McKinnon v Adams
[2003] VSC 116
•16 April 2003
7
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 8605 of 2001
| JAMIESON BRUCE MCKINNON & ORS | Plaintiffs |
| V | |
| HALINA WENDY ADAMS & ORS | Defendants |
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JUDGE: | BONGIORNO J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5 & 6 March 2003 | |
DATE OF JUDGMENT: | 16 April 2003 | |
CASE MAY BE CITED AS: | McKinnon v Adams | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 116 | |
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Land – subdivision – body corporate – appointment of administrator – grounds for appointment – consequences of appointment – negative declaration – grounds for – s.38 Subdivision Act 1988.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr. N. Jones | McKean & Park |
| For the First Defendant | Appeared in person | |
| For the Fourth Defendant | Mr. P. McCaffrey | J. N. Zigouras & Co |
HIS HONOUR:
The plaintiffs in this proceeding are the owners of three of the six units in an older style block situated at 35 Alfred Street, Kew. The block was built about sixty years ago and was the subject of a strata title subdivision under the Strata Titles Act 1967 in 1982. The first defendant is the owner of the other three units, having purchased two of them in about November 1988, and the third, from her sister and brother in law, after this proceeding commenced. As originally filed, the originating motion which commenced the proceeding named Barbara Irene Macey and John Alfred Macey as the second and third defendants. They are the first defendant's sister and brother-in-law. The Maceys recently sold their unit to the first defendant and the proceeding was amended to delete them from it. The fourth defendant is the body corporate in respect of the subdivision.
The plaintiffs' claim is for the appointment of an administrator to the body corporate of the subdivision pursuant to the Subdivision Act 1988 and for consequential and ancillary relief, including relief by way of injunction, against the first defendant with respect to her activities in relation to the body corporate. Most importantly the plaintiffs seek a declaration that they do not owe any money to any of the defendants by way of unpaid levies or otherwise.
Upon the trial of the proceeding the plaintiffs were all represented by Mr N Jones of counsel. The first defendant, Ms Halina Adams appeared in person. The second and third defendants, Ms Adams' sister and brother-in-law, had, as has already been noted, sold their unit to Ms Adams prior to the trial, and were released from the action by consent. No order was made as to costs upon their being so released.
Adjournment application
The fourth defendant, the body corporate, was served with the originating motion, and other documents in this proceeding, but never entered an appearance. At the commencement of the trial Mr P McCaffrey of counsel announced an appearance for the body corporate and sought an adjournment of the trial. This application was opposed by the plaintiffs. Mr McCaffrey's instructions came, he said, from a Mr Walter Edwards, an employee solicitor of the firm of J N Zigouras & Co who claimed to be the secretary, manager and administrator of Body Corporate Strata Plan No 17739 having been appointed to those positions by a special general meeting of the body corporate held on 27 March 2002, attended only by Ms Adams. A document purporting to be the minutes of that meeting was produced by Mr Edwards. They showed that on that night Ms Adams purported to pass some 22 motions, including an extensive motion appointing Mr Edwards to the position he claimed and conferring upon him extremely wide duties, functions and powers which took almost two pages to describe. The minutes show that no one else attended the meeting.
Mr Edwards gave evidence on the application to adjourn the proceeding. He said that at the time of his appointment in March last year he wasn't aware that it was on foot. He said that he became aware of its existence on the evening of 3 March this year when Ms Adams told him that his name had been mentioned in affidavit material filed by the plaintiffs and that she wanted him to file an answering affidavit in respect of some issues which were raised. No such affidavit by Mr Edwards directly responding to the plaintiffs' case was ever filed although on the second day of the trial, namely 6 March 2003, two short affidavits by Mr Edwards, sworn 5 and 6 March 2003 respectively, were filed without objection from the plaintiffs. The first of them does little more than repeat information which Mr Edwards had been given by the first defendant Ms Adams, and deposes to the fact that he did not know of the proceeding until 7.00 pm on Monday 3 March 2003, when he was told of its existence by Ms Adams. The second affidavit appears to be in support of Ms Adams' contention that Mr Edwards should be appointed administrator of the body corporate by this Court. Reference to this affidavit will be made later in this judgment.
