Zenith [2025] QBCCMCmr 228 (2 July 2025)

BODY CORPORATE ASSETS & COMMON PROPERTY - whether a body corporate can acquire a lot within its own scheme - whether a body corporate can continue to hold an acquired lot as a body corporate asset without incorporating the same with its common property - whether a body corporate can grant an occupation authority over a body corporate asset to a service contractor or letting agent - whether an occupation authority is appropriate for residential use by a service contractor or letting agent.

COMMITTEE - whether committee members are liable to pay for losses incurred by the body corporate purportedly as a result of their actions and decision-making

REASONABLENESS - where the body corporate passed a motion that sought to transfer non-freehold rights in a lot that is a body corporate asset - whether the body corporate acted unreasonably in passing that motion

Act, ss 11, 35, 37, 40, 41, 43, 45, 62, 94, 100, 101A, 116, 154, 157 and Schedule 1A; Standard Module, ss 52, 157, 184, 190

1. I hereby declare that the decision on motion 1 at the vote outside committee meeting dated 18 September 2024 is void and of no effect.
2. I hereby order that within four months from the date of this order, the Body Corporate for Zenith CTS 10343 ('body corporate') must ensure that its holding of and dealing with Lot 1 of Zenith CTS 10343 ('scheme') is compliant with the Body Corporate and Community Management Act 1997 ('Act') and Body Corporate and Community Management (Standard Module) Regulation 2020 ('Standard Module').
3. For the avoidance of doubt, Order 2 may be complied with by the body corporate:
   1. Ceasing to own Lot 1; or
   2. Incorporating Lot 1 with its common property, pursuant to:
      1. Obtaining the consent of its members to record a new Community Management Statement ('CMS') to reflect the said incorporation by way of either ordinary resolution in accordance with section 62(4) of the Act; or by way of committee resolution if not precluded under section 62(7) of the Act; and
      2. Lodging a request to record the new CMS reflecting the said incorporation; and
      3. Carrying out relevant titling and subdivisional arrangements under the Land Title Act 1994, in accordance with section 43(2) of the Act.
4. I hereby order that if the body corporate wishes to implement its decision on motion 3 at extraordinary general meeting dated 12 September 2024, it must as a pre-requisite:
   1. Incorporate Lot 1 with its common property in the manner described in Order 3(b) above; and thereafter
   2. Lease the newly incorporated portion of common property (Lot 1) to the caretaking service contractor pursuant to:
      1. Authorisation by special resolution in accordance with section 184(2)(b) of the Standard Module; or
      2. Authorisation by ordinary resolution in accordance with section 184(3) of the Standard Module, provided the body corporate has also recorded a new CMS to provide for the said lease upon obtaining the requisite authorisation for the same.

• [1] The dispute that is the subject of this application is about the acquisition of a lot within the scheme by the body corporate; the body corporate's failure to incorporate the lot with its common property; and the dealing with that lot by the body corporate.

• [2] The scheme comprises 91 lots and common property, and is regulated under the Standard Module.
• [3] The applicant, Josh Mennen, is the owner of Lot 52. The respondent is the body corporate.
• [4] The respondent body corporate tabled a motion for decision by ordinary resolution at extraordinary general meeting ('EGM') dated 12 September 2024, primarily to authorise engaging Paul Cannon as the scheme's caretaker[1] and letting agent (collectively the caretaking service contractor)[2] for a period of one year on stated terms and conditions.
• [5] Under those proposed terms, Cannon was to be paid a specified sum for his caretaking duties. This dispute arose because these terms also sought to authorise Cannon to occupy Lot 1 at the scheme for no further monetary consideration or benefit to the respondent body corporate.[3]
• [6] Lot 1 is owned by the respondent body corporate having been acquired in late January 2015. It has not been incorporated into the scheme's common property.[4]
• [7] On 5 September 2024, the applicant lodged an interim order application disputing the validity of this motion ('Motion 3') on the basis that section 157 of the Standard Module only allows the respondent body corporate to grant Cannon an occupation authority over a 'particular part of the common property'. He claimed that since Lot 1 has not been incorporated into common property for the scheme, the granting of any occupation authority over it by the respondent body corporate is precluded under the Act and Standard Module.
• [8] The applicant sought interim relief for Motion 3 to be withdrawn by the committee of the respondent body corporate; or for the same to be ruled out of order by the chairperson at the EGM; or if Motion 3 is passed before the determination of the interim order application, for the respondent body corporate to be temporarily restrained from executing the proposed contract to engage Cannon as the caretaker and letting agent until Lot 1 has been formally incorporated in the scheme's common property.
• [9] Prior to the determination of the interim order application, Motion 3 was carried with 29 votes in favour, nine against and seven abstentions. However, the respondent body corporate furnished an undertaking at my request that it would refrain from executing the contract engaging Cannon as per Motion 3, until the interim order application was finalised.
• [10] Notwithstanding the above undertaking, on 18 September 2024 the respondent body corporate voted outside a committee meeting ('VOCM') and carried a motion ('Motion 1') to engage Cannon on largely the same terms and conditions as that contemplated under Motion 3, save for a shorter term of three months as opposed to one year.
• [11] In these circumstances, the applicant seeks the following orders:
  1. That Motion 1 of the voting outside committee meeting dated 18 September 2024 is void and of no effect ('first order sought');
  2. That the respondent body corporate seek authorisation to record a new Community Management Statement ('CMS') pursuant to section 62 of the Act ('second order sought');
  3. That the respondent body corporate seek authorisation by special resolution pursuant to section 184(2)(b) of the Standard Module ('third order sought');
  4. That within three months from obtaining the authorisations noted in the second and third orders sought, the respondent body corporate must make an application for a new CMS to incorporate Lot 1 into common property ('fourth order sought');
  5. That the respondent body corporate will take all reasonable steps to recover losses from those committee members and any professionals responsible for the maladministration of Lot 1 since its acquisition ('fifth order sought');
  6. Any further order deemed appropriate by the adjudicator.

