Body Corporate and Community Management (Accommodation Module) Regulation 2020 (Accommodation Module)

COMMITTEE RESOLUTIONS - whether the committee acted unreasonably in resolving to commence legal proceedings - whether the committee had power to pass the motions.

Act, ss 94(2), 312; Accommodation Module, s44

1. The Body Corporate for Flinders Village does not have authority to commence proceedings against former committee members and the body corporate manager, SSKB pursuant to Motions 1, 2 and 3 passed by a vote outside of committee meeting on 16 August 2024, unless the proceeding is a "prescribed chapter 6 proceeding".
2. The application is otherwise dismissed.

• [1] The applicant is an owner and former member of the committee at Flinders Village. She has brought this application against the body corporate, disputing 3 motions resolved by the current committee on 16 August 2024 to:
  1. commence legal proceedings against previous committee members to recover losses suffered by the body corporate due to the previous committee's unauthorised expenditure (Motion 1);
  2. commence legal proceedings against previous committee members to recover losses suffered by the body corporate due to the previous committee's failure to return body corporate assets (Motion 2); and
  3. commence legal proceedings against the body corporate manager, SSKB to subpoena full body corporate records (Motion 3).
• [2] The applicant's primary basis for the application is that the committee failed to act reasonably in passing each of the above motions. A question also arises as to whether the committee had sufficient authority to make these decisions.
• [3] I will consider whether there is any basis to invalidate the resolutions as sought by the applicant.

• [4] I am satisfied that this matter falls within the legislative dispute resolution provisions.[1] The dispute is between a lot owner and the body corporate regarding an alleged contravention of, and the exercise of powers, under the Act.
• [5] On 16 October 2024, I made an interim order that pending final determination of the application, the body corporate must not implement the motions passed outside of committee meeting dated 16 August 2024 to commence legal proceedings against former committee members and the body corporate manager, SSKB.
• [6] The Commissioner invited submissions on the final order application. Submissions were received from the committee and 11 lot owners. The Commissioner then referred the matter to department adjudication.

• [7] The body corporate and the committee have an obligation to act reasonably when discharging their statutory functions, including in making a decision.[2] If satisfied a body corporate or its committee have failed to act reasonably in making a decision, an adjudicator is empowered to make an order overturning or amending that decision.[3]
• [1] Whether or not a body corporate has acted reasonably is an objective question of fact, having regard to all the particular circumstances of each case.[4] Reasonable decision-making has been described as involving an "evaluation of the known facts, circumstances and considerations that tend to have a rational bearing on the issue at hand" and it requires all relevant matters to be taken into consideration and irrelevant ones left out.[5]
• [2] A body corporate's decision is not unreasonable simply because it could have made a different or even 'better' decision. Further, it is not the role of an adjudicator to put themselves in the shoes of the body corporate, to substitute their own personal view as to what would be a preferable or more reasonable decision.[6] The burden is on the applicant, as the one challenging the decision, to demonstrate that the body corporate acted unreasonably in making the decision.

• [3] Motion 1 resolved to commence proceedings in a court of competent jurisdiction against previous committee members between August 2021 to April 2022 to recover all losses suffered by the body corporate "because of the previous Committee's unauthorised/ undocumented expenditure". The explanatory note to Motion 1 states the following:

• Tax invoice from Nicholsons Solicitors dated 30 Aug 2021. $3220.58

• Tax invoice from Nicholsons Solicitors dated 30 Sep 2021. $2183.50

• Tax invoice from Nicholsons Solicitors dated 11 Oct 2021. $5108.49

• Tax invoice from Hynes Legal dated 21 Oct 2021. $2530.00

• Tax invoice from Nicholsons Solicitors dated 28 Oct 2021. $7774.80

• Tax invoice from Nicholsons Solicitors dated 3 Dec 2021. $3879.08

• Tax invoice from Nicholsons Solicitors dated 30 March 2022. $1002.10

• Tax invoice from Nicholsons Solicitors dated 28 Apr 2022. $405.35

• Tax invoice from SSKB dated 18 Oct 2022. $4402.65

• Subtotalling $30538.78 + all incidentals incurred during this proceeding

None of abovementioned legal action was tabled, documented, or voted by any committee member at any Committee Meeting that is available.