In his oral evidence in support of the application for an adjournment of the proceeding Mr Edwards outlined his understanding as to why the body corporate was not functioning, or not functioning properly, and said that he needed an adjournment for six weeks, although what he would do during that six weeks was unclear. There was no evidence before me that he had done anything since his purported appointment as secretary, manager and administrator of the body corporate in March of last year.
In the event I refused the body corporate's application for an adjournment without deciding whether Mr Edwards could lawfully represent it. Having been briefed only upon the adjournment application Mr McCaffrey was excused, and the matter proceeded, although Mr Edwards remained in court during much, if not all of the hearing. He took no part in it.
Thus, the trial proceeded with the body corporate being unrepresented and, technically, not appearing. However, as all members of the body corporate were before the Court, and it became apparent upon a reading of the material filed (if it was not already apparent from the purported minutes relied upon by Mr Edwards) that his appointment as secretary, manager and administrator was of extremely doubtful validity, it seemed that no rights of the body corporate would be infringed by allowing the trial to proceed, particularly as it also became apparent that Ms Adams was, by now, not going to oppose the appointment of an administrator. Her case, as it developed, seemed to be that there was no need for this step to be taken although she continued to contend that all members of the body corporate were indebted to her or the body corporate in large sums and had been for many years.
The Law as to Administration
Section 38 (4) of the Subdivision Act 1988 provides as follows:-
"(4)A body corporate or a member of a body corporate, a creditor of the body corporate or any person with an interest in land affected by the body corporate may apply to the Supreme Court or the County Court for the appointment of an administrator. "
The only other references in the Act relevant to the circumstances of this case concerning an administrator are to be found in ss 38 (6), (7) and (8) which are in the following terms:-
"(6)Subject to this section, the Court may appoint an administrator and set down terms and conditions of the appointment, or make such other order as it thinks fit on an application under this section.
(6A) . . .
(6B) . . .
(6BA) . . .
(6BB) . . .
(6C) . . .
(7)The members of the body corporate must pay the remuneration and expenses of the administrator in accordance with their lot liabilities or, if the order otherwise provides, in accordance with the order.
(8)An administrator: -
(a)must lodge with the Registrar a copy of the court order of appointment without delay;
(b). . .
(c)subject to any court order, may do anything which the body corporate or the committee can do;
(d)may delegate in writing any power.
(9)A court to which an application is made or a matter referred under this section may make any order for payment of costs it thinks fit."
The sub-sections not quoted above relate to the powers and functions of an administrator in relation to matters other than those relevant to this case.
I was not referred by Mr Jones to any authority which further elucidated the functions of an administrator appointed under the Subdivision Act 1988 or the criteria upon which the Court would act to place a body corporate under administration. The term itself is not defined in the Act. Accordingly, the provisions quoted fall to be construed by reference to ordinary principles of construction including the object of the legislation under consideration.
Section 38 of the Act carries the heading "Disputes relating to bodies corporate". It is found in Part 6 headed "MISCELLANEOUS" which contains sections as diverse in their effect as those relating to compulsory acquisition of land, the power of an owner to acquire or remove easements, the referral of some disputes to the Victorian Civil and Administrative Tribunal and the usual sections relating to delegation of powers and the making of regulations. However the heading to s 38 strongly suggests that the appointment of an administrator must be seen in the context of the resolution of disputes within a body corporate.
The terms "administrator" is used, generally, in a wide number of contexts. It appears in a very large number of Victorian statutes. In some such statutes, particularly those relating to Government business enterprises, the statute provides for an administrator to be appointed to conduct the ordinary operations of the enterprise. For example, the Transport Act 1983 provides for the appointment of an administrator to run the Public Transport Corporation. Statutes relating to the electricity industry and the gas industry provide similar examples. The common feature of these statutes is that the administrator is not appointed to replace any existing governing structure, or in circumstances of a failure of the ordinary methods of governing the enterprise but is rather part of the chosen statutory governing structure for the enterprise. This group of statutes is not concerned with the appointment of an administrator in the event of disputation as to the conduct of the enterprise being regulated.
