Body Corporate for Palm Springs Residences v J Patterson Holdings Pty Ltd [2007] QDC 360

1 [2007] QDC 360 DISTRICT COURT APPELLATE JURISDICTION JUDGE McGILL SC No 3134 of 2007 BODY CORPORATE FOR PALM SPRINGS RESIDENCES CTS 29467 Appellant and J PATTERSON HOLDINGS PTY LTD AS TRUSTEE FOR THE PATTERSON FAMILY TRUST Respondent BRISBANE ..DATE 12/11/2007 ORDER -- 1 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 2 ORDER 1 10 20 30 40 50 60 HIS HONOUR: This is an application for an extension of time within which to appeal from a decision of a body corporate adjudicator under Section 290 (2) of the Body Corporate and Community Management Act (1997). A notice of appeal was filed on 31 October 2007. On the same day an application was filed for an extension of time within which to appeal. Section 290 permits an appeal to be started within six weeks after the aggrieved person receives a copy of the order appealed against. The order was made on 23 June 2007, so presumably it came to the appellant body corporate fairly soon after then, so that on the face of it the notice of appeal was well out of time. The difficulty is that under Section 312 a body corporate for a community title scheme may start a proceeding only if the proceeding is authorised by special resolution of the body corporate. On the face of it, therefore, if a body corporate is aggrieved by the decision of an adjudicator, it is necessary for the body corporate to get a special resolution authorising an appeal within the six week period, in order to appeal in the timely way, which is likely to be difficult. In the present case it appears from the evidence that the notice of meeting at which a resolution was passed in respect of the appeal was for a meeting on 28 September 2007, and that -- 2 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 3 ORDER 1 10 20 30 40 50 60 referred to a barrister's opinion distributed to unit owners in relation to the decision of the adjudicator. The notice of meeting simply proposed a resolution that the body corporate appeal against the adjudicator's decision, although the notes to Schedule B say a bit more about the background to the dispute, and indicate that it was in relation to a default notice issued by the body corporate to the managers, and a decision of an extraordinary general meeting in February 2007 to terminate the management rights agreements. Evidently, the manager made application to the specialist adjudicator, who ruled in favour of the manager. The notice of meeting makes no reference to the fact that - I think even by the time it was sent out, certainly by the time of the meeting - the time of appeal had already expired so that it was going to be necessary to apply under Section 290 (2) in order to be able to appeal. I was told that there was also no reference in relation to this to the costs involved in the application for an extension of time within which to appeal. However, the argument it seems to me really does not touch on the validity of the application for an extension of time because it is really directed to the proposition that the motion at the annual general meeting was invalid, and that is something which can only be challenged by proceedings before a specialist -- 3 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 4 ORDER 1 10 20 30 40 50 60 adjudicator, or perhaps before the Commercial and Consumer Tribunal, under Section 229 of the Act. I have to proceed on the basis that the resolution was valid, and on the face of it the resolution authorised the appeal which was therefore properly commenced on the 31st of October 2007. Once the appeal has been commenced, it is open to a body corporate without authorisation of the special resolution to bring a proceeding in the proceeding which is the appeal under section 312 (2)(b). It was conceded by counsel for the respondent, and I think correctly, that an application under section 290 (2) could be made after the notice of appeal had been filed, and in those circumstances the application for an extension of time is properly seen as a proceeding in a proceeding rather than itself a separate proceeding for which authorisation by special resolution of the body corporate is required under section 312. In those circumstances, it is not, I think, to the point, to investigate whether any information about this proposed application was made to the members of the body corporate. The application is valid on the basis that it is a proceeding in a proceeding, and that the original proceeding, the appeal, was itself authorised on the face of it by a meeting of the body corporate. So, in view of that, I overrule the preliminary point. -- 4 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 5 ORDER 1 10 20 30 40 50 60 ... HIS HONOUR: This is an application for an extension of time within which to appeal from the decision of an adjudicator under the Body Corporate and Community Management Act (1997). Under that Act there is a provision by which disputes can be brought before adjudicators and there is provision for an appeal under part 11 of the Act from decisions of adjudicators to this Court. The appeal can only be brought on a question of law, and under Section 290 (2) an appeal to the appeal body must be started within six weeks after the aggrieved person receives a copy of the order appealed against. A period of six weeks might be a reasonable enough period in most cases, but one of the difficulties if the aggrieved person is the body corporate itself is that under