TWO ISSUES TO LOOK OUT FOR WHEN TOPPING UP

09 February 15

 A recent decision by the Queensland Civil and Administrative Tribunal Appeals reinforces two very important issues which you need to bear in mind when seeking to “top up” or to enter into new Caretaking and Letting Agreements.
Whilst this is a Queensland case, the same principles apply in New South Wales.

Facts

The Building Manager put up a motion at a general meeting for the Body Corporate to enter into a new Caretaking Agreement and a Letting Authority for a total term of 25 years (including options). The motion was passed by way of a secret ballot with voting as follows:


In favour – 14 votes
Against – 13 votes
Disallowed – 2 votes
Total – 29 votes


The two votes disallowed were on the grounds that the lot owners each owed a debt to the Body Corporate. One lot owner’s debt was – (drum roll).......one cent!! QCATA had to decide whether one cent constituted a “Body Corporate Debt” and, therefore disqualified the lot owner was being able to vote.


The other key issue for decision involved an incorrect explanatory note which formed part of the Notice of Meeting sent to owners. The explanatory note stated that “The committee has also reviewed the new agreements and recommends they be entered into”. This was not correct.


The QCATA Member had to decide whether the explanatory note was wrong and misleading and consequently, whether the resolution to approve the entering into of the new agreements should be declared void.

The Decision:

The “debt”

The question of whether one cent = a Body Corporate debt was quickly dealt with by the Member. He pointed out that this issue had been decided twice in earlier proceedings and in both cases, it had been decided by an adjudicator that a debt of one cent was a “Body Corporate debt” and therefore, the lot owner was not entitled to vote. The Appeal Member agreed with this decision and that was the end of any debate!


The Misleading Explanatory Note

After the meeting notices were sent out, the chairperson of the Body Corporate contacted as many owners as possible to inform them that the committee had made no such recommendation. Of the persons who voted, only four owners were not contacted.


The Appeals Member took the view that the misleading statement (that the committee recommended that the Body Corporate pass the resolution) could well have affected the decision of lot owners to vote in favour of the resolution. Even though the chairperson of the Body Corporate had managed to contact all but four of the lot owners who voted, there was (in his view) a real possibility that owners were misled by the note. He concluded that in circumstances where the motion was passed by a majority of only one vote, there was a real risk the motion was passed, in part, on the basis of a misleading explanatory note and a non-existent recommendation of the committee.


The Appeals Member decided that it was just and equitable to resolve the dispute by making an Order declaring the resolution to be void and the appeal was granted. (At a later application for leave to appeal the QCATA decision to the Queensland Court of Appeal was denied).

Consequences

With the motion declared invalid, the Body Corporate has been left with the decision to:


(a) make a follow-up application to declare that the Caretaking and Letting Agreements invalid and have them set aside, or
(b) call a further general meeting to ratify the agreements.


Key Points to take out of the Case

As silly as it sounds, a debt of one cent owing by a lot owner invalidates that lot owner from voting at a general meeting on issues such as topping up or extending Caretaking and Letting Agreements. Consequently, if you are a Building Manager looking to “top up” you should:


1. Check the Strata records prior to the calling of any general meeting (which as an owner, you are entitled to do) to identify anomalies such as this and ensure that minor “debts” are promptly cleared;
2. Make sure that you review the explanatory notes relating to motions that go out with meeting agendas – preferably before the agenda is sent out by the Strata Manager or as soon as possible thereafter. If the explanatory note is wrong in any way, have it corrected or the meeting notice re-sent to owners. It is not worth taking the risk.


Liability limited by a scheme approved under Professional Standards Legislation
Disclaimer – This article is provided for information purposes only and should not be regarded as legal advice.
 

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