A second group of statutes relating to a large number of different types of organisations, including those engaged in providing financial services, health services or carrying on community activities such as the operation of cemeteries or business enterprises conducted on a community, or interest group basis, often contain provisions for the appointment of an administrator in circumstances where, for one reason or another, the original governing structure of the organisation has broken down. Disparate examples can be found in the Cemeteries Act 1958, the Mental Health Act 1986 and the Friendly Societies (Victoria) Act 1996. There are a very large number of others. For example the Murray Valley Citrus Marketing Act 1989 provides for the appointment of an administrator to the Murray Valley Citrus Marketing Board where all members of the Board have vacated their offices or where the relevant Minister considers it to be in the best interests of the Board that an administrator be appointed. Clearly, these statutes contemplate the appointment of an administrator in circumstances where the body corporate being regulated is either not carrying out its functions as its statute contemplated it would or is having difficulty in doing so.
Almost all of the statutes in the second group to which I have referred provide criteria for the appointment of an administrator, and consequences which flow from his or her appointment. For example, s 6 of the Cemeteries Act 1958 provides that the governor in council may appoint an administrator to manage a public cemetery where the responsible minister is satisfied that such cemetery is being inefficiently, or incompetently managed, or the appointment is necessary to protect the interests of the public. Upon appointment of the administrator the members of the cemetery trust of the public cemetery cease to hold office, and the administrator acquires all of their functions, powers, immunities and duties. Similar provisions exist in the Friendly Societies (Victoria) Act 1996, the Mental Health Act 1986 and many others. The Corporations Act 2001 provides that where a company is "under administration" the ordinary officers of the company cannot perform or exercise any of their functions.
The Subdivision Act 1988 is unusual in that it provides for the appointment of an administrator to a body corporate without setting out the criteria upon which the Court should make such appointment. Nor does the Act provide for the consequences of such appointment as far as the ordinary governance of the body corporate is concerned, although it confers upon the administrator the power to do anything which the body corporate or the committee[1] can do. He or she may also delegate in writing any power..
[1]Reference to the committee is, presumably, reference to the committee provided for by the Subdivision (Body Corporate) Regulations 2001, Reg 305 et seq
The fact that the legislation confers upon a court appointed administrator the power to do anything which the body corporate or its committee can do implies that the body corporate and its committee cease to function once an administrator is appointed. The Legislature could not have intended that the ordinary governing structure of a body corporate should continue to function co-extensively with a replacement power structure imposed upon the body corporate by a court. It follows that if the appointment of an administrator deprives a body corporate of its power to act, an order appointing such an administrator should only be made where it is appropriate to so deprive the body corporate of that power. For the Court to deprive a body corporate of its ordinary power of governance by the appointment of an administrator without there being some cause for doing so would run directly contrary to the scheme established by the Subdivision Act 1988 for the care, maintenance and administration of common areas in a subdivision which assumes governance of a body corporate by those most interested, namely the unit holders. Thus, although there are no specific provisions in the Subdivision Act 1988 providing criteria upon which a court should act to appoint an administrator it seems that criteria similar to those found in the second group of statutes referred to above providing for the appointment of administrators should be applied by analogy.
In Filaria Pty Ltd v Proprietors of Unit Plan 932[2] Miles CJ had to consider s 92 of the Unit Titles Act 1970 (ACT) which provided for the appointment of an administrator to a corporation having equivalent functions to a body corporate under the Subdivision Act 1988 in this state. Similarly to the Victorian act the ACT legislation provided no criteria upon which an administrator should be appointed by the Court other than that such an appointment should only be made "on cause shown" and in the exercise of a judicial discretion. The Chief Justice commented on the lack of guidance as to what constituted "cause shown" in the legislation, but concluded that:-
". . . general equitable principles applied by the Court under section 25, section 26 and section 31 of the Supreme Court Act as well as similar principles applied by Australian courts exercising jurisdiction to appoint receivers and managers under the Corporations Law seem to me to be appropriate, and counsel for the parties accepted such an approach."
