Body Corporate for Palm Springs Residences v J Patterson Holdings Pty Ltd [2008] QDC 300

DISTRICT COURT OF QUEENSLAND CITATION: Body Corporate for Palm Springs Residences CTS 29467 v J Patterson Holdings Pty Ltd [2008] QDC 300 PARTIES: BODY CORPORATE FOR PALM SPRINGS RESIDENCES CTS 29467 Appellant AND J PATTERSON HOLDINGS PTY LTD Respondent FILE NO/S: Appeal 3134/07 DIVISION: PROCEEDING: Appeal ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 18 December 2008 DELIVERED AT: Brisbane HEARING DATE: 10 July 2008 JUDGE: McGill DCJ ORDER: 1. Appeal allowed. 2. Orders of the adjudicator of 23 June 2007 set aside. 3. Through the Commissioner, refer the matter back to an adjudicator, other than the adjudicator who made the orders of 23 June 2007, to resolve the dispute according to law. 4. Order that the respondent pay the appellant’s costs of and incidental to the appeal to be assessed. 5. Order that the costs of the adjudication which produced the orders which have been set aside abide the final outcome of the adjudication. -- 1 of 32 -- 2 CATCHWORDS: HOME AND COMMERCIAL UNITS – Body Corporate – General Meeting – notice of meeting – material circulated by committee in support of motion – whether sufficient as notice – whether breach of fiduciary duty. HOME AND COMMERCIAL UNITS – Management agreements – termination – requirements for – dispute over. HOME AND COMMERCIAL UNITS – Adjudication – obligation to give reasons – whether reasons adequate. HOME AND COMMERCIAL UNITS – Adjudication – scope of jurisdiction of adjudicator – whether equitable relief or relief on equitable grounds available, Body Corporate and Community Management Act 1997 ss 227, 274(2)(b)(i), 276(1). Body Corporate and Community Management (Accommodation Module) Regulation 1997 s 40C. Bancorp Investments Ltd v Primac Holdings Ltd (1984) 9 ACLR 263 – cited. Bawden v ACI Operations Pty Ltd [2003] QCA 293 – cited. Bulfin v Bebarfald’s Ltd (1938) 38 SR (NSW) 423 – considered. Campbell v Australia Mutual Provident Society (1908) 24 TLR 623 – applied. Carruth v Imperial Chemical Industries Ltd [1937] AC 707 – cited. Cominos v Cominos (1972) 127 CLR 588 – cited. Cypressvale Pty Ltd v Retail Shop Leases Tribunal [1996] 2 Qd R 462- applied. Devereaux Holdings Pty Ltd v Pelsart Resources NL (No. 2) (1985) 9 ACLR 956 – cited. Dindas v Body Corporate for One Park Road CTS 2114 [2006] QDC 302 – followed. Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 – applied. Fraser v NRMA Holdings Ltd (1994) 52 FCR 1 – applied. Hablethwaite v Andrijevic [2005] QCA 336 – considered. Houghton v Immer (No. 155) Pty Ltd (1997) 44 NSWLR 46 – considered. Re Mathieson, ex parte Herman (No. 1) [1961] NSWLR 1139 – cited. McColl v Body Corporate for Lake View Park CTS 20751 [2004] QCA 44 – applied. Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457 – applied. Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 – applied. Ryan v Edna May Junction Gold Mining Co (1916) 21 CLR 487 – applied. Suncorp Insurance and Finance v Hill [1998] QCA 112 – cited. -- 2 of 32 -- 3 Talga Ltd v MBC International Ltd (1976) 133 CLR 622 – cited. COUNSEL: SL Moody for the appellant DA Savage SC for the respondent SOLICITORS: Herd Law for the appellant Hickey Lawyers for the respondent [1] This is an appeal from a decision of an adjudicator under the Body Corporate and Community Management Act 1997 (“the Act”) made on 23 June 2007, by which he ordered that a resolution purportedly passed at an extraordinary general meeting of the appellant body corporate was invalid, and that the purported termination of a caretaking agreement was also invalid. Certain consequential orders were made. By s 289(2) of the Act, a person aggrieved by a decision of an adjudicator may appeal to this Court but only on a question of law. The appeal was not started within the time limit specified in s 290(2), but that subsection permits the court to allow the appeal to be started at a later date, and on 12 November 2007 I made an order allowing the appeal to be started by 31 October 2007, when the notice of appeal was filed. The powers on appeal are set out in s 294 of the Act. Background [2] The appellant entered into an agreement described as a caretaking agreement dated 6 September 2001 with a company, AJA 2000 Pty Ltd, described in the agreement as “the manager”.1 The agreement provided for the appointment of the company as caretaker of the building for a term of five years, although the company also had four option periods each of which was for five years. The agreement therefore potentially runs for a very long time. It sets out the various duties of the manager, and provides for remuneration calculated in accordance with the agreement to be paid each year in 12 monthly instalments. At some point the rights of that company under the agreement came to be transferred to the respondent. The material before me, as far as I can see, does not indicate when that occurred. [3] It appears that for some time the body corporate has been attempting to terminate the caretaking agreement, and that some of the owners of lots in the scheme are unhappy with the respondent. Under Clause 8.1.2 of the agreement it may be terminated by the body corporate by notice in writing “if the manager shall neglect to carry [out] its duty pursuant to this agreement and shall not have taken all reasonable steps to remedy such neglect within a period of 14 days after notice in writing shall have been given to the manager specifying the duty which the manager has neglected to carry out.” The body corporate gave notice in writing dated 20 December 2006 to the respondent specifying 17 matters in respect of which it was alleged that the respondent had neglected to carry out its duty pursuant to the agreement. By a letter dated 19 February 2007 from the appellant’s solicitors, the appellant purported to terminate the agreement pursuant to Clause 8.1. 1 Both sides put a copy of the agreement before me. Otherwise the background facts were generally taken from the reasons of the adjudicator. -- 3 of 32 -- 4 [4] The respondent disputes that the letter was valid to terminate the agreement. If the matter were simply one of contract, that would depend on whether the respondent had neglected to carry out its duty pursuant to the agreement in one or more of the ways specified in the notice, and had not taken all reasonable steps to remedy such neglect within a period of 14 days after that notice was given to it. If those matters had occurred, then the appellant had a right to terminate the agreement, and the purported termination was effective.2 If the matter were subject to dispute, a court or other body having appropriate jurisdiction could determine as a question of fact whether the circumstances had arisen so that the notice was validly given. [5] Because the matter arises in respect of a caretaking agreement under the Act, the situation is rather more complicated than this, because the Act and the regulation under it3 contain mechanisms designed to make it difficult for a body corporate to terminate an agreement of this nature.4 Although as a general proposition the committee for the body corporate decides things for the body corporate, that does not apply to a decision that under the regulation is a decision on a restricted issue for the committee: s 100. It was common ground before me that the termination of the agreement was a matter which was not within the power of the committee, and that under the regulation this requires a decision by the members of the body corporate in general meeting, by ordinary resolution. No doubt because of this, an extraordinary general meeting was held on 11 February 2007.5 [6] According to the minutes of the meeting, the resolution was put to terminate the service contract, otherwise described as the caretaking agreement, and it was carried by a majority of 27 to 7 with one abstention. The resolution incorporated the notice of default, and the substance of the resolution was: “The Resident Caretaker being in default under the Service Contract (Caretaking Agreement) and having failed to rectify its default of which notice has been given and the body corporate herewith terminates the Service Contract (Caretaking Agreement). Details of the defaults are as set out hereunder.” Then followed the terms of the notice of default. Hence the letter which was subsequently given to the respondent. [7] On or about 13 February 2007 the respondent made an application to the commissioner under the Act for an order that the resolution terminating the service contract be set aside, and seeking by way of interim relief that the appellant be restrained from taking action in reliance on the resolution. On 28 February 2007 an adjudicator made an interim order restraining the appellant from acting in reliance on the resolution. Subsequently, and at the prompting of the adjudicator in the reasons for making that interim order, the respondent sought and was allowed to amend the application to seek in the alternative a declaration that the resolution was invalid. Subsequently in the relevant decision the adjudicator concluded that the resolution was invalid. 2 Cheshire and Fifoot’s Law of Contract, 9th Aus. Ed. 2008 paras 21.2-21.7. I am assuming there was no concurrent right to terminate in law, eg for repudiation. 3 The Body Corporate and Community Management (Accommodation Module) Regulation 1997 (“the regulation”). I have been working from Reprint 3D. 4 This is because property developers who set up these schemes want to be able to sell the management rights for large sums of money, so the rights that are conferred by the body corporate while it is still under the developer’s control have to be reasonably secure, otherwise prospective managers will not be willing to pay so much for them. 5 Notice of the meeting was dated 15 January 2007: see copy attached to the submissions sent with the respondent’s dispute resolution application. Presumably it was sent out then or soon after. -- 4 of 32 -- 5 [8] This is the decision which the appellant seeks to challenge. The challenge was based essentially on two grounds: the first, that the adjudicator did not have jurisdiction to deal with this matter, because the respondent was no longer a party to a service agreement, as a result of the termination of the agreement by the appellant. The second, that the reasoning which led the adjudicator to conclude that the resolution was invalid was wrong in law. It is appropriate to deal with these in that order. Did the adjudicator have jurisdiction? [9] Chapter 6 of the Act deals with dispute resolution. The purpose of this chapter was to establish arrangements for resolving, in the context of community title schemes, disputes about, among other things, the exercise of rights or powers or the performance of duties under the Act or community management statements, and matters arising under the engagement of persons as body corporate managers, the engagement of certain persons as service contractors, and the authorisation of persons as letting agents.6 It was not disputed that the effect of the agreement was that the respondent had been engaged as a service contractor for the purposes of the Act. Under s 238 a person may make an application for resolution of a dispute if the person is a party to or is directly concerned with a dispute to which this chapter applies.7 The concept of “dispute” is defined in s 227 as including a dispute between the body corporate for a community title scheme and a caretaking service contractor under the scheme. The appellant’s argument was that once the caretaking agreement was terminate the respondent ceased to be a caretaking service contractor as that expression was defined in the Act, and thus there was no dispute within s 227(1)(d) of the Act. If there was no dispute then the respondent was not a party to a dispute to which the Act applied and was therefore not entitled to apply to the commissioner for resolution of the dispute. [10] This depended on the proposition that the caretaking agreement had been terminated, but it was said to be based on a finding by the adjudicator that that had occurred. This was a reference to what was said at paragraph 18 of the decision: “By letter dated 19 February 2007 from the body corporate’s solicitor … the body corporate gave notice terminating the caretaking agreement.” This was in the part of the determination headed “Background” and I do not consider that it was part of the process of reasoning which produced the conclusion that the agreement had not been validly terminated. The effect of the adjudicator’s conclusion that the decision of the extraordinary general meeting was invalid was that the agreement had not been validly terminated, and it would have been plainly inconsistent with that conclusion to have found that the agreement had been terminated. All the adjudicator was doing there was reciting what had happened, properly described as a purported termination.8 [11] Even apart from that, it seems to me that the termination of a caretaking service contract would not necessarily mean that the former party to that contract would not be party to a dispute for the purposes of s 227(1)(d) if that party was in fact in dispute with the body corporate. Consider for example a situation where the contract is about to expire from effluxion of time. If there was a dispute between 6 Act s 228(1)(b), (d). 7 Not, it may be noted, a party to a contract to which it applies. 