Babray & Ors v Whittles Australia Pty Ltd (Owners Corporations) [2013] VCAT 327

1. Ms Horell and Mr & Mrs Merlino own lots in an owners corporation in Travencore. Mr Babray is a former owner of a lot and is the partner of Ms Horell. There are eight residences but there are 10 lots in the plan of subdivision. Ms Horell and Mr & Mrs Merlino collectively hold 23% of the lots.
2. The respondent is the manager of the owners corporation. The respondent was originally appointed in around 2009 and that appointment was renewed on 22 March 2012 for a further term of one year. Ms Horell signed that appointment agreement on behalf of the owners corporation.
3. The applicants seek the removal of the manager and findings that manager breached its duties under the Owners Corporations Act 2006 (OC Act). The applicants say that the manager failed to act honestly and in good faith in the performance of its functions, failed or refused to exercise due care and diligence in the performance of those functions and made improper use of the its position for gain for itself or another person. Mr Babray, Ms Horell and Mr Merlino gave evidence and made submissions about a number of specific events and actions of the manager.
4. The manager denies each of the allegations. It says further that the applicants have no standing to seek an order that it be removed where the applicants do not represent the owners corporation and do not have the majority lot owners support. Evidence was given by Ms B Ashby, Strata Manager and Mr N Saunders, State Manager of the respondent.
5. Before turning to the particular matters raised by the applicants, it is necessary to refer to some background which informs the dispute.

1. As the owners corporation comprises less than 13 lots, it is not required to have a committee.[1] The owners corporation did not make rules by special resolution and so the model rules contained in Schedule 2 of the Owners Corporations Regulations 2007 (model rules) apply.[2]
2. For a period of some years before late in 2011, Ms Horell was the Chairperson of the owners corporation. She gave undisputed evidence that she was contacted by the manager (and its predecessor) from time to time about maintenance and other matters. She was asked for approval for works to be undertaken including minor repairs and the removal of rubbish left behind by tenants.
3. The plan of subdivision shows that there are eight residences and a car space adjoining each located on the common property. While there is a question as to the proper execution of licences for the car spaces, it is apparent that it has been understood that one car space is allocated to each residence.
4. The evidence indicates that in or around 1999 Mr Bottiglieri constructed a paling fence around the car space for lot 7. He apparently also made other alterations to the exterior of that unit, including the installation of french doors onto the enclosed area. The fence encloses not only the car space but also the hot water service for lot 8, owned by the Director of Housing (DOH).
5. The fence around common property is at the heart of this dispute. The applicants say that it is an occupational and safety risk because the tenant of lot 8 must climb over it to access the hot water service. Further, they say that, by building it, Mr Bottiglieri has changed the boundaries of the common property and that change has not been approved by a special resolution of the owners corporation as required under the OC Act.
6. While it is unsurprising that individual lot owners would have concerns about dealings of this kind with common property, those individual lot owners cannot act upon such concerns other than through the owners corporation. This proceeding has not been brought in the name of the owners corporation against Mr Bottiglieri and so the legality or otherwise of the construction of the fence or any other alterations are not matters which are before me for decision.
7. The complaints made in this proceeding by the applicants against the manager concern various meetings at which the fence and related concerns were discussed and the role played by the manager in respect of those meetings. There are also complaints that the manager did not call a further meeting or arrange for a postal ballot about matters relating to the fence and the owners corporation.
8. I have decided that none of the allegations made about the manager have been proven. In these circumstances, the application will be dismissed and there is no need for me to consider the question of whether the applicants have standing to seek the removal of the manager.
9. I will first discuss relevant provisions of the OC Act and then turn to the particular complaints.

1. An owners corporation may appoint a manager under section 119 of the OC Act. Where there is no committee, a manager has the functions and powers that are delegated to the manager by the owners corporation at a general meeting.
2. Under section 122, a manager:
   • (a) must act honestly and in good faith in the performance of the manager's functions; and
   • (b) must exercise due care and diligence in the performance of the manager's functions; and
   • (c) must not make improper use of the manager's position to gain, directly or indirectly, an advantage personally or for any other person.
3. The meaning of the phrase "honestly and in good faith" depends on the context. Here it is appropriate to have regard to the functions allocated to the manager by the owners corporation. Those functions include convening and organising meetings, dealing with correspondence and matters that arise from time to time and providing general advice and assistance to the owners corporation, including in respect of complaints.
4. The words "in good faith" must mean more than honesty as otherwise the phrase would be redundant. In other contexts, the requirement of good faith is understood to import notions of not acting capriciously and of not acting to further an ulterior purpose. An example of such action might be if a majority acted in such a way as to further their own interests over the legitimate interests of the minority.[3]
5. As to the phrase "due care and diligence", in Giurina v Owners Corporation No 1579 & Ors,[4] Lansdowne AsJ noted that similar words in relation to the duties of directors imposed an objective standard, being what an ordinary person, with the knowledge and experience of the director, might be expected to have done in the circumstances if he was acting on his own behalf.
6. Here, the applicants say that the manager acted dishonestly but also in a manner consistent with acting to benefit Mr Bottiglieri over their interests. In order to show that was the case, it would be necessary for there to be evidence that it is more likely than not that the decisions made and actions taken by the manager were motivated by that purpose.
7. I will deal with each event raised by the applicants and the allegations arising in turn.

1. On 20 October 2011, Ms Horell wrote a letter to Mr Bottiglieri. It carried the following heading:

Notice is hereby given to members of the Owners Corporation Plan of Subdivision No. 24189, 117-119 Mooltan St, Travencore, that a General Meeting will be held on Thursday 3rd November 2011 at 6:30pm at the Springthorpe Country Club, Springthorpe Boulevard, Macleod. (Opposite Grand Avenue).