• [12] An adjudicator may make an order that is just and equitable in the circumstances to resolve a dispute about a claimed or anticipated contravention of the Act or the CMS[5] or about the exercise of rights or powers or performance of duties under the Act or CMS.[6] Further, an order may require a person to act, or prohibit a person from acting in a manner stated.[7] An order may also contain ancillary and consequential provisions the adjudicator considers necessary or appropriate. [8]
• [13] I am satisfied that I have jurisdiction to determine the dispute in question by virtue of sections 276(1)(a) and (b) of the Act (read together with section 227(1)(b) of the Act).
• [14] There is a question of whether I lack jurisdiction under section 149B of the Act, which partly states that a dispute about a claimed or anticipated contractual matter about the engagement of a person as a caretaking service contractor or the authorisation of a person as a letting agent for a scheme, may be resolved by an order of a specialist adjudicator or the Queensland Civil and Administrative Tribunal ('QCAT'), as opposed to a department adjudicator such as myself.
• [15] A 'contractual matter' about an engagement or authorisation of a service contractor or letting agent etc., under Schedule 6 of the Act means 'a contravention of the terms of the engagement or authorisation; or the termination of the engagement or authorisation; or the exercise of rights or powers under the terms of the engagement or authorisation; or the performance of duties under the terms of the engagement or authorisation'.
• [16] I am of the view that this dispute does not involve any such claimed or anticipated contractual matter because the dispute concerns the validity and substance of the motion which seeks to authorise the respondent body corporate to enter into the contract for caretaking and letting services (regarding Motion 3). Further I note that the contract intended to be valid for a term of one year has seemingly not been entered into by the respondent body corporate yet. Such a dispute regarding the validity and/or reasonableness of an EGM motion is well within the jurisdiction of a department adjudicator.
• [17] Similarly, the dispute as it pertains to Motion 1 is not a contractual matter about the authorisation of Cannon as a letting agent but rather regarding the validity and substance of the motion which seeks to so authorise him. Hence, this matter too is well within the jurisdiction of a department adjudicator.

• [18] The applicant lodged an interim order application for this dispute on 5 September 2024, immediately pursuant to which the dispute was referred to department adjudication by the Commissioner under section 247 of the Act.
• [19] On 24 September 2024, I made an interim order restraining the respondent body corporate from executing the contract with Cannon pursuant to the resolution under Motion 3 until further or final order or otherwise until 12 months from the date of the order.
• [20] Subsequently, I referred the dispute back to the Commissioner in accordance with section 279(4) of the Act.
• [21] On 24 December 2024, the applicant amended his application for final orders under section 245 of the Act.
• [22] On 7 January 2025, the Commissioner provided a copy of the said application and invited submissions from all owners and the committee on behalf of the respondent body corporate.
• [23] Subsequently, the owners of Lots 26, 39 and 40 made submissions.
• [24] On 4 February 2025, the applicant replied to the said submissions.
• [25] Subsequently, on 12 February 2025, the Commissioner referred the dispute to department adjudication.
• [26] Pursuant to referral to department adjudication, it was discovered that an administrative oversight caused a submission made by the committee on behalf of the respondent body corporate to be overlooked.
• [27] On 24 February 2025, I, through my delegate provided the applicant with a copy of the committee's submission and invited a reply to the same. The applicant opted not to reply to the said submission.
• [28] I have investigated the dispute by reviewing the application, submissions and reply pursuant to section 271 of the Act.

• [29] I must note at the outset that the applicant has not sought an order to invalidate Motion 3. Rather he seeks orders (i.e., the second and third orders sought) which I reasonably assume are for the purpose of giving lawful effect to Motion 3.[9]
• [30] Secondly, I note that it is unclear what purpose the first order sought (to invalidate Motion 1) would practically serve considering the contract executed pursuant to Motion 1 had terminated on 11 December 2024 without renewal, by the applicant's own admission. this first order sought is seemingly then for advisory and academic purposes.
• [31] Accordingly, the questions before me for determination are as follows:
  1. Whether the respondent body corporate acted unreasonably in carrying Motion 1;
  2. Whether an order invalidating the resolution under Motion 1 (i.e., the first order sought) is warranted;
  3. Whether the second, third and fourth orders sought are warranted;
  4. Whether committee members and any other professionals ought to be held responsible for any maladministration of Lot 1, and whether the respondent body corporate ought to attempt to recover losses from the said committee members and other professionals.
• [32] I will examine each of these questions in the analysis below. However, before I do so, I will explain the provisions of the Act and Standard Module relevant to this dispute.