8 As in reasons [56]. -- 5 of 32 -- 6 the parties to the agreement prior to the termination of the contract in this way, it would be unsurprising if the legislature intended that the dispute arising out of the relationship of the body corporate and a caretaking service contractor would still be determined under this scheme, even if that relationship was no longer current. [12] Accordingly it seems to me that what matters for the purpose of s 227(1)(d) is whether the dispute is between the body corporate and someone who came to be in dispute with the body corporate because of circumstances associated with that person’s status as a caretaking service contractor. That follows because the purpose of the chapter as indicated in s 228(1)(d) includes dealing with disputes about matters arising under the engagement of persons as service contractors. Accordingly what matters for the purpose of s 227 is the basis of the dispute rather than the status of the individuals concerned. What matters is whether the dispute arose with the party other than the body corporate because that other party was a caretaking service contractor. If that were the case, I do not think it matters whether the contract is current or has terminated. Conversely, I do not think that a dispute which arose in circumstances which had nothing to do with a caretaking service contract would come within s 227(1)(d) merely because the party to the dispute other than the body corporate happened, coincidentally, also to be a party to a caretaking service contract of the body corporate. That I think is the consequence of giving a purposive construction to s 227, in the light of the purpose for the chapter declared by the legislature in s 228. It follows that the first argument on behalf of the appellant fails. Was there a (relevant) error of law? [13] The first ground listed in the notice of appeal was that the adjudicator erred in law in finding that the resolution to terminate the agreement was invalid. That was expressed in very general terms, perhaps too general, although more details were set out in the outline of argument subsequently filed. Given that the appeal is only on a question of law, and the adjudicator concluded that the resolution was invalid, so that the proposed termination was also invalid, the decision of the adjudicator is liable to challenge by appeal if the conclusion arrived at was wrong in law or if some error of law was made in the reasoning to this conclusion. Although the reasons of the adjudicator clearly involved the conclusion that the resolution was invalid with the consequence that the subsequent termination was invalid, it was not encouraging that there was a substantial divergence between counsel for the appellant and for the respondent as to just what the adjudicator’s reasons were for arriving at that conclusion. It is therefore necessary for me to look closely at the reasons themselves. Reasons of the adjudicator [14] They begin by setting out something by way of background, including a description of various things that occurred between the service of the notice of default and the holding of the extraordinary general meeting, and indeed the immediate aftermath. Reference was then made to the application for the interim orders, and to the evidence, and various comments were made about the evidence. The adjudicator noted that the evidence was extensive and that the parties had told conflicting stories. He said that on the evidence of the body corporate at face value the caretaker was totally incompetent and totally underperforming, whereas on the evidence of the caretaker it was the victim of a body corporate determined to rid -- 6 of 32 -- 7 itself of the caretaking agreement and to go to any extremes in order to do so. It occurs to me that those propositions are not necessarily inconsistent; one would expect that if a caretaker’s performance was hopeless the body corporate would be keen to get rid of the caretaker, with any element of desperation involved in that process attributable to the difficulties placed in its way by the Act and the regulation. [15] The adjudicator said that the caretaker had been pursued with remarkable tenacity by the members of the committee, which was said to show that the committee if not a majority of unit owners were very determined to rid themselves of the caretaker: [31]. Without making any specific findings, he said that there was clear evidence that for a substantial period of time the caretaker had underperformed: [32]. In those circumstances, the enthusiasm of the committee to get rid of the caretaker is understandable. The adjudicator went on then to comment (I do not think this could be described as a finding) that the default notice “may well have been” justified. He concluded, however, that it was unnecessary to determine whether it was valid, or whether the defaults had been remedied. [16] He then said that the body corporate appeared to have had two options available to it: to serve a notice to remedy and in the event of failure to remedy to terminate the contract, or to serve a notice under Division 8 of Part 2 of Chapter 3 of the Act requiring transfer of the management rights. The adjudicator continued at [36]: “The first option (ie the one chosen by the body corporate) was always going to be the most difficult. It would inevitably lead to an application such as the current application, which seeks to protect an asset of substantial value. After all, if an adjudicator or the court dismisses an application such as the present one, they are effectively with the stroke of a pen wiping away this valuable asset. It is obvious that such an order cannot be made lightly.” [17] That paragraph suggests that it is appropriate for an adjudicator, or for that matter a court, to approach the resolution of the dispute with a strong preconceived reluctance to arrive at a conclusion unfavourable to the caretaker, because of the consequences to the caretaker of the application failing. No doubt those consequences would be unpleasant, but the adjudicator did not seem to recognise that there is more to a caretaking agreement than simply a valuable asset for the caretaker; the fundamental purpose of such an agreement is to ensure that appropriate caretaking services are made available to the body corporate, for the benefit of all the lot owners. It is not immediately apparent to me why lot owners should be saddled with a caretaker who has underperformed for a substantial period of time merely because of a desire to preserve to the caretaker the benefit of the agreement. I would have thought the best way for a caretaker to preserve its valuable asset was to ensure that its obligations under the agreement were properly complied with. If a caretaker has allowed circumstances to arise where the body corporate is entitled to terminate the agreement, that option is available to the body corporate. In any dispute about whether that entitlement has arisen, both parties to the dispute are entitled to an objective determination of the matter, without partiality or prejudgment.9 What concerns me about this paragraph in particular is that it appears to amount to an admission on the part of the adjudicator that he approached 9 Act s 269(2)(a). -- 7 of 32 -- 8 the resolution of the matters in issue between the parties with a preconceived sympathy for the respondent. [18] The adjudicator then went on to identify five issues which he said needed to be determined in relation to the application: [40]. The first was a question of whether the application was properly brought by the respondent, which was speedily dealt with in favour of the respondent. The second issue was said to be whether the body corporate went about the passing of the resolution in a proper way that was appropriate to the outcome being sought. The third was whether if it did not the consequence was that the resolution was invalid. The fourth was whether, if the resolution was valid, the applicant had standing to make the application because it was no longer a caretaking service provider, and the fifth was whether if the resolution was valid it should otherwise be set aside. It occurs to me that this list of issues disregarded any consideration of whether, as a matter of contract, the entitlement to terminate the caretaking agreement had arisen. Presumably this was not mentioned because of the conclusion at [34] that it was unnecessary to determine the issues associated with that matter for the purpose of disposing of the application. [19] It was unfortunate that the adjudicator adopted this approach. If there was a deficiency in the procedure by which the resolution was carried, either in terms of a formal defect in the notice of the meeting, or because of a breach by the committee of its fiduciary duty, then presumably the matter could be resubmitted to a further general meeting of the body corporate, and the matter resolved without any such procedural deficiency. Given the size of the majority on the last occasion, I suspect that the outcome would be the same, though that in itself would not be a reason for refusing relief. But if the appellant was not entitled to terminate the caretaking agreement on contractual grounds, it was really a waste of time even considering whether the procedure requirements for termination had been complied with. [20] Logically, the first issue for determination was whether the appellant was entitled, as a matter of contract, to terminate the caretaking agreement, and accordingly that issue ought to have been decided first by the adjudicator. If he had found that the body corporate was not entitled to terminate the contract, procedural questions about the resolution to do so became irrelevant. When that issue was not determined by the adjudicator, the body corporate was left in the position of not knowing whether there was any point in attempting a further resolution to terminate. That was another unsatisfactory aspect of the approach of the adjudicator. [21] The adjudicator then turned to the second issue, and referred to the provisions of Part 4 of the regulation. He referred to s 40(3)(e) which requires notice of the general meeting to be accompanied by explanatory material required under s 40C, and said that there was nothing in s 40C that required explanatory material to accompany the notice convening the extraordinary general meeting. He then referred to s 40C(7) which permits a notice of a proposed general meeting to be accompanied by “explanatory material given by the committee, other than an explanatory note mentioned in subsections (2) to (5), if the material is contained in a schedule of the committee’s explanatory material that is separate from the explanatory schedule.” I have no idea what that provision means, if anything,10 but there does not seem to have been a finding by the adjudicator that anything was 10 This regulation is as incomprehensible as it is over-prescriptive. -- 8 of 32 -- 9 done in breach of it, so that probably does not matter. There was then a reference to subsection (8). [22] The explanatory schedule to the notice of meeting said that it was submitted by the committee for the extraordinary general meeting motion 2. The committee was the proposer of the motion, and the statement on my count is not longer than 300 words (I make it about 250) so that, on the face of it, it was an explanatory note which fell within s 40C(1)(a) and was therefore one which was required to accompany the voting paper and hence the notice of meeting. It satisfied so far as I can see the requirements of s 40C(2); there appears to have been no evidence or argument to the contrary. In these circumstances, it is not clear what the relevance of s 40C(7) was. [23] The adjudicator then said it was significant to note that the body corporate chose to set out the terms of the notice of default in full as part of the motion to terminate the caretaking agreement without any information as to whether or not any of the alleged defaults had been rectified. I must say the significance of that escapes me. The proposed resolution was in the following terms: “The resident caretaker being in default under the service contract (caretaking agreement) and having failed to rectified its default of which notice has been given and the body corporate herewith terminates the service contract (caretaking agreement). The details of the default are as set out hereunder: - .” [24] There was then quoted the notice of default. The proposed resolution seems to me to be perfectly clear. It involves the propositions that the resident caretaker was in default, that notice of the default had been given and that the resident caretaker had failed to rectify its default. The defaults were those set out in the notice of default which was quoted. This was a practical way of giving particulars of the defaults asserted by the proposer of the motion, the committee, and it seems to me that the notice made it tolerably clear that the committee asserted that the defaults in the notice of default had not been rectified. Whether or not it was necessary for that to be the case for all of them in order for the body corporate to be entitled to terminate the agreement, that was on the face of it what was asserted by this notice of resolution. It seems to me, with all due respect to the adjudicator, that the resolution is quite clear on its face, and that the defaults alleged by the proposer of the resolution were appropriately particularised in the notice of motion. I am unable to understand the adjudicator’s criticism of the wording of the notice of motion in this respect. [25] The adjudicator then went on to say