This meeting is called under section 6(5) of the Model Rules in relation to breaches brought to the attention of the Owners Corporation and identified in the Notice to Rectify Breaches sent to you as the owner of Lot 7.

1. The letter said that Mr Bottiglieri would have the opportunity to show that he had not breached the model rules at the meeting. It referred to concerns about the fence and lot 8's tenant's limited access to the hot water service and other alterations and noted that a notice to rectify breaches allowed him 28 days to rectify the breaches. A proxy form was provided.
2. The letter said that the tenant of lot 8 had made complaints to Ms Horell about accessing the hot water service. The letter said that the tenant having to climb the fence to re-light the pilot light, "is unacceptable in relation to safety and public liability insurance concerns and is brought to the attention of the Owners Corporation."
3. The letter was signed by Ms Horell as Chairperson.
4. Attached to that letter was a standard form notice headed "Notice of General Meeting". Beneath that heading appear the words:

Owners Corporations Act 2006 Section 76, Owners Corporation Regulations 2007 and Owners Corporation Rules. This Notice must be given to each Lot Owner 14 days before the meeting.

1. The notice is address to "The Lot Owner". It states that a "general meeting" would be held on the date and at the location specified above and that, at the meeting, the members can vote on issues affecting the owners corporation. The form has a box in which the agenda may be noted. It had been completed as follows:
   1. Notice to Rectify Breaches issued to the owner of Lot 7 - Mr Rick Bottiglieri.
   2. General business.
2. There was also a box in which the "text of any special or unanimous resolution to be vote on at the meeting is attached or specified below." That box was completed as follows:

Mr Bottiglieri to remove the 2 fences he erected without approval on a car space next to his Lot's north-west wall (Rear building). The fences are permanently blocking access to the gas water heater of Unit 8 (Department of Housing). The tenant is climbing over the fences to light the pilot light of the heater and this situation is creating safety and public liability concerns for the owners. Mr Bottiglieri to return the common property land next to his Lot which he is now using as a "fenced private courtyard" to a car park space as identified on the plan of subdivision.

Mr Bottiglieri to remove the French doors he installed without permission; and to re-instate the window, security grill and bricks he removed without permission from the north-west load bearing double brick wall of the rear building. The Owners Corporation to approve the building works.

1. Ms Horell as Chairperson was shown as the person giving the notice.
2. A document purporting to be a notice to rectify defects had been issued by Ms Horell in her capacity as Chairperson on 18 October 2011. The defects and steps to be taken are essentially the same as set out in the proposed resolution above.
3. On 31 October 2011, the manager wrote to all lot owners to report on the outcome of separate Tribunal proceedings between Mr Babray and Ms Horell as applicants and the manager and Mr Bottiglieri as respondents. Relevant here, the orders made by the Tribunal on 27 September 2011 state that they do not deal with any car space, the installation of gates on any car space or the installation of french doors in lot 7.
4. The letter included the following:

As Owners Corporation managers it has come to our attention that a "Notice of General Meeting" has been called for the (sic) 3 November 2011. We impartially note that the elected chairperson Anne Horell has the power to call this meeting but has not given members the required timeframe notification of 14 clear days and as such the meeting and any decisions made will be invalid.

We further note, an unauthorised "Notice to Rectify Breach" issued in the name of the Owners Corporation by Anne Horell is not valid.

1. A meeting proceeded on 3 November 2011. Present were Ms Horell, Mr Bottiglieri, Mr & Mrs Prolisko (joint owners of lot 1) and Mr Babray. The minutes for the meeting, prepared by Ms Horell, show that proxies were received from the DOH, in favour of Ms Horell, and from the owner of lot 3, Biotech Com. Pty Ltd. While the minutes state that the latter proxy was in favour of Ms Horell, in fact it gave a proxy to the director of the lot owner.
2. The minutes show that a resolution on the above terms was passed with Ms Horell voting in favour for herself and on behalf of DOH and the owner of lot 3. Mr Bottiglieri and Mr & Mrs Prolisko voted against the resolution.
3. On 10 November 2011, Ms Horell wrote to the manager saying in part "I provide the following documents that are required for filing of records in relation to the Owners Corporation General Meeting held on 3rd November 2011." Attached were copies of minutes, proxy forms, the notice of the meeting, the notice to rectify breaches and the covering letter to Mr Bottiglieri. The letter referred further to concerns about the tenant's access to the hot water service and gave contact details for the DOH. The letter asked that Mr Bottiglieri be asked to remove the fence as soon as possible. The letter was signed by Ms Horell as Chairperson.
4. On 16 November 2011, the manager wrote to all lot owners. The letter referred to a special general meeting (SGM) to be held on 7 December 2011. The letter explained that the SGM had been called as a result of the 3 November 2011 meeting. The letter stated:

We impartially note again that the elected chairperson Anne Horell had the power to call this meeting but had not given members the required timeframe notification of 14 clear days and as such the meeting and any decisions made are considered invalid.

We have been advised by members that attended the meeting that the minutes as supplied to members are factually incorrect, are not a true reflection of the meeting and the resolutions purportedly passed are invalid.

Please find attached Notice of Special General Meeting. We have the power to convene the meeting and do so in response to matters of concern raised by some owners. They are calling for the removal of the chairperson and the election of a new chairperson. It is time to clear up all outstanding issues.

1. The letter also said that, as the proxy for Biotech Com. Pty Ltd, was in favour of the director who did not attend, there was no quorum such that any valid resolutions could be passed at the 3 November 2011 meeting.

1. The applicants say that the manager was incorrect to say that proper notice had not been given for the meeting on 3 November 2011. They say that it was not an SGM but rather a meeting under the dispute resolution procedures set out in the model rules. They say those rules require that the parties to the dispute meet within 14 days and so there is no requirement for 14 clear days notice to be first given. They further say that the form used is not only for general meetings. By the inclusion of the reference to the model rules beneath the form heading, it is clear that it is the appropriate form to be used to call a dispute resolution meeting. The applicants say that, as the manager is incorrect about its understanding of these matters, it has failed to act with due care and diligence.
2. Further, the applicants say that the managers acted dishonestly and in bad faith in writing the above letters and expressing views about the validity of the 3 November 2011 meeting. They did not point to any evidence of dishonesty or bad faith but say that the managers were acting to support Mr Bottiglieri over them. In this way, the manager was said to be acting improperly to obtain a gain for Mr Bottiglieri. It was implied that the gain was Mr Bottiglieri not being required to remove the fence but no direct evidence of this was given.
3. Ms Ashby's evidence was that she wrote the above letters after discussing the events with Mr Sanders and that he helped her finalise their terms. Mr Sanders gave evidence that he believed the contents of the letters to be correct and true. The manager denies the allegations made as to its competence, honesty and good faith.

Dispute resolution under the rules and the OC Act

1. Rule 6 of model rules deals with disputes. In broad terms, the rule sets out a process to be applied where there is a dispute involving a lot owner, manager, or an occupier or the owners corporation. The process differs slightly depending on whether the owners corporation has or does not have a grievance committee. There is no such committee here.
2. Rule 6(2) requires that the party making the complaint must prepare a written statement in the approved form. Mr Sanders gave evidence that those forms are available from the Director of Consumer Affairs and copies can be provided by the manager on request.
3. All lot owners are then to be notified of the dispute by the complainant, whether or not they are a party to the dispute (rule 6(4)).
4. Rule 6(5) then says:

The parties to the dispute must meet and discuss the matter in dispute, along with either the grievance committee or the owners corporation, within 14 days after the dispute comes to the attention of all parties.

1. Taking into account the requirement that an approved form be completed and sent to all lot owners, this means that the meeting ought to be held within the 14 day period after that form has been received by lot owners.
2. Leaving to one side for the moment the form of the documents Ms Horell produced, she was entitled to make a complaint, notify other lot owners about it and to have a meeting with the owners corporation to try to resolve the dispute.
3. If a dispute is unable to be resolved, the parties may then exercise their rights to take further action under Part 10 of the OC Act. Under Part 10:
   • A lot owner can make a complaint to the owners corporation about an alleged breach by another lot owner of an obligation imposed under the OC Act or under the rules. That complaint must be made using an approved form (section 152)
   • The owners corporation must decide to take action under Part 10 in respect of the alleged breach, or apply to the Tribunal for an order requiring the breach to be rectified or to take no action. That decision can only be made after the dispute resolution process under the rules has been used and has not resolved the dispute (section 153)
   • If the owners corporation decides to take no action, it must give notice of the decision to the complainant and include reasons (section 154)
   • If the owners corporation decides to take action, it must give notice of the alleged breach to the person alleged to have committed the breach and allow them 28 days to rectify the breach. That notice must be in the approved form. Where the breach concerns an act of a lot owner, a copy of that form must be given to all lot owners (section 155)
   • If the breach is not rectified, more time may be allowed, a final notice may be given or no further action may be taken (section 156)
   • A final notice must be in writing in the approved form, give a further 28 days to rectify the breach and state that, if the breach is not rectified, the owners corporation may decide to apply to the Tribunal for an order requiring rectification of the breach (section 157)
4. So, where the rules' process has not resolved a dispute and the complainant says that there has been a breach of an obligation, the process described under Part 10 applies. That requires decisions to be made by the owners corporation, one of which may be to issue a breach notice.
5. Where the breach is not rectified and a final notice has been given, the owners corporation may decide to commence a proceeding in the Tribunal. Under section 18, a special resolution is required for legal proceedings to be commenced, unless an individual lot owner applies to represent the owners corporation.[5] Such a resolution can only be passed at a properly convened meeting.
6. Ms Horell, even as Chairperson had no power to issue a breach notice to Mr Bottiglieri. While an individual lot owner may initiate the processes found in the rules and Part 10, a decision to issue a breach notice may only be made by the owners corporation. The consequence is that her breach notice was invalid and cannot be said to have fallen within the rules' dispute resolution processes.

1. As noted earlier, Ms Horell's documents contained an agenda which included a proposed resolution concerning Mr Bottiglieri's fence and other alterations. Such a resolution could only be considered at a properly convened SGM.
2. Under section 74 and relevant here, an SGM may be convened by the Chairperson of the owners corporation and also by a manager where there is no committee. Accordingly, Ms Horell was empowered to convene such a meeting.
3. Section 76 requires that a person convening an SGM must give notice in writing of the meeting to each lot owner at least 14 days before the meeting.
4. On its face, Ms Horell's notice purports to call a general meeting. Although the form used by her makes reference to the Regulations and model rules, there is nothing else about the form which is consistent with a meeting being called under rule 6, particularly because what is sought is the passing of a resolution.
5. The use of the words "General Meeting" in the heading on the form, the express reference to section 76, the boxes providing for the setting out of the agenda and any resolutions are all consistent with the form being concerned with a general meeting. Further, the inclusion of a resolution to be voted on is consistent with a general meeting rather than a meeting convened as part of a dispute resolution process which has no decision making powers.
6. While I have noted that the second paragraph of the heading of the letter to Mr Bottiglieri did refer to the model rules, it also referred to a general meeting.
7. On balance, the correspondence and notice are more consistent with the purported calling of a general meeting than a dispute resolution process. I am satisfied that, even though Ms Horell may have believed she was seeking a meeting for the latter purpose, the manager was entitled to understand that she was purporting to call a general meeting.
8. In those circumstances, 14 days notice had to be given and was not. The consequence is that I am satisfied that the meeting was invalid and the resolution said to have been passed is also invalid.
9. The manager was entitled to advise lot owners of these matters and, in my view, would have failed to act with due diligence not to do so. The manager was entitled to say that the Chairperson has no power to issue a notice to rectify breaches under the OC Act. While it may well be correct that the manager sought approval from Ms Horell about small matters of maintenance and repairs in the past, that conduct could not give her the power to issue such a notice.
10. The complaints about the manager made relating to the 3 November 2011 meeting are not proven and are dismissed.

