Cairns Central Plaza Pty Ltd v Lloyd and Anor [2013] QCATA 26

CITATION: Cairns Central Plaza Pty Ltd v Lloyd and Anor [2013] QCATA 26 PARTIES: Cairns Central Plaza Pty Ltd (Applicant/Appellant) v Wayne Lloyd (First Respondent) Body Corporate for Cairns Central Plaza Apartments CTS 40022 (Second Respondent) APPLICATION NUMBER: APL339-12 MATTER TYPE: Appeals HEARING DATE: On the papers HEARD AT: Brisbane DECISION OF: Hon James Thomas AM QC, Judicial Member DELIVERED ON: 11 February 2013 DELIVERED AT: Brisbane ORDERS MADE: 1. Appeal allowed. 2. Adjudicator’s decision of 23 August 2012 set aside. 3. Matter returned to the Adjudicator for further determination. CATCHWORDS: Validity of body corporate resolution – service contract dispute – whether resolutions to increase remuneration valid – need for proof of effective power of attorney and assignment thereof to proxy-holder‘s principal - whether resolutions valid as a review under s 130 of the Body Corporate and Community Management Act 1997 – application to invalidate resolutions not brought for more than two years – whether adjudicator erred in waiving three months time limit – relevant considerations in exercise of discretion – whether prejudice to service provider capable of removal – powers of adjudicator under the Body Corporate and -- 1 of 11 -- 2 Community Management Act 1997 – power to make orders conditional upon giving of an undertaking – enforceability of such undertakings Body Corporate and Community Management Act 1997, ss 130, 135, 228, 229, 242, 276, 284, 287, 288, Schedule 5 Queensland Civil and Administrative Tribunal Act 1999, ss 32, 146, 147 APPEARANCES and REPRESENTATION (if any): This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (‗QCAT Act‘). REASONS FOR DECISION [1] This is an appeal against an Adjudicator‘s decision in a dispute concerning the validity of motions which substantially increased the remuneration of the appellant service provider. They were said to have been passed at a body corporate meeting on 23 March 2010. [2] The original parties to the dispute were Mr Lloyd (the owner of lot 1106) and the Body Corporate. However by an amendment made on 23 April 2012 the present appellant, Cairns Central Plaza Pty Ltd, was added to the proceedings as a ‗person affected by the outcome sought‘. Correspondence ensued between the Adjudicator and that company whose director, Ms Alison Knell, made substantial submissions to the Adjudicator on 8 June 2012. [3] In this appeal, Cairns Central Plaza Pty Ltd will be referred to as ‗the Appellant‘, and the respondents will be referred to, respectively, as ‗Mr Lloyd‘ and ‗the Body Corporate‘. [4] The decision of the Adjudicator, given on 23 August 2012, was that the resolutions in question are and always were void. [5] Both respondents support the decision of the Adjudicator. The submissions of all 12 lot owners who chose to make submissions to the Adjudicator also support that outcome. Jurisdiction [6] The Adjudicator‘s jurisdiction arose under ss 228 and 229 of the Body Corporate and Community Management Act 1997 (‗the BCCM Act‘). The function of the Adjudicator is essentially inquisitorial. The Adjudicator is not bound by the rules of evidence, but is subject to the rules of natural justice. -- 2 of 11 -- 3 [7] The present appeal is brought under Part 11 of Chapter 6 of the BCCM Act (ss 288A-294). Under s 289(2) an appeal from an adjudicator's decision lies only on a question of law. [8] The present appeal is therefore governed by s 146 of the QCAT Act. Such an appeal, which is on a question of law only, is confined to the evidence that was obtained by or presented to the Adjudicator. Section 146 may be contrasted with s 147 of which a specific discretion is entrusted to the Appeal Tribunal to receive additional evidence. Prima facie then, the present appeal is an appeal in the strict sense.1 [9] The material provided to QCAT by all parties on this appeal includes a good deal of further factual information and documents which are not contemplated in an appeal of the present kind. If the interests of justice require further evidence (as distinct from submissions on the existing material) to be taken into account it would be necessary for the Appeal Tribunal to return the matter to the adjudicator under s 146(c) of the QCAT Act for the hearing of further evidence. But this is not appropriate if the parties have already had adequate opportunity to present their case during the original adjudication proceedings. Principal Issues [10] The principal issues are – a) Whether the Adjudicator erred in law in waiving the three month time limit imposed by s 242 of the BCCM Act for applications to declare void body corporate resolutions. b) Whether the Adjudicator erred in law in determining that the resolutions were invalid. [11] So far as issue number 2 is concerned, the grounds of invalidity were never limited by pleadings in the proceedings before the Adjudicator, which is hardly surprising in proceedings that are primarily inquisitorial. But clearly enough the principal points of contention that emerged during the Adjudicator‘s enquiries and her extensive