Section 312, the body corporate for a community title scheme may start a proceeding only if the proceeding is authorised by special resolution of the body corporate. There are some exceptions to this rule, but that does not extend to a proceeding by way of an appeal to this Court against a decision of an adjudicator under the Act. A special resolution of the body corporate is a fairly cumbersome thing. It is likely to require an extraordinary general meeting, or some sort of general meeting of the body corporate, and there -- 5 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 6 ORDER 1 10 20 30 40 50 60 are notice requirements in relation to that. It is likely to take time. It is, I think, going to be difficult given the requirement of Section 312 for a body corporate to comply with even the relatively generous appeal provision in Section 290 (1) of six weeks. How bodies corporate are expected to comply with more rigorous appeal provisions in other legislation is something that has always been something of a puzzle to me. However, that is what Section 312 says. Fortunately, Section 290 contains in (2) a provision to allow the appeal to be started at a later time on application by the aggrieved person. On the face of it, there is an unfettered discretion under (2), and I think it would be reasonable enough to consider the usual sort of considerations applicable in relation to an extension of time within which to do something, which is whether there is an explanation for the delay which has occurred, whether there will be prejudice to the parties in either allowing the matter to proceed or not allowing the matter to proceed, and in the case of an appeal, the prospects or whether anything sensible can be said at this stage about the prospects of success in relation to the appeal. In relation to the last part, the position seems to have been that the adjudicator has decided that the effect of Section 40C of the Body Corporate and Community Management Accommodation Module Regulation requires that an explanatory -- 6 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 7 ORDER 1 10 20 30 40 50 60 schedule to a voting paper for a general meeting contain a balanced explanation for anything in relation to any motion which is put before the proposed general meeting, and that the motion can be invalid if what is circulated by the committee to the lot owners is not balanced and does not fairly present or promote both sides of the issue in relation to the motion. It is sufficient for present purposes today that I cannot find anything in Section 40C of the Regulation which contains anything remotely suggesting that is a relevant consideration, so on the face of it the appeal may have something in it. One would imagine ordinarily that, if the committee is proposing a resolution, the committee would be entitled to circulate arguments in support of the resolution but would not be under any obligation to circulate arguments against it. However, I have not heard full argument in relation to that, and there may be more to it than that. I would simply say that on the face of it, the appeal may have some prospect of success. With regard to the explanation for the delay, the delay was largely attributable to reluctance of the committee to commit itself to legal expenditure in relation to the appeal without the authority of an extraordinary general meeting. There is an argument on behalf of the respondent that it was open to the committee to authorise expenditure of $3000 to obtain an opinion from counsel, on the basis that this was -- 7 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 8 ORDER 1 10 20 30 40 50 60 within the amount which the committee was authorised to expend. It may well be that $3000 is an amount which could have been paid, but the evidence is not that what was offered to the committee by the solicitors was an agreement under which they would provide an opinion of counsel in relation to an appeal for that amount. Rather, what was said was that the solicitors were willing to obtain an opinion from counsel but that they required the body corporate to put at least $3000 in trust before the commencement of any work. That does not, in my opinion, carry the implication that that was an upper limit on the amount the solicitors would charge if so retained, and it is understandable in view of the difficulties created by the provisions of the legislation in relation to the authorisation of legal costs, which I discussed in the matter of Warren v Body Corporate for Buron Vista (CTS 14325) [2006] QDC 398, that the committee would be wary about engaging lawyers without obtaining approval of the general meeting first. The committee resolved reasonably quickly after the decision became available to call an extraordinary general meeting to decide whether to appeal the decision to authorise major spending for the appeal process. However, before that meeting -- 8 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 9 ORDER 1 10 20 30 40 50 60 was held, the chair of the committee funded, with his own money, a legal opinion in relation to the prospect of success. It seems as a result of that decision the extraordinary general meeting did not decide whether to appeal and whether to authorise the spending, but these matters were put over to the annual general meeting which was to be held about a month later. At that stage, counsel's opinion was not available, though it became available later the same day. At the annual general meeting, a motion