1. There was no dispute that the manager had the power to call the SGM on 7 December 2011, however, the applicants say that, in doing so, the manager chose to side with Mr Bottiglieri. No evidence about that was produced other than the reference to the opinions of attendees at the earlier meeting contained in the manager's 16 November 2011 letter and referred to above in paragraph [36].
2. On 23 November 2011, Ms Horell wrote to the manager setting out in detail her concerns about health and safety risks arising from the hot water service for lot 8 being located within the fenced area of lot 7. She noted that she had asked the manager to ask Mr Bottiglieri to remove the fence and that the manager had failed to do so or to acknowledge the request. She stated that the failure and refusal to act was unacceptable. Ms Horell set out alleged breaches of the model rules arising from the construction of the fence. She then, in her capacity as Chairperson, purported to instruct the manager to arrange for the removal of the fences using funds from the owners corporation's account and then seek repayment from Mr Bottiglieri. She said that Consumer Affairs had confirmed that urgent works to ensure health and safety do not require a special resolution and that a unanimous resolution is required regarding use of common property. She sought a response by 30 November 2011.
3. On 25 November 2011, the manager wrote to all lot owners. It forwarded the above letter from Ms Horell and stated that Ms Horell had been advised that the matters raised would be discussed at the SGM, as that is the correct forum in which to deal with such matters. The letter also stated that Ms Horell did not have the power to authorise action or expenditure on behalf of the owners corporation and that, as manager it did not have that power either. It stated that only members of the owners corporation have the power to so act. The letter noted that gates to lot 7 had been in place for over 10 years and access is available to the hot water service.
4. I will come to the complaints about this exchange of correspondence shortly.

1. On 7 December 2011, Mr Merlino received a telephone call from Ms Ashby. The agreed evidence was that she called to enquire about whether he intended to attend the SGM. Ms Ashby's evidence was that she initiated the call because, given the nature of the matters to be discussed, she and Mr Sanders wanted to ensure that as many lot owners as possible attended. Mr Merlino gave evidence that Ms Ashby said that it was advisable that he attend and that the issues Mr Babray and Ms Horell were pursuing were going in the wrong direction.
2. As he could not attend the meeting, later that day Mr Merlino faxed a completed proxy form to the manager nominating Mr Babray as proxy for he and Mrs Merlino. The proxy form was signed only by Mr Merlino.
3. Within a short time he received a second telephone call from Ms Ashby. Mr Merlino's evidence was that she asked why he had given his proxy to Mr Babray. Mr Merlino replied that he agreed with some of the points Mr Babray was making and that he wanted Mr Babray to represent him.
4. At the hearing Mr Merlino confirmed that all Ms Ashby asked was why he had given the proxy to Mr Babray but he read into those words that she was encouraging him to give the proxy to her or to someone else. He said that was not proper.
5. Ms Ashby's evidence was that she had asked about Mr Merlino's intentions regarding the proxy in the context of an agenda item which touched on Mr Babray's attendance at the meeting. The agenda item said:

Members to consider a resolution that Henry Babray not be granted admittance to any meeting to be held of the Owners Corporation

1. Ms Ashby's evidence was that she wanted to check that Mr Merlino intended to appoint Mr Babray as proxy and to check that he was aware of that agenda item. In evidence she said that she probably should not have made the second telephone call. She agreed that if Mr Babray was a properly nominated proxy he could attend the meeting.
2. The applicants contend that by making the second telephone call to Mr Merlino, Ms Ashby breached section 89 of the OC Act which makes it an offence for a person to "require or demand that an owner provide a proxy in favour of a person for voting at a meeting" and acted dishonestly and in bad faith.
3. On Mr Merlino's own evidence, Ms Ashby did not ask for the proxy to be given to Ms Ashby or someone else or use words which could meet the description of a requirement or demand to that effect. While I accept that Mr Merlino may have believed that to be the implication of what was said, I also accept Ms Ashby's evidence that she was making the enquiry in the context of the specific agenda item dealing with Mr Babray. I find no breach of section 89 of the OC Act.
4. I agree that it would have been preferable for the telephone call not to have been made. That is not because the call could have amounted to a breach of section 89 or because it indicates dishonesty or bad faith but rather because, Mr Babray was entitled to attend if nominated to act as proxy. Mr Merlino's nomination rendered the telephone call and the agenda item redundant. I do not consider the decision to make the unnecessary phone call to be sufficient to base a finding that the managed failed to exercise due care and skill.
5. The applicant's complaints arising from the contact with Mr Merlino are dismissed.
6. During the hearing, the manager raised a question as to whether the proxy from Mr Merlino was valid as it was signed only by him and not by Mrs Merlino, the joint lot owner. As the proxy was accepted as valid at the meeting, the question is hypothetical. If the proxy had been set aside, there would have been no change to the voting outcome. In those circumstances, I am not required to express a final view on this question, however I note that it would be preferable for joint lot owners to each sign a proxy form so that it is clear that their joint vote may be exercised by the appointed proxy. On the other hand, if Mr Merlino was his wife's agent and signed on her behalf in that capacity, the proxy may have been valid.[6]

1. As to the agenda item itself, the applicants complain that it is indicative of partisan support for Mr Bottiglieri by the manager which is inappropriate.
2. Ms Ashby's evidence was that the item was included at the direction of Mr Sanders and had not been sought by Mr Bottiglieri. She said that Mr Babray had been disruptive at previous meetings. Mr Sanders' evidence was that the item was included after Mr Babray had participated in the earlier Tribunal proceeding and they had, in his words, been "unpleasant". I understood Mr Sanders to consider that Mr Babray was disruptive and his presence would make the conduct of the meeting more difficult. Mr Sanders conceded the resolution should have been to provide that only lot owners or their proxies could attend meetings.
3. As a former lot owner, Mr Babray was not entitled to attend owners corporation meetings in his own right. As mentioned above, he could of course attend if he was a properly appointed proxy.
4. The inclusion of this agenda item was clearly likely to provoke an adverse reaction from Mr Babray and Ms Horell. It would have been preferable if the resolution sought was expressed to be concerned with non lot owners without a valid proxy rather than naming Mr Babray. Having said that, I find that the manager breached no duty in taking a step, which had as its concern the proper and smooth running of an SGM intended to deal with a matter which was clearly divisive. The agenda item was quite properly passed over as Mr Babray was appointed as a proxy.
5. The complaints regarding the agenda item are dismissed.

1. As discussed earlier, on 24 October 2011, the owner of lot 8, DOH, sent a completed proxy form to Ms Horell nominating her as proxy for a period expiring on 24 October 2012. At the 7 December 2011 meeting, Ms Horell sought to rely on that proxy.
2. A second proxy had been sent to the manager by DOH on 21 November 2011. That proxy nominated Ms Ashby and contained an end date of 21 November 2012.
3. At the 7 December 2011 meeting, Mr Sanders decided that the latter proxy superseded the former and so Ms Horell could not vote on behalf of DOH. This was disputed by Ms Horell and Mr Babray at the meeting, but Mr Sanders' decision stood.
4. The timing of the proxy indicates that it was sent to Ms Horell in response to her letter calling the 7 November 2011 meeting.
5. Ms Ashby gave evidence that it was usual for DOH to send a proxy for each meeting and that the manager was routinely authorised to vote. This was usual for not only lot 8 of this owners corporation but also for other DOH owned properties managed by the manager. Ms Ashby said that the proxy just arrived at the manager's office via facsimile.
6. The applicants say that, at the 7 December 2011 meeting, during the course of a discussion about which proxy was to be relied upon, Ms Ashby said that she had telephoned DOH and that she had been authorised to act as proxy and had instructions to support Mr Bottiglieri on all motions. Ms Ashby denied both saying these words and having telephoned DOH about the proxy.
7. The applicants complain that Ms Ashby breached section 89 of the OC Act by seeking the DOH proxy and further that the manager acted in bad faith in refusing to accept the proxy held by Ms Horell as valid and in supporting Mr Bottiglieri's position.
8. Neither the applicants nor the manager called the DOH representative who signed the proxy form to give evidence. However, the manager produced an email sent by Ms Ashby to Ms Joanna Fernandez of DOH. Ms Ashby asked Ms Fernandez to provide a letter "explaining the intention of the provided proxies." The email set out a timeline of events and then said:

Can you please provide a letter advising of your intention in regard to the proxies provided and noting that the 21 November proxy to myself revoked the earlier proxy by its issue, even though not revoked. If of course this was the intention.

A proxy was incorrectly signed on behalf of the Department for Ms Anne Horell, who was incorrectly acting on behalf of the Owners Corporation, to act as a proxy for a private owners committee meeting arranged by her on 23 November 2011.

It was the intention of the Department to appoint the Body Corporate Manager of [address] to represent the Department and act on the Departments (sic) best interests during a special general meeting convened by Whittles for the 7 December 2011.

When appointing a proxy to represent the best interests of the Department during an owners corporation meeting, a proxy is always given to the Body Corporate Manager.

1. Having regard to this email, which was not challenged by the applicants by summonsing Ms Fernandez,[7] I consider it more likely than not that DOH intended, for the purposes of the 7 December 2011 meeting, that the manager would be its authorised proxy. I am unable to reach a firm conclusion about what was or was not said by Ms Ashby at the meeting, however, even if words to that effect were said, there is no suggestion that Ms Ashby required or demanded the proxy contrary to section 89 of the OC Act or that she acted improperly in voting at that meeting given she was intended to be given discretion as to votes.
2. The applicants placed significant weight on section 87 of the OC Act which deals with proxies. That section says:

(1) A lot owner may authorise a person in writing to act as proxy for any of the following -

(a) to attend, speak or vote on the lot owner's behalf at a meeting of the owners corporation;

(c) to represent the lot owner on the committee of the owners corporation.

(2) The authorisation may set out how to vote on particular matters.

(c) must not be transferred by the holder of the proxy to a third person; and

(d) must be delivered to the secretary of the owners corporation; and

(e) is effective from the beginning of the first meeting of the owners corporation held after it is delivered to the secretary; and

(f) lapses 12 months after being given or, if there is an earlier date specified in the authorisation, on that date; and

(g) is revoked on the date that notice of the revocation is delivered to the secretary.

(5) A person authorised to act as proxy must act honestly and in good faith and exercise due care and diligence.

(6) A lot owner may revoke an authorisation given under this section and vote at a meeting or in a ballot instead of the person who was authorised.

1. The applicants say that, reading (3)(f) and (g) together, an authorisation to act as proxy does not lapse and may not be superseded with the nomination of a new proxy or be cancelled by the manager. They say that an authorisation to act as proxy lapses 12 months after being given or is revoked by way of a revocation notice.
2. Mr Sanders gave evidence that there is no standard form for a notice of revocation. He stated that, based on his many years experience and legal advice he has received in the past, he believes that a later in time proxy amounts to a revocation of any earlier proxy and so the latter document is the valid proxy.
3. While it is correct that section 87(3)(g) refers to notice of a revocation being given, it makes no reference to how that is to be done. There are many provisions in the OC Act which require that a particular form be used - relevant here the appointment of a proxy must be done using the prescribed form (section 87(3)(a) above). In the absence of a reference to a prescribed or specific form in section 87, I read it to require only that there be a written notification of revocation of an existing proxy. I accept the proposition that a proxy which post dates an existing proxy could amount to such a notice.
4. Taking into account the timing of the proxies and the email material from Ms Fernandez, I find no breach of the manager's duties in relation to the management of this aspect of the 7 December 2011 meeting. As indicated above, the evidence before me does not support a finding that there was a breach of section 89 in respect of the giving of the DOH proxy to the manager.

1. The agenda item dealing with lot 8's fence said:

Members to consider the invalid issue of a Notice to Rectify breach issued in the name of the Owners Corporation to Lot 7 but without authority of the Owners Corporation. Members to consider a resolution that this matter has been dealt with many years ago and is no longer an issue the Owners Corporation wishes to pursue and is considered finalised.

1. The applicants say that, contrary to the letter sent by the manager dated 25 November 2011, the health and safety concerns raised by Ms Horell in her letter of 23 November 2011 were not discussed. They say that Mr Sanders said those matters were not on the agenda and so would not be discussed. Mr Sanders denies making that statement. His evidence was that the issue was one of access to the hot water service rather than about occupational health and safety.
2. The applicants further say that Mr Sanders "accepted" a verbal agreement made between Mr Bottiglieri and the DOH's tenant, to the effect that the tenant could access the hot water service as required through lot 7's bedroom. After the above motion was passed, Mr Babray suggested that a postal ballot be held for all owners to consider approving Mr Bottiglieri's arrangement with both tenants and his fences. The applicants say that "Mr Sanders rejected a postal ballot."
3. Mr Sander's evidence was that he had reviewed minutes of the owners corporation back to 2001 and they showed that the alterations had been discussed. He took the approach that these matters had been dealt with by the owners corporation previously. He told the meeting that a special resolution is required for legal proceedings to be commenced. He said that there was a discussion about the matter including about access to the hot water service. He told the meeting about the arrangement made between Mr Bottiglieri and the DOH and its tenant.
4. The applicants' complaints of bad faith on the part of the manager and of a failure to exercise due care and diligence in respect of the discussion about the fence must be dismissed for two reasons.
5. Firstly, the applicants appear to have a misunderstanding about the role of a manager and the decision making powers of an owners corporation. While there can be little doubt that a professional manager will have influence at a meeting that may extend to managing the course of discussions, the manager does not make decisions. Decisions are made by votes being cast by lot owners or their proxies. The minutes show that the above resolution was passed three votes to two. It is not correct to say that Mr Sanders accepted or rejected anything - any decisions made were of the owners corporation. As I have found that Ms Ashby held a valid proxy for DOH which contained no express instructions, she was entitled to vote at her discretion.
6. Second, it is apparent from the minutes of the meeting that a range of matters were covered in the discussions. While I understand that the applicants dispute aspects of those minutes, I consider it more likely than not that the matters giving rise to the health and safety concerns outlined by Ms Horell in her 23 November 2011 letter were discussed. Further, in my view it does not matter whether those concerns were more properly described as health and safety concerns or access issues.
7. I have reached these views taking into account the fact that the breach notice issued by Ms Horell was referred to in the agenda and that document included reference to lot 8's access to the hot water service being blocked by the fence. Further, the SGM followed shortly after Ms Horell's meeting. The minutes she prepared show that there was a detailed discussion about the health and safety issues for the tenants of lot 8 arising from the construction of the fence. Finally, having observed Ms Horell and Mr Babray at the hearing of this matter, I have no doubt that they would have been more than capable of raising all of their concerns at the meeting.
8. The complaints regarding the conduct of the 7 December 2011 meeting are dismissed.

Meeting at the manager's office - 16 January 2012

1. The applicants attended the manager's office on 16 January 2012. They say that Mr Sanders and Ms Ashby confirmed that the owners corporation register does not contain an approval for the fences erected on lot 8 and that he does not have a car park or courtyard licence. They say that Mr Sanders said that he had not asked Mr Bottiglieri to remove the fences because he had received no direct complaints from the DOH tenant.
2. The applicants say that complaints had been received by them from the tenant and that Mr Sanders had been notified of those via Ms Horell's correspondence. They further say that it is not surprising that the tenant may not have raised concerns about access to the hot water service with DOH, because s/he would not want to be known as a troublesome tenant. They say they put this to Mr Sanders.
3. Mr Sanders agreed that there is no approval for the fences in the register and that there is no licence for the car space. He says that none of the car space licences for the lots have been executed but that they have been treated as valid and the interest in each has been treated as passed on the sale of lots from time to time. He maintains that the erection of the fence and other alterations were accepted by the owners corporation many years ago.
4. As discussed earlier, in making these complaints, the applicants appear to misunderstand the role of the manager as compared to the owners corporation constituted by the lot owners. Decisions about the construction or removal of a fence on common property are for the owners corporation to make.
5. If the manager had not received direct complaints from DOH about access or health and safety, it was entitled to say so. Given that these matters were the subject of discussion and a vote at the meeting a little over a month earlier, it is difficult to see what the applicants could ask of the manager in January 2012.
6. These events do not establish any breach of the manager's duties.

1. The applicants complain that at the annual general meeting (AGM) held on 3 March 2012, the manager did not allow Ms Horell to vote as proxy for DOH. The proxy to be relied upon was that dated 24 October 2011 and discussed earlier.
2. For the reasons given, I am satisfied that the proxy given to Ms Ashby on 21 November 2011 was notice of revocation of that proxy and so the manager did not err in not allowing Ms Horell to vote for DOH. This complaint is, accordingly, dismissed.
3. The minutes of the meeting note that a proxy dated 23 March 2012 in favour of Ms Ashby was received that day, too late for the meeting. As a consequence of DOH not attending in person, no vote was cast for lot 8.
4. The applicants say that Mr Sanders told the meeting that he had cancelled all proxies granted in 2011 effective 1 January 2012 and that he had authority to do so. They say that is another reason why Ms Horell was prevented from voting for DOH.
5. Mr Sanders denied this was said and Ms Ashby also denied hearing such words. Mr Sanders added that he was aware he had no power to cancel a valid proxy. He contends that he did make reference to the date 1 January 2012 in the context of explaining that the OC Act had been amended with effect from that date to change the provision dealing with voting and non financial lot owners. I will come to that provision shortly. He says that the applicants have confused the two matters.
6. I prefer the evidence of Mr Sanders about this matter. I find is most unlikely that, Mr Sanders would believe that he had the power to cancel valid proxies. Given the matters discussed below regarding Mr & Mrs Merlino's entitlement to vote, I consider it more likely than not that the reference to 1 January 2012 concerned the new provisions regarding voting rights and that Ms Horell and Mr Babray misunderstood what was said.
7. It became apparent in the hearing that, given the 21 November 2011 proxy was valid for 12 months, it could have been relied upon at the AGM. The applicants said that, if the 21 November 2011 proxy was valid, then the manager's failure to use it indicates a failure to exercise due care and skill. The failure to use the proxy was certainly an error but given the plain evidence that DOH's pattern was to send a new proxy for each meeting, the error may be excused as a lapse which an objective person would accept can occur from time to time. These events do not support a conclusion that there was any deliberate act or negligence on the part of the manager.
8. The complaints regarding the use of the DOH proxy are dismissed.

1. Mr Babray attended the meeting as proxy for Mr Merlino. The manager informed the meeting that, as Mr & Mrs Merlino and lot owner 1 were unfinancial, they had no right to vote at the meeting. The consequence of two lots being excluded from voting and no vote being cast for DOH was that there was a deadlock between Ms Horell and Mr Bottiglieri on a number of agenda items.
2. Perhaps surprisingly, given the institution of these proceedings, one item Ms Horell and Mr Bottiglieri did agree on was the reappointment of the manager for another year.
3. After the meeting, Mr Merlino was told that he was unfinancial because he had not paid a levy.
4. Mr Merlino produced a receipt showing that he had made a cash payment at the post office on 19 March 2012 and that payment was directed to the manager's account via the DEFT payment system.
5. Section 94 of the OC Act, which took effect from 1 January 2012, says:

(1) Subject to subsection (2), a lot owner who is in arrears for any amount owed to the owners corporation is not entitled to vote, either in person, by ballot or by proxy, unless the amount in arrears is paid in full.

(2) A lot owner who is in arrears for any amount owed to the owners corporation is always entitled to vote in a case where a special resolution or unanimous resolution is required.

(3) For the purposes of subsection (1), except in the case of a payment in cash, an amount is only taken to be paid in full if it is paid not less than four business days before the vote in question.

1. The applicants say that a cash payment can be made prior to voting at the AGM and that it is not dependent on where the cash payment is made. They say that the manager refused to allow Mr Babray to vote for Mr & Mrs Merlino due to bath faith.
2. Mr Sander's evidence was that payments made via the DEFT system are cleared to their account after four days. The manager says that, section 94 allows for a cash payment to be made to the owners corporation, usually at the manager's office. As the payment in issue here was made at the post office and not at the manager's office, it cannot be a cash payment under section 94.
3. In those circumstances, the manager says that, as the payment was only made three days before the meeting via a payment system, it was not received four business days before the vote. Accordingly, Mr Merlino was not entitled to vote himself or through a proxy.
4. The manager's reading of section 94(3) must be correct. Read in context, the reference to a cash payment only makes sense if it refers to payments of cash made direct to the owners corporation. It allows a lot owner to secure their voting rights even at very short notice. A payment made through a payment system is not the same as cash because the funds are sent to the intended recipient's account and must be cleared. While it is often the case that such payments can be cleared in one or two days, that payment method is not the same as a cash payment direct to the owners corporation.
5. As there is no dispute that there was an amount of $87.70 outstanding and it was not paid within four business days of 22 March 2012 or in cash to the owners corporation, it was correct for the manager to refuse to accept the proxy given to Mr Babray.
6. The applicants also complain that Mr Merlino was later told by the manager that he was "technically" unfinancial because he had paid the levy invoice after the due date and because he owed $0.73 in interest. He was then informed that invoices for interest alone were not issued and so he queried how he could be aware that interest was due. The implication was that the managers changed the reasons for excluding the proxy and those reasons were tenuous.
7. I have reviewed the emails exchanged about these matters. I am satisfied that the manager's emails correctly identified section 94 as being the primary reason why Mr & Mrs Merlino could not vote and that the reference to the interest was included as further information.
8. The complaints regarding the manager's exclusion of the Merlino proxy are dismissed.

1. Mr Babray and Ms Horell complain that, at the conclusion of the meeting, Mr Sanders invited them to remain for an "information session". They say that he presented copies of correspondence and photographs concerning the arrangements for the tenant of lot 8 to access the hot water service within the fenced area of lot 7. Those arrangements included a gate being made accessible from outside lot 7 and a key having been given to the tenant to open the gate. The applicants say that they told Mr Sanders that the information session was unacceptable and that the material relating to the fence/gate and access should have been sent to all lot owners before the meeting.
2. Mr Sanders' evidence was that he simply presented the material to Mr Babray and Ms Horell to inform them about the arrangements Mr Bottiglieri had made with DOH and the tenant. He said it was not a separate session and that the other lot owners at the meeting, Mr Bottiglieri and Mr Prolisko were either aware of the content already or had left. When asked why he had not circulated the material in advance of the meeting so all lot owners were aware of it, Mr Sanders said that the owners corporation was not a party to the agreement and that the material simply extended the existing arrangement between lot owners 7 and 8.
3. I have noted that the fence around lot 7 was not the subject of any agenda item and so it was not a matter before the AGM. On the one hand, it might have been prudent for the materials to be sent to all lot owners to keep them all fully informed. On the other hand, only Ms Horell and, through Mr Babray, Mr & Mrs Merlino had expressed concerns about the fence. In those circumstances, giving only Ms Horell and Mr Babray a copy of the documents seems reasonable.
4. Nothing about the "information session" affected the conduct or outcome of the AGM and there was no breach of section 122 by the manager in speaking with Ms Horell and Mr Babray in this way.

1. On 12 April 2012, Ms Horell sent an email to Ms Ashby which set out a range of concerns about the conduct of the AGM. The concerns including the refusal to accept the DOH proxy given to Ms Horell and Mr & Mrs Merlino's proxy and the conduct of the information session discussed above. She ended the email asking that the manager convene an SGM with the agenda item "to consider whether the AGM held on 22 March 2012 was valid given the actions and statements by Mr Sanders."
2. Having received no reply, Ms Horell emailed Ms Ashby again on 17 April 2012. She referred to matters of concern and asked that she be advised of the date of the SGM at which the following resolutions would be discussed:
   • Whether the minutes of the 22 March 2012 AGM are a true reflection of the business discussed
   • Consideration of all interim resolutions passed and whether they are agreed to by the owners
   • Whether the manager should be replaced
   • The election of a committee and chairperson
   • A requirement that Mr Bottiglieri apply for unanimous approval for the alleged alteration of the boundaries of the common property
3. After discussing the matter with Mr Sanders, Ms Ashby replied on the same day and noted that 25% of the lot owners would be required to object to the decisions of the AGM before an SGM could be called.
4. That response arises from section 78 of the OC Act which has the effect that, where there is no quorum of 50% of lot owners (as occurred here), interim resolutions may be passed which come into effect after a specified period unless the resolutions are the subject of an SGM. Under section 74 of the OC Act, such a meeting can be called by at least 25% of lot owners. Where there is no committee, the manager may also call such a meeting (section 74(d)(iii)).
5. Ms Horell next asked for an SGM to be called by the manager.
6. There were further emails between the parties. The manager's view was that it was not appropriate for it to call another meeting where the matters of concern to Ms Horell had been discussed as recently as December 2011. Ms Ashby expressed the view that, given past history, few owners would attend and they would be unimpressed at incurring costs for such a meeting. The manager said that if 25% of lot owners called for a meeting then one would be convened.
7. Ms Horell objected to this position. In particular she noted that the manager had convened the December 2011 SGM at the request of Mr Bottiglieri and Mr Prolisko who do not constitute 25% of lot owners. She said that the manager was applying the OC Act inconsistently.
8. Ms Ashby stated in reply that the earlier meeting was not related to a petition by lot owners but was called by the manager to clear the air of all issues and give the owners the opportunity to participate. I accept that evidence.
9. Mr Sanders's view was that the manager was required to take instructions from the owners corporation not from a minority of lot owners who hold less than 25% of the lots.
10. The applicants complain that the manager failed to take into account their interests and acted in bad faith in doing so.
11. The applicants say that the only cost of a meeting is the postage for the notices. The cost of convening a meeting was said to be around $250. It was accepted that the amount would have had to be borne by the owners corporation.
12. In my view, given the history of the matter, including Ms Horell's meeting on 3 November 2011 and the subsequent SGM in December 2011, the manager was acting consistently with its duties to all lot owners not to convene a further meeting to discuss matters which had been addressed four months earlier. It was entitled to draw the conclusion that the owners corporation had made its decisions and that, in the absence of the required 25% support for a further meeting, to call one would be elevating the interests of two lot owners above those of the whole.
13. The complaint regarding the refusal to call a further SGM in around April 2012 is dismissed.

1. On 27 June 2012, Ms Horell emailed Ms Ashby asking that she arrange a postal ballot to consider a requirement that a unanimous resolution regarding changes to common property be passed and that there either be approval of the fence around lot 7 or that it be removed.
2. Ms Ashby acknowledged the email and stated that a postal ballot would not be raised.
3. Section 83 of the OC Act governs postal ballots and its terms regarding who can call for a ballot mirror those contained in section 74.
4. For the same reasons as given above, in the absence of a call for a meeting by 25% of the lot owners, the manager was entitled to refuse to call a ballot and these events give rise to no breach of its duties.

1. As indicated by the above discussions, there was no evidence before the Tribunal to show that the manager acted dishonestly or in bad faith. While some small errors were made, they did not amount to a failure to exercise due care and diligence. I am satisfied on the evidence that the manager sought to undertake its duties mindful that it is required to act on the instructions of the owners corporation for the benefit of the owners corporation as a whole.
2. For the reasons given the application will be dismissed.

[3] Anstat commentary to the OC Act, A Vassie, I Lulham and B Steele, paragraph [5.02]

[4] [2012] VSC 466

[5] An individual lot owner may make an application to the Tribunal on behalf of an owners corporation to resolve an owners corporation dispute and so no resolution is required (section 163(1A)).

[6] See discussion of proxies in the context of section 250A of the Corporations Act 2001 (Cth) in Cordiant Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC 1005, paragraph [30]

[7] At the conclusion of the first day's hearing I indicated to the parties that they may wish to consider whether there were witnesses they wished to summons to attend the further hearing. Express reference was made to Ms Fernandez. No summonses were issued.