correspondence with the parties included: a) Whether the meeting was duly convened in accordance with the BCCM Act and the relevant module; b) Whether valid powers of attorney had been given by the various unit owners to the original owner authorising such votes to be cast; c) whether those rights had been validly assigned to other parties, and whether they were exercisable by Mr Knell on 23 March 2010; d) Whether the person who cast the proxies (Mr Knell) was validly authorised to do so, and whether Blue Chip, the party on whose behalf Mr Knell purported to be acting, was entitled to vote. 1 Mirana Investments Pty Ltd & Ors v Coupe [2012] QCATA 187 at [30]-[34]. -- 3 of 11 -- 4 Relevant Facts [12] The relevant apartments are a high rise residential scheme in Cairns consisting of 48 lots and common property. The relevant development also includes commercial lots which are part of a separate Community Titles Scheme (Number 40024). The present litigation concerns only the Cairns Central Plaza Residential Community Titles Scheme Number 40022. [13] The relevant scheme was established on 14 May 2009. However by that time many lots had been sold off the plan by the original developer (Blue Chip Development Corporation (Cairns) Pty Ltd). The assignments and dealings by which Mr Knell took over the so called ‗marketing entitlements‘ are not revealed by the evidence, but it may be noted in passing that Blue Chip was wound up on 9 December 2011 by P Lyons J following substantial litigation involving evidence of somewhat devious corporate manipulation. [14] The service agreements in question were made by the appellant, a company then under the control of Mr Knell, and now apparently represented by Ms Alison Knell. [15] The agreements were made on 20 May 2009 between the Body Corporate and the Appellant. Each was for a term of 25 years. The first, described as a corporate service contractor‘s agreement, specified an annual remuneration of $20,000.00. The second, described as a shared facilities service contractors agreement entitled the Appellant to further remuneration of $25,000.00 per annum. Each agreement contained provision for a CPI based annual increase. [16] The motions in question purport to have been passed at an extraordinary general meeting of the Body Corporate on 22 March 2010. They increased the Appellant's remuneration under the first service contract to $40,100.00 per annum, and under the second contract to $50,200.00 per annum. Overall, this approximately doubled the Appellant's entitlement to remuneration over the balance of the 25 years. [17] The minutes state that the motions were passed by 36 votes to nil and that valid proxy votes were passed in respect of lots 501, 504, 506, 602- 605, 701-706, 801-806, 901, 903-906, 1001-1005, 1103-1106, and 1201- 1203. Each of these lots was stated to have been represented by S Knell of Blue Chip by means of a Power of Attorney for such a vote in respect of those lots. [18] No issue was taken over the validity of the resolutions until a little over two years later (18 April 2012) when Mr Lloyd moved a motion challenging them. During the intervening period the Appellant had continued to provide the necessary services, and accounting was maintained, approved and ratified on the basis of validity of the resolutions. The Appellant claims that the Body Corporate is now in arrears with its -- 4 of 11 -- 5 payments, but that does not affect the fact that no challenge was made to the validity of the resolutions until 18 April 2012. Order of Discussion [19] The strength of the claimant‘s case for invalidating the motions is an important factor in the exercise of the discretion to waive the time requirement of s 242. It is therefore desirable to consider the issue of validity of the resolutions first. Validity of the Resolutions [20] The Adjudicator‘s decision that the resolutions were invalid was in my view correct. In particular, the following findings are supported by the evidence and should be affirmed: [51] I find that the EGM of 23 March 2010 was not authorised to be called in accordance with the legislation by either a committee resolution or a requisition by or for the owners of at least 25% of owners within the scheme. [52] I find further that S Knell was not a ―voter‖ as that term is defined in section 81(1) of the Accommodation Module for the EGM of 23 March 2010 in respect of 35 of the 36 lots for which votes were purportedly cast. I find further that S Knell was not entitled to be a representative for 35 of the 36 lots for which votes were purportedly cast by him on motions 2 and 3 at the EGM of 23 March 2010. Any purported exercise of the POA said to have been held by Bluechip (no evidence of which was able to be provided to me) in exercising votes for 35 lots at the EGM of 23 March 2010, was beyond the scope of any limited POA conferred by clause 19 of the Contract of Sale. [53] I further find that no vote was cast for lot 1105, (the only lot for which S Knell could have legitimately cast a vote for on motions 2 and 3) at the EGM of 23 March 2010. [21] There were only two ways in which the original service contracts between