(a) Summary of the relevant provisions of the Act and Standard Module

• [33] I will set out below in a nutshell, the provisions of the Act and Standard Module relating to dealing with common property and body corporate assets; the limited scenarios in which a body corporate can acquire a lot within its own scheme; the requirements regarding the use of a letting agent's lot; and the granting of an occupation authority to a service contractor or letting agent over a part of the common property.[10]

• [34] Common property for a scheme is owned by the lot owners as tenants in common, in shares proportionate to the relevant interest schedule lot entitlements.[11] Under the Land Title Act 1994, the registrar creates a title for the common property for a scheme.[12]
• [35] A body corporate may acquire further freehold land contiguous to the scheme, or acquire a lot within the scheme itself and incorporate the same into its common property, provided the body corporate is authorised to do so by resolution without dissent.[13]
• [36] The Standard Module comprehensively sets out the manner in which a body corporate may deal with its common property.[14] For example, a body corporate may grant a lease or licence for a term of three years or less over a part of the common property only if authorised by special resolution.[15] It may grant a lease or licence for a term of more than three years over a part of the common property only if authorised by resolution without dissent.[16]
• [37] However, under section 184(3) of the Standard Module, a body corporate may grant a lease or license over the whole or part of the common property without the authority of a resolution without dissent or special resolution if its CMS provides for the lease or licence.[17]

• [38] Unlike common property which is owned by the lot owners as tenants in common, a body corporate holds its body corporate assets beneficially[18], i.e., for the benefit of the lot owners.[19]
• [39] Body corporate assets may consist of personal property, as well as real property (other than real property incorporated into the common property), including freehold and leasehold rights to land, or a licence to use land.[20]
• [40] The Standard Module sets out the manner in and extent to which a body corporate may deal with body corporate assets.[21] For example, a body corporate many grant a lease for a term of three years or less over freehold land that is a body corporate asset only if authorised by special resolution.[22] Further, a body corporate may grant a lease over a body corporate asset for a term of more than three years if authorised by a resolution without dissent.[23]

(iii) Can a body corporate acquire a lot within the scheme?

• [41] A body corporate may certainly acquire a lot within its own scheme. However, it may only do so in either of the scenarios set out under section 44 of the Act which include that:
  1. Under section 37 of the Act: A body corporate may acquire a lot within the scheme[24], and incorporate the same into its common property, provided the body corporate is authorised to do so by resolution without dissent; or
  2. Under section 40 of the Act: A body corporate may acquire a lot within the scheme if it intends for the same to become common property for use solely as a residence for a letting agent or service contractor, or as a residence and office for a letting agent, if so authorised by resolution without dissent.

If a body corporate proceeds to acquire a lot for this specific purpose, it must subsequently be incorporated with the common property for the scheme.[25] Thereafter, the relevant part of the common property so incorporated must be leased to the service contractor or letting agent for a period not longer than the term of the authorisation as a service contractor or letting agent. [26] This is known under the Act as 'lessee common property'.

• [42] It is my view that when a body corporate acquires a lot under either of these provisions, it becomes a body corporate asset immediately upon such acquisition, that is until it is formally incorporated into the scheme's common property pursuant to carrying out relevant titling arrangements under the Land Title Act 1994.
• [43] Accordingly, the Act does not permit a body corporate to acquire a lot, and let it remain a body corporate asset indefinitely or for an inordinate amount of time. It must in due course be incorporated into the scheme's common property as envisaged under section 37 or 40[27] of the Act.[28] I am also of the view that it is contrary to the legislation for a body corporate to transfer any non-freehold interest in the lot to any other person before it is incorporated into the common property, and while it is still a body corporate asset.

• [44] Section 116(2) of the Act states partly that if a letting agent business is conducted from a lot which is not lessee common property, then at all times, either:
  1. The letting agent must be the registered owner or lessee of the lot (section 116(2)(a) of the Act); or

1. A deed must be in place between the body corporate and the person who is the registered owner or lessee of the lot ('lot holder'). Under this deed, the lot holder must agree to transfer their interest in the lot in the event the letting agent is required to transfer their managements rights pursuant to, for example, a failure to comply with a code contravention notice (section 116(2)(b) of the Act).[29]

• [45] It is pertinent to note that this provision of the Act does not make allowance for an instance where a letting agent can conduct business from a 'lot' which is owned by the body corporate.[30] This is consistent with my view that the legislation does not permit a body corporate to acquire a lot and maintain it as a body corporate asset by refraining from incorporating it with the common property.

• [46] Section 157(1) of the Standard Module permits a body corporate to, by ordinary resolution, give a person who is a service contractor or letting agent an authority to occupy (also known as 'occupation authority') a particular part of the common property for particular purposes necessary to enable the performance of obligations as a service contractor or letting agent.
• [47] For example, the body corporate might authorise a letting agent to occupy a particular part of the common property as a reception area, or a caretaker to occupy a shed on the common property for storage of tools and garden implements. An occupation authority terminates when the engagement of the person as a service contractor or letting agent is terminated or ended.[31]
• [48] In my view, a body corporate cannot permit a service contractor or letting agent to occupy a particular part of the common property for residential purposes under this provision of the Standard Module. Such residential occupation would require a higher threshold of authorisation by either special resolution or resolution without dissent.[32]

(b) Application of the relevant provisions of the legislation to the issues pertaining to Motion 3

• [49] The respondent body corporate is the registered owner of the lot in question (i.e., Lot 1 at the scheme) and has been since January 2015. Titles records as at the date of this decision clearly indicate that this lot does not form part of the common property for the scheme. This means that for all intents and purposes Lot 1 is currently a body corporate asset.
• [50] The survey plan bearing reference BUP 4847 (which was registered in 1982 prior to the enactment of the Act) identifies Lot 1 as a 137m2 parcel of land, which is to be used for 'residential use and letting agency'.
• [51] Further, By-law 15(2) of the CMS states as follows:

The occupier of lot 1 in BUP 4847 may use that lot for residential purposes and management purposes and for the purpose of carrying on the business of letting lots on scheme land on behalf of owners of such lots.

