Hoft Pty Ltd v Fairthorpe Body Corporate CTS 5820

[2014] QCATA 105

CITATION: Hoft Pty Ltd v Fairthorpe Body Corporate CTS 5820 [2014] QCATA 105

PARTIES:	Hoft Pty Ltd (Applicant)
v
Fairthorpe Body Corporate CTS 5820 (First Respondent) Morat Pharmaceuticals Pty Ltd (Second Respondent)

APPLICATION NUMBER: APL258-13

MATTER TYPE: Appeals

HEARING DATE: On the papers

HEARD AT: Brisbane

DECISION OF: Member Barlow, QC

DELIVERED ON: 6 May 2014

DELIVERED AT: Brisbane

ORDERS MADE:

1.       Appeal allowed.

2.       Declare that the second resolution of the body corporate made at the extraordinary general meeting held on 23 July 2012 is void.

CATCHWORDS:

APPEAL - Body Corporate and Community Management – Ineligibility of lot owner owing a body corporate debt to vote at general meeting – Meaning of “body corporate debt” –
Body Corporate and Community Management – Misleading statement accompanying notice of general meeting – Whether meeting or resolution void due to statement

Body Corporate and Community Management – Application for adjudication – Whether applicant can raise fresh ground of application in reply submissions – Whether good grounds to allow an application out of time

Body Corporate and Community Management Act 1997 (Qld) s 242(4)(b)
Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Qld) s 4, schedule 1

APPEARANCES and REPRESENTATION (if any):

This matter was heard and determined on the papers pursuant to s 32 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act).

REASONS FOR DECISION

Introduction

1. By a secret ballot conducted at a general meeting of the respondent body corporate (Fairthorpe), the members of the body corporate passed a resolution to the effect that the body corporate enter into a new caretaking agreement and letting authority for a term of 10 years, with options of 10 years and 5 years respectively.  The resolution was passed with 14 votes in favour, and 13 votes against it.  Twenty-nine ballot papers had been cast in respect of the motion, but two were disallowed on the ground that the respective lot owners each owed a debt to the body corporate.  One of those lot owners was the appellant.  The other was the owner of lot 31, which owed the body corporate one cent. 

2. The appellant made an adjudication application, seeking orders that the meeting be held invalid, or that the resolution be declared invalid, or that one or both of the two votes that had been declared invalid be admitted and counted.  Its application was dismissed by the adjudicator. 

3. There are nine grounds of appeal from the adjudicator’s decision.  In essence, however, they boil down to three principal issues:

   a)Was the owner of lot 31 ineligible to vote because he owed the body corporate one cent?

   b)Notice of the meeting at which the motion was put to approve the agreement was given to owners with an explanatory note which stated that, “the committee has also reviewed the new agreements and recommends they be entered into”.  That was not correct.  One of the grounds of the application was that that explanatory note was wrong and misleading.  Did the adjudicator fail to consider that ground and, if so, does that constitute an appellable question of law?

   c)In his submissions in reply before the adjudicator, the appellant asserted, and provided evidence in support of the assertion, that the owner of lot 5, whose vote had been counted, owed a debt to the body corporate at the time of the meeting and was therefore ineligible to vote. That was not a ground set out in the application for adjudication. The body corporate objected to that matter being raised at such a late stage and opposed the application being amended out of time under s 242 of the Body Corporate and Community Management Act. The adjudicator agreed that it was too late to raise the issue. He nevertheless commented that he was not satisfied that the owner of lot 5 owed a body corporate debt, as it might have been owed by his tenant, and as it was a secret ballot it was not possible to determine how that lot owner voted. He also commented that he did not consider that the applicant had shown good reason for waiving non-compliance with the three month time limit imposed by s 242(2). Should the adjudicator have treated this newly raised issue as an amendment to the applicant and, if so, did he make an error of the law in refusing to grant an extension of time?

Is a one cent debt a “body corporate debt”?

1. This issue can be dealt with in short compass.  It had already been decided twice in earlier proceedings to which Hoft, as an owner, was a party.[1]  In both cases it had been decided by an adjudicator that the debt of one cent was a “body corporate debt” and therefore the lot owner was not entitled to vote.  As Hoft was a party to those applications, and there was no appeal from either decision, the question is res judicata.  It has been decided in a manner that binds Hoft and all other persons associated with Fairthorpe, and it was not open for Hoft to raise it again in its application in this matter. 

   [1]Re Fairthorpe [2012] QBCCMCmr 570, an application by the owner of lot 31; and Re Fairthorpe [2013] QBCCMCmr 79, an application by the owner of lot 33 concerning the validity of the vote of the owner of lot 31.

2. But in any event, I consider that each of those decisions was correct.

Misleading explanatory note

1. The application, and the submissions filed by all parties before the adjudicator raised and dealt with whether the explanatory note accompanying notice of the meeting was wrong (which it clearly was) and whether that should result in the resolution or the meeting being declared invalid.

2. The body corporate submitted to the adjudicator that, before the meeting occurred, the chairperson of the body corporate contacted as many owners as possible to inform them that the committee made no such recommendation and, of the persons who voted, only the owners of lots 12, 19, 4 and 20 were not contacted.  Notably, none of the owners of those lots was represented, in person or by proxy, at the meeting itself.[2] 

   [2]The minutes of the meeting were in evidence before the adjudicator. They listed who was present in person and which lots were represented.  Confusingly, some were said to be represented “by voting paper”.  What that means is unclear, but none of the lots referred to was in that list.  Nevertheless it appears that they voted.

3. Having summarised the parties’ submissions in his reasons for decision, the adjudicator failed to deal with the question whether the incorrect explanatory note was a good reason to declare the meeting, or the resolution itself, void.  In failing to deal with it at all, he has erred in law.

4. While it would be possible for this Tribunal to set aside the adjudicator’s decision and to remit the matter to him for a decision on that ground, if the Tribunal can determine the issue on the evidence before the adjudicator then it should do so. 

5. It is clear that the explanatory note was wrong and therefore misleading.  A misleading statement that the committee recommended that the body corporate pass a resolution could well affect the decision of a lot owner to vote in favour of a resolution apparently recommended by the committee.  Even if the chairperson of the body corporate had managed to contact all but four of the lot owners who voted (about which there was an assertion, but no supporting evidence), where those four persons who were not contacted voted by submitting a ballot paper without attending at the meeting, there is a real possibility that they were misled by the note and that their decision as to how to vote was affected, one way or another, by the apparent recommendation of the committee.

6. In these circumstances, where the motion was passed by a majority of only one vote, there is a real risk that the motion was passed, in part, on the basis of a misleading explanatory note and a non-existent recommendation of the committee.  It seems clear to me, in those circumstances, that it is just and equitable to resolve the dispute by making an order declaring the resolution to be void.[3] 

   [3]Section 276(1)(b) and Schedule 5 Item 8.

7. The result is that the appeal should be allowed on this ground and the resolution should be declared void.  Of course, this does not prevent the body corporate committee, if it sees fit, calling a meeting to put a motion that the entry by the body corporate into the caretaking and letting agreement be ratified by the body corporate in general meeting, or that a fresh agreement be entered into.

Should the issue of lot 5 have been dealt with?

1. Having regard to my conclusions on the second issue, it is unnecessary for me to consider this issue.  I will, however, make some brief observations.  The appellant’s proposed new ground appeared to have a good arguable basis, as the evidence on which it sought to rely appeared to show that the owner of lot 5 may well have owed a body corporate debt at the time of the meeting.  If that were correct, that lot owner was ineligible to vote and, as the resolution was passed by only one vote, that lot owner’s vote may well have affected the result.  In those circumstances it seems to me that there was good ground for allowing an application out of time and it was a miscarriage of the adjudicator’s discretion not to treat the appellant’s raising of the issue as making application out of time, and not to allow that application, with any necessary adjournment to enable further evidence and submissions to be filed on behalf of the other parties. 

2. However, given my conclusion on the second issue, I do not need to make findings on this issue.

Other matters

1. While unnecessary for the purpose of my decision, I should also note that there were submissions made as to whether the other party to the caretaking and letting agreement, Morat Pharmaceuticals Pty Ltd, was aware that the explanatory note was misleading and that, therefore, the resolution was arguably invalid, and therefore the agreement between it and the body corporate that was entered into as a result of the resolution is in some way invalid or ought be set aside.  None of those matters was properly raised in this application.  There was no application to set aside the agreement.  Now that the resolution has been declared void, that issue may be raised in another proceeding, perhaps depending upon the result of any further meeting, but it was unnecessary for the adjudicator or this Tribunal to consider and determine that issue. 

Conclusions

1. In my view, therefore, the appeal should be allowed and the resolution should be declared void.