the Appellant and the Body Corporate could lawfully have been varied – either by valid variation of contract, or by statutory review under s 130 of the BCCM Act. The above findings show that the Appellant‘s attempt to prove the first of these failed. [22] The Appellant, however, both before the Adjudicator and on this appeal, strongly argued an alternative case that the necessary variations were effected by means of a review of the service contracts under s 130 of the BCCM Act. The ‗review advice‘ upon which the Appellant relies is a report by a real estate agent, Mr Winfield, prepared at the request of Mr Knell, and sent to the Body Corporate on 11 August 2009. It is superficial, and consists of a series of assertions without discussion or justification. I can only say that as the evidence stands, the procedure that was followed before, during and after the meeting in question does not look anything like a s 130 review. -- 5 of 11 -- 6 [23] The BCCM Act contemplates several steps and stages in such a review. Assuming in the Appellant‘s favour (as seems likely) that the relevant EGM was within the original owner control period, the procedures contemplated by ss 130 – 132 of the BCCM Act were never followed. These include a decision by a majority of the members of the Body Corporate after consideration of an appropriate ‗review advice‘ subsequent to a specific request for such a review. This submission fails at several levels, including s 135(1) of the BCCM Act. [24] I also agree with the Adjudicator‘s reasons in paragraphs [43] – [46] of her reasons for decision for concluding that the increase in remuneration was not authorised either under the remuneration review provisions of the BCCM Act, or by contract. [25] A number of submissions from Ms Knell on behalf of the Appellant contend that the Adjudicator failed to gather ‗evidence of the actual POA given by owners of lots within the scheme‘, and that the document relied on by the Adjudicator were ‗not the same‘. She annexed a document which she claimed was a correct version of ‗the contract‘, presumably the original sale contracts to the various purchasers, containing the Power of Attorney on which the Appellant relies. This was a two page document (an extract purporting to be pp 9 and 10 of a 23 page document), with no evidence of the date parties or other details. The relevance of this inadmissible document to the present discussion is that it contains the terms of the Power of Attorney upon which she relies in her submissions, and also the terms of a further clause on which she relies as entitling the Appellant to ‗change the terms of the Body Corporate agreements‘. It is sufficient to note that the Power of Attorney clause in that document (clause 19) is in identical terms to those stated by the Adjudicator in paragraph [38] of her reasons for decision. The other clause relied on in her submissions (clause 18.3) is in the following terms The seller is entitled to change the terms of the Body Corporate Agreements as considered necessary by the seller or the seller‘s solicitor for the effective control and management of the scheme and the building. [26] I agree with the Adjudicator's reasons for regarding clause 19 as an inadequate source of power for Mr Knell in the circumstances. Further, in my opinion the alleged clause 18 could not possibly justify the unilateral doubling by the seller (or the seller‘s assignees) of the remuneration under the service agreements. [27] I have dealt with these points because one of the major areas of the Appellant‘s complaint is that the Adjudicator should have obtained further evidence of the relevant powers of attorney, or given the Appellant the opportunity to provide further such evidence. The ‗actual POA‘ as supplied by the appellant does not aid its argument, or suggest that it was deprived of any opportunity to present evidence that would support its case. -- 6 of 11 -- 7 [28] The same may be said in relation to numerous factual assertions concerning peripheral issues and speculative points on pp 5-8 of the Appellant‘s submissions. [29] It was further alleged that the Adjudicator failed to afford natural justice to the Appellant by not affording it the opportunity to make submissions on such issues. However, the Commissioner‘s file, which is the official record of the Adjudicator's investigation, demonstrates continued efforts by the Adjudicator to obtain the Appellant‘s version of the relevant events, and its case for supporting the validity of the resolutions. I consider that the Appellant was given sufficient opportunity to present its case. It is true that the issues were not defined by pleadings, but Mr Knell‘s right to cast the relevant proxy votes, the validity of any power of attorney on which he relied, and his entitlement to exercise it, were essential matters in proof of the validity of the votes that the appellant relied on. The Adjudicator made requests for relevant material, and adequate opportunity was extended to the Appellant to provide evidence and make submissions. [30] I note in any event that as the matter is to return to the Adjudicator the Appellant