that the explanatory note that accompanied the notice of meeting as permitted by s 40C(7) was not particularly helpful in assisting a unit owner to determine whether or not it was justifiable to terminate the caretaking agreement. I have looked at the explanatory schedule. It stated, with the conciseness which was inevitable in view of the constraint of the length of the explanatory note imposed by the regulation, that it was the committee’s position that the caretaking agreement should be terminated for failure to comply with the notice given on 20 December 2006. Because the notice had been incorporated in the wording of the resolution, it was not necessary to set out the notice in the explanatory note, something which could not have been done anyway without exceeding the 300 word limit. That may well be a further justification for including the notice of default in the terms of the resolution, since it was plainly impracticable -- 9 of 32 -- 10 to include it in the explanatory note. The note then went on to explain that the resolution would be by secret ballot, and how that would work, stated clearly that a yes vote supported the termination of the agreement whereas a no vote supported the retention of the respondent as resident caretaker. It drew attention to the fact that one consequence of the termination of the caretaking agreement was that the letting agreement would also come to an end, a matter which may well have been of some importance to some lot owners who wanted to have their lots let by the respondent. It then went on to point out that if the agreement were terminated it was the committee’s intention to appoint a relieving caretaker and letting agent until the body corporate voted on future arrangements. [26] The adjudicator said that this was not particularly helpful in assisting a unit owner to determine whether or not it was justifiable to terminate the caretaking agreement. As to that, any note which is no longer than 300 words was not going to be able to provide very much assistance in respect of a dispute of this nature, given the complexity of the issues and the large number of defaults alleged by the committee against the respondent. But the absence of a detailed explanation was not the fault of the committee of the body corporate; it was the consequence of the restraint imposed by s 40C(1)(a), which has evidently been drafted on the assumption that the issues raised by a motion at a general meeting will never be more complicated than something that could be explained adequately in not more than 300 words. It seems to me that the explanatory schedule made clear the position of the committee, pointed out appropriately how the vote was to be taken, and drew attention to a consideration which some lot owners may regard as important if the resolution were carried. No doubt someone who knew nothing about the matter apart from what was said in the explanatory note would not be particularly well informed about whether or not it was justifiable to terminate the caretaking agreement, but I cannot see how that could be a basis for criticising the committee or the body corporate. [27] There was also the consideration that it was not ultimately a matter for the decision of the body corporate whether, as a matter of contract, the agreement was able to be terminated, in the sense that the decision of the body corporate to terminate was not conclusive. Whether there was a right to terminate was something which could be the subject of a dispute and be resolved on the basis of the true facts as found. Whether there was a right to terminate might well be a matter for consideration at the meeting11 but strictly speaking what the meeting was to decide was whether the right to terminate would be exercised by the body corporate. [28] The adjudicator then went on to say at [47] that the material incorporated within the notice of meeting was quite damning of the applicant and in the absence of other material would be very persuasive in favour of an affirmative vote. Again, I cannot understand the point of this proposition. There was nothing particularly damning of the respondent in the explanatory schedule, as I have just pointed out, and the notice of default simply set out the defaults the committee asserted had been committed by the respondent. If it is the committee’s position that the respondent is in default under the service agreement in the various respects set out in the notice, and those assertions if true amount to a damning criticism of the respondent as caretaker, that cannot be something which rendered the inclusion of these matters in the notice of motion inappropriate. 11 A lot owner might regard it as a good reason not to seek to terminate if he or she thought the right to do so did not exist, or if the right to do so was disputed. -- 10 of 32 -- 11 [29] What is the alternative? If hypothetically a caretaker had been in default under the caretaking agreement to such an extent that any list of the defaults which had occurred would inevitably amount to something quite damning of the caretaker and therefore very persuasive to an affirmative vote, is the committee of the body corporate required to pull its punches, and allege only a part of the defaults, being a part which could not be characterised as damning of the caretaker? That would be absurd, and there is no reason to think the regulation requires it. If a caretaker is in default in a large number of ways under the caretaking agreement, then it is appropriate that all of the defaults be identified in a notice of this nature and the caretaker be required to remedy all of them, and there is certainly an entitlement under the contract for the body corporate to do so. Indeed, the body corporate is required to do so if it wants to take any further action in relation to those defaults. If it is therefore the committee’s position that all of these defaults have been committed, it seems to me that the committee really had no sensible alternative to including all of the defaults in the notice of default. Once one gets to that point, it seems to me entirely appropriate that the same list of defaults should be incorporated in the notice of motion, in order that all of the lot owners are informed of all of the defaults which are alleged by the committee. [30] The adjudicator then went on to say at [47]: “The notice of meeting does not set out a balanced assessment of the situation and it makes no mention of the denials of the applicant in relation to the alleged defaults.” If a notice of default in particular terms has been given to the respondent, I fail to see how incorporating that notice in the notice of motion was in any sense unbalanced. It was true that the notice of motion did not incorporate or indeed make any mention of the respondent’s response to that letter, and the respondent’s denials in relation to the alleged defaults. There were two good reasons for that. The first was that there was no logical place for such a thing in the notice of the resolution. The second was that the respondent’s response was not received until 19 January 2007, four days after the date of the notice of meeting, when it was presumably sent out.12 Whatever is required by way of a notice of meeting, it can hardly be expected to anticipate the future, or incorporate reference to events which have not yet occurred. [31] In any case, I cannot understand why the notice should be required to be balanced. What the notice is required to do is to give notice of the resolution actually proposed. The obligation is faithfully to reproduce what it is that has been proposed by the committee, or whoever else is proposing the motion,13 and there is a requirement that if an explanatory note of the resolution is provided by the submitter of the motion it must be included.14 Obviously any note put forward by the submitter of the motion is going to present an argument in favour of the motion. I cannot see anything in the regulation which requires the submitter of the motion to include in the explanatory note arguments against the motion as well as arguments in favour of it, so as to be balanced, and such a proposition strikes me as not supported by anything in the legislation or the general law. 12 The date of the respondent’s response was mentioned by the adjudicator at [13], where he again missed the point that this was after the notice of the general meeting had been given, the date of which does not appear to have been mentioned in his reasons. 13 Regulation s 39(2). 14 Regulation s 40C(1)(a). -- 11 of 32 -- 12 [32] If the respondent had, prior to the notice being given, communicated to the committee that it was its position that the defaults alleged against it were denied,15 an issue would arise as to whether there was any obligation on the part of the committee to refer to that fact in the terms of the resolution or the explanatory note. It seems to me that the material sent out made the true position quite clear, namely that the committee alleged that these defaults had occurred and they had not been remedied and that the appropriate response was to terminate the agreement. It was open to the respondent to assert to the contrary if that were his position. I am completely unable to see how, in terms of the true function of the motion, there was anything unbalanced about the notice of meeting, or that there was any obligation for the notice and explanatory note to be balanced. [33] The adjudicator then went on at [48] to refer to a communication sent to the lot owners by the committee after the notice of meeting; this communication was quoted in paragraph 14 of the reasons. The adjudicator noted that it contained an express assertion that all defaults were valid, current and ongoing. Accordingly if there had been any ambiguity in the earlier material as to whether it was asserted by the committee that the defaults were continuing in respect of all of the matters identified in the notice of default, that communication removed that ambiguity. However, the adjudicator said that the notice did “not correct the situation. Indeed, it is even more damning of the applicant.” Reference was made to the assertion in that communication that the respondent had cost the appellant over $60,000. It was said to make no mention of the denials of the respondent, and to graphically illustrate the ongoing defaults by means of seven photographs. 16 The fact that the photographs might have been persuasive did not make it improper to circulate them. [34] In paragraphs [49]-[51] the adjudicator then commented on the proposition that the eight items of cost listed in the committee communication were tested by him and that “based on the information that testing brought to light, it is clear to me that in respect of many of those items, the body corporate would have great difficulty in a court of law establishing liability on the part of the applicant, on the balance of probabilities. Even if the body corporate were successful in establishing that liability, there would be substantial argument as to the quantum of any damages and there is no doubt in my mind that the amount recoverable by the body corporate would be substantially less than the $62,550 alleged in the committee communication. To this extent, the committee communication is misleading.” [35] The respondent’s position was that the notice of meeting, the explanatory note, and this later communication were misleading because they did not disclose that the propositions that the respondent was in default, and had not remedied the defaults, were disputed, and the material did not draw attention to the grave consequences to the lot owners if the contract were terminated, or was wrongfully repudiated. But this was the only specific finding that any particular thing was misleading. It could have been said that this finding was a finding of fact on the part of the adjudicator, and it was a sufficient basis for a conclusion that the resolution of the extraordinary general meeting was invalid, and that the finding that the communication was 15 There was no finding to this effect by the adjudicator, or any reference to any evidentiary basis for such a finding. 