(i) Does the CMS provide for a lease or license over Lot 1 in accordance with section 184(3) of the Standard Module?

• [52] By-law 15(2) of the CMS does not trigger the application of section 184(3) of the Standard Module, since Lot 1 does not constitute common property and also because its wording is not indicative of a lease or license per se. It merely declares the purpose for which Lot 1 may be occupied but does not importantly specify the precise character of the rights to be transferred (for e.g., leasehold rights).

(ii) Can the respondent body corporate grant a lease or license over Lot 1 in its current form as a body corporate asset?

• [53] It is my view that the respondent body corporate cannot grant a lease or license to Cannon over Lot 1 in its current form as a body corporate asset, because as stated above, this would conflict with sections 37 and 40 of the Act. I reiterate that the Act and Standard Module in my view precludes the respondent body corporate from transferring any non-freehold interest in Lot 1 until it is formally incorporated with common property.
• [54] Accordingly, the respondent body corporate cannot seek to permit Cannon to occupy Lot 1 in its current form pursuant to a lease, or license or a transfer of any other non-freehold interest under for example section 116 of the Act or section 190 of the Standard Module.

(iii) How then can the respondent body corporate permit Cannon to occupy the land that forms Lot 1[33]?

• [55] The respondent body corporate must firstly incorporate Lot 1 with the scheme's common property.
• [56] The question however is, how such incorporation can now occur. This depends on the decision made by the body corporate to acquire Lot 1 in 2015 and importantly the specific wording of the motion that led to this decision. I have not been provided with a copy of this decision. However, below are my observations on the matter:
  1. If this decision to acquire Lot 1 was made in terms of section 37 of the Act, the respondent body corporate strictly speaking requires no further decision now by its members/lot owners to incorporate Lot 1 into common property. However, given implementing a resolution nearly a decade after it was passed may prima facie be challenged for constituting unreasonable conduct under section 94(2) of the Act, the respondent body corporate may require further authorisation to incorporate Lot 1 into common property under the legislation;
  2. If the decision to acquire Lot 1 was made in the precise terms of section 40 of the Act, there is a question as to whether it would require any further authorisation under the Act to incorporate Lot 1 into common property; and would require further authorisation by under section 184 of the Standard Module to lease the part of the common property that used to be Lot 1 to Cannon for one year. This is because unlike the authorisation under section 37 of the Act which covers both acquisition and incorporation with common property, the authorisation under section 40 strictly speaking appears to cover acquisition but not such incorporation or the leasing. Having said so I must note that if the motion was worded broadly enough to seek authorisation for acquisition as well as incorporation and was carried by way of a resolution without dissent, then the respondent body corporate would be sufficiently authorised to incorporate Lot 1 into common property;
  3. If in actual fact the decision to acquire Lot 1 was made neither in terms of section 37 nor section 40, this acquisition could be in contravention of the legislation. There would then be a question of how this contravention can be regularised under the Act.
• [57] The respondent body corporate claims[34] that the decision was made in terms of section 40 of the Act and that Lot 1 was acquired for the purpose of being used a residence for the caretaking service contractor or letting agent. The applicant does not dispute this statement and I have no reason to doubt the veracity of the same.
• [58] I have not been provided with a copy of the motion resulting in this decision perhaps because the same is not available[35]. Had it been available, I could have examined it and ascertained whether the respondent body corporate did in fact expressly authorise incorporation.
• [59] On the one hand, this decision having been made at least a decade ago coupled with the fact that incorporation has not occurred to date does not prima facie support the notion that incorporation was authorised by the respondent body corporate. On the other hand, although the respondent body corporate may not have expressly authorised such incorporation, the plain existence of an authority to acquire Lot 1 indicates that the members of the body corporate were aware that incorporation would follow. I prefer the latter view which is consistent with the unlawfulness of a body corporate acquiring a lot and holding the same as a body corporate asset indefinitely.
• [60] In other words, I am of the view that if the respondent body corporate made a decision to acquire Lot 1 in accordance with section 40, consent to incorporate the same with its common property would be implied. This however does not release the respondent body corporate from the requirement to obtain consent to record a new CMS reflecting this incorporation.
• [61] Section 62(4) of the Act states that such consent need not be in the form of a resolution without dissent or special resolution if the new CMS is different from the existing one only to the extent necessary for certain purposes including:
  1. Compliance with a provision of the Act under which the body corporate is required to lodge a request to record a new CMS (section 62(4)(a) of the Act);
  2. Changing the scheme to reflect a formal acquisition affecting the scheme (section 62(4)(d) of the Act); and
  3. Compliance with the order of an adjudicator which requires the body corporate to lodge a request to record a new CMS (section 62(4)(b) of the Act).
• [62] I am satisfied that authorisation by ordinary resolution or committee resolution would suffice to record a new CMS to reflect incorporation on the basis of section 62(4)(a) of the Act, given an acquisition under section 40 of the Act must necessarily be followed by incorporation in accordance with section 41(a) of the Act.
• [63] Similarly, I am also of the view that authorisation by ordinary resolution or committee resolution would suffice on the basis of section 62(4)(d) of the Act, given once Lot 1 was acquired by the respondent body corporate, it cannot be left a body corporate asset and must be incorporated with the scheme's common property.
• [64] As stated above, the respondent body corporate can record a new CMS for this purpose either by ordinary resolution or committee resolution. There are however two scenarios in which the latter would not be appropriate, i.e., where:
  1. Consenting to the recording of a new CMS is a restricted issue for the committee; and/or
  2. The respondent body corporate has engaged a body corporate manager to carry out the functions of a committee and the executive members of a committee.[36]
• [65] There is no indication in the evidence provided that consenting to the recording of a new CMS is a restricted issue for the committee. Section 52(1)(b) of the Standard Module states that a decision that changes rights, privileges or obligation of the lot owners is a decision on a restricted issue for the committee. I am of the view that in this scenario it is the decision to acquire and incorporate a lot that changes the rights, privileges and obligations of owners, as opposed to the decision to record a new CMS that reflects the acquisition and incorporation.
• [66] However, the applicant claims that in or around October 2024, a number of committee members resigned and that accordingly the body corporate manager commenced acting as an administrator. If this is correct, it may not be appropriate for the consent to the recording of a new CMS to reflect the incorporation to be by way of committee resolution. It would rather be prudent for the same to be obtained by way of ordinary resolution at a general meeting.
• [67] However, I note that several months has since passed. Accordingly, if there is now a functioning committee and the consenting to the recording of a new CMS is not a restricted issue for it[37], it may so consent to a new CMS to reflect the incorporation of Lot 1 with common property by way of a committee resolution.

