I am satisfied that Dual Homes has a conflict of interests and that it has rendered the Owners Corporation dysfunctional.

In McKinnon v Adams [2003] VSC 116 Bongiorno J considered an application to appoint an administrator, under section 38 of the Subdivision Act 1988. At that stage the Owners Corporations Act had not been enacted. His Honour said at paragraphs 20 and 21:

1. To justify the appointment of an administrator the body corporate concerned must be affected by some incapacity, or must be acting so dysfunctionally as to render the provision of appropriate services to unit holders and/or care of the common property either non-existent, or so beset by difficulties as to render the body corporate unable to function at what the Court considers to be a satisfactory level. There may or may not be financial difficulties or even financial impropriety affecting the body corporate's capacity to function but there must be some deficiency in its operational capacity sufficient to justify the Court's intervention in the interest of some or all of the unit holders. 2. Thus, the power to appoint an administrator pursuant to s 38 (6) of the Subdivision Act 1988 may be ordered, in the Court's discretion, where the evidence discloses that the body corporate is failing to operate properly in the interests of its members, is being inefficiently or incompetently managed, or the appointment is necessary to protect the interests of the members.

It is significant that His Honour held that no impropriety need be demonstrated. It is a question of whether the owners corporation is unable to function, or is failing to operate properly in the interests of its members as a whole. I have no hesitation in finding that the Owners Corporation is in that position in this case, and that an administrator ought be appointed.

The Applicants sought the appointment of an administrator for 18 months, and Dual Homes submitted that such an appointment would unduly deprive lot owners of their rights.

As the issue most affecting the Owners Corporation was its ability to commence its action for damages arising from defective building work, I concluded that it was unnecessary to appoint an administrator for such a lengthy period of time. An appointment for 28 days would be sufficient to enable the administrator to put the building case in motion.

The Applicants sought to appoint as administrator the principal of the current manager of the Owners Corporation, Mr McLean. He deposed that he would be prepared to act as administrator on the same terms as to remuneration and the like as applied to his company's role as manager. I note that as a registered manager Mr McLean would hold professional indemnity insurance, and that the manager already operates a Trust Account on behalf of the Owners Corporation. Mr McLean is an appropriate person to act as administrator.

Dual Homes objected to the proceeding having been filed in the absence of a special resolution under section 18(1) of the Owners Corporations Act 2006. Ordinarily an administrator could issue a fresh proceeding in such circumstances. It was suggested during the hearing that the Owners Corporation's cause of action might now be statute barred. In those circumstances it is appropriate that I order, pursuant to section 165(1) of the Owners Corporations Act 2006, that this proceeding have effect nunc pro tunc as if filed on 1 December 2010 pursuant to a special resolution of the First Applicant authorising the commencement of legal proceedings.

The owners of Lots 1 & 2 were not named as parties to the proceeding. Their interests are affected by both applications. I was advised from the Bar table that they were aware of the proceeding. I was also advised though that they had given their Proxy to Dual Homes for the Annual General Meeting on 16 September 2010 with instructions to vote against the proposed resolution to authorise the commencement of legal proceedings. Clearly it would have been preferable for them to be named as respondents. Nevertheless I was not prepared to dismiss the application for the appointment of an administrator on the basis of their absence.

I will grant the parties liberty to apply and reserve their costs of the application for the appointment of an administrator. I will have the proceeding transferred to the Domestic Building List.