• [4] The applicant alleges that the committee's decision to commence legal proceedings was based on differences of opinions and personal prejudices rather than on reliable evidence. She submits that the body corporate records contradict the committee's assertion that legal expenses were incurred without proper authorisation or documentation. She says all decisions made by the former committee members relating to legal expenses are recorded in committee meeting minutes and that invoices were submitted to the SSKB Invoice Hub for approval by the authorised committee members.
• [5] The application includes the following records:
  1. A committee resolution dated 8 September 2021 to engage Nicholsons Solicitors for legal advice regarding:
     • Lawful right of entry to Lot 51 (caretaker's lot) to undertake balcony repairs
     • Review of the caretaking and letting agreement
     • Body corporate requirements regarding a proposed sale of management rights
     • Body corporate requirements regarding caretaker's exercise of option for a further 5 years extension
     • Performance of manager's duties as per caretaking agreement
  2. A committee resolution dated 2 November 2021 to revoke the appointment of the caretaker to authorise online payment of invoices, and to appoint the chairperson and secretary instead as first level approvers and the treasurer as second level approver to authorise online payment of invoices.
  3. A committee resolution dated 12 October to appoint Hynes Legal to provide advice in relation to owner' motions proposed for the 5 November 2021 annual general meeting.
• [6] The committee submits that the applicant bears the onus of establishing that the committee acted unreasonably and that she has failed to discharge this onus. The committee says it formed the view that former committee members were personally liable for expenses incurred as they had not acted in good faith and without negligence, and that "a notionally reasonable committee faced with the same issue could (not would) have honestly and rationally reached the same conclusion on a proper consideration of all the available material".[7]
• [7] I note the applicant has demonstrated that there was at least some record of the former committee having engaged Nicholsons Solicitors and Hynes Legal for advice relating to bona fide body corporate matters. However, in the circumstances, that is not sufficient for me to conclude that the committee acted unreasonably in resolving to commence proceedings. In the committee's view, the former members have not acted in good faith in the performance of their duties, resulting in financial loss to the body corporate. In the committee's view, this loss should be recouped from the former committee members responsible for those decisions. Whether this would be a successful claim remains to be seen. Indeed, based on the material before me, there seems to be little evidence to support such a case. As I observed in my interim decision, there is no suggestion that the Nicholsons' invoices related to legal advice of a personal nature or that were unrelated to the administration of the body corporate. The current committee may not agree with the way funds were spent in pursuance of the caretaker, but unless there is evidence to indicate the former committee members acted in bad faith or were negligent in the performance of their duties, then they are protected from liability under the Act.[8]
• [8] Nonetheless, although there may be little merit to the committee's case against the former committee members, I do not have sufficient evidence to conclude that its decision to commence such proceedings is objectively unreasonable. If, having considered their prospects of success, the committee still decided it worth pursuing the former committee members, that is a decision for the committee to make. I note some owners say the committee is simply pursuing the former committee members as an intimidation tactic to discourage them and others from challenging the committee's decisions. If that is the case, it would bring into question the reasonableness of the committee's actions. However, in the circumstances, I have not been presented with sufficient evidence to support such a finding.

• [9] Motion 2 resolved to commence legal proceedings against previous committee members to recover all losses suffered by the body corporate because of the previous committee's failure to return body corporate assets.
• [10] The explanatory note to Motion 2 states the following:

• Tax invoice from Grace Lawyers dated 31 Mar 2024. $4443.45

• Tax invoice from Grace Lawyers dated 16 Apr 2024. $2683.45

• Tax invoice from Grace Lawyers dated 30 Apr 2024. $781.00

• Tax invoice from Grace Lawyers dated 31 May 2024. $1292.50

• Tax invoice from Grace Lawyers dated 30 Jun 2024. $1529.00

• Subtotalling $ 10729.40 + all incidentals incurred during this proceeding

• [11] My understanding of Motion 2 is that the body corporate incurred legal expenses by engaging Grace Lawyers to pursue the return of body corporate assets from former committee members, and now seeks to recover those legal costs from the applicant and Mr Levick, as the former committee members. I note it is alleged the applicant and Mr Levick were served with prescribed notices under section 224 of the Accommodation Module for the return of body corporate property and that they did not comply with these notices.
• [12] The applicant says the onus is on the body corporate to evidence that a person has possession of body corporate items. She says that the committee's decision to engage Grace Lawyers to issue notices for the return of body corporate property to herself and Mr Levick was at an unnecessary cost to lot owners. The applicant says the secretary continues to claim that the applicant did not comply with the prescribed notice but has not provided any proof that the applicant is still in possession of the requested body corporate items.
• [13] The committee submits that the decision to commence legal proceedings under Motion 2 was reasonable and necessary to recover significant losses suffered by the body corporate because of what the committee believed was the former committee members' failure to return body corporate property. It says the legal costs incurred in pursuing the matter were the direct consequence of actions, or inactions, by the former members. The committee asserts that the prescribed notices were served lawfully and in good faith, and that the failure to comply with these notices necessitated the engagement of legal representation. The committee outlined the attempts it made to facilitate the return of outstanding body corporate property. It again relies on the principle that a notionally reasonable committee faced with the same issue could (not would) have honestly and rationally reached the same conclusion on a proper consideration of all the available material.
• [14] In my interim decision, I stated that I am not aware of any determination that has been made regarding the applicant's (and Mr Levick's) compliance with notices to return body corporate property. In the absence of a determination on that issue , I questioned the reasonableness of the committee's decision to commence proceedings against these former committee members to recover its legal costs. However, having reviewed the submitted material, I do not have sufficient evidence to conclude that the committee acted unreasonably in resolving to commence such proceedings. As with Motion 1, it is not for me to determine the strength of any potential case against the applicant and Mr Levick. The committee can reasonably choose to seek recovery of its legal fees against those who it considers responsible for them. Whether there is any merit to such a claim is a separate question. In the absence of evidence that the committee was motivated by ill-intent or that it failed to take into account relevant considerations, I have no basis to conclude that it acted unreasonably in respect of Motion 2.

• [15] Motion 3 resolved to commence proceedings in a court of competent jurisdiction against the body corporate manager, SSKB to subpoena full and accurate body corporate records between 1 January 2021 to 31 October 2023 in order for the body corporate to conduct a forensic audit. The motion states that "per the financial report as at 31 July 2022 and as at 31 July 2023 conducted by Independent Auditor "KPMG" indicating anomalies in relation to the previous Committee Members between June 2021 to Oct 2023, the Flinders Village Body Corporate CTS 37247 may potentially have suffered a significant financial loss". The explanatory note lists the records that the body corporate presumably wants made available, and states that "full and accurate Body Corporate records made available will allow the independent forensic auditor to perform a full and accurate investigation in order for the Body Corporate Committee to make a sound and informed decision".
• [16] The applicant disputes that there are any anomalies in the body corporate's financial statements as asserted by the committee. Further, she says that all committee meeting minutes and resolutions are recorded and made available to owners via the SSKB owner's portal, and all body corporate records are kept on file by SSKB and are available to committee members at no cost.
• [17] At the interim order stage, it was unclear to me why the committee needs to commence legal proceedings to obtain its own body corporate records. Presumably, SSKB, as the body corporate manager holds the records on behalf of the body corporate. I had not been presented with any explanation as to why the records are not available to the committee such that proceedings are required to recover them.
• [18] The committee now submits that Motion 3 was believed to be necessary because SSKB held the records of the body corporate; the administration agreement between SSKB and the body corporate had mutually come to an end early; and the body corporate required its records for transferring to a new body corporate management company and there was apparent difficulty in obtaining those records. As such the committee submits the decision on Motion 3 was warranted at the time. In any event, for other reasons since making that resolution, the committee says it does not intend to implement the motion regardless of the outcome in this application.
• [19] Given these considerations, I am not satisfied the committee acted unreasonably in respect of Motion 3.

• [20] While based on the available evidence, I have not found the committee to have acted unreasonably, there is still a question as to whether the committee had power to make those decisions.
• [21] A committee is empowered to make decisions on behalf of the body corporate, unless the decision relates to a "restricted issue".[9] A decision to start a proceeding is a restricted issue for the committee other than:[10]

(i) a proceeding to recover a liquidated debt against the owner of a lot; or

(ii) a counterclaim, third-party proceeding or other proceeding in relation to a proceeding to which the body corporate is already a party; or

(iii) a proceeding for an offence under chapter 3, part 5, division 4 of the Act; or

• (iv) a prescribed chapter 6 proceeding.[11]
• [22] Section 312 of the Act specifically provides that the body corporate may start a proceeding only if the proceeding is authorised by special resolution (unless the proceeding is a prescribed proceeding).
• [23] In this instance, the commencement of legal proceedings were authorised by the committee only. It is unclear from the motions what type of proceedings are intended. If the intention is to bring an application for dispute resolution with the Commissioner's Office under Chapter 6 of the Act, a committee resolution would be sufficient authority. However, beyond that, a special resolution is required.
• [24] In relation to Motion 3, the committee submits that the Commissioner's Office has the exclusive jurisdiction to grant the remedy being sought and it is therefore the only forum that could have been contemplated by Motion 3. The committee makes no comment about the jurisdiction in which proceedings are envisaged under Motions 1 and 2.
• [25] Crucially, I note some of the former committee members whom the committee seeks to pursue are no longer lot owners in the scheme. The Commissioner does not have jurisdiction for disputes between a body corporate and former lot owners.[12] It is also questionable whether there is jurisdiction for the body corporate to bring an application against owners for acts undertaken in their capacity as former committee members.[13] Given these jurisdictional constraints, it seems to me that the proceedings contemplated under Motions 1 and 2 would not be prescribed proceedings under Chapter 6 of the Act. Rather, the nature of the action being sought would suggest they need to be heard in a court of competent jurisdiction in which case, the committee resolutions would not be sufficient authority to commence such proceedings.
• [26] On the face of the resolutions, they may not be invalid. However, as explained, the resolutions have limited application. To be clear, I have made a declaration that apart from proceedings brought under Chapter 6 of the Act, the committee does not have authority to commence proceedings against the former committee members and SSKB, pursuant to the motions passed on 16 August 2024.

• [27] I note the applicant has requested some direction be made about the committee allegedly passing on its legal fees and other costs to the applicant's and Mr Levick's body corporate accounts. This issue is beyond the scope of the current application which relates only to the validity of the 3 disputed motions. The application and submissions also contain limited information in this regard. However, I will make some general comments below.
• [28] The committee does not have authority under the Act to unilaterally impose its legal costs on an owner who it considers responsible. Section 153 of the Accommodation Module sets out what may be included on a contribution notice, namely, the owner's contributions, any arrears, penalty interest and any amounts that an owner has agreed to pay associated with services provided to their lot or related to an exclusive use by-law. A 'body corporate debt' is defined in the schedule to the Accommodation Module as a contribution or contribution instalment; a penalty for not paying a contribution by the due date, or another amount associated with the ownership of a lot (such as a payment for agreed services or under an exclusive use by-law).
• [29] Section 156 of the Accommodation Module sets out a body corporate's right to recover unpaid contributions as a debt. This includes the costs reasonably incurred in recovering the amount. However, while a body corporate can seek to claim these costs from an owner, they cannot simply include them on the contribution notice. Rather, they are an amount that can only be recovered through proceedings in a court or tribunal of competent jurisdiction. Similarly, if the body corporate wishes to pursue former committee members for legal costs that the committee considers those individuals are responsible for, it would appear that they may only be recovered as part of the proceedings against those members.
• [30] In conclusion, while I have not been able to determine that the committee acted unreasonably in passing the motions of 16 August 2024, those resolutions will only be sufficient authority for commencing proceedings with the Commissioner's Office. However, given the nature of the action being sought, that is, against former lot owners and committee members, there may be no jurisdiction to do so under Chapter 6 of the Act. If proceedings are to be commenced in another court of competent jurisdiction, the body corporate's consent will need to be obtained by special resolution at a general meeting. I note that the committee subsequently proposed the same motions to the annual general meeting of 9 October 2024. However, the motions failed to pass as they did not achieve the required votes for a special resolution. It seems clear then that the committee does not have the required support to commence the disputed proceedings.

[1] Sections 227 and 228 of the Act

[2] Section 94(2) and 100(5) of the Act

[3] For example, Item 24 of Schedule 5 of the Act

[4] Waters v Public Transport Corporation [1991] HCA 49 at [59] Secretary, Department of Foreign Affairs and Trade v Styles [1989] FCA 342 at [51]

[5] Body Corporate for Beaches Surfers Paradise v Backshall [2016] QCATA 177 at [42] referencing McKinnon v Department of Treasury [2006] HCA 45

[6] Ainsworth v Albrecht [2016] HCA 40 at [101]

[7] The committee referencing and applying Adjudicator Barry's comments in Palmerston Tower [2020] QBCCMCmr 369

[8] Section 101A of the Act provides that a committee member is not civilly liable for an act done or omission made in good faith and without negligence in performing the person's role as a committee member.

[9] Section 100(1) & (2) of the Act

[10] Section 44(1)(e) of the Accommodation Module

[11] "Prescribed chapter 6 proceeding" means a proceeding, including a proceeding for the enforcement of an adjudicator's order, under chapter 6 of the Act.

[12] See section 227(1) of the Act

[13] See section 226 of the Act