• [68] Pursuant to incorporation as stated above, the respondent body corporate may permit Cannon to occupy the part of common property that will then have been Lot 1 in one of two ways. This, in my view, depends on the purpose behind seeking to grant Cannon the right to occupy Lot 1. For example:
  1. If the purpose is to enable Cannon to perform the obligations as proposed under his engagement as a service contractor and/or to operate as a letting agent excepting any residential use (as intended by Motion 3), the respondent body corporate must[38] grant an occupation authority over the particular part of the common property that used to be Lot 1 to Cannon in terms of section 157 of the Standard Module pursuant to authorisation for the same by ordinary resolution;
  2. If the purpose is to enable Cannon to occupy Lot 1 and use the same as a residence in his capacity as a service contractor and/or letting agent; or as a residence and office as a letting agent, the respondent body corporate must lease the part of the common property that used to be Lot 1 to Cannon as a body corporate lessee as envisaged under sections 40 and 41 of the Act.
• [69] I am satisfied that the contract proposed under Motion 3, by way of Clause 12, seeks to permit Cannon the right to occupy Lot 1 as a residence. This appears to be consistent with By-law 15(2) and the notes in the scheme's survey plan. It also appears to be consistent with clause 13 of the proposed contract under Motion 3 which provides for a separate area of unidentified property to be used as a 'caretaker's office' to perform his caretaking duties. Further, the submissions made in response to the application make it clear that Cannon and/or his associates have previously or are currently occupying Lot 1, or that the respondent body corporate intended Cannon to occupy the same. Moreover, the respondent body corporate submitted that the decision to acquire Lot 1 was made in terms of section 40 of the Act, which means that it contemplated leasing the same upon incorporation to a letting agent or service contractor such as Cannon.
• [70] Accordingly, I am of the view that an occupation authority under section 157 of the Standard Module is not an appropriate mechanism to be used to permit Cannon to occupy and reside in Lot 1.
• [71] The question is how Lot 1 upon incorporation can be leased to Cannon. Section 41 of the Act makes clear that the authorisation to lease the same is separate to that for acquisition under section 40 of the Act.
• [72] Section 184(2)(b) of the Standard Module states that the body corporate may if authorised by special resolution grant or amend a lease or license for three years or less over the whole or part of the common property (unless a new CMS is recorded to provide for the lease or license, whereupon authorisation by ordinary resolution would then suffice)[39].
• [73] Accordingly, the respondent body corporate can lease Lot 1 to Cannon pursuant to its incorporation with common property for a period of one year, upon seeking authorisation by special resolution for the said lease[40].

(c) The committee's submission in response to the interim order application

• [74] The committee in its submission on behalf of the respondent body corporate in response to the interim order application claims that the respondent body corporate's ownership of Lot 1 is not inconsistent with the legislation as Lot 1 was acquired for the purpose of a residence of the caretaking service contractor or letting agent by resolution without dissent as contemplated under section 40 of the Act.
• [75] It adds that the Act is framed so that the respondent body corporate is only able to hold Lot 1 as common property while a caretaking or letting agent contract is in place.
• [76] In this regard, it refers specifically to section 43(1)(b) of the Act which states as follows:

(1) If the body corporate lessee's authorisation as a letting agent or engagement as service contractor ends, whether by termination or otherwise -

(a) the lease ends immediately; and

(b) if the lessee common property is no longer to be used for a purpose mentioned in section 40(2)(a), the body corporate must convert the lessee common property to a lot in the scheme.

(2) In incorporating a lot with common property under section 41(a), or in converting lessee common property to a lot under subsection (1)(b), the body corporate must ensure any necessary titling and subdivisional arrangements are carried out under the Land Title Act.

• [77] The committee states that accordingly, the conversion of Lot 1 into common property must take place only once the agreement with Cannon is in place. In this regard, it refers to the Explanatory Notes for the Body Corporate and Community Management and Other Legislation Amendment Bill 2002 which states as follows:

The lot must be converted to common property during its letting use. Once that use ceases it is to be reconverted to a lot and sold.