16 I cannot see how the inclusion of photographs was a problem, unless perhaps they were photographs of something else, which was not a finding made. There was no finding that the photographs did not accurately depict the true situation. -- 12 of 32 -- 13 misleading was a conclusion of fact which was not susceptible of challenge on an appeal on a question of law. If so and if the latter proposition was right in law, there was no proper basis shown on which I could allow the appeal, and the various other comments made by the adjudicator in the course of his reasons were not directly related to his conclusion or his findings, so that, even if they did involve some misapprehension of the proper functioning of the Act or the regulation, that did not invalidate his decision. [36] The first of these propositions, that the finding that the communication was misleading was a question of fact, is true, but that is really no answer. The difficulty with this finding is that, although the adjudicator produced 11 close-typed pages of reasons for his final determination, he provided no reasons for this particular finding, which was the only specific finding that anything was misleading. There was no explanation as to why or how or on the basis of what evidence the adjudicator came to the conclusion that it was misleading to assert that the cost to which the body corporate had been put by reason of the defaults of the respondent, assuming that it had been put to cost by reason of the respondent’s defaults, was substantially less than the amount of $62,550 alleged by the committee in this communication. Obligation to give reasons [37] The order of adjudicator must be accompanied by a statement of the adjudicator’s reasons for the decision: s 274(2)(b)(i) of the Act. This is consistent with the ordinary rules in relation to the obligation of a court to give reasons for its decision. It is well established that there is a duty on the part of judicial tribunals to give reasons for their decisions and that failure to give reasons which ought to be given can amount to an error in law. 17 What is required to be included in the reasons varies, and depends on the circumstances. In Cypressvale Pty Ltd v Retail Shop Leases Tribunal [1996] 2 Qd R 462 at 476-7 Fitzgerald P said: “The broad principle deductible from the cases is that the decision-maker is required to give reasons which disclose what was taken into account and in what manner, and thus whether an error has been made. … There have been many attempts to elaborate; indicating for example, the need for findings of fact, usually related at least in broad terms to the evidence on which each finding is based, and an explanation of the reasoning process; vague general statements, or unexplained conclusions are not sufficient. While a tribunal such as the Retail Shop Leases Tribunal might not be required to ‘submit the material before it to the most meticulous analysis and carry into [the reasons for its decisions] a detailed exposition of every aspect of the evidence and the arguments’ or ‘incorporate an extended intellectual dissertation upon the chain of reasoning’, at least ‘a basic explanation of the fundamental reasons which led the [tribunal] to [its] conclusion’ is necessary.” 17 Crystal Dawn Pty Ltd v Redruth Pty Ltd [1998] QCA 373; Bawden v ACI Operations Pty Ltd [2003] QCA 293 at [29]. As to when this amounts to an error of law, see Attorney-General v Kehoe [2000] QCA 222 at [23]. -- 13 of 32 -- 14 [38] In that matter his Honour’s judgment was a dissenting one, but this proposition was approved by all the members of the court in Suncorp Insurance and Finance v Hill [1998] QCA 112, and in Bawden v ACI Operations Pty Ltd [2003] QCA 293 at [29]. I consider that that obligation applies equally to the statutory obligation under s 274(2)(b)(i). The passage to which I have just referred in the adjudicator’s reasons was obviously devoid of any identification even in broad terms of the evidence on which the finding was based or any explanation of the reasoning process; it contained merely an unexplained conclusion. It amounted in the circumstances to an error of law which in my opinion would justify setting aside the decision of the adjudicator. That I think is particularly so in a case where the finding follows a series of statements, arguably obiter, which seem to me to be obviously open to criticism, and which suggest that the adjudicator was approaching this matter with a strong predisposition in favour of the respondent. [39] I am not at all sure, however, that it was the adjudicator’s decision that the invalidity flowed simply from the fact that this communication, which had been sent by the committee, was misleading in this way. The adjudicator went on to say at [52] that the applicant’s communication to investment owners would not necessarily have corrected the situation, because it was competing with an official communication from the committee of the body corporate, presented in the strongest possible terms, and it was only distributed to investment owners and therefore was not available to other owners. Again I find this proposition puzzling. I cannot see why it should assist the respondent’s case, or be in effect a basis for criticism of the committee of the body corporate, that the respondent chose to distribute his communication only to investment owners and not to resident owners. One might suspect that his omission to provide this defence to resident owners could be explained as a tacit recognition that he had negligible chance of persuading the owners who were actually living in the premises, and knew what the physical state of the premises had been like, that there had not been widespread default under the caretaking agreement. [40] It also seems to me that the former proposition, apart from being factually inaccurate,18 seems to suggest that inevitably anyone other than the committee who seeks to present an argument against a notice of motion proposed by the committee is entitled to have the resolution which results in the motion being carried set aside simply because anything that that person said in opposition to what was being said by the committee was necessarily going to carry less weight than anything said by the committee. That cannot be right. The point is that lot owners at a meeting of this nature are expected to make up their own mind as to whether they will support the motion or not, and ordinarily those opposed to the motion, like those supporting it, have the opportunity to persuade, and the task of persuading, those lot owners to vote in favour the position they advocate. The mere fact that the committee was on one side can hardly be a basis of rendering that process unbalanced and unfair, and therefore incapable of producing a valid result. The respondent cannot complain that it was deprived of the opportunity to present its case on the basis that it chose not to present it. [41] The adjudicator then said at [53]: 18 In the sense that I can think of a lot of ways in which the propositions included in the notice of meeting and the committee’s subsequent communication could have been expressed in terms which were even stronger. -- 14 of 32 -- 15 “It is my conclusion that the committee (and therefore the body corporate) attempted to get around the prohibition in s 40C(8) of the module by doing two things: (j) incorporating into the wording of the motion to terminate the caretaking agreement the terms of the notice of default; and (k) sending around the separate communication to all lot owners.” [42] He said at [54] that this amounted to a clear contravention of the prohibition in s 40C(8) which directly impacted on the validity of the resolution purportedly passed on 11 February 2007. He then said at [55]: “In addition to that, the unit owners were seriously misled by the way in which information intended to help them in their voting decision was presented to them. That information was such as to virtually guarantee the passing of the motion, as was most likely the clear intention of the committee. This is a serious defect in any circumstances, but more so when the subject matter of the motion has such devastating effects for one of the unit owners.” [43] He then went on to state the conclusion that the resolution was invalid. As I read the reasons, the adjudicator did not say that the resolution was invalid just because there had been a misleading communication sent by the committee. On the contrary, the adjudicator came to the conclusion that the resolution was invalid because of a contravention by the body corporate of s 40C(8) which was said directly to impact on the validity of the resolution, and because the unit owners were misled by the way in which information generally was communicated to them, that is, misled by everything provided to them by the committee. That it seems to me was the true basis of the reasoning of the adjudicator; it was much wider than the mere proposition that some specific thing was said in the communication sent after the notice of the meeting which was misleading, although there was no other specific finding as to how or why the material from the committee was misleading. No breach of s 40C(8) [44] As to the former proposition, that there was a contravention of s 40C(8), in my opinion that conclusion was clearly wrong and involved an error of law. 19 The explanatory material in the schedule to the notice of motion was not merely something permitted to be circulated, it was required to be circulated under s 40C(1)(a) of the regulation. Even if this were not so, the adjudicator in paragraph [46] found that the explanatory notes that accompanied the meeting were permitted by s 40C(7), and if that were the case then there was plainly no breach of s 40C(8), which permits a voting paper to be accompanied by explanatory material if it is permitted under the regulation. As I read the reasons there was not a finding that the material in the explanatory schedule was not permitted by s 40C(7), but rather a finding to the contrary. Accordingly, there was necessarily no breach of 19 Counsel for the respondent did not seek to uphold the decision of the adjudicator that there was a breach of s 40C: Tscp p 3. -- 15 of 32 -- 16 s 40C(8) in including in the notice of the meeting the materials in the explanatory schedule. [45] It seems to me that the conclusion that there was a breach of s 40C(8) was based on the proposition that the terms of the notice of default had been included in the wording of the motion, as explained in [53]. There are two problems with that proposition. The first is that s 40C is not a restriction on the terms of a proposed motion. Indeed, so far as I can see there is no restriction in the regulation as to the terms of a motion proposed to a general meeting of members. Section 39 of the regulation provides that a motion for consideration at a general meeting may be submitted at any time by, inter alia, the committee, and in subsection (2) that if a motion is submitted it must be included in the next general meeting agenda subject to subsections (3) and (4). Subsection (3) does not apply to a motion submitted by the committee, and subsection (4) applies only to motions which if included would result in a particular type of motion having been considered more than once in a financial year for the body corporate. The types are specified and none of these refer to a motion to terminate a service contract. It seems to me that the obligation on the body corporate was to incorporate the terms of the motion as proposed by the committee in the notice of the general meeting. There was certainly not a breach of s 39 of the Act by the body corporate in circulating the notice of motion. [46] The adjudicator’s proposition that the actions of the committee were the actions of the body corporate was also in my opinion not correct. The scheme of the Act and regulation is that in respect of some matters the actions of the committee are the actions of the body corporate, but in respect of other matters the body corporate acts by resolution in general meeting. In respect of matters where the body corporate acts by resolution in general meeting, so that the matter is a restricted issue for the committee, the effect of s 100 is that a decision of the committee is not a decision of the body corporate.20 It follows that the committee in proposing a motion for a general meeting, is not acting as the body corporate. If a committee does do something which is contrary to the Act or regulation in relation to a resolution put to a body corporate, that may result in invalidity of the resolution, but it is not because that act of the committee amounted to an act of the body corporate. [47] All of this, however, is really beside the point, because for reasons that I have already given I consider that there was nothing objectionable in the inclusion in the notice of motion of the terms of the notice of default. It was in my opinion entirely appropriate that the notice of motion should have included particulars of the defaults alleged by the committee against the respondent, and setting out the terms of the notice of default was a convenient way of doing so. It also provided members of the body corporate with the opportunity to make their own assessment of whether the notice given was in accordance with the requirements of the relevant part of the caretaking agreement. Far from being a matter for criticism, in my opinion it was actually something the inclusion of which in the motion was appropriate and helpful. The conclusion of the adjudicator that the inclusion of the terms of the notice of default in the wording of the motion amounted to a contravention of s 40C(8) was therefore wrong in law.21 20 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 471. 