was passed to commence the appeal and a separate motion to approve spending for the appeal. That was on the 28th of September 2007 and the appeal was then filed about a month later; the explanation for that further delay was apparently associated with obtaining or having the notice of appeal settled by counsel. It may be that the process could have been done more quickly, and to some extent the timing arose because of the fact that, although there was an extraordinary general meeting called, ultimately it was not asked to decide and did not decide whether or not to proceed with the appeal, as a result of the committee chair's decision to commit his own funds. On the face of it, however, there may well have had to have been an extraordinary general meeting to authorise expenditure to obtain legal advice as to whether to appeal, and then subsequently another extraordinary general meeting to decide whether to appeal in the light of that advice. -- 9 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 10 ORDER 1 10 20 30 40 50 60 In the event the process was somewhat faster than that but that was really only the result of a personal decision by the committee chair. I do not know that the fact that that decision was not taken earlier is a fact which should tell against the body corporate. I think this just underlines the fact that sometimes it can take a body corporate a long time to do something under the mechanism laid down in this legislation. No doubt there are competing considerations as to the desirability of bodies corporate being able to decide things speedily. In any event, it seems to me that in all the circumstances a reasonable explanation of the delay that has occurred has been given, and although there may be some areas where things could possibly have been done a little more quickly, the delay is largely the consequence of the structure of the appellant rather than anything else. With regard to the question of prejudice, the respondent, a company that has a management contract, has been in dispute, with the committee of the body corporate at least, for some time. In July 2006 its contract was renewed for a further five years, but at that stage it appeared clear that the committee intended to make it difficult to carry out the duties in a meaningful manner and the respondent decided to list the management rights for sale. The person behind the management company has sworn that there were a number of parties who were initially interested, but -- 10 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 11 ORDER 1 10 20 30 40 50 60 after inspection of the body corporate records which disclosed the friction with the executive committee of the body corporate, those parties have lost interest. It seems as though attempts by the respondent to sell the business in the period of some months before the current dispute were unsuccessful. Then, earlier this year, there were attempts to terminate the management contact which led to the proceedings before the adjudicator. The adjudicator has said in his reasons that there was a different course which could have been followed under the Act; the body corporate has now foreshadowed taking that course. It seems to me that in view of the ongoing hostility, there were going to be difficulties for the respondent in selling this business anyway, regardless of this appeal and regardless of the timing of the appeal. There is also the consideration that the body corporate has the authority of a general meeting to proceed on the alternative path suggested by the adjudicator It has not yet done so, possibly in the hope that the appeal will be successful. But evidently if the appeal is unsuccessful, or perhaps in parallel with the appeal, it could take that course, and that might put further pressure on the respondent. -- 11 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 12 ORDER 1 10 20 30 40 50 60 It does not seem to me that in principle there is any objection to the body corporate taking both steps at the same time, that is, following the alternative mechanism endorsed by the adjudicator while at the same time submitting on the appeal that the adjudicator's decision was wrong in law. In all the circumstances, it seems to me that whether or not this appeal is allowed to proceed, the respondent's saleable asset is likely to be of fairly limited value, and it might have difficulty in attracting customers anyway, and that in those circumstances there is no great prejudice to the respondent in having the appeal proceeding out of time. It does not appear that anything was done by the respondent on the assumption that there would not be an appeal, because there was no appeal within the six-week period nominated in the Act. So, it seems to me that there is no significant prejudice in the circumstances flowing from an extension of time within which to appeal, and that in all the circumstances it is appropriate to allow the appeal be started by filing a notice of appeal on the 31st of October 2007. In effect, I extend time for appealing to the 31st of October 2007. I think the draft order should say pursuant to that provision, allow an appeal against the decision and orders et cetera to -- 12 of 13 -- 12112007 T(1)10-11 15-17/DMK(BNE) M/T TANK3 (McGill DCJ) 13 ORDER 1 10 20 30 40 50 60 be started by notice of appeal filed 31 October 2007, which I hope follows more closely the terms of (2) ... HIS HONOUR: Subject to those amendments, there will be an order in terms of the draft. ----- -- 13 of 13 --