• [78] The committee does not dispute that Lot 1 must be incorporated into common property.
• [79] I respectfully disagree with its argument that the effect of section 43(1)(b) of the Act is that the respondent body corporate is only able to hold Lot 1 as common property while a contract is in place to authorise a letting agent or engage a service contractor. It is not feasible for a body corporate to convert a part of common property into a lot each and every time a contract with a service contractor or letting agent who is a body corporate lessee ends. That is not the intention behind section 43(1)(b) of the Act, given the use of the words 'no longer to be used' as opposed to for e.g., 'no longer used' clearly indicates that this provision is triggered only if a body corporate decides that a certain part of common property which was acquired under section 40 of the Act will no longer be leased to a service contractor for use as a residence or letting agent for use as an office and/or residence. For example, if a body corporate lessee's authorisation as a service contractor ends, but the body corporate intends to enter into a contract with a new service contractor to whom it wishes to lease the part of the common property that was lessee common property for residential purposes, section 43(1)(b) of the Act is not triggered.
• [80] Further, it is my view that the legislation does not permit a body corporate to acquire and hold a lot within its scheme as a body corporate asset as discussed above. It may acquire a lot, incorporate it with common property and continue to hold the same as common property as envisaged under section 37 or 40 of the Act. Importantly, it is my preliminary view that if the conditions under section 43(1) of the Act are met, the respondent body corporate cannot merely convert the lessee common property (that used to be Lot 1) back to a lot, and continue to hold it as a body corporate asset. Rather it must transfer freehold title to the lot to another after conversion.
• [81] Furthermore, I disagree that Lot 1 can be converted to common property only after occupation by a letting agent or service contractor commences. Edelman J noted the following in relation to the use of explanatory notes in Mondelez Australia Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union[41]:

Having regard to their provenance and to the circumstances of their creation, explanatory memoranda for Government Bills introduced into the Commonwealth Parliament can ordinarily be taken by courts to be reliable guides to the policy intentions underlying Government sponsored legislation. They can ordinarily be relied on by courts to explain the overall legislative design and the intended practical operation of provisions and combinations of provisions. Their use of examples of the contemplated operation of provisions can inform in both those respects. They can sometimes even yield insight into the precise grammatical sense in which words appear in the texts of provisions.

Lacking both the force of law and the precision of parliamentary drafting, however, an explanatory memorandum cannot be taken to be an infallible and exhaustive guide to the legal operation of a provision. Notoriously, explanatory memoranda sometimes get the law wrong...

• [82] Sections 40 and 41 of the Act are unambiguous to the extent that acquisition of the lot is followed by the incorporation of the lot with common property, which is in turn followed by the leasing. The explanatory note above which indicates that incorporation must occur during the letting use cannot prevail over an unambiguous provision of the Act.
• [83] Accordingly, I am not satisfied that Lot 1's ongoing status as a body corporate asset owned by the body corporate is compliant with the legislation.

(d) Did the respondent body corporate act unreasonably in carrying Motion 1?

• [84] The applicant refers to the undertaking furnished by the respondent body corporate at my request on 9 September 2024 to refrain from executing the contract contemplated under Motion 3 until the interim order application was determined.
• [85] As stated above, on 18 September 2024, the committee through a vote outside committee meeting passed a resolution to enter into a contract to engage Cannon to undertake caretaking and letting duties for a term of three months commencing on 12 September 2024, on substantially the same terms as that envisaged under Motion 3, labelled as the 'Short Term Caretaking Agreement'. The applicant notes that this Short Term Caretaking Agreement includes an occupation authority for Cannon over Lot 1 under Clause 12.
• [86] The applicant states that Lot 1 has continuously been occupied by Cannon or his business associates, and that it is unclear on what basis this occupation continues considering the Short Term Caretaking Agreement terminated without renewal on 12 December 2024.
• [87] The applicant complains that the committee's actions in carrying Motion 1 and executing the Short Term Caretaking Agreement constituted an attempt to circumvent the undertaking given to me, as well as an attempt to avoid a vote by owners by bringing the said agreement within the committee spending limit.
• [88] I note that at some point following the interim order made on 24 September 2024, multiple committee members tendered their resignations.
• [89] The owner of Lots 39 and 40, who is also the former secretary of the committee, submits however that the Short Term Caretaking Agreement to engage Cannon as a caretaking service contractor for a period of three months was not executed. She states instead that the respondent body corporate resorted to a 'handshake agreement' for Cannon to work at the scheme for the benefit of all owners at the scheme, especially those in the letting pool. She further states that Cannon and his associates commenced occupation of Lot 1 without the knowledge or authority of the respondent body corporate.
• [90] The respondent body corporate has not made any submission in this regard.
• [91] Section 94(2) of the Act requires a body corporate to act reasonably in anything it does under the Act including when making or not making decisions. Furthermore, the committee too has a statutory obligation to make reasonable decisions.[42] In this regard, the legislation specifies that a decision of the committee is a decision of the body corporate itself.[43]
• [92] I reiterate that the respondent body corporate was not entitled to transfer to any person any non-freehold rights to Lot 1 including the right to occupy or possess the same, or a license over the same, be it for a year or three months or less, given it remains a body corporate asset and is not part of common property.
• [93] On this basis alone, I am satisfied that the respondent body corporate acted unreasonably in carrying Motion 1, and accordingly declare the same to be void and of no effect.

(e) Are the second, third and fourth orders sought warranted?

• [94] Strictly speaking, for the same reasons stated above with respect to Motion 1, Motion 3 too is irregular and ought to be invalidated. However, an order to that effect has not been sought. Rather, the applicant seemingly seeks an order that allows the respondent body corporate to regularise Motion 3 during implementation.
• [95] If the respondent body corporate wishes to proceed with the contract proposed under Motion 3, it must firstly incorporate Lot 1 with its common property and subsequently lease the same to Cannon in the manner explained further above in this decision.
• [96] I am reluctant to make the second, third and fourth orders sought given it would in my view constitute a usurpation on my part of the respondent body corporate's autonomy.
• [97] I am of the view, that I ought not remove the respondent body corporate's choice to either transfer the freehold title to Lot 1 to another if it does not wish to proceed with the contract with Cannon or another letting agent or service contractor; or if it does, then I must not remove the further choice with how it leases the incorporated Lot 1 to Cannon, for e.g., by recording a new CMS[44] to provide for the lease (with the requisite authorisation to do so), and then leasing the same to Cannon pursuant to authorisation by ordinary resolution; or by leasing the incorporated Lot 1 to Cannon for one year pursuant to authorisation by special resolution (as explained further above in this decision).
• [98] In my view, it would be just and equitable for me to instead require the respondent body corporate to either cease to hold Lot 1 as a body corporate asset or to deal with the same in a manner contemplated under the legislation, one of which is as proposed by the applicant under the second, third and fourth orders sought.

(f) Should the body corporate be required to recover losses from committee members and other professionals?

• [99] The applicant states that previous committees have spent body corporate funds pursuing the previous caretakers ('the Porters') for unpaid rent in relation to the occupation of Lot 1. He adds that the Porters disputed the respondent body corporate's claim for a total sum of $16,949.50 in rental arrears and noted in that regard that Lot 1 was not incorporated with the common property.
• [100] The applicant states that the Porters could have no rental obligation due to the failure to so incorporate Lot 1 with common property. He adds that this failure has deprived the body corporate (comprised by its members) of a rental return for a major asset and also resulted in the wastage of further funds on the recovery of rent it was never entitled to in the first place.
• [101] Accordingly, the applicant claims that the members of the previous committees have failed in their obligations to act in accordance with the Code of Conduct for Committee Voting Members ('Code') under Schedule 1A of the Act. He states that if they did not understand their obligations in respect to these issues, then they have failed to comply with Item I of the Code i.e., to 'have a commitment to acquiring an understanding of this Act'. He then states that if they did indeed understand their relevant obligations, then by acting in breach of those obligations they failed to act with honesty and fairness, as required under Item 2 of the Code.
• [102] The applicant concludes that these committee members did not act in good faith and without negligence and hence is not protected from civil liability under section 101A of the Act.
• [103] The applicant relies on the decision in The Glades-Peninsula[45] as precedent to order the respondent body corporate to take all reasonable steps to recover losses from committee members.
• [104] In my view the fifth order sought by the applicant in this regard, is rather punitive in nature as far as the said committee members are concerned (albeit it contains the added layer of my requiring the respondent body corporate to initiate the relevant action, instead of my directly ordering the committee members concerned to pay for any losses incurred).
• [105] I note that unlike the decision in The Glades-Peninsula where a committee member was somewhat unjustly enriched when the body corporate paid for legal services that benefited the committee member personally, the committee members in question received no such benefit in foregoing rental payments or spending on legal services in an attempt to recover those rental payments. This is the reason why I view this order sought to potentially have a punitive effect.
• [106] I agree with the applicant that it is contrary to the legislation for the respondent body corporate to have dealt with Lot 1 whilst it was still a body corporate asset as explained further above. However, I am not entirely persuaded that the failure to incorporate Lot 1 with the scheme's common property alone would negate a claim for rent. The basis for a rental charge does not lie within the Act and Standard Module, but other laws. Regardless, I am not the arbiter of whether the Porters can lawfully refuse to pay rent on the basis of a failure to incorporate Lot 1 with common property. Accordingly, I am not satisfied that previous committees acted unreasonably or in contravention of the Code by engaging lawyers to recover monies due.
• [107] I must acknowledge that the provisions of the Act and Standard Module are terribly complex.[46] The provisions that I have cited in this decision in particular, are not simple for persons of a non-legal background to grasp, especially in its raw statutory form. The legislation does not require committee members to be legal experts. It merely requires them to have a 'commitment' to acquiring an understanding of the Act relevant to their role on the committee. The submissions indicate that these committee members sought advice from legal professionals in the course of performing their duties. If anything, such conduct is indicative of a commitment to understanding the legislation.
• [108] Accordingly, whilst I cannot speak to the quality of the legal advice these committee members received, I am not persuaded that these members either acted in bad faith or negligently in performing their duties. As a result, I cannot grant the fifth order sought by the applicant.
• [109] I note that in the event of a breach of the Code by a committee member, the legislation allows the body corporate to remove the said member.
• [110] The applicant states that these committee members are likely to claim that they relied on the advice of body corporate managers and lawyers, and accordingly must be required to produce evidence of the same. He states that depending on such evidence the respondent body corporate must take action against those professionals.
• [111] I note that it is the applicant who bears the onus to prove his case. If the applicant and any other lot owners are concerned with the quality of advice provided by legal and other professionals, they are free to table a motion to initiate relevant action. However, at this stage, there is no evidence before me warranting an order requiring the respondent body corporate to take all reasonable steps to recover losses from these professionals.
• [112] Accordingly, I reiterate that I am not of the view that it would be just and equitable to grant the fifth order sought.

• [113] A body corporate cannot permit a service contractor or letting agent to occupy a particular part of the common property for residential purposes under section 157(1) of the Standard Module. Such residential occupation would require a higher threshold of authorisation by either special resolution or resolution without dissent (see section 184(2) of the Standard Module).
• [114] The Act does not permit a body corporate to acquire a lot within its scheme and let it remain a body corporate asset indefinitely or for an on inordinate amount of time. It must in due course be incorporated into the scheme's common property as envisaged under section 37 or 40 (and 41) of the Act. It is contrary to the legislation for a body corporate to transfer any non-freehold interest in the lot to any other person before it is incorporated with the common property.
• [115] Accordingly, the respondent body corporate has acted unreasonably by carrying Motion 1 which sought to permit Cannon to occupy Lot 1 whilst it remains a body corporate asset. For this reason, I declare Motion 1 to be void and of no effect.
• [116] If the respondent body corporate wishes to permit Cannon to occupy the land that forms Lot 1, it must firstly incorporate Lot 1 with its common property. Based on the evidence, it would now suffice for it to obtain consent (by way of ordinary resolution or if appropriate by committee resolution) to record a new CMS to reflect the incorporation of Lot 1 with its common property under section 62(4) of the Act; and lodge a request to record this new CMS; and carry out relevant titling and subdivisional arrangements under the Land Title Act 1994 in accordance with section 43(2) of the Act. Secondly, the respondent body corporate must lease the incorporated Lot 1 to Cannon under section 184(2)(b) of the Standard Module for a period of one year if authorised by special resolution (unless a new CMS is recorded to provide for the lease whereupon authorisation by ordinary resolution would suffice as per section 184(3) of the Standard Module).
• [117] I am not persuaded that committee members have acted in bad faith or with negligence warranting an order that requires the respondent body corporate to take all reasonable steps to recover certain losses from them. Furthermore, there is no evidence before me warranting an order requiring the respondent body corporate to take similar steps to recover losses from other professionals.

[2] See definition under Schedule 6 of the Act

[3] Clause 12 of the proposed contract for caretaking and letting services

[4] The common property bears title reference 19204847, whilst Lot 1 bears title reference 17228020

[5] The CMS includes the scheme's by-laws

[6] Sections 276)(1)(a) and (b) of the Act

[8] See Brighton on Broadwater Breezes [2018] QBCCMCmr 243 at [8]

[9] For e.g., the applicant seeks an order requiring the respondent body corporate to seek authorisation to record a new CMS under section 62 of the Act. He however does not specify in the order itself what the new CMS is to achieve. I gather from the broader context of the dispute, is that it is to reflect the incorporation of Lot 1 into the scheme's common property

[10] The provisions in the Act regarding the prohibition and limitations on the receipt of benefits by the body corporate from a letting agent or service contractor are also noteworthy (See sections 42, 114 and 115 of

[11] Section 35(1) of the Act

[12] Section 35(2) of the Act

[13] See section 37 of the Act

[15] Section 184(2)(b) of the Standard Module

[16] Section 184(2)(a) of the Standard Module

[17] It is worth noting that section 184(4) of the Standard Module prohibits a body corporate from granting a lease or license over part of the common property if the same is subject to a right of occupation by a service contractor or letting agent

[19] Unless a body corporate is dissolved, whereupon lot owners become entitled to body corporate assets in shares proportionate to the respective interest schedule lot entitlements of their lots (Section 81S of the Act).

[20] Section 11 of the Act. See also section 190 of the Standard Module

[21] See sections 45(3) and 157 of the Act. However, a body corporate is only permitted to mortgage or create a charge over a body corporate asset to the extent permitted under the regulation module.

[22] Section 190(b)(ii) of the Standard Module

[23] Section 190(b)(i) of the Standard Module

[24] Or acquire freehold land contiguous to scheme land

[25] Section 41(a) of the Act

[26] Section 41(b) of the Act

[27] Read together with section 41 of the Act

[28] This is consistent with the second example set out under section 11 of the Act, and the lack of provision under section 116(2) of the Act for a scenario where the lot is owned by the body corporate as a body corporate asset.

[29] It appears that the legislative intention behind section 116(2)(b) of the Act requiring the execution of a deed as stated above, was to bind the lot holder - in instances where the lot holder was not the letting agent - to the provisions in the Act pertaining to the transfer of the letting agent's management rights (See Division 8 of Part 2 of Chapter 3 of the Act), when there was a breach of a code of conduct by the letting agent (See Explanatory Note to the Body Corporate and Community Management and Other Legislation Amendment Bill 2002).

[30] A lot which is incorporated into a scheme's common property, ceases to be a 'lot' thereafter

[31] Section 157(5)(e) of the Standard Module

[32] See section 184(2) of the Standard Module

[33] While freehold title to the land that so forms Lot 1 remains with the respondent body corporate. (In other words, this analysis does not cover the transfer of freehold title in Lot 1 by the respondent body corporate to any person)

[34] In its submission made in response to the interim order application

[37] For e.g., under section 52(1)(c) of the Standard Module

[38] See section 157(7) of the Standard Module

[39] See section 184(3) of the Standard Module

[40] Unless as stated above, a new CMS is recorded to provide for the lease or license, whereupon authorisation by ordinary resolution for the lease would suffice

[41] [2020] HCA 29. This decision was further cited in Blanch v Workers' Compensation Regulator [2021] QIRC 408 at [54]

[44] With the requisite authorisation/consent to do so

[45] [2019] QBCCMCmr 337

[46] See Carroll and Ors v Body Corporate for Palm Springs Residences CTS 29467 [2013] QCATA 21 at [22]