appears to be a “Committee instruction 27/04/2021”. It is a mystery as to how CBC’s 11 In fact, the invoices are directed to Ms Divall at Stewart Silver Kings & Burns – which I assume to be SSKB. -- 10 of 28 -- 11 committee could instruct that Broadwater pay to CBC the amounts that had been claimed by the service provider from Broadwater. [44] A possibility is that Island Resorts (Facilities and Equipment) carried out the caretaking work for the nine months specified and sought to claim the fee directly from Broadwater who argued that they did not engage Island Resorts (Facilities & Equipment). Possibly that is the explanation for Broadwater saying that the invoices are “invalid as there is no agreement in place to justify these invoices”.12 But all of that is speculation. The facts were not explored in the affidavit material,13 or in the submissions of either party. Submissions on the Disputed Invoices [45] CBC was content to submit that all there was from Broadwater was an assertion that the relevant debts were invalid and that a mere assertion that a debt is disputed did not enable the court to conclude that the debts did not exist.14 Broadwater was content to submit the opposite, namely that that there was merely an assertion by CBC that amounts were owing for legal costs and that there was no demonstrated basis for the claims in the By-Laws.15 [46] Further written submissions were directed to the issue. In those submissions Broadwater contended that, if CBC claimed money other than contributions, it was obliged to conform to the conventional remedies available in our system of justice, namely, to make a claim, issue proceedings and, if successful, obtain a judgment which it could execute.16 It was contended that the body corporate could not simply carry out its own system of execution by refusing the lot owner a right to vote, and that, by doing so, CBC was abusing its power in order to deprive Broadwater of its right to vote. [47] CBC’s further submissions contended that the levies were either contributions levied and due and payable or were other moneys recoverable under the MUD Act by the CBC. [48] There is a practical problem with the stance that both parties have taken, namely that the other party bears the onus of proving, or disproving, the disputed debts. The caretaking fee for the three-month period from 1 June 2019 can be used as an example. There is no evidence which enables the court to make a finding that the caretaking was carried out and, if it was, who agreed to pay for it. To take the example one step further, no evidence enables a conclusion to be drawn that the cleaning and gardening was carried out during that three-month period let alone for which entity. The position is similar for the other services and for the later quarterly periods. [49] Curiously, Broadwater relied on the principle in Blatch v Archer that all evidence is to be weighed according to the proof which it was in the power of one side to have 12 See paragraph [34] above. 13 The evidence was by affidavit. 14 Paragraph 22(d) of CBC’s written submissions. See also paragraph 11 of CBC’s further submissions: “…there is no evidence which contradicts what appears on the face of the CBC’s ledger of debts owed to it by Broadwater. Broadwater bears the onus to adduce such evidence. It has failed to do so.” 15 Paragraphs 8-10 of Broadwater’s written submissions. 16 Paragraph 2 of Broadwater’s further written submissions. -- 11 of 28 -- 12 produced, and in the power of the other to have contradicted.17 It is perfectly correct that CBC could have adduced evidence that sustained the validity of the invoices for caretaking, cleaning and gardening and the other caretaking services. But, equally, Broadwater could easily have adduced evidence to the effect that, for example, no caretaking, cleaning or gardening was carried out during the relevant periods, or that the services were carried out by the service providers for CBC or for some other entity. The activities of both CBC and Broadwater coincide on the same site on South Stradbroke Island. Both sides presumably have access to relevant witnesses but have declined to descend to any detail about what actually happened. A Postscript [50] It should not be thought that Broadwater’s debt position with CBC has remained static and that Broadwater’s only indebtedness comprises the disputed invoices totalling $296,066. A recent SSKB statement for the period 1 March 2022 to 23 May 2023 shows that Broadwater’s account started that period with a balance of $1,446,916 and ended with a balance of $1,555,223. [51] Again, there is no explanation for the position but at least some of the amounts claimed by CBC comprise administrative fund and sinking fund levies. The somewhat invidious position that CBC finds itself in is that it is presently owed the following amounts by its members: (a) Lot 1 – $150,030; (b) Lot 2 – $9,757,278; (c) Lot 3 – $0; (d) Lot 4 – $4,022,840; (e) Lot 5 – (Broadwater) $1,555,223; (f) Lot 6 – (Eco) $20,461,013. [52] That is a total of just under $36m. The Relevant MUD Act Provisions [53] As Broadwater’s submissions explain, by reason of s 172(9) of the MUD Act, Part 2 of Schedule 2 to BUGTA applies to meetings of bodies corporate.18 Part 2(6) is quoted at paragraph [19] above. In summary, the disqualification from voting applies if, at the commencement of the meeting, the lot owner has not paid all contributions levied and due and payable 30 days before the meeting, or if the lot owner has not paid any other moneys recoverable under BUGTA. [54] Section 174 of the MUD Act is the source of the power to levy contributions: (1) A body corporate may levy— 17 (1774) 1 Cowp. 63, 65; 98 ER 969, 970. 