may yet have a further opportunity to raise any relevant point and to correct any misinformation. However so far as I can see, nothing raised in the submissions on appeal is capable of overturning the primary findings which render the resolutions invalid. Waiver of Time Limit under s 242 of BCCM Act [31] Section 242(2) of the BCCM Act requires an adjudication application to be made within three months of the meeting at which the resolution was passed. [32] However, a discretion is entrusted to an adjudicator in very broad terms. Section 242(4) provides as follows : However, if the making of the adjudication application does not comply with subsection (2)— (a) the commissioner must deal with the application (including making a dispute resolution recommendation for the application) as if the making of the application complied with subsection (2); and (b) an adjudicator to whom the application is referred for specialist or department adjudication may, for good reason, waive the noncompliance. [33] As earlier indicated no such application was brought for over two years. [34] Mr Lloyd was not given notice of the relevant meeting and has explained his substantial delay in his complaint. The evidence concerning whether the Body Corporate Manager (a third party) gave the necessary notice of meeting to the other lot owners is unsatisfactory and conflicting. It is open to think that many of the earlier lot owners simply assumed that the developer had the right to vary the service provider‘s remuneration at that -- 7 of 11 -- 8 time, having been advised to that effect by the then Body Corporate Manager. It may be that they had notice but saw no point in challenging the variations either before or after relevant motions. It is relevant to note that all the lot owners (other than the service provider itself), whose interests are collectively represented by the Body Corporate, are the beneficiaries of any declaration of invalidity of these motions, and that consideration of conduct of the parties on the issue of explanation of the delay should not be confined to the action or inaction of Mr Lloyd. The most satisfactory explanation of the lack of challenge by any of the other unit owners is their erroneous belief in the validity of the motions, which was to some extent induced by erroneous advice from a third party. [35] There has been some prejudice to all parties by reason of the lapse of time, and associated loss of memory of relevant details. This however is not a decisive factor in the present case, as most necessary facts are provable by documents. [36] The Appellant conducted services for the Body Corporate and the unit owners for a substantial period after March 2010 in the belief that the remuneration was at the stated level. It continues to provide the necessary services, and there is no issue as to its competency and entitlement to do so. [37] During the period between the passing of the resolutions and the time when they were first challenged, the Appellant conducted its affairs in the belief that it was entitled to a certain level of revenue, and it is reasonable to infer that it planned its affairs on that basis. It is also true that money, once received, tends to be spent. [38] Most importantly, the Appellant during that period abstained from bringing any review under s 130, which it very likely would have brought if it had been made aware that the resolutions on which all parties were relying were invalid. The following submission by Ms Knell on behalf of the Appellant is, I think, well founded: The Appellant proceeded on the basis that the POA [power of attorney] exercise during the EGM of 23 March 2010 was valid. If the Appellant considered that the POA was invalidly exercised, and if the applicant had lodged the original application within the time limit of adjudication applications, then the Appellant would have had the opportunity to propose an alternative method of increasing the remuneration, ie under the provisions of s 130 of the BCCM … If the objection to motion 2 and motion 3 of the resolutions was known within the time limit for the adjudication of applications, then the Appellant would have been alerted of the potential invalidity of the resolutions, and could have pursued the right to request a review of the remuneration. [39] The consequence of the Adjudicator‘s order is that the Body Corporate has the legal right to recover all payments in excess of the originally -- 8 of 11 -- 9 authorised remuneration of $45,100.00 per annum. To date this is a potential deprivation of the appellant is of the order of $120,000.00, without taking into account CPI increments. [40] In the context of waiver or extension of time limits, the incurring of prejudice by a party which cannot be adequately compensated for is usually fatal to the grant of an extension. In the present circumstances I do not think it was open to the Adjudicator to simply extend the time and proceed with the application, leaving the loss to lie where it fell without any correction of the parties‘ legal entitlements. [41] The Body Corporate has contended that it is still open to the Appellant to bring