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

ADMINISTRATOR - whether the body corporate is dysfunctional and requires an administrator to ensure it operates within its statutory framework, or a general meeting to elect a new committee.

FINANCIAL MANAGEMENT - whether the body corporate's "unreasonable spending" should be audited; whether a body corporate invoice for repairs to a common property gate damaged by an owner's invitee should be deemed void.

CONTRIBUTIONS - whether owners with exclusive use of jetties must pay an additional 25% on their contributions to the administrative fund.

Act, ss 4(a), 36(1), 94(1)(a), 205, 276(1); Standard Module, ss 44(2)(f)-(g), 102(2), 160(2), 162(5), 172(1)(a), 173, 192(1).

• [1] Mr Hart of lot 6 seeks orders against the body corporate in the following terms:

The Committee's management practices, including procedural failures and unprofessional, unreasonable conduct, have caused significant issues and based on that, we request the following:

1. Request for Administrator Appointment: We request the appointment of an Administrator (Kyla Smith from Cube Body Corporate Management) under Practice Direction 17 due to the issues detailed in this document, especially concerning the Garden (point 1), Email Communication (point 6), and Expenditure Practices (point 7)...

2. Request for Audit Authorisation: We need an Administrator to authorise an audit in response to the unreasonable spending outlined in Expenditure Practices (point 7).

3. Invoice Dispute: We request that invoice number 249 issued to Lot 6 be voided, based on the evidence provided in the Gate section, specifically under Gate & Visitor (point 5).

4. Council Approval Request: We require a copy of the Council Approval for the water connection. If no such approval exists, we request a Council Inspection specifically under Garden (point 1, heading Garden replacement could have been avoided.

5. Insurance: That Lots 1-4 be issued invoices for the years they have not paid the 25% annual charge for maintenance and insurance, and that invoices continue to be issued annually, as detailed in Insurance point 4 refer to the CMS.

6. Request for EGM: We ask that the Administrator convene an Extraordinary General Meeting (EGM) to elect a new Committee based on the points above.

• [2] The former Queensland Commercial and Consumer Tribunal (QCCT) noted that the appointment of an administrator:

... is a significant step since it takes responsibility for the conduct of the affairs of the body corporate out of the hands of the committee and vests it in the administrator. An applicant must therefore demonstrate to the required standard that such a step is appropriate. Typically, without attempting to be exhaustive, there will be evidence that the body corporate is so dysfunctional that it cannot operate properly within the statutory framework that governs it, or that there is a well founded suspicion, on the part of an applicant for appointment of an administrator of financial malpractice within the body corporate, or that there is conduct that amounts to undue oppression in the conduct of its affairs.[1]

• [3] Mr Hart says an administrator is required at Madang 2325 because:
  1. the body corporate committee spent over $15,000 replacing a common property garden without proper authority and in circumstances where the old garden might have been saved and the expenditure avoided
  2. the committee's correspondence with owners is "consistently unprofessional, unreasonable and disrespectful, and in all instances, entirely unwarranted", and
  3. in addition to the unapproved expenditure on the garden, the body corporate budgeted $2,500 for "administration fees" in the 2023-24 administration fund budget without explanation, and has engaged in unreasonable expenditure such as replacing plants with identical plants in the same location and repairing an old vehicle gate motor only to replace it shortly afterward.
• [4] In the same order:
  1. Spending $15,000 without presenting two quotations to a general meeting and obtaining authorisation by ordinary resolution was a breach of statutory requirements,[2] though it is unclear what an administrator could do about it. The money has been spent and the garden replaced.
  2. Mr Hart submitted examples of committee correspondence that were terse, dismissive, and/or rude about third parties. But there is no statutory requirement for a committee to be nice, friendly, or polite. If owners are unhappy with the conduct of their committee members, they may remove them or elect someone else in future.[3] Discourteous communication is not dysfunction warranting the appointment of an administrator.
  3. The expenditure of concern to Mr Hart is discussed below.
• [5] None of these concerns persuades me that the Madang 2325 body corporate is fundamentally dysfunctional and ought to be stripped of its powers. Mr Hart submitted minutes of the 2023 and 2024 annual general meetings which show that the body corporate is adopting budgets and setting contributions, insuring and maintaining the common property, and electing committees to make day-to-day decisions on behalf of the body corporate. While Mr Hart objects to some of the committee's conduct, the nature of the disputes tends to indicate that the committee is actively seeking to meet its responsibilities with respect to the common property. For instance, it has addressed the condition of the garden and repaired the vehicle gate. The body corporate seems to be substantially meeting statutory requirements.
• [6] Some of the body corporate's conduct may be irregular, such as the unapproved expenditure on the garden, but isolated instances of non-compliance are best addressed with targeted orders to correct those specific issues. Bodies corporate often make mistakes and have orders made against them. That is to be expected when lay volunteers attempt to comply with a complicated legal framework. But most mistakes will not be grounds for stripping the body corporate of its powers and vesting them in an administrator. That would be disproportionate and contrary to the intended self-management of community title schemes.[4]