21 There was no legal justification for it, and, to the extent that it involved a conclusion of fact, it was a conclusion no reasonable adjudicator would have reached on the material. -- 16 of 32 -- 17 [48] It also seems to me that, insofar as criticism by the adjudicator of the terms of the notice of motion and the explanatory schedule as discussed earlier was included as part of the matters taken into account in paragraph [55] of the reasons, that was unjustified and also amounted to an error of law. The adjudicator’s real criticism, however, seemed to be based on the proposition that it was necessary for the body corporate to present a balanced position to the lot owners, that is to say, to put, as it were, both sides of the argument. He did not distinguish between that and an obligation to acknowledge that the respondent’s position was that he was not in default in the ways alleged by the committee, or that any default had been remedied, as the case may be. It seems to me that that is the real basis on which the actions of the committee were criticised by the adjudicator, rather than the narrow proposition that the assertion that the cost of the respondent’s defaults to the body corporate had been in excess of $60,000 was misleading. [49] I can find nothing in the Act or regulation which required the committee of the body corporate when proposing a resolution of this nature, to set out arguments against the resolution, or to disclose that the factual matters asserted by the committee were disputed by the respondent, or anyone else. Notice of meeting [50] There is certainly an obligation to give proper notice of what is actually to be considered by the meeting, and to point out the relevant consequences of the approval of the resolution. If there is a failure to give proper notice of the meeting, which may occur if the notice of the proposed resolution is misleading as to what is really proposed, or its effect and implications, then that may well impact on the validity of the resolution, because in such circumstances there was either no valid notice of the meeting or no valid notice of the proposed resolution. [51] A notice of a meeting must indicate the general nature of the business to be brought before the meeting or its object, to give members fair warning of the matters to be dealt with: Ryan v Edna May Junction Gold Mining Co (1916) 21 CLR 487 at 496 per Barton J, who also quoted with approval at p 495 a passage from the judgment of Bowen LJ in Alexander v Simpson (1889) 43 Ch D 139 at 149: “The construction of a notice convening an extraordinary general meeting of a company is not a technical point, and I agree entirely with what Mr Justice Chitty has pointed out - the extreme importance that these notices should be so plain that those who run may read, and that they should be construed in a sense in which businessmen to whom they are addressed would understand them.” [52] In Ryan, Isaacs J at p 500 said: “All that is needed in the absence of definite provision is a fair and reasonable intimation of what is actually proposed to be done. … If on the whole it gives fair business-like notice in the circumstances, that is enough.” [53] In that case the issue was whether a notice of a proposal to wind up a company voluntarily at an extraordinary general meeting to be held at such a time that, under the articles, there was an adverse consequence for the holders of particular shares in -- 17 of 32 -- 18 the company, vendor’s shares, in terms of the distribution of surplus assets on the winding up of the company was valid because this was not pointed out. In that situation the High Court held that it was necessary to give notice of that consequence if the resolution was carried. It seems to me that the analogue in the present case is that notice was given in the explanatory schedule of the fact that determination of the caretaking agreement had the effect of automatically bringing to an end the letting agreement, a matter which as I have noted may well have been of some concern to some lot owners. [54] Of course the test in relation to the notice of a meeting of a body corporate would be cast in terms of the ordinary lot owner rather than a businessman; indeed, these days where the holding of shares is more widely distributed within the community the case of notices of publicly listed companies at least is also somewhat broader.22 [55] I cannot see how there was any deficiency in the notice given in the present matter; what was proposed was abundantly clear from notice, that a resolution be passed which had the effect of terminating the caretaking agreement. No implication or consequence of that has been identified either in the reasons of the adjudicator or in the submissions before me which would not have been entirely clear to anyone who read the notice of meeting and the schedule, no matter how fast he was running. The effect of this proposed resolution was fully set out, and the only ground of lack of information identified was that the schedule did not disclose that the respondent disputed the existence of the defaults, something that apparently had not occurred at the time the notice was sent out. The fiduciary duty of the committee [56] Apart from this, in the case of ordinary companies there is an equitable principle derived from the fiduciary duty of directors to provide corporators with material which is substantially full and true in relation to any proposal that the directors are putting before a meeting of the corporators.23 It was submitted for the respondent that this principle applied to the members of the committee of the body corporate, and I proceed on the basis that that was correct. There are particular obligations of frankness on members of a board of a company, or members of a committee of a body corporate, where the effect of the carriage of the resolution would be to confer some benefit on one or more, or all of them: Baillie v Oriental Telephone and Electric Co Ltd [1915] 1 Ch 503.24 There is nothing in the reasons of the adjudicator to suggest that considerations of this nature were applicable here. [57] In Bulfin v Bebarfald’s Ltd (1938) 38 SR (NSW) 423 Long Innes CJ in Eq reviewed a number of authorities dealing with this principle, and said at p 430 that company directors had a duty to exercise their powers in good faith for the benefit of the company as a whole. He noted various statements, such as that at p 433, that there was a breach if shareholders had not been fully and fairly informed of what was proposed to be done, and at p 435, that the issue was whether a shareholder who had not participated in the vote would have done so if he had known the real facts. He also noted at p 437 a decision where relief was refused, 25 where there was a finding 22 Devereaux Holdings Pty Ltd v Pelsart Resources NL (No. 2) (1985) 9 ACLR 956 at 958. 23 Devereaux Holdings Pty Ltd v Pelsart Resources NL (No. 2) (1985) 9 ACLR 956 at 958. 24 See also Chequepoint Securities Ltd v Claremont Petroleum NL (1986) 11 ACLR 94 at 96; Bulfin v Bebarfald’s Ltd (1938) 38 SR (NSW) 423 at 432. 25 Carruth v Imperial Chemical Industries Ltd [1937] AC 707, a decision of the House of Lords. -- 18 of 32 -- 19 that the circular would have conveyed the information necessary to enable members to realise what the proposals of the board were, and the grounds on which the policy underlying the proposals was based. [58] Bultin was applied by McPherson J in Bancorp Investments Ltd v Primac Holdings Ltd (1984) 9 ACLR 263. His Honour said at p 266 that “a notice … should be couched in clear terms and that any comments … from the board of directors should fully and fairly inform and instruct the shareholders upon what is proposed to be done.” In that case notice of a proposal to replace the articles was held insufficient where the commentary from the Board did not correctly summarise the effect of the proposed change, in circumstances where the notice did not set out all the proposed new articles. [59] In Devereaux Holdings Pty Ltd v Pelsart Resources NL (No. 2) (1985) 9 ACLR 956 Young J referred to these and other cases, and at p 959 quoted with approval a passage26 where it was said: “The question is not whether the circular might not have been differently framed, but whether there was any reasonable ground for supposing that such imperfections as may be found in the circular have had, with or without other circumstances, the result that the majority (who may have approved the proposal placed before them) have done so under some serious misapprehension of the position.” [60] The obligation was considered further by the Full Federal Court in Fraser v NRMA Holdings Ltd (1995) 55 FCR 452. That case involved a proposal to demutualise the respondent, formerly known as National Roads and Motorists Association Ltd, a large New South Wales organisation similar to the RACQ. The proposed demutualisation was strongly supported by a majority of the Board, and a prospectus which incorporated notices of meetings was sent out to members advocating support for the proposal. Dissentient members challenged this on the basis that the prospectus contained matters which involved a breach of s 52 of the Trade Practices Act, and were successful at first instance27 and on appeal, although in the Full Court the application succeeded on a more limited basis. [61] The court held that the particular relationship between the parties which gave rise to a fiduciary duty under the general law was relevant in determining whether there had been a breach by a failure to give information or the provision of only limited information: p 465.28 At p 466 the court said: “The fiduciary duty is a duty to provide such material information as will fully and fairly inform members of what is to be considered at the meeting and for which their proxy may be sought. The information is to be such as will enable members to judge for themselves whether to attend the meeting and vote for or against the 26 From Re Imperial Chemical Industries Ltd [1936] Ch 587 at 618 per Clauson J, approved on appeal: Carruth v Imperial Chemical Industries Ltd [1937] AC 707 at 768. Young J omitted reference to an introductory qualification in the original judgment, that it applied when the directors were honestly putting forward to the best of their ability a fair picture of the company’s position. 27 In (1994) 52 FCR 1, per Gummow J. 28 Referring to a number of cases including Bulfin (supra). -- 19 of 32 -- 20 proposal or whether to leave the matter to be determined by the majority attending and voting at the meeting.” [62] The court added at p 468: “The need to make full and fair disclosure must be tempered by the need to present a document that is intelligible to reasonable members of the class to whom it is directed, and is likely to assist rather than to confuse. … In complex cases it may be necessary to be selective in the information provided, confining it to that which is realistically useful. … It is important that the adequacy of the information provided by the prospectus and supporting documents be assessed in a practical, realistic way having regard to the complexity of the proposal. In the circumstances the court should not be quick to conclude that a contravention of s 52 has occurred because other information could have been provided that was not. The need for the applicants to establish the materiality of errors and omissions is an important step in the proof of their claims.” [63] In application of that principle, the court examined the question of whether a statement as to the legal position in a particular matter discussed in the prospectus was strictly correct in the legal sense, and concluded that it was not, but that because of the practical effect of what was stated this was not a material error and was not misleading or deceptive: p 479. The conclusion of the Full Court was expressed in a passage at p 487: “The prospectus asserts that under the proposed restructure members will be ‘better off’ and strongly recommends a ‘yes’ vote. In these circumstances the failure to identify and inform members about disadvantages of which the directors making the recommendation were aware was to leave the members in a half light which had the potential to lead them to think that the unintended disadvantages, whatever they might be, must be ones that they would not treat as significant in relation to the rights being given up and the new rights to be acquired in a public listed company. This is more particularly so when it is remembered that, contrary to the notion engendered by the persistent use of the phrase ‘free shares’, the shares might be acquired without significant loss or outgoing, the rights that would be surrendered were significant ones which were material to the members of Association in making a properly informed judgment.” [64] In the company context, there is also authority for the proposition that, when directors are proposing a course of action for a general meeting of the company, they are not obliged to circulate the views of members opposed to the board’s policy: Campbell v Australia Mutual Provident Society (1908) 24 TLR 623.29 This is authority directly against the proposition of the adjudicator that the advice from the committee is required to be “balanced”. 29 Cited in Ford “Principles of Corporations Law” para [7.460], p 7541. This is a decision of the Privy Council. -- 20 of 32 -- 21 [65] In Fraser (supra) at first instance Gummow J referred to this decision at p 20 as “authority that there is no obligation upon the Board to circulate contrary arguments on behalf of the dissentient members, it being for the dissentients to circulate their views at their own cost. It is unnecessary to consider whether, if at all, the general law should respond to modern statutes such as the Part B provisions of Chapter 6 of the Law30 in a way which would require modification of previous authority such as Campbell.” Considerations of that nature would not impact on the application of the principle to a body corporate under the Act. Gummow J evidently regarded that decision as still authoritative. In Fraser the thrust of the applicant’s contentions was that what had been said by the Board in the prospectus was misleading and deceptive, rather than that there was some obligation on the part of the Board to draw existence to the attention of different views in relation to the matter, or for the information to be “balanced”. This issue did not surface in the Full Court. [66] The effect of an inaccuracy in something stated by the directors of a company in a circular supporting a resolution at a general meeting of the company was considered by the High Court in Peters’ American Delicacy Co Ltd v Heath (1939) 61 CLR 457. Latham CJ with whom McTiernan J agreed said at p 487-8: “It is further objected that the directors misrepresented the position by stating that articles 108 and 120 were inconsistent and that for this reason it was necessary to alter article 120 in order to bring about any distribution of bonus shares. … The question is an arguable one. The directors were putting their views forward for the consideration of the shareholders. Even if their views were wrong, there was no dishonesty or trickery. The shareholders could get their own advice and use their own minds. The circular was almost necessarily argumentative. That this was in fact the case was obvious upon the face of the document. An expression of an honest opinion upon such a matter does not amount to misrepresentation or even inaccuracy if the opinion, even if wrong, is accurately stated as an opinion. In so far as the circular stated that it was necessary to declare a dividend in order to bring about a capitalisation, it stated what was, I think, plainly a matter of legal opinion. The same observation applies to the statement that articles 108 and 120 would only be consistent when all the issued shares of the company were paid up to the same amount. … I agree with Nicholas J that in a strictly legal sense they were not inconsistent. … But, in my opinion, the circular should, in this respect, be regarded as expressing the views of the directors and not as laying down in absolute terms propositions of law guaranteed as correct. Even if those views were wrong, the action of the shareholders in passing the resolutions is not invalidated.” [67] Dixon J who delivered a separate concurring judgment said at p 514: “The statements contained in the circular and made at the meeting do not, in my opinion, invalidate the resolutions nor affect the conclusion I have just stated. … The fact that a description honestly made of the exact legal result arising from the existing articles is thought by the court to be capable of conveying an incorrect 30 Ie the Corporations Law. -- 21 of 32 -- 22 impression is no sufficient ground for treating as void special resolutions duly notified, proposed and passed. The argument of the solicitor at the meeting was clearer in its error, but a bad argument to a shareholders’ meeting has not the same effect upon their resolutions as a misdirection upon a jury’s verdict. This observation is sufficient to dispose of the contention founded on the chairman’s mistaken statement as to where his own pecuniary interests lay.” [68] The fourth member of the court, Rich J, did not discuss this matter in any detail. [69] In the present case, what was put out in the circular in relation to the cost of works was not stated as a cost which had in fact already been incurred. It was made clear in the communication that what was being spoken of were estimates of the cost of doing work which it was asserted had been made necessary by the deficiencies of the respondent. It was therefore obviously put forward as the opinion of the committee. The notice contained the assertion that “all defaults are valid, current and ongoing.” Although it did not expressly say that the respondent disputed that proposition, it seems to me that the view at least was open that that could reasonably have been deduced by an ordinary lot owner from the following sentence: “Enclosed are photographs taken at 10.00 am Sunday 21 January 2007 showing some of the defaults claimed by the caretaker to have been rectified.” [70] There was then a list of seven photographs. This was the matter which excited some criticism from the adjudicator, for reasons which I cannot understand. What I suppose this document did not do was indicate whether the respondent’s position was that all defaults had been rectified, or only some of them and which. The view might have been open that at this stage, which was after there had been a written response to the notice of default by the respondent, this was a matter which ought to have been disclosed, in order to provide full and fair information as to the proposal which the members were to consider. But it seems to me clear on the authorities that, provided they complied with their fiduciary duty, the committee was entitled to put forward arguments in support of their position, and was not obliged to put forward arguments in opposition to their position. In relation to the particular point made by the adjudicator, as to whether the potential expenditure of over $60,000 was misleading, there was no finding that that did not reflect the bona fide opinion of the committee at the time, and it seems to me that, in circumstances where that was obviously put forward as an expression of the committee’s opinion in relation to the situation, it was covered by the principle in Peter’s American Delicacy Co Ltd v Heath (supra). [71] In relation to the question of whether there was a breach of the fiduciary obligation, it is important to bear in mind what was said about the obligations of a party alleging a breach of this duty in the Full Federal Court in Fraser (supra) at p 467-8: “Where the contravention of s 52 alleged involves a failure to make a full and fair disclosure of information, the applicant carries the onus of establishing how or in what manner that which was said involved error or how that which was left unsaid had the potential to mislead or deceive. Errors and omissions to have that potential must be relevant to the topic about which it is said that the respondents’ -- 22 of 32 -- 23 conduct is likely to mislead or deceive. The need for an applicant to establish materiality is of particular importance in a case like the present one where the proposal is complex, and involves difficult questions of commercial judgment and matters of degree and conjecture as to the future about which there is room for a range of honestly and reasonably held opinions.” [72] That was related to a breach of s 52, but essentially the same applies in my opinion to a party alleging a breach of the fiduciary duty, and seeking relief on that basis.31 In these circumstances, it was necessary for the respondent (the applicant below) to identify with some precision what it was which was not disclosed by the committee, the omission of which meant that there had been a failure to make full and fair disclosure. It was also important that, if there were to be a finding that there had been a breach of the committee’s fiduciary duty by a failure to make full and fair disclosure, the matter which had not been properly disclosed be identified by the adjudicator with some precision. This is really an aspect of the obligation to give proper reasons discussed earlier. That difficulty arises in my opinion in relation to this aspect of the matter. Although it seems to me that the approach of the adjudicator was much wider than that contended for by counsel for the respondent, there was a failure properly to identify what it was which ought to have been said and was not which had the effect that the members of the committee who were advocating support for this proposal were in breach of their fiduciary duty, so that it was appropriate to give equitable relief. [73] Part of the reason for this, no doubt, is that there is nothing in the reasons of the adjudicator to suggest that he had any clear appreciation that that was what he was being asked to do, or purporting to do, or that he was conscious of the relevant tests that ought to be applied, in the light of the authorities to which I have referred, or of such considerations as the distinction between a material failure to disclose relevant information known to the committee,32 and an expression of an opinion in fact held bona fide by the committee members, expressed in support of their position. There was no appreciation of the distinction between disclosing material disadvantages known to the committee which would not have been obvious to the lot owners if they supported the proposal (which was required) and setting out arguments against the proposal (which was not required). There is nothing in the cases which suggest any obligation to be “balanced” about an issue put forward; if the committee is proposing a course of action, it is entitled to support it vigorously, so long as the fiduciary obligation is not breached. [74] All the adjudicator did was focus on what he said was a contravention of the prohibition in s 40C(8), and the proposition that the unit owners were misled because the information provided to them was such as to virtually guarantee the passing of the motion. There was no precise identification of what it was that was misleading or how it was misleading, as was set out in some detail by the Federal Court in the admittedly more complex case of Fraser. I do not of course suggest that that degree of detail was appropriate in the present matter; that was a very complex proposal, whereas it seems to me that the issue raised in relation to this resolution was essentially a simple one. The reasons did not identify any 31 Particularly if the complaint is based on the proposition that what was sent out was misleading. 32 This would extend to information of which the committee was unaware as a result of its deliberately refraining from finding out the information, or otherwise acting in bad faith: Fraser (supra) at p 466. -- 23 of 32 -- 24 consideration material for the decision of the unit owners which ought to have been drawn to their attention by the committee but which was not. In these circumstances it is really impossible to know what the true grounds were on which the conclusion was reached that the resolution was invalid. That in my opinion amounted to an error of law on the part of the adjudicator, justifying setting aside the adjudicator’s decision. Could the adjudicator give equitable relief? [75] It was submitted on behalf of the appellant, that, unless the circumstances were such that the adjudicator was entitled to find that there had been no sufficient notice of the proposed resolution, there was no basis on which the adjudicator could find the notice invalid, because the matter relied on by the respondent, the alleged breach of fiduciary duty by the committee, was an equitable obligation, giving rise to equitable remedies, and the adjudicator did not have jurisdiction to give equitable relief, as distinct from relief at law. This submission focused on the statutory basis of the jurisdiction of the adjudicator, in s 276(1) of the Act, which relevantly provides that “an adjudicator to whom the application is referred may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute … .” It was submitted on behalf of the appellant that this did not confer on the adjudicator any general equitable jurisdiction, but rather gave a jurisdiction to enforce compliance with the legislation and the regulating documents of a scheme. [76] In support of this proposition a number of authorities were referred to, as well as some particular provisions of the Act. As to the cases, reference was made to Re Mathieson, ex parte Herman (No. 1) [1961] NSWLR 1139, where Kinsella J speaking of the jurisdiction of the Small Debts Court which under its Act had “power and authority to hear and determine in a summary way and according to equity and good conscience” claims for amounts of money within specified limits, did not have “power to depart from established principles of law nor do they give it power to dispense justice otherwise than according to law” (p 1142). In Cominos v Cominos (1972) 127 CLR 588 the High Court was concerned with s 86 of the Matrimonial Causes Act 1959 which empowered a court exercising jurisdiction under the Act to require parties to a marriage to make such settlement of property to which the parties are or either of them is entitled “as the court considers just and equitable in the circumstances of the case.” At issue was whether this took it outside the judicial power of the Commonwealth. [77] Gibbs J at pp 599-600, after noting that the discretion had been said33 to “be exercised according to accepted principle, for what is just and equitable in this jurisdiction is not a matter of unfettered individual opinion”, went on to say: “It is not a discretion of an arbitrary kind. The standard imported by the familiar words ‘just and equitable’ is ‘by no means foreign to the judicial function’ nor is it ‘so indefinite as to be insusceptible of strictly judicial application’. It is also true that s 86 enables the court to create new rights and impose new duties and not merely to enforce legal rights already existing, but the fact that a court is authorised to create or alter rights and not merely to declare and give effect to 33 By Windeyer J in Sanders v Sanders (1967) 116 CLR 366 at 379. -- 24 of 32 -- 25 pre-existing rights does not necessarily show that the powers conferred are not judicial powers.” [78] Mason J at p 608 said: “To authorise a court to make an order where it is just and equitable to do so creates a judicial discretion exercisable after a consideration of all the circumstances relevant to the making of the order and in accordance with principle.” [79] In Talga Ltd v MBC International Ltd (1976) 133 CLR 622 the majority said on p 634, concerning a power in the Banking Act 1974 for a court to treat as valid something which had not been done in accordance with the requirements of certain regulations, if “it is just and equitable … .”: “When it comes before a court in proceedings in which its validity has been called in question the issue for the court will be whether it is just and equitable that the transaction should be treated as valid. The court will have before it an existing transaction replete with all its surrounding facts and circumstances and in their light will determine what is just and equitable. In doing so it will certainly be exercising a wide discretion but this is a commonplace of the curial process; the court will be bound to act judicially, exercising its discretion by reference only to such considerations affecting the transaction as, on an examination of the legislation, may be seen to be material to the decision which it is called on to make. Irrelevant matters, matters such as the plaintiffs instanced in the course of argument, which have no relational connection with the policy of the regulations but would be expressions only of the personal predilections of the court, cannot be allowed by it to play any part in its decision.” [80] In Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 the New South Wales Court of Appeal was concerned with the scope of the jurisdiction under the Anti-discrimination Act 1977 which provided that the Tribunal set up by the Act was to “act according to equity, good conscience and the substantial merits of the case … .” The majority after noting at p 30 that this expression was not a term of art and depended upon the statutory context in which it was found, and referring to Re Mathieson (supra) concluded at p 31 that “the duty to act according to equity and good conscience, in the context of this Act, did not free the tribunal from its duty to apply the general law in deciding the issues raised by the defences of release by deed.” [81] In Houghton v Immer (No. 155) Pty Ltd (1997) 44 NSWLR 46 the appellants owned four of five lots in a strata title property, with the fifth lot owned by the respondent. The appellants had used their numerical superiority in the body corporate to pass resolutions enabling two more lots to be built on the roof of the building, which were then transferred by the body corporate to the appellants for a nominal amount. At trial it was held that there were procedural invalidities in the process adopted by the appellant and the body corporate to give effect to this scheme, and that in any case the actions of the appellants were a fraud on the minority, the respondent. The former decision was set aside on appeal, but the latter was upheld, the Court of -- 25 of 32 -- 26 Appeal also endorsing a broad approach of dealing with the matter by way of an order for equitable compensation, with a particular figure to be paid by the appellants to the respondent. [82] In relation to equitable relief, it was held on appeal that there could be a fraud on the power although the formal requirements had been properly complied with (p 52) and that the doctrine was of general application and applied to a body corporate of this nature in the same way that it applied to an ordinary company: p 53. On the same page there were various authorities quoted supporting the proposition that an apparently regular exercise of power will be set aside if it is a means of securing some personal or particular gain, or otherwise not exercised bona fide for the purposes for which it was conferred. In that case there was a fraud on the minority because it involved the transfer to the majority at a nominal value of property which had been part of the common property for their exclusive benefit, and that property was worth more than a nominal amount. That can apply to both the committee and the general meeting (p 53G) but there was no suggestion of anything of that nature in the present case. This was not said to be a case of fraud on a power, nor was there any finding of fraud. [83] As to the Act, I was referred to s 228 for the purpose of chapter 6, the definition of “dispute” in s 227, the terms of s 276, and the terms of s 281, which permit an adjudicator to make an order requiring stated repairs to be carried out, or to pay the applicant an amount fixed by the adjudicator as reimbursement for repairs carried out by the applicant, in each case subject to a monetary limit. It was submitted that although this was in the nature of equitable relief by way of a mandatory injunction, the fact that this specific power was conferred by s 281 suggested that the legislature did not intend that it had been covered by the power conferred by s 276. Certainly it would I think be difficult to argue that a matter which was of the general nature of the subject matter of s 281 but fell outside the limits of the power conferred by that section was nevertheless covered by the general power in s 276, but whether that excludes other equitable jurisdiction is another matter. [84] It was noted that a failure to comply with the adjudicator’s order was made an offence under s 288, and that s 289 gave an appeal on a question of law, which suggested that the adjudicator was required to act according to law. Such an appeal would be of little value if all that mattered was whether the adjudicator had found, as a fact,34 that a particular order was in the circumstances “just and equitable”. There was also the factor that the adjudicator’s orders set out in Schedule 5, although not exhaustive, did not contain anything in the nature of equitable relief, apart perhaps from the reference to orders being made declaring certain things, as to which it was noted that there was an express provision in s 276(1) extending the power to make an order that was just and equitable to a power to make a declaration. It was submitted that that also suggested that the legislature did not consider that otherwise the power to make an order that was just and equitable would have extended to a power to make a declaration. It does seem to me, however, that some of the other orders in Schedule 5 could be seen as analogous to equitable relief by way of injunction, particularly mandatory injunction. 34 It has been said, in another context, that what is “just and equitable” is a question of fact: Re Kurilpa Protestant Hall Pty Ltd [1946] St R Qd 170 at 183. I am not sure that proposition is applicable directly here. See eg Stephenson v State Bank of NSW Ltd (1996) 39 NSWLR 101 at 112-3 per Sheller JA. -- 26 of 32 -- 27 [85] One feature of the Act is that, when a dispute is within the jurisdiction of an adjudicator is that jurisdiction is exclusive: s 229. It would follow that, if an adjudicator were confined to remedies at law, there would be no opportunity for a party to the dispute to obtain relief which was available only in equity, since the jurisdiction is exclusive even of the Supreme Court. It is unlikely (one would hope) that such an outcome would have been intended by the legislature. [86] There have been some cases where the question of the scope of an order which could be made under s 276 has been touched on, though most of them did not involve any comprehensive discussion of the question. In Independent Finance Group Pty Ltd v Mytan Pty Ltd [2003] 1 Qd R 374 at 382-3 Thomas JA gave some consideration to the scope of what was then s 223 of the Act, now s 276 of the Act, for the purpose of determining whether a dispute fell within the ambit of that section. He did not say anything particularly helpful for present purposes about the scope of the jurisdiction, although some of his remarks in paragraph [31] suggests that it was at least not narrower than a jurisdiction to give equitable remedies. [87] In James v Body Corporate for Aarons CTS 11476 [2003] QCA 329 Davies JA at [20] said, in relation to that section by its former number: “Orders of the kind which the adjudicator is given power to make by s 223(3) are all orders with respect to matters which might be expected to arise in the administration of the affairs of the body corporate including the obligation of the body corporate to maintain the common property in good condition.” He went on to contrast what is now s 281 of the Act, which authorised orders which “trespass into the field ordinarily occupied by the common law.” [88] In McColl v Body Corporate for Lake View Park CTS 20751 [2004] QCA 44 the Court of Appeal was again using the earlier numbering scheme. The appeal was about whether a particular amendment to the by-laws was one required to be carried without dissent, but one of the grounds sought to be argued that the body corporate in general meeting resolving as it did was required to act reasonably, in reliance on what was then s 87 of the Act, now s 94. Davies JA, with whom the other members of the court agreed, said at [25] that this section “is concerned with the body corporate’s general management functions. It is not, it seems to me, concerned to regulate decisions made at meetings of the body corporate, in this case to consent to the recording of a new community management statement. In my opinion s 87(2) has no application to a resolution of the members of the body corporate under s 55.” [89] It seems to me that that decision is authority for the proposition that the effect of s 94 of the Act is not to impose on the members of the body corporate an obligation to act reasonably in relation to decisions in general meetings, here the decision to terminate the caretaking agreement. I respectfully agree with the interpretation of this decision of Wilson DCJ in Dindas v Body Corporate for One Park Road CTS 2114 [2006] QDC 302 at [34]-[35]. It is not clear whether the adjudicator was seeking to rely on s 94 in his decision. If he was, that would have been an error of law, in view of the interpretation of the Act adopted by the Court of Appeal. [90] I might add that insofar as s 100(5) of the Act requires the committee to act reasonably in making a decision, by the application of the reasoning in McColl -- 27 of 32 -- 28 (supra) it appears to me that this also applies to a situation where the committee is making a decision to which that section applies, a decision which is a decision of the body corporate. I do not consider that this provision applies to the actions of the committee in proposing a resolution for a general meeting of the body corporate, giving notice of the general meeting, or expressing views about the proposed resolution to the lot owners prior to or indeed at the meeting. This provision could not be of any relevance to this matter, even apart from the fact that it seems it was inserted by an amendment which commenced on 1 July 2007. [91] In Woodrange Pty Ltd v Le Grand Broadwater Body Corporate [2004] QDC 215 I held that the general power in s 276(1) of the Act did not extend to a power to make an order in relation to the legal costs of a party to the dispute. In that context there was some reference to the scope of s 276(1) in paragraph [43], though of course I was not considering a question of this nature in that judgment. The outcome is, however, consistent with the proposition that it was not enough for the adjudicator to conclude that it was just and equitable for one party to the dispute to pay the legal costs of another party to the dispute. [92] In Hablethwaite v Andrijevic [2005] QCA 336 the Court of Appeal dismissed an application for leave to appeal from a decision of a judge of this court dismissing an appeal from a decision of an adjudicator. In that case the adjudicator had in effect reversed the outcome of votes in relation to a number of motions put to a general meeting by disregarding the votes cast by the applicants, who owned a majority of the lots, essentially it seems on the basis that it was not reasonable for them to have voted against those resolutions. In effect, the adjudicator was substituting his decision as to how the particular resolutions should have been decided for the decision of the members in general meeting, which power if it exists would involve a wide interpretation of the scope of power conferred by s 276(1). However, the question of whether the adjudicator could by order declare votes of some unit owners void and that resolutions were deemed to be carried was not the subject of dispute either before the District Court or in the application for leave to appeal: [13] per Jerrard JA. In essence, the appeal was concerned with the question of whether there had been a breach of the rules of natural justice in relation to the decision of adjudicator. However, at [33] Keane JA said: “The adjudicator’s statutory powers extend to making orders resolving disputes about the exercise of voting rights by lot owners. The statutory conferral of power upon the adjudicator to make an order which is ‘just and equitable in the circumstances’ necessarily contemplates a decision by the adjudicator which may be ‘just and equitable in the circumstances’ even though it overrides the exercise of voting rights by a scheme member. [34] Accordingly, the mere circumstance that voting rights of the owner of a lot in a scheme are overridden by a decision cannot, of itself, render the decision something other than ‘just and equitable’. In so far as the rights of a lot owner, other than voting rights, are not affected by the adjudicator’s decision, it is impossible to see how the lot owner can be prejudiced in a way which could not be ‘just and equitable’ simply by a decision to nullify his or her voting rights. As I have already noted, the applicants did not seek to demonstrate to the adjudicator that the enjoyment of their other rights as lot owners would be adversely affected by the nullification of their voting -- 28 of 32 -- 29 rights. As a result, there was no basis on which the applicants could seek to demonstrate that the adjudicator had erred in reaching his decision so as to entitle them to succeed on appeal to the District Court on a question of law.” [93] This statement seems to assume that there is at least potentially a very wide scope for the jurisdiction conferred on an adjudicator under s 276(1). It seems to me, however, that it should not be taken at face value. In the first place, it was clearly obiter, since his Honour had already decided that the application for leave to appeal should be refused for other reasons: see [15], [31]. In the second place, it was a statement made without the benefit of a full argument, since the applicants were litigants in person, and presumably did not make detailed submissions as to the issue of the scope of s 276(1), in circumstances where one member of the court at least thought that the matter was not in issue. In these circumstances, I do not consider that it is appropriate to approach the resolution of the matters in issue before me on the basis that there is already authority in the Court of Appeal that there is power in the adjudicator to make any order so long as that adjudicator thinks that that order is just and equitable. [94] The scope of an adjudicator’s powers under s 276 was considered in a little more detail in Dindas v Body Corporate for One Park Road CTS 2114 [2006] QDC 302 by Wilson DCJ. In that case his Honour rejected an argument based on the notion that the body corporate operates on democratic principles, or perhaps moral principles. His Honour noted at [24] that s 276 was posited on the existence of a dispute about legal rights arising within the parameters of the legislation and, hence, a just and equitable order made under the section was necessarily one made in accordance with the law, 35 and not one which rested on any notion of pure democracy. At [25] his Honour quoted as applicable to this legislation a passage in McPherson’s “Law of Company Liquidation” (4th edition) at p 177, to the effect that the mere fact that the minority were outvoted by the majority does not in itself amount to oppression. His Honour referred to the decisions in Houghton v Immer (supra), McColl (surpa), and Hablethwaite (supra). I would respectfully agree with his Honour’s comment on the third of those decisions at [38]. [95] At [39] his Honour concluded: “Neither decision is, then, authority for the proposition that the adjudicator’s powers under s 276 to make a just and equitable order to resolve a dispute necessarily connotes the power to override other rights which lie behind, and form the basis of, voting rights. The legislation plainly contemplates and permits a majority (determined by reference to voting rights granted by the Act) to assert its will by the legitimate exercise of that voting power. The principle adumbrated in Hablethwaite is confined to circumstances surrounding the actual exercise of voting rights; it does not support the much broader proposition which the respondents propound.” [96] After noting at [40] that it followed that the adjudicator had fallen into error in overriding votes simply on the basis that the decisions were “unreasonable”, his Honour continued: 35 There is no reason to think that his Honour was here seeking to distinguish between law and equity. -- 29 of 32 -- 30 “The power arising under s 276 may only, as follows from the discussion set out above, be exercised if the orders which are made do not unacceptably trample the appellants’ rights as lot owners.” [97] Decisions at a general meeting which had been overturned on the basis that they amounted to a fraud on the minority were reversed, in essence it seems to me on the basis that the adjudicator must have applied the wrong test as to what constituted a fraud on the minority. Wilson DCJ after referring to Houghton v Immer (supra) held that it was insufficient to establish an entitlement to relief on this basis simply because of findings that particular resolutions were unreasonable: [31]. His Honour said that without evidence of fraud or actual oppression, that was a step too far: [32]. The effect of his Honour’s decision was that s 276 does give an adjudicator the power to grant what might be described as equitable relief or relief on equitable grounds, that is on the basis of some breach of an equitable principle, but does not go further and give the adjudicator a discretion to set aside a decision which was taken in accordance with the mechanism established under the Act simply on the basis that he disagrees with it. With respect, I would agree with and endorse his Honour’s approach. [98] It seems to me that the authorities referred to did not support the proposition that the adjudicator was not entitled to have regard to equitable principles, or give relief on equitable grounds, when making such order as was just and equitable in the circumstances. There is also no reason, in the light of the provisions of the legislation generally, for construing this provision in such a restrictive way. I accept that inferior courts and statutory tribunals and other decision makers do not in general have equitable jurisdiction unless it is conferred on them, but whether it has been conferred in a particular case depends on the true construction of the relevant Act. 36 On the other hand, it does seem to me that the authorities do establish the proposition that an adjudicator’s power under s 276(1) is not unrestrained, that is to say, it is not simply a question of whether the adjudicator thinks that, if a particular order were made, the result would be just and equitable in accordance with the subjective view of the adjudicator. The authorities suggest that an interpretation as wide as that will not readily be adopted, and it seems to me that there is nothing in the Act to suggest that such a wide power was intended here. [99] The Act clearly contemplates that various matters are to be decided by the members of the body corporate in general meeting, and provides a mechanism for regulating the voting rights of members in general meeting, and the inference from such provisions is that the members are entitled to exercise such voting rights at general meetings. There is no general fiduciary obligation on proprietors in general meetings in relation to the way in which they exercise their votes: Houghton (supra) p 52. Accordingly it would be no basis for setting aside the resolution of the members in the general meeting that the majority’s desire to be rid of the respondent as a caretaker should not be given effect to because this had the effect of terminating contractual rights which were from the point of view of the respondent a valuable asset. Circumstances may arise under which a resolution of the members in general meeting which had such an effect would amount to a fraud on the power, 36 Whether or not the effect of the Judicature Act was to effect a “fusion” of law and equity, that may well have come about in the minds of legislators. -- 30 of 32 -- 31 but it would not be a fraud on the power merely because it had that effect, or merely because the adjudicator thought that such an outcome was unfair to the respondent. [100] Accordingly, the appellant cannot show the respondent’s application is doomed to fail because the adjudicator lacked the power to give relief for breach of an equitable principle. On the other hand, the respondent is not entitled to support the existing decision of the adjudicator simply on the basis that the adjudicator thought that the result was unfair to the respondent37 . It is in my opinion necessary to show some proper basis in law or equity for the grant of relief under s 276(1) where that has the effect of preventing a majority of the members of the body corporate from exercising effectively their rights to vote at general meetings, in accordance with the scheme laid down by the Act and regulation. Irrelevant matters [101] The appellant also submitted that the adjudicator had erred in law in taking into account irrelevant matters, essentially by reference to the various things said by the adjudicator in his reasons to which I have already referred critically. It is I think sufficient for me to say that the reasons of the adjudicator are so unclear that I cannot be certain what has and what has not been taken into account by him in coming to the decision that the resolution was invalid, and accordingly it is not possible to say whether or not irrelevant considerations were involved in that decision. Since the decision is to be set aside anyway, it is not I think necessary for me to say anything further in relation to this particular ground. [102] The appellant also challenged the adjudicator’s order under s 280 that it pay the costs of the adjudication. It is unnecessary in the circumstances to consider whether, if the order of the adjudicator had been otherwise sustainable, the adjudicator’s order that the appellant pay those costs ought to be set aside. In the circumstances where the substantive appeal succeeds, the whole of the orders made by the adjudicator including the order in relation to payment of the costs should be set aside, and should abide the outcome of the rehearing. The respondent should, however, pay the costs of the appeal, to be assessed. Conclusion [103] In the circumstances therefore the decision of the adjudicator involved errors of law and should be set aside. Given that the relevant factual considerations, including the contractual issues, had not been resolved by the adjudicator, the appropriate course is to send the matter back for rehearing, under s 294(1)(c). There were some submissions before me as to whether the effect of this provision was that any rehearing had to take place before the same adjudicator. Although read literally that is what the section says, I do not think that it should be interpreted so narrowly. [104] The legislature must have been cognizant of the fact that circumstances could easily arise under which the matter could not be sent back to the same adjudicator. For example, the error of law justifying setting aside the decision might have involved the error of a hypothetical adjudicator in failing to disqualify him or herself for actual or apparent bias; the adjudicator concerned might be dead, or might be no longer willing or able to do adjudications, or perhaps just not willing to do this one 37 Counsel for the respondent did not seek to support the decision of the adjudicator on this basis. -- 31 of 32 -- 32 anymore. Technically the power is to refer the order back through the Commissioner, and I do not consider that the statute on its true construction excludes the capacity of the Commissioner to appoint a different specialist adjudicator, and in those circumstances, if it is inappropriate for the same specialist adjudicator to conduct the rehearing, there must be a power in the court to order that the Commissioner refer the matter to a different specialist adjudicator for rehearing. [105] In my opinion it is not appropriate in the present case that the rehearing take place before the same adjudicator. As I have noted earlier, the reasons of the adjudicator suggest that he had pre-judged the matter, and was predisposed to favour the position of the respondent, and his views were so firmly expressed adversely to the appellant that I do not consider that the rehearing could be conducted fairly before him. As well, it appeared to me that his whole approach to the mater was wrong. [106] The adjudicator was required to act in accordance with the rules of natural justice, which include that the parties were entitled to a decision maker who was unbiased in fact and in appearance.38 The question in relation to apparent bias is whether in all the circumstances the parties or the public might entertain a reasonable apprehension that the decision maker might not bring an impartial and unprejudiced mind to the resolution of the question involved in the case.39 This is something which has to be assessed according to the function being discharged and the particular circumstances, and where, as here, there are reasons for the decision, a reasonable apprehension endangered by the terms of those reasons can give rise to an indication of apprehended bias. It was not a ground of appeal that the decision was defective because of actual or apparent bias, and I do not decide whether that test was satisfied by the matters in the reasons of the adjudicator to which I have referred. Where a matter has to be reheard I do not consider that it is necessary to satisfy that test in order to justify an order or direction that the matter be heard and determined by someone else. In all the circumstances I consider that in this case it is appropriate that I make an order that any determination be by someone other than the adjudicator who made the decision subject to the appeal. [107] Accordingly the orders are: 1. Appeal allowed. 2. Orders of the adjudicator of 23 June 2007 set aside. 3. Through the Commissioner, refer the matter back to an adjudicator, other than the adjudicator who made the orders of 23 June 2007, to resolve the dispute according to law. 4. Order that the respondent pay the appellant’s costs of and incidental to the appeal to be assessed. 5. Order that the costs of the adjudication which produced the orders which have been set aside abide the final outcome of the adjudication. 38 Chu v Minister for Immigration and Ethnic Affairs (1997) 78 FCR 314 at 337-8. 39 Livesey v NSW Bar Association (1983) 151 CLR 288 at 293-4; Minister for Immigration v Mok (1994) 55 FCR 375. -- 32 of 32 --