Body Corporate for East Village Ridges v Body Corporate for Ridges Peregian Springs [2018] QCATA 59

CITATION: Body Corporate for East Village Ridges v Body Corporate for Ridges Peregian Springs [2018] QCATA 59 PARTIES: Body Corporate for East Village Ridges CTS 41995 Body Corporate for The Ridge CTS 39799 (Appellants) v Body Corporate for Ridges Peregian Springs CTS 39713 (Respondent) APPLICATION NUMBER: APL426-16 MATTER TYPE: Appeals HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Member Barlow QC DELIVERED ON: 1 May 2018 DELIVERED AT: Brisbane ORDERS MADE: The appeal be dismissed. CATCHWORDS: REAL PROPERTY – STRATA AND RELATED TITLES – MANAGEMENT AND CONTROL – RIGHTS AND OBLIGATIONS OF PROPRIETORS – whether decision of body corporate to extend service contracts unreasonable Body Corporate and Community Management Act 1997 (Qld) s 94 This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act). REASONS FOR DECISION The respondent (the PBC) is the principal body corporate, and the appellants are subsidiary bodies corporate, in a layered arrangement of community titles schemes that has been partly developed. The developer is FKP Residential Developments Pty Ltd (FKP). -- 1 of 4 -- 2 Ernst Facility Management Pty Ltd is a body corporate manager. In 2016 it was ‘assigned’1 three service contracts with the PBC (a landscaping contract, a caretaking contract and a community liaison officer contract) under which a company related to FKP had originally been the service contractor. The landscaping and caretaking contracts were for periods that were due to expire in February 2019 and the community liaison officer contract was due to expire in January 2021. At the annual general meeting of the PBC on 22 April 2016, the PBC resolved to vary each of those service contracts by extending their expiry dates to 21 April 2026. The resolution was passed on a secret ballot under which five votes were in favour, three were against and one was invalid. The appellants applied for an adjudicator’s order that the resolution be rescinded. They contended before the adjudicator that the decision of the PBC was invalid or should be rescinded for a number of reasons. Those reasons included that it was unreasonable because the members of the PBC that voted in favour were controlled by FKP, and that the PBC had not complied with s 152 of the Standard Module because it had not obtained two independent quotes for the services to be provided during the periods of the extensions. The adjudicator dismissed the application. In this appeal, the appellants contend only that the adjudicator erred in construing whether the resolution was unreasonable, contrary to s 94(2) of the Body Corporate and Community Management Act 1997 (Qld). They do not raise the issue of non-compliance with s 152, nor any of the other grounds on which they relied before the adjudicator. The appellants contend that the decision to approve the variation of the contracts was unreasonable because: a) the cost of the extension (in terms of the value of services to be provided under the contracts during the additional years) would be over $4.5M; b) the members of the PBC that voted in favour of the resolution were all controlled by FKP or its parent company; c) the members of the PBC that voted against the resolution (apparently including among those numbers the invalid vote) were subsidiary bodies corporate comprising a total of 605 lots out of a total of 727 lots in the layered scheme; 1 In reality, it and the original parties to the services contracts presumably novated the contracts, as it is not possible to assign obligations under a contract: see Emvalle Pty Ltd v Aqua Vista Apartments [2011] QCAT 224 at [24] – [26]. -- 2 of 4 -- 3 d) when the overall scheme is fully developed there will be seven subsidiary schemes comprising the members of the PBC and, as four voted against the resolution, the majority of schemes representing the majority of lots were against the resolution and the extension of the contracts; e) at the time of the meeting the PBC was insolvent because it had an administrative fund deficit of over $330,000, making it unreasonable for it to extend its financial obligations to 2026 when it could not then pay its existing obligations. The last of these reasons was not one raised before the adjudicator and depends upon the admission before me of evidence that was not before the adjudicator. This appeal is an appeal in the strict sense on a question of law only. The sole question is whether the original decision was right at the time of that decision, having regard to the law and the evidence at that time. New evidence is not admissible, at least without an application for leave. I consider that I should disregard that ground. In support of their grounds, the appellants contend that the decision had the effect of overriding the will of a substantial majority of owners2 - clearly referring to the owners of lots in the entire scheme rather than the owners (in the sense of the members) of the PBC. The respondent contends that the decision was undertaken in accordance with the constitution of the PBC, the Act and the Regulations. The PBC members comprise six subsidiary bodies corporate and the owners of three parcels of land associated with the developer. The majority of members of the PBC approved the motion and therefore it was validly passed. As it was a secret ballot there is no evidence of which member voted in which manner. The Act and Regulation (the Standard Module) set out the manner in which the PBC must conduct a vote: that is, in accordance with the composition of the PBC at the time of the meeting. That was done in this case (and I note that there was no contention to the contrary by the appellants). The respondent also submits that the extension of the contracts was in accordance with s 119 of the Standard Module, as the unexpired term of the extended contracts was no more than 10 years. The adjudicator noted (at [56]) that an applicant who is challenging a decision as unreasonable must do more than identify that a different course of action would have been ‘better’ or ‘more reasonable’. Rather, an applicant bears the onus of establishing that the decision was not one that could rationally have been made, such that it was objectively unreasonable. 2 Referring to Ainsworth v Albrecht [2014] QCATA 294 at [1]. -- 3 of 4 -- 4 The adjudicator went on (at [58]) to say that, where the majority of PBC members have chosen to vote in favour of the motion, the onus is on the applicants to establish that those PBC members were misled or that the variation would be so contrary to the interests of the PBC and its members that it could not reasonably decide to approve the variations to the contracts. These statements of principle are correct. The appellants’ contention on this appeal is, in summary, that the structure of the PBC meant that, although the majority of its members voted in favour of the motion, that was unreasonable given that: a) the minority of the PBC’s members ‘represented’ the vast majority of the lot owners in the overall scheme; b) that current minority also ‘represented’ the majority of the PBC members that will exist once the development is complete; and c) it was unreasonable for the PBC to bind itself to contracts that would extend well beyond the period of the developer’s control. This contention cannot succeed. The fact is that, at the time of the meeting, the PBC was structured in a particular way and the vote was undertaken in accordance with that structure. There were several benefits of the proposed extensions contended for, and it was for the PBC members then existing to determine whether they considered that the suggested benefits merited the extensions. The proper application of the voting procedures of the PBC as then structured is not unreasonable at law. Also, while other persons – even the adjudicator or this tribunal - may have thought it reasonable to put off the receipt of those alleged benefits and to reconsider matters closer to the then current expiration of the contracts, that does not mean that it was not reasonable for the majority to consider the extensions to be appropriate at the time of the meeting. What was reasonable was for them to decide, subject to the tests referred to by the adjudicator and to which I have referred above. Therefore, the appellants have not demonstrated any legal error in the adjudicator’s reasoning or decision.3 The appeal must be dismissed. 3 That is, on the ground raised in the appeal, disregarding whether the adjudicator erred on any of the other grounds raised then but not on this appeal. -- 4 of 4 --