18 See also Proprietors Cathedral Village Building Units Plan No 106957 v Cathedral Place Community Body Corporate [2013] QCA 264 at [34]. -- 12 of 28 -- 13 (a) the contributions determined by it under section 177(1)(i); and (b) any amount determined under section 177(2) in relation to the contributions; by giving its members written notice of the contributions payable by them. (2) Contributions must be levied, and are payable by the members of the body corporate, in shares proportional to their voting entitlements at the time the contributions are levied… [55] Thus, a requirement is that the contributions be determined by it [i.e. the body corporate] under section 177(1)(i) of the MUD Act. In turn, s 177(1)(i) of the MUD Act requires that the body corporate determine the amounts necessary in its opinion to be raised by way of contributions— (i) for the purpose of meeting its actual or expected liabilities incurred or to be incurred under paragraph (b); or (ii) for the payment of insurance premiums, rates or any other liability of the body corporate (other than amounts referred to in paragraph (m)) [56] The disputed amounts claimed by CBC from Broadwater cannot qualify as contributions under Part 2(6) because there is no evidence that CBC made a determination of an amount necessary to meet CBC’s liabilities or for payment of insurance premiums, rates or other liabilities of CBC. And the disputed amounts are claimed directly from Broadwater for the full amount of the invoice. There is no suggestion that the disputed amounts comprise a total amount which has been shared by the members of the body corporate in accordance with their lot entitlement. [57] The body corporate can also levy contributions under s 177(1)(m) of the MUD Act if the body corporate becomes liable to pay an amount that it is unable to pay immediately, and if the body corporate is not required to levy contributions to meet the liability. The problem again, is a lack of evidence. The evidence does not demonstrate that CBC was unable to pay the disputed amounts immediately. And, even if that problem were overcome, the right given by s 177(1)(m) was to levy proportionate contributions from its members under s 174. There is no suggestion that was done. The Three Service Provider Invoices [58] CBC claims that the three service provider invoices fall within s 177(1)(i) of the MUD Act because they were debts incurred by CBC in maintaining the community property or the precinct property held by CBC in a state of good and serviceable repair.19 There are two problems with that submission. 19 CBC’s further written submissions at [14]. Note that s 177(1)(b) requires the body corporate to properly maintain and keep in a state of good and serviceable repair—(i) the community property or the precinct property held by it, including any improvements on the community property or the precinct property; and (ii) any personal property vested in it; and (iii) any road, wharf or land leased by the body corporate under section 164 and any improvements on the road, wharf or land. For the purposes of the present discussion, I have confined the maintenance obligation to community property and precinct property, but the same principles (and lack of evidence) apply to the maintenance obligation over personal property and roads, wharves and land. -- 13 of 28 -- 14 [59] The first is that there is no evidence which supports the submission. No witness says what the invoices were for. To use the same example, the cleaning and the gardening could have been anywhere,20 and for any purpose, and requested by any number of people or entities. There is no evidence that the cleaning or gardening described in the invoices was CBC fulfilling its obligation under s 177(1)(b) to maintain the community property or the precinct property held by CBC in a state of good and serviceable repair. In fact, the fact that the invoices were originally rendered to Broadwater, rather than CBC, suggests that the cleaning and gardening involved Broadwater’s property rather than community or precinct property. However, that is difficult to properly assess. And it is impossible to determine whether the character of the caretaking involved putting the property, wherever it is, into a state of good and serviceable repair. [60] CBC argues that: The IRF&E [service provider] invoices were issued to Broadwater via the CBC. It is open to infer in those circumstances that the invoices reflect Broadwater’s share of the Services, proportional to Broadwater’s voting entitlements. [61] However, it is far from clear that the invoices were issued to ‘Broadwater via CBC’. The actual invoices are addressed by the service provider to Broadwater. And, there is no factual basis for an inference that the invoices reflect Broadwater’s share of the caretaking services. The invoices themselves and the invoice summary do not mention any such apportionment. In fact, the only inference one can draw from the invoices, and the invoice summary, is that the charges made in the invoices are likely to be the subject of a specific written caretaker agreement with one or other of Broadwater or CBC. (I will come back to this issue of an agreement below.) [62] The second problem with CBC’s argument that the three service provider invoices fall within s 177(1)(i) of the MUD Act is that there is no evidence that CBC made any determination under s 177(1), or gave its members written notice of the contributions payable by them, or in fact levied any proportionate contributions determined by it. The one skerrick of evidence on the issue is that the invoice summary attaching the three caretaking invoices states: Refer to attached invoice issued by Island Resorts (Facilities & Equipment) invoice reissued via Couran Cove Community Plan MCP 106751 per Committee instruction 27/04/2021… [63] The “Committee instruction” could be anything. It could be an instruction that the invoice, having been issued by the service provider to Broadwater, be redirected by the service provider to CBC. Or it could be a committee instruction that CBC was to assume Broadwater’s debt and to claim the amount from Broadwater. Or it could be a direction simply to reissue the invoices to Broadwater. Of course, the involvement of the service provider in the exercise is not explained by any evidence. Did the service provider consent to an effective novation of the creditor? [64] In any event, there is no basis upon which the court could conclude that CBC had made a determination to strike a levy based on its opinion of the amount necessary to 20 The cleaning and gardening may have been on common property or on the property of Broadwater unitholders, or other unitholders, or a combination of those. -- 14 of 28 -- 15 be raised,21 or issued a notice, or required the members to pay their contributions. To the contrary, the disputed amounts were targeted at Broadwater rather than requiring Broadwater to pay its proportionate share of a levy on all members. [65] As McMurdo JA explained in Cathedral Place Community Body Corporate v The Proprietors Cathedral Village BUP 106957,22 s 174 of the MUD Act does not permit a body corporate to discriminate between its members in levying contributions. Those contributions must be levied in shares proportional to the voting entitlements of the members of the body corporate. Management Agreements [66] At the outset of the hearing, I was supplied with a bundle of ‘Selected Documents from Exhibits’. This folder of documents was agreed as a useful bundle of the documents which counsel would need to refer to during the hearing. The first tab in that bundle of documents comprises ‘Extracts From Service Agreements’. Within the tab are extracts from three agreements, namely: (a) Services Supply and Caretaking Agreement dated 12 September 2019 between CBC and Island Resorts (Facilities & Equipment) Pty Ltd; (b) Community Facilities Service Agreement between CBC and Interpacific Resorts (Australia) Pty Ltd; (c) Infrastructure Service Agreement between CBC and Interpacific Resorts (Australia) Pty Ltd (in liquidation).23 [67] The preamble to the Services Supply and Caretaking Agreement discloses that, consistent with its obligation to control, manage and administer for the benefit of its members the community property pursuant to s 177(1) of the MUD Act: (a) CBC has entered into management agreements with the body corporates within the development; and (b) CBC is entering into this agreement with Island Resorts (Facilities & Equipment) Pty Ltd (IRFE) so that IRFE will provide assistance to CBC so that CBC can discharge its obligations to control, manage and administer the Community Property and CBC’s obligations under the various management agreements. [68] Clause 3.1 of the agreement contains CBC’s appointment of IRFE as its service provider for in excess of 27 years from 12 September 2019. Clause 4 specified that IRFE’s remuneration was to be in accordance with Schedule 1 to the agreement. [69] All of that demonstrates that it was CBC that retained IRFE to supply services in respect of the community property and that it was CBC that was responsible for 21 A determination of the amount necessary in the opinion of the body corporate is essential: see McMurdo JA in The Proprietors Cathedral Village BUP 106957 v Cathedral Place Community Body Corporate [2020] QCA 240 at [34]; Note that the section discussed there, s 177(1)(h) of the MUD Act is the present legislation’s equivalent of s 177(1)(h). 22 (2020) 6 QR 211 at [72], [85], [86]; Brown J and Ryan J agreed. 23 The agreements are part of JJT-3, which is a lengthy exhibit to an affidavit filed by Mr Jay Tseng on 20 September 2022. Mr Tseng is a solicitor with Enyo Lawyers, the former solicitors for CBC. -- 15 of 28 -- 16 IRFE’s invoices for that work. Of course, there is the possibility that IRFE was retained by CBC to perform services on Broadwater’s property or at Broadwater’s request. But if that occurred, some evidence is needed. [70] Incidentally, the evidence also includes a Management Agreement dated 26 March 2003 between Broadwater and CBC whereby Broadwater retained CBC to manage Broadwater’s property. The Management Agreement was extended twice (to 31 October 2009 and then to 31 October 2012) but it is not clear whether it was current as at 14 December 2021. In any event, CBC does not contend that the caretaking invoices are payable by Broadwater pursuant to the Management Agreement and the remuneration payable is in accordance with a formula that includes total costs plus 15%. [71] The result is that the basis for the caretaking charges is something of a mystery. The James Conomos Lawyers’ Invoices [72] CBC does not argue that the three service providers invoices fall within Part 2 section 6(d) as “any other moneys recoverable under this Act by the body corporate from…the proprietor of the lot”.24 But it does argue that the James Conomos Lawyers invoices totalling $179,771 fall within that subsection. [73] CBC’s submission is that the James Conomos Lawyers invoices are “other moneys recoverable under the Act” because they are recoverable under CBC’s Property by- laws. The by-laws relied on are by-laws 27.1 and 27.3. It is necessary to set out by- laws 27.1, 27.2 and 27.3 in full: 27.1 Persons shall pay on demand the whole of the Community Body Corporate’s cost and expenses (including solicitor and own client costs and any costs ordered by any Court or Tribunal of competent jurisdiction) incurred by or on behalf of the Community body Corporate in recovering levies or moneys due and duly levied upon a person or persons pursuant to the Act and/or the By-Laws of the Community Body Corporate. 27.2 If notwithstanding demand having been made by the Community Body Corporate to persons for payment of the said costs and expenses, the persons fail to pay such costs and expenses, the Community Body Corporate may recover the said costs and expenses by instituting proceedings in any Court or Tribunal of competent jurisdiction. 27.3 The Community Body Corporate may, at any time, claim such costs and expenses as a levy against the lot or lots of the persons who caused the Community Body Corporate to incur such costs and expenses. [emphasis added] [74] As the emphasised words make clear, the by-laws operate if CBC has incurred costs and expenses in “recovering levies or moneys due and levied”. On any view that is not the character of the James Conomos Lawyers fees and expenses. As explained above, a perusal of the solicitors’ invoices indicates that those legal expenses were incurred by CBC in defending proceedings commenced by a service provider, Island 24 Part 2 section 6(d) is relied on by CBC as authorising the claim for the amount of the James Conomos Lawyers’ invoices: see paragraph 18 of CBC’s further submissions. -- 16 of 28 -- 17 Resorts (Facilities & Equipment) against CBC. Certainly, Broadwater is not shown to be a party to those proceedings or to have any direct involvement. [75] By-laws 27.2 and 27.3 refer to “such costs and expenses”. That expression must refer to the costs and expenses incurred by CBC in “recovering levies or moneys due and levied”. [76] It follows that, contrary to CBC’s submissions, by-laws 27.1 and 27.3 do not authorise a claim by CBC to recover against Broadwater the costs and expenses CBC has incurred in defending proceedings brought against CBC by a service provider. And, as it happens, that was at least one of the points made by Broadwater’s solicitors nearly two years ago, in their letter to CBC on 20 August 2021.25 There is, as noted, no response to that letter. [77] There is no evidence from CBC to the effect that any of the James Conomos Lawyers invoices totalling $179,771 comprise costs and expenses spent in recovering levies or moneys due and duly levied on Broadwater. A perusal of the lawyers’ invoices is that the costs and expenses were incurred for an entirely different purpose, namely defending CBC from an action brought by a service provider. Conclusions regarding the Disputed Claims [78] It follows that the amounts claimed by CBC against Broadwater for the James Conomos Lawyers fees, and for the three caretaking invoices, are not claims that are comprehended by Part 2 of Schedule 2 to BUGTA. As explained, CBC’s claims do not seem to have a foundation and it is difficult to conclude that there is even a genuine dispute about the claims. It follows that Broadwater was entitled to vote at the AGM on 14 December 2021. [79] What, then, is the effect of the decision of the chairperson, Mr Rosenblum, to wrongly refuse Broadwater’s entitlement to vote? [80] Broadwater contends that the decision to disqualify Broadwater from voting has drastic consequences: Clearly Broadwater was financial and entitled to vote. If it had voted Broadwater’s votes would have carried the day: having 216 votes against the combined total for lots 1 and 3 (which purported to vote) of 70. The meeting was accordingly invalid and no votes which took place, either as to the levies or election of the committee were valid. If allowed to vote Broadwater would not have voted for the individuals purportedly elected on the committee, but would have voted for others and would have voted against the proposed resolutions. It is the committee purportedly elected at that time that purported to issue subsequent notices for contributions and meetings. These notices clearly are not valid. The meetings held consequent upon the notices were accordingly also invalid as were any other actions taken by the purported committee.26 25 This point is made at pages 12-13 of the letter. 26 Broadwater’s written submissions at [11]-[13]. -- 17 of 28 -- 18 [81] Broadwater goes further. Because the committee has no legitimacy, these proceedings were commenced or maintained without authority and are therefore a nullity.27 [82] That submission must be rejected. [83] First, nothing in Part 2(6) of Schedule 2 to BUGTA specifies that an incorrect disqualification of voting rights has the effect of invalidating the resolutions made at the meeting. [84] Second, nothing in BUGTA justifies the conclusion that the legislature intended that a wrongful disqualification of a person’s entitlement to vote would invalidate the resolutions of the meeting. A helpful starting point here is the following extract from the reasons of McHugh, Gummow, Kirby and Hayne JJ in Project Blue Sky Inc v Australian Broadcasting Authority: An act done in breach of a condition regulating the exercise of a statutory power is not necessarily invalid and of no effect. Whether it is depends upon whether there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition. The existence of the purpose is ascertained by reference to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void every act done in breach of the condition. Unfortunately, a finding of purpose or no purpose in this context often reflects a contestable judgment. The cases show various factors that have proved decisive in various contexts, but they do no more than provide guidance in analogous circumstances. There is no decisive rule that can be applied; there is not even a ranking of relevant factors or categories to give guidance on the issue.28 [emphasis added] [85] There is no discernible legislative purpose to invalidate the resolutions of a meeting where a person’s vote was improperly excluded. To the contrary. The legislation expressly provided a remedy for a party improperly denied a vote. Section 92 of BUGTA provided: 92 Order where voting rights denied or due notice of item of business not given (1) Where, pursuant to an application by a person under this section, a referee is satisfied that a particular resolution would not have been passed at a general meeting of a body corporate but for the fact that the applicant— (a) was improperly denied a vote on the motion for the resolution; or (b) was not given due notice of the item of business pursuant to which the resolution was passed; the referee may order that the resolution be treated as a nullity on and from the date of the order. (2) An application for an order under subsection (1) shall be made within the period of 30 days (or such longer period as the referee, in the particular case, allows) after the date of the meeting at which the resolution was passed. 27 Broadwater’s written submissions at [56]. 28 (1998) 194 CLR 355 at [91]. -- 18 of 28 -- 19 (3) Where— (a) an order under subsection (1) is made in respect of a resolution making a by-law amending, adding to or repealing another by-law; and (b) the by-law made pursuant to that resolution is in force; and (c) the order is recorded as provided by section 112; the by-laws shall, subject to their having been or being amended, added to or repealed under section 30 and to any order with respect to the order under subsection (1) made by a superior court, have force and effect on and from the date the order is so recorded to the same extent as they would have had if the resolution had not been passed. [86] That section, and the whole of Part 5 of BUGTA, applied to disputes concerning the operation of BUGTA and concerning the rights and obligations of persons under BUGTA.29 And so a person denied a vote, and able to demonstrate that the vote was decisive, was entitled to apply to a referee for an order that that “the resolution be treated as a nullity on and from the date of the order.” It was contemplated that such an application be brought within 30 days, or such longer period that the referee allows. Presumably that was because Parliament contemplated that the business of the body corporate would be unduly impaired if a longer period were permitted. [87] Thus, the legislature contemplated that a party improperly denied a vote could promptly apply to a referee to quash a resolution and to have it treated as a nullity.30 That is a strong indication that the legislature did not have in mind that, in the absence of such an application, the resolutions passed at a meeting, and affected by this type of irregularity, would be invalid or a nullity. [88] Third, the consequences would be significant, and would potentially cause injustice if every resolution affected by this type of voting irregularity were automatically void. It would mean that even uncontroversial resolutions,31 and resolutions passed by an overwhelming majority, would be invalid simply by reason of a voting irregularity. The legislature can hardly have intended that every voting irregularity, no matter how inconsequential, can invalidate the body corporate’s resolutions and thereby disrupt the business of the body corporate. [89] It is true that the right to vote at an AGM is a valuable right.32 However, the legislature has left the enforcement of that right to referees who can decide whether the applicant was improperly denied a vote and can then exercise a discretion the particular resolution should be treated as a nullity. The legislature did not, either expressly or 29 See s 214A of the MUD Act. 30 An example of a case where a similar application was made regarding a voting irregularity (under the successor Act, the Body Corporate and Community Management Act 1997) is Morat Pharmaceuticals Pty Ltd v Hoft Pty Ltd [2014] QCA 319. 31 Consider, for example, a resolution that simply sought to strike a contribution or sinking fund levy consistent with previous years, or a levy relating to building insurance. 32 Broadwater’s submissions in reply (at [28]) described the right to vote as a precious thing, so easily denied by manipulative departures from a course chartered for orderly, informed decision-making, that the law leans towards a characterisation of it as a thing of substance: Re Ryde Ex-Services Memorial and Community Club [2015] NSWSC 226 at [104], [105]. But note the legislative effort (referred to below) whereby the vote is preserved for ‘financial’ members. -- 19 of 28 -- 20 impliedly, decide that any denial of a right to vote immediately had the effect of invalidating all of the proceedings at the meeting and any decisions of a committee appointed at such a meeting. [90] For those reasons, the resolutions passed at the AGM on 14 December 2021 are valid. Meeting on 11 November 2022 [91] It will be recalled that the disputed amounts comprised a total of $296,066.33 That was the total claimed as owing by Broadwater to CBC at the time of the AGM on 14 December 2021. According to CBC’s running account that disputed amount continued to be owed by Broadwater to CBC until 16 May 2022. From that point on, the running account fell further into arrears. The SSKB running account is as follows leading up to the next AGM on 11 November 2022:34 DATE TYPE DETAILS DEBIT CREDIT BALANCE Brought forward 296,066 296,066 16/05/22 Administrative Fund 01/07/21 to 31/10/21 83,464 379,531 16/05/22 Community Facility 16/05/22 36,886 416,417 16/05/22 Sinking Fund 01/07/21 to 31/10/21 5,263 421,681 16/05/22 Utility Infras- Admin 01/07/21 to 31/10/21 50,474 472,156 16/05/22 Utility Infras- sink 01/07/21 to 31/10/21 11,324 483,481 17/05/22 Administrative Fund 01/11/21 to 28/02/22 83,466 566,947 17/05/22 Community Facility 17/05/22 36,888 603,836 17/05/22 Sinking Fund 01/11/21 to 28/02/22 5,266 609,102 17/05/22 Utility Infras- Admin 01/11/21 to 28/02/22 50,474 659,577 17/05/22 Utility Infras- sink 01/11/21 to 28/02/22 11,324 670,902 30/05/22 Supreme Crt 5871/20 03/06/22 351,602 1,022,504 30/05/22 Supreme Crt 0601/21 03/06/22 33,354 1,055,859 30/05/22 Supreme Crt 2382/21 03/06/22 300,920 1,356,779 30/05/22 Utility Admin- GasWork 03/06/22 6,670 1,363,449 24/06/22 Other Utility Infras Admin 13,400 1,376,850 24/06/22 Other Utility Infras Admin 13,400 1,363,449 04/07/22 Administrative Fund 01/03/22 to 30/06/22 83,466 1,446,916 33 That is $179,771 for the JCL invoices and $116,295 for the three caretaking invoices. 34 For reasons of brevity, I have deleted the reference column and amounts of less than a dollar. -- 20 of 28 -- 21 04/07/22 Community Facility 11/07/22 36,888 1,483,805 04/07/22 Sinking Fund 01/03/22 to 30/06/22 5,266 1,489,071 04/07/22 Utility Infras- Admin 01/03/22 to 30/06/22 50,474 1,539,546 04/07/22 Utility Infras- sink 01/03/22 to 30/06/22 11,324 1,550,870 08/07/22 Receipt Administrative Fund 83,464 1,467,406 08/07/22 Receipt Community Facility 36,886 1,430,520 08/07/22 Receipt Sinking Fund 5,263 1,425,256 08/07/22 Receipt Utility Infras- Admin 11,385 1,413,870 27/07/22 Receipt Community Facility 22,175 1,391,695 27/07/22 Receipt Utilityadmin- Gaswork 6,670 1,385.025 21/09/22 Utility Infras- Admin 24/06 Ir Infrast. 50,474 1,334,550 21/09/22 Utility Infras- sink 24/06 Ir Infrast. 11,324 1,323,225 21/09/22 Administrative Fund 24/06 Ir Infrast. 6,700 1,316,525 21/09/22 Utility Infras- Admin 24/06 Ir Infrast. 50,474 1,266,050 21/09/22 Utility Infras- sink 24/06 Ir Infrast. 11,324 1,254,725 21/09/22 Administrative Fund 24/06 Ir Infrast. 6,700 1,248,025 [92] That running account shows that, by the time of the AGM on 11 November 2022, Broadwater’s debt to CBC had blown out to more than $1.2m. Even if one deducts both the credits (a total of $316,239) and the disputed amount ($296,066) the outstanding balance is $635,720. Consequently, the likelihood is that Broadwater was ‘unfinancial’ at the time of the 2022 AGM. [93] As I understood it, the argument put by Broadwater was that by reason of the invalidity of the resolutions at the 2021 AGM, and, in particular, the invalidity of the resolutions at the 2021 AGM appointing the committee, the whole of the conduct of the 2022 AGM was invalid. For the reasons explained, there was no earlier validity. [94] It is now necessary to deal with Broadwater’s second broad contention that CBC’s committee comprises persons who were not, and are not, “electable persons” and that, by reason of s 186 of the MUD Act, their positions are vacant. PART C: THE ELECTABLE PERSONS POINT The MUD Act Amendments [95] As counsel for Broadwater points out, effective from 1 December 2022, the MUD Act was amended so that a person was only eligible to be elected if the person was an -- 21 of 28 -- 22 “electable person”.35 A person is eligible for election as chairperson, secretary or treasurer, or as another member of the executive committee of the body corporate only if the person is an electable person for the body corporate at the time of the meeting of the body corporate at which the person’s election is proposed.36 [96] Pursuant to s 166C of the MUD Act, a person is an electable person for a body corporate if— (a) the person is an individual who is— (i) a member of the body corporate; or (ii) a nominee of a corporation that is a member of the body corporate; and (b) neither the person, the corporation mentioned in paragraph (a)(ii) nor an associate of the person, other than an associate mentioned in section 214E(2)(a) or (b), owes a relevant body corporate debt to the body corporate or an associated body corporate; and (c) neither the person, the corporation mentioned in paragraph (a)(ii) nor an associate of the person— (i) is a body corporate manager for the body corporate or an associated body corporate; or (ii) is a service provider or letting agent for the body corporate or an associated body corporate. [97] Under s 214E of the MUD Act, ‘associates’ are persons defined in this way: (1) For this Act, a person is associated with someone else if— (a) a relationship of a type to which this section applies exists between them; or (b) a series of relationships of a type to which this section applies can be traced between them through another person or other persons. (2) This section applies to relationships of the following types— (a) marriage or de facto partnership; (b) the relationship of ascendant and descendant (including the relationship of parent and child) or the relationship of persons who have a parent or grandparent in common; (c) business partnership; (d) the relationship of employer and employee; (e) a fiduciary relationship; (f) the relationship of persons, one of whom is accustomed, or under an obligation (whether formal or informal), to act in accordance with the directions, instructions or wishes of the other; 35 Broadwater’s written submissions at [18]. 36 MUD Act s 185(7A). -- 22 of 28 -- 23 (g) the relationship of a corporation and executive officer of the corporation; (h) the relationship of a corporation and a person who is in a position to control or substantially influence the corporation’s conduct. [98] On 1 December 2022, if a person holding office was not an “electable person” a vacancy occurred; which was to be filled under s 186(3) to (11).37 Mr Rosenblum [99] Mr Rosenblum was re-elected as chairperson at CBC’s AGM held on 11 November 2022. He was the nominee of Lot 1 – Resorts (Developments) Pty Ltd. Mr Rosenblum therefore satisfies the qualifying requirements of s 166C(a) quoted above. The issue is whether Mr Rosenblum was disqualified by reason of s 166C(b). [100] Broadwater contends that: (a) Mr Rosenblum accordingly had a fiduciary obligation or was otherwise obliged to act in accordance with the directions of Island Resort Developments;38 and hence an associate of it. Lachlan McIntosh was a director of both Island Resorts Development and CCH Developments No 1 Pty Ltd (CCHD1). He owed to each a fiduciary obligation. Tracing through the relationships as section 166C requires, Mr Rosenblum accordingly was an associate with CCHD1. (b) CCHD1 owed Eco a debt of $15,068,505.86 for contributions and other amounts payable under BUGTA. (c) Mr Rosenblum was accordingly not entitled to remain in office after 1 December 2022 and did not purport to do so.39 [101] That last aspect is presumably why CBC has made no submissions in relation to the position of Mr Rosenblum and why no decision needs to be made about Mr Rosenblum’s position. Mr Horwitz [102] Mr Horwitz was also elected at CBC’s AGM on 11 November 2022. He was elected as secretary, treasurer and committee member. [103] Broadwater contends that Mr Horwitz was a nominee of the owner of Lot 3, Couran Cove Holdings Pty Ltd (CCHPL) and that, accordingly, he was an associate of it.40 [104] However, that does not make sense. First, it would make no sense for the Act to specify, in one breath, that a person qualifies as an ‘electable person’ if that person is the nominee of a corporation that is a member of the body corporate,41 and to, in the next breath, specify that a person’s appointment as nominee of a corporation that is a member of the body corporate is a disqualifying criteria.42 Section 166C(b) of the MUD Act does not say that. 37 Broadwater’s written submissions at [21]. 38 Presumably this is a reference to Resorts (Developments) Pty Ltd. 39 Broadwater’s written submissions at [23]-[25]. 40 Broadwater’s written submissions (19 May 2023) at [26]. 41 Section 166C(a) of the MUD Act. 42 This seems to be Broadwater’s interpretation of s 166C(b) of the MUD Act. -- 23 of 28 -- 24 [105] Second, an ordinary and literal interpretation of s 166C(b) of the MUD Act, applied to these facts, has these steps: (a) Mr Horwitz, is the nominee of CCHPL, the corporation mentioned in paragraph (a)(ii) of s 166C; (b) that corporation, that is, CCHPL, will be disqualified if it owes a relevant body corporate debt to the body corporate, here CBC, or an associated body corporate. [106] In other words, the point of s 166C(b) is to disqualify as ‘electable persons’ those persons representing corporations that owe relevant corporate debts to the body corporate or to an associated body corporate. [107] Third, nothing in the MUD Act makes a mere nominee of a corporate lot owner an associate of the lot owner. If it did it would prevent a lot owner from nominating even an independent solicitor or accountant or other person as its nominee. [108] Broadwater makes this submission: (a) Mr Napoli was a director of CCHPL until 30 November 2022 and WN Developments NSW [Pty Ltd] was its sole shareholder until 30 November 2022. (On 30 November Mr Cao became the sole director of CCHPL.) Simon Napoli was a director of WN Developments NSW. Mr Horwitz, tracing through the relationships, was accordingly an associate of WN Developments NSW, until 30 November 2022. (b) WN Developments NSW owed Eco, as associated body corporate of CBC, an amount of $495,826.32 for contributions and other amounts payable for lots owned in Eco. (c) Mr Horowitz would have accordingly been disentitled to be a committee member, absent the purported changes to CCHPL, on 1 December 2022.43 [109] It is hard to see the logic, or more importantly, the application of s 166C(b) in that submission. The involvement of Mr Napoli and WN Developments NSW in CCHPL appears to have ceased on 30 November 2022 – before the amendments to the Act came into effect. And it is hard to discern a relationship between Mr Horwitz and Mr Napoli and between Mr Horwitz and WN Developments NSW. Mr Horwitz was not a director or a shareholder of CCHPL or of WN Developments NSW. And so, any debt owed by WN Developments NSW to Eco is irrelevant. [110] In any event, the focus of s 166C(b) is on representatives of corporations that owe relevant corporate debts to the body corporate, in this case CBC, or an associated body corporate. Thus, because Mr Horwitz was the nominee of CCHPL, the issue is whether CCHPL owed a relevant body corporate debt to CBC or an associated body corporate. [111] The MUD Act Schedule 5 Dictionary defines the concept of a ‘relevant body corporate debt’ as any of the following amounts relating to a lot that are unpaid and have been due for at least 30 days— 43 Broadwater’s written submissions at [27]-[29]. -- 24 of 28 -- 25 (a) a contribution; (b) a penalty for not paying a contribution by the date for payment; (c) another amount associated with the ownership of a lot. [112] No evidence establishes that, as at 1 December 2022 such a debt was owed by CCHPL to CBC. To the contrary, as at 30 November 2022 CCHPL’s account balance with CBC was showing a nil balance.44 That nil balance continued until 22 December 2022 when a number of administrative fund, community facility, sinking fund and other levies were struck. Those amounts were all paid on 29 December 2022 returning the running account to a zero balance. [113] For those reasons Mr Horwitz was not disqualified from being an electable person. As it happens, on 28 November 2022, CBC’s committee resolved to replace Mr Horwitz with Mr Howard Cao – also a nominee for Lot 3, the lot owned by CCHPL. Broadwater also challenges Mr Cao’s capacity to be an “electable person”. Mr Cao [114] Mr Cao became the sole director of CCHPL on 30 November 2022. The one share in CCHPL appears to have been transferred from WN Developments NSW to a company called Option Funds Management Limited effective on 14 December 2022. Mr Cao was a director of Option Funds Management Limited until 17 March 2023.45 Given that, on 30 November 2022 Mr Cao became the sole director of CCHPL and a company connected to him acquired a beneficial interest in CCHPL, it is not surprising that Mr Cao would be appointed as CCHPL’s nominee for Lot 3. [115] Broadwater draws attention to the fact that, despite the transfer of the shares from WN Developments NSW to Option Funds Management Limited, the registered office and the principal place of business have not changed. The geographical location of the registered office and the principal place of business has not been shown to be significant. [116] In any event, as explained above, the focus of s 166C(b) is on representatives of corporations that owe relevant corporate debts to the body corporate, in this case CBC, or an associated body corporate. Thus, because Mr Cao was the nominee of CCHPL, the issue is whether CCHPL owed a relevant body corporate debt to CBC or an associated body corporate. For the reasons explained above, no evidence establishes that CCHPL owed a ‘relevant corporate debt’ to CBC. [117] Broadwater contends that: “The inference is inescapable that Mr Cao is an associate of CCHPL and is accordingly an associate of WNDNSW; which owed a debt to Eco.”46 It is difficult to see why Mr Cao would be an associate of CCHPL when he is the nominee, or why Mr Cao is an associate of WN Developments NSW when he is not an office-bearer or a shareholder of that company. I accept CBC’s submission to the effect that nothing in the material establishes that, as at 1 December 2022, Mr Cao 44 See ex DB29 to Mr Bender’s affidavit sworn 25 May 2023. 45 Second Affidavit of Mr Bowden of 3 May 2023 at DB45. It is unclear from the search who held the shares in Option Funds Management Limited. 46 Broadwater’s written submissions at [46]. -- 25 of 28 -- 26 has the relevant ‘associate’ relationship with WN Developments NSW.47 And so the debt owed by WN Developments NSW to Eco is irrelevant. [118] For those reasons, I do not think Mr Cao was disqualified from being an ‘electable person’ under s 166C(b). [119] It is true that a person can be an ‘associate’ if a series of relationships as described in s 214E(2) is established.48 It may be that Mr Cao has some kind of business relationship with Mr Napoli and his company, WN Developments NSW. But the concept of ‘associate’ does not extend to those who are merely involved with each other in a business transaction. The thrust of s 214E(2) is directed to relationships involving some corporate closeness or dependency such as business partnerships, the relationship of employer and employee, fiduciary relationships, executive officers of corporations and persons who is in a position to control or substantially influence the corporation’s conduct.49 Mr Hampson [120] On 11 December 2022 the committee of CBC (Mr Cao) appointed Mr Edmund Hampson as a treasurer and committee member. He was the nominee of Lot 1 owned by Resorts (Developments) Pty Ltd. [121] Broadwater contends that: Mr Hampson was a director and shareholder of a company formed on 30 November 2022, namely Lot 1 South Stradbroke Pty Ltd. According to the books and records of CBC on or about 30 November 2022, Lot 1 South Stradbroke Island gave notice to the body corporate manager (SSKB) that it was or was immediately entitled to be registered as the proprietor of Lot 1 in place of Island Resort developments. An historical search of lot 1 shows, however, it still to be registered in the name of Island Resort Developments; with a second mortgage to WN Developments (NSW) Pty Ltd. Clearly, Lot 1 South Stradbroke was not a member of CBC and hence its representative, Mr Hampson was not entitled to be a member of the committee of CBC. [122] Again, the logic is problematic. The notice of a transfer of the ownership of Lot 1 to Lot 1 South Stradbroke Pty Ltd does not appear to have matured into an actual transfer of ownership. And so, whilst there is evidence of a notice by Lot 1 South Stradbroke Pty Ltd that it was entitled to be registered as the owner of Lot 1, there is no evidence that addresses the actual transfer. Whatever happened seems to have been ineffective to transfer the interest in Lot 1. [123] None of that disqualifies Mr Hampson from being Lot 1’s nominee. And, no evidence establishes that either entity, that is Lot 1 South Stradbroke Pty Ltd or Resorts 47 CBC’s written submissions at [24]. 48 See s 214E(1)(b) of the MUD Act. 49 See s 214E(2) of the MUD Act. -- 26 of 28 -- 27 (Developments) Pty Ltd, owed a relevant body corporate debt to CBC or an associated body corporate. [124] For those reasons Broadwater has not established that Mr Cao or Mr Hampson are disqualified from being an “electable person”. A Further Problem [125] Broadwater’s application is for the court to dismiss or stay the proceedings brought by CBC. That application is made on the basis that the committee was invalidly elected because Broadwater and Eco were denied a vote at the AGM on 14 December 2021 and the AGM on 11 November 2022, and on the basis that CBC’s committee comprises persons who were not, and are not, “electable persons” and that, by reason of s 186 of the MUD Act, their positions are vacant. For both of those reasons, Broadwater contends that those purporting to exercise the powers of CBC’s committee had no such power and they were incapable of instructing CBC to commence or to continue to prosecute these proceedings. [126] However, as Finkelstein J explained in Ox Operations Pty Ltd v Land Mark Property Developments (Vic) Pty Ltd,50 a proceeding brought without authority is not a nullity in the sense that it is void ab initio without the possibility of subsequent ratification. To the contrary, it is well established that it is possible for the company to ratify the unauthorised act of the solicitor in bringing an action in its name without its actual or implied authority.51 Finkelstein J noted that, because ratification is possible, a practice has developed that when an action is brought without authority it will not be stayed or dismissed forthwith but the company will be permitted to convene a general meeting, or a meeting of its directors to consider whether to adopt the action.52 [127] Here, even if I were satisfied that the proceedings were brought without proper authority, Ox Operations justifies refusing the stay or dismissal so that ratification can be sought. Here, as CBC’s submissions explain,53 there are good reasons for thinking that the proceeding is likely to be ratified. Those reasons are as follows: (a) Clause 35.6 of the CBC’s Activity by-laws operates (inter alia) to ratify any act or proceeding of the executive committee in circumstances where there was a vacancy of office or defect or disqualification of a member’s appointment, so long as the relevant act or proceeding was done in good faith. Here, there is no allegation that any of the acts or proceedings which Broadwater seeks to impugn were done in bad faith; (b) A receiver appointed pursuant to an order of Jackson J made on 25 October 2022 has sought to exercise his powers over the claim subject to the present proceeding. The receiver acts in the shoes of the body corporate, not as its agent. Accordingly, the receiver has authority to ratify the commencement and continuation of the proceeding. He has sought to do so. (c) the receiver’s election to exercise his powers comes after an extraordinary general meeting of the CBC held on 26 May 2023 which resolved that the 50 [2007] FCA 1221. 51 Here Finkelstein J cites Danish Mercantile Co Ltd v Beaumont [1951] Ch 680. 52 Here Finkelstein J cites SBA Properties Ltd v Craddock [1967] 1 WLR 716, 722. 53 CBC’s written submissions at [43]. -- 27 of 28 -- 28 executive committee take all steps necessary to have a receiver appointed over the CBC. If the court were not satisfied that the CBC presently has authority to continue the proceeding, the appropriate course would be to permit the receiver appointed pursuant to that resolution over the CBC to elect to ratify the proceeding. PART D: CONCLUSION [128] It follows that the applications should be dismissed. -- 28 of 28 --