• [7] Mr Hart argues an audit is required given:
  1. the $15,000+ spent on the garden without proper authority
  2. the unexplained $2,500 for "administration fees" in the 2023-24 administration fund budget, and
  3. the committee's "unreasonable expenditure", such as on the garden and gate motor.
• [8] I am not sure why an audit would be required of the garden expenditure. While it does not seem to have complied with the spending controls in the Standard Module, there does not appear to be anything unexplained about it. There is apparently nothing unclear about the amount that was spent, what it was spent on, or where the money came from.
• [9] Mr Hart has not established that there is likely to be anything irregular about the $2,500 budgeted for administration fees in 2023-24. He is unsure of the purpose of the proposed expenditure and was unable to obtain a clear explanation from the committee, leaving him suspicious. Suspicion alone is an insufficient basis for an order.
• [10] Whether it was appropriate to repair an ageing gate motor or replace plants in a garden that was damaged by toxic bore water are matters open to debate and differences of opinion. Those are not questions that can be resolved by a financial audit (or an administrator).

• [11] Mr Hart says a visitor to his lot reversed into a vehicle gate on common property in November 2023. He wrote to the committee "informing them of the incident and suggesting that the slight bend in the gate might have been attributed to the visitor, we explicitly asked that quotes be obtained, and following that, we would explore options." But when the committee chairperson requested $700 cash to transport and straighten the gate, Mr Hart ignored the email on the advice of his lawyer.
• [12] In February 2024, Mr Hart says a landscaping company's truck damaged the gate further, necessitating repairs.
• [13] A few days later, on 18 February 2024, Mr Hart received invoice 269 (mistakenly described as invoice 249 in the application) from the body corporate requesting payment of $731.60 for repairs to the gate. It was subsequently adjusted to $907.60 when further repairs proved necessary.
• [14] Mr Hart objects to the invoice because:
  1. "...the gate was removed on 7 February 2024 at 4:01 pm and returned by approximately 5:08 pm. Given that the round trip to Molendinar takes at least 40 minutes, it implies that all the work was completed in just 20 minutes during normal working hours."
  2. The repairs partially related to the damage done by the landscaping truck.
  3. A report from 2021 mentioned that the gate was already warped at that time.
• [15] I do not accept that I should declare the invoice void. There is no evidence before me to substantiate that:
  1. the repairs were necessary because of damage done by the landscaping truck rather than Mr Hart's visitor
  2. the gate could not have been transported and repaired in a little over an hour, or
  3. any repairs related to the warping observed in 2021 rather than the damage done by Mr Hart's visitor in 2023.
• [16] The body corporate is responsible for the administration of the common property and may sue for rights and liabilities relating to it.[5] I see no reason it could not issue an invoice to a party it held responsible for damage to common property.
• [17] That is not to say that Mr Hart must pay the invoice. I make no findings about his liability for the repairs. I cannot think of anything in the Act, Standard Module, or the by-laws that would require an owner to reimburse the body corporate for the cost of repairing damage done to the common property by the owner's invitee.
• [18] But the body corporate may have some other legal basis for recovering its costs from Mr Hart, or it may have expected that Mr Hart would accept responsibility for the damage without recourse to legal formalities. In either case, an invoice seems a reasonable place to start.
• [19] At the 2024 AGM, Mr Hart's voting paper was "ruled inadmissible" because "there is an outstanding Body Corporate debt". If that ruling was based upon invoice 269, it was in error. An owner may not vote at a general meeting if they owe a body corporate debt,[6] where:

body corporate debt means a following amount owed by a lot owner to the body corporate -

(a) a contribution or an instalment of a contribution;

(b) a penalty for not paying a contribution or an instalment of a contribution by the date for payment;

(c) another amount associated with the ownership of a lot.[7]

• [20] Invoice 269 did not relate to any of these things and was not a valid reason to disenfranchise Mr Hart. I make no orders in relation to this irregularity though, as none have been sought. I only point out the error so the body corporate might correct it or avoid it in future.

• [21] The body corporate had a tap installed in the common property garden and connected to mains water when toxic bore water was damaging the garden. Mr Hart believes the tap was "unlawfully connected to the Gold Coast City Council Water Mains". He seeks "a copy of the Council Approval" or "a Council Inspection".
• [22] However, Mr Hart has submitted no evidence to indicate the tap was unlawfully connected. Even if it was, an adjudicator has no role policing local government regulations. My role relates to disputes arising under the Act, Standard Module, and community management statement (CMS).[8] I cannot order a council inspection.
• [23] As an owner, Mr Hart is entitled to inspect the body corporate records or obtain copies of them.[9] He may seek any council approval documentation there, if it exists.

25% annual charge for maintenance and insurance

• [24] Mr Hart says the Madang 2325 CMS requires lots 1-4 to pay an additional 25% on their contributions to the administrative fund to cover the maintenance and insurance of their exclusive use pools and jetties, yet all lots have paid equal contributions since he became an owner in 2019.
• [25] By default, the cost of maintaining and insuring the common property and body corporate assets is met from the administrative fund.[10] Owners contribute to the administrative fund in shares proportionate to the contribution schedule lot entitlements, or (for insurance) interest schedule lot entitlements, recorded for their lots in the CMS.[11] The contribution and interest schedule lot entitlements in the Madang 2325 CMS are the same for each lot, with the result that all owners contribute equally to the administrative fund.
• [26] However, an exclusive use by-law may, if the benefiting lot owner agrees in writing:

...impose conditions, including, for example, conditions that require the owner to do 1 or both of the following things -

(a) make a payment to the scheme's body corporate or the owners of lots included in the scheme;

(b) make periodic payments to the scheme's body corporate or the owners of lots included in the scheme.[12]

• [27] But the CMS does not include an exclusive use by-law that requires lots 1-4 to pay an additional 25% on their contributions. Instead, it states at Schedule B Explanation of the Development of Scheme Land:

Application has been made for a sub-lease of part of the adjacent water way upon which two jetties are to be constructed as an addition to the common property. Upon the grant of the sub-lease and upon the completion of the jetties the following by-laws are to be created.

• [28] A proposed by-law is then set out that would grant exclusive use to lots 1-4 subject to the following conditions:

(1) shall be responsible for the repair up-keep maintenance and replacement of the property on their exclusive use area

(2) must comply with the terms of the Sub Lease of their exclusive use area and

(3) must pay to the body corporate on demand 25% of any rental provided for in the terms of the sub-lease and

(4) must pay to the body corporate on demand 25% of the cost of any insurance costs associated with their exclusive use area.

• [29] But no such by-law was ever recorded. Madang 2325 has retained its first CMS recorded in 2003 and not acted on the intention expressed at Schedule B. In the absence of the proposed exclusive use by-law, all owners remain obliged to contribute equally to the administrative fund as set out above.

• [30] There is no need to order an administrator to call an extraordinary general meeting given:
  1. I am not appointing an administrator
  2. while mistakes may have been made, I am not satisfied that the committee is significantly dysfunctional, and
  3. an AGM and a fresh committee election are due in a few months anyway.

[1] Surace V Commisso [2009] CCT KA002-09 at [44].

[2] Standard Module, ss 172(1)(a) & 173.

[3] Standard module, s 44(2)(f)-(g).

[4] Act, s 4(a).

[5] Act, ss 36(1) & 94(1)(a).

[6] Standard Module, s 102(2).

[9] Act, s 205.

[10] Standard Module, s 160(2).

[11] Standard Module, s 162(5).

[12] Standard Module, s 192(1).