a s 130 application for review of the remuneration. Assuming that to be correct, a future application would not adequately remove the prejudice suffered by the Appellant because it could not ensure that the amended level of entitlements would be back-dated to the date upon which an earlier review might have been conducted. [42] However, a number of courses are available which would enable the resolutions to be set aside, and which would sufficiently eliminate the prejudice of which the Appellant complains. Essentially what is required is an undertaking from the Body Corporate to account to the Appellant on the footing that a timely review had been conducted. In my view, it would be unjust to permit the resolutions to be set aside unless some such arrangement is made or directed. Adjudicator's powers [43] An adjudicator's powers in the context of a dispute of the present kind include the power to make ‗an order that is just and equitable in the circumstances (including a declaratory order)‘;2 an order requiring a person to act, or prohibit a person from acting, in a way stated in the order;3 ancillary orders that the adjudicator considers necessary or appropriate;4 and a wide range of orders requiring a body corporate to act in various ways.5 [44] There is no doubt that an adjudicator has the power to make an order conditional upon a party giving an undertaking, and that such an undertaking, once given, is enforceable. The breadth of the adjudicator‘s powers stated in ss 276, 284 and Schedule 5 of the BCCM Act, the example set by the courts in their exercise of equitable powers, the exclusivity of the adjudicator's jurisdiction in this area,6 and the specific powers of enforcement mentioned in ss 287-288 of the BCCM Act make such orders a valuable means for the attainment of justice. 2 BCCM Act s 276 (1). 3 Ibid s 276(2). 4 Ibid s 284(1). 5 Ibid Schedule 5. 6 Ibid s 229 (subject, of course, to the ultimate prerogative supervision of the Supreme Court). -- 9 of 11 -- 10 Suggested solutions [45] The following paragraphs contain suggested courses to which the parties could agree, or in default of their agreement, be achieved by the Adjudicator. [46] It is necessary to ensure that the Body Corporate accounts to the Appellant on the footing that the Appellant is entitled to any fee increase that it could reasonably have obtained upon a s 130 review as at 1 July 2010. This date is posited on the resolutions having been set aside within the time specified by s 242, and the premise that in such event a s 130 review was likely to have soon followed. [47] A specimen undertaking that would sufficiently remove the prejudice and allow the resolutions to be set aside, would be as follows: The Body Corporate undertakes to deal with the Appellant: (a) on the footing that the remuneration payable under the said service contracts as and from 1 July 2010 is the amount to be certified by an independent person chosen by the Body Corporate and the Appellant (and in default of their agreement, a person chosen by the Adjudicator) as the fair and reasonable remuneration of the service provider as at that date, with annual adjustments thereto in accordance with the first schedule of each service agreement; and (b) on the footing that the service agreements are amended accordingly. [48] It would be appropriate to include a provision that, in default of agreement to the contrary the costs of the independent person should be borne equally by the Appellant and the Body Corporate. [49] Upon the giving of such an undertaking it would be appropriate to the Adjudicator to waive the time for the making of the application under s 242, and to declare the motions void. [50] It follows from the above discussion that in the absence of some such undertaking or an alternative agreed to between the parties, it would be unjust to set aside the motions, and the appropriate order of the Adjudicator should be ‗application refused‘. [51] The proceedings should be referred back to the Adjudicator with a view to further proceedings which will afford the parties the opportunity to proceed along these lines. [52] A further alternative solution would be for the parties to agree to the conduct of a s 130 review and to the backdating of the determination to 1 July 2010 or to some other date preferred by the parties. [53] Obviously the parties could achieve a similar result more quickly and economically by mediation leading to agreement upon a reasonable level of remuneration from an agreed date. -- 10 of 11 -- 11 [54] Such solutions are up to the parties to make. This Appeal Tribunal can only make an order under s 146(c) of the QCAT Act with effect that the decision of the Adjudicator is set aside and the matter is returned to the Adjudicator for reconsideration and redetermination having regard to the considerations here expressed. It will be within the discretion of the Adjudicator whether additional evidence (as distinct from further submissions) is to be received. Orders 1. Appeal allowed. 2. Adjudicator‘s decision of 23 August 2012 set aside. 3. Matter returned to the Adjudicator for further determination. -- 11 of 11 --