Whilst Miles CJ was there dealing with a dispute concerning the ownership and management of interests in lands and buildings comprising an operating hotel, his general approach may be adapted to the appointment of an administrator under the Victorian legislation in circumstances where the parties are in dispute, not as to any proprietary rights but as to the proper management of the body corporate and the proper administration of the common property of the units concerned.
[2]unreported [2000] ACT SC 69 (16 August 2000)
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.
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.
The facts
Having regard to the fact that in this case the appointment of an administrator was ultimately not contested by Ms Adams it is not now necessary for me to review extensively the factual material before the Court. It is sufficient that I refer to so much of it as demonstrates the breakdown in governance of the body corporate so as to justify the Court making the appointment sought by the plaintiffs.
The plaintiffs relied upon eight affidavits sworn by Robin John Pearson (2), John Alexander Atchison, Jamieson Bruce McKinnon (2), John Connors (2) and
Maurice J Dunlea. The affidavits of Messrs Pearson, McKinnon and Connors exhibited 130 documents being minutes and purported minutes of meetings of the body corporate, letters and copy letters to and from the first defendant Ms Adams, correspondence with other parties and other miscellaneous documents. The authenticity of these documents is not disputed by the first defendant, they having been the subject of an unanswered Notice to Admit dated 14 February 2003.
In opposition to the plaintiffs' claim, the first defendant, Ms Adams has filed one affidavit and relies upon two affidavits of Mr Walter Edwards to which reference has already been made. Ms Adams' affidavit is 120 pages and 275 paragraphs in length. It exhibits six documents. In very general terms it disputes the facts put forward in the plaintiffs' affidavits. It is discursive and argumentative. It contains much inadmissible opinion and concentrates heavily on her contention that members of the body corporate (other than she and her sister and brother-in-law) all owe large sums of money to the body corporate in respect of expenditure which she says she undertook, allegedly on its behalf, in about 1989 – 1990.
As I have noted, Mr Connors' affidavit exhibits a number of letters written by Ms Adams to the body corporate and its members. They contain a litany of complaints, demands for compensation and threats of legal action. They are often of three or more closely typed or handwritten pages and, in some cases, purport to order other body corporate members to undertake specific items of work which she considered appropriate or necessary. It is appropriate that I refer to a small part of that earliest part of that correspondence as evidence of the beginning of the breakdown in communication between the unit holders which led to the body corporate being unable to function properly for many years.
Ms Adams took possession of the first of the units she acquired in late 1988 or early 1989. On 9 January 1989 she wrote the first of the letters to which I have referred. It is directed to the secretary of the body corporate and notes 21 matters in respect of which, she says, she requires answers "virtually immediately". The letter expresses disappointment that a body corporate meeting is not planned until 2 February and seeks that that meeting be brought forward. The letter is couched in aggressive and demanding terms.
Despite the meeting referred to being held as originally planned on 2 February and the minutes of that meeting recording that considerable discussion was devoted to the matters she had raised in her earlier letter, on 10 February 1989 Ms Adams wrote another letter to the body corporate. This letter was of two and a half pages of single space typing. It required "unequivocal answers" to 12 numbered points. The matters raised ranged from rising damp (which the minutes of the meeting of 2 February demonstrate was discussed at that meeting) to infestations of fleas allegedly caused by cats which had previously inhabited one of the units she had purchased. The letter concludes with an assertion that Ms Adams was suffering economic loss as a result of the delay in addressing her concerns.
A further, similar, letter of complaint was written by Ms Adams on 20 February 1989 to the other members of the body corporate before a meeting which was held on 23 February. Many matters were discussed at that meeting which ran for over three and a half hours. The minutes record that the body corporate was to seek legal advice on several of the issues raised by Ms Adams.
Two days later, on 25 February, Ms Adams again wrote to the body corporate. The letter is in similar style to those to which I have already referred although it also contains allegations of gross negligence against the body corporate and an allegation that it had deliberately allowed ". . . parts of the building to turn to waste because maintenance has been disregarded . . .". The letter concludes:-
"How long must I wait to receive your responses to my requests that we correct our immense deficiencies at once? I remind you that the quantum of my damages continues to rise and denying liability in the face of the evidence will do you no good."
On 27 February Ms Adams sent a medical certificate to the body corporate in support of a claim for damages due to her having allegedly fallen on the common property.
On 28 February Ms Adams again wrote to the members of the body corporate complaining that the minutes of the meeting of 26 February:-
". . . illustrate the Members' inability to take affirmative action in respect of crucial matters the nature of which I have noted again and again in my letters. I shall not be bothering you again about the substantial damages I suffer as a result of members committing waste and causing damage to my units. Your inaction in the face of visible damage is evidence of your continuing negligence as you defer repair work from meeting to meeting. As you do not comprehend that time is of the essence when damages are occurring, I am not prepared to be a party to any of your meetings, & waste time.
I shall be giving my Solicitor instructions to sue each of you for your inaction to relieve me of my damages & for the damages as caused and continuing to be caused by you."
By letter dated 7 March 1989 Mr Connors denied any liability on his part in respect of Ms Adams personal injury and went on to remonstrate with her in respect of the attitude she had shown towards other members of the body corporate. In contradistinction of those of Ms Adams, Mr Connors' letter is measured and reasonable in its tone.
Not surprisingly it prompted a swift response from Ms Adams. By a letter dated 10 March she joined issue with Mr Connors and defended her attitude to the body corporate, concluding her letter with a reference to contemplated court action.
I have set out the above exchanges in somewhat more detail than might have been thought to be necessary to demonstrate that the problem presently before the Court had its genesis over 13 years ago. The plaintiffs' affidavits, as well as that of Ms Adams herself, demonstrate that over the succeeding years little changed other than that the divide between her and the other members of the body corporate (except, whilst they were members, her sister and brother-in-law) continued to deepen.
It is clear that for many years the body corporate has been unable to function as contemplated by the relevant legislation. Its situation has met the criteria which I have set out above as warranting the appointment of an administrator. In reaching that conclusion it is not necessary for me to make any finding as to the validity of any of Ms Adams claims. I simply observe that despite having read her affidavit and having heard her, in argument, for some considerable time I am far from convinced that there is any merit in most, if not all of her claims. However, with the exception of claims which arise out of a purported meeting of the body corporate of 27 July 1990 to which I shall turn hereunder, there is no need for me to deal with these issues further. A line must be drawn. There must be a new start if this group of unit owners is ever to achieve peace in their own life times. The intolerable situation demonstrated by the evidence cannot be allowed to continue.
A prior attempt at administration
Before proceeding to consider the terms upon which an administrator will be appointed to the body corporate I should note that on 1 March 1991 his Honour Judge Neesham in the County Court appointed Ms Marian Binks of Binks and Associates Pty Ltd to be an administrator of the body corporate. Application had been made to the County Court for the appointment of an administrator following a purported meeting of the body corporate held on 27 July 1990 at which Ms Adams and her sister had passed a large number of resolutions purporting to commit the body corporate to paying her (and her sister and brother in law) large amounts as reimbursement for money allegedly spent by them on its behalf and damages for various torts and other wrongs committed by it. This meeting and its validity will be dealt with below. Although his Honour's reasons for judgment were not before this Court it appears from the orders which he made that he intended that Ms Binks should try to establish whether any of Ms Adams' claims had any substance and attempt to restore some semblance of order to the way in which the body corporate operated. To that end he gave her a series of detailed directions.
Immediately after Judge Neesham made his order for administration Ms Binks took over as administrator of the body corporate and, in a circular to unit holders of 22 March 1991, indicated that she would attend, as a priority, to the sorting out of its financial status. She advised members that she would proceed to call a special general meeting of the body corporate as soon as some preliminary investigations into works which needed to be undertaken were completed. Thus, it appears, she saw her role as being essentially that of a peace maker rather than someone who would act in the place of the body corporate.
It is not necessary to detail the sorry history of Ms Binks' administration other than to note that there is no reason to believe that she did not use her best endeavours to carry out Judge Neesham's order. Although I do not have evidence of the exact date upon which she ceased her administration it is clear from the minutes of a meeting held on 16 April 1992, exhibited to Mr Connors' affidavit, that by that time Binks and Associates Pty Ltd had expressed its intention of disassociating itself from the affairs of the body corporate following "the period of administration". As Judge Neesham had ordered the administration to be for a period of 12 months subject to liberty to the administrator or any member of the body corporate to apply for an extension of that term it would appear that, as no such application was made, Ms Binks' appointment actually expired on 28 February 1992.
In the course of her case Ms Adams criticised Ms Binks, accusing her of being part of a "hidden agenda" contrived by "the lawyers" to defraud her in some indeterminate way. She accused Ms Binks of fraud and of being a part of a conspiracy against her. On the evidence before the Court there would appear to be no basis whatsoever for these wild allegations. Similarly, there is no evidence to support similar allegations made by Ms Adams against Inscor Services Pty Ltd, another body corporate managing agent which had attempted to manage the body corporate before the appointment of Ms Binks.
Judge Neesham's order contemplated a co-operative approach to the ills of the body corporate by the administrator and the members. He made extensive orders concerning consultation between the administrator and members of the body corporate in respect of work which needed to be carried out. He also contemplated that the administrator would call meetings and would obtain reports in respect of certain specific items.
I have set out the experience of the former period of administration to explain why it is important that the administrator I am going to appoint must take a much more vigorous and definitive approach to management of the body corporate. Having regard to the experience of the operation (or non-operation) of this body corporate since the end of the administration period ordered by Judge Neesham, some 12 years ago, the orders which I will make will be somewhat different.
As explained above, the appointment of an administrator (subject to any qualifications such as those which were included in Judge Neesham's order) implies the removal of the body corporate from its function of managing the common property of the subdivision on behalf of the unit holders. There will be no qualification on the appointment of the administrator in this case which will require him to consult any unit holder before taking any step which he considers ought to be taken in the best interests of the unit holders as a whole. He has all the powers of the body corporate or the committee of the body corporate. He need not consult or discuss the exercise of those powers with any unit holder or any group of unit holders. His function is to act as a reasonable body corporate would act in protecting the common property of the subdivision and ensuring that the interests of all of the unit holders are properly protected. The brake on the administrator seeking to perform any act which is not thought to be in the interests of the body corporate or the unit holders will be the requirement upon the administrator to record each decision he makes in writing and to provide a copy of any such decision where the expenditure of funds in excess of $500 is involved to each unit holder at least seven clear days before such decision is put into effect. Thus a unit holder will have an opportunity of approaching this Court for appropriate relief in a summary way in the event that he or she considers the administrator's decision not to be an appropriate exercise of his powers. Cumbersome as this procedure might appear it is preferable to the interminable wrangling which has beset the owners of this block of units for the last 14 years. Over-enthusiastic resort to the Court in inappropriate circumstances will ordinarily result in compensatory costs orders being made against the applicant.
The capacity of the administrator to act without consultation with the members of the body corporate does not, of course, preclude such consultation. Where consultation is appropriate and possible, a prudent administrator will seek the views of members of the body corporate. He should not, however, engage in disputation or time and money wasting argument with any member of the body corporate in respect of any decision which he considers appropriate.
Costs of the administration
Section 38 (7) of the Subdivision Act 1988 provides that the members of the body corporate must pay the remuneration and expenses of the administrator in accordance with their lot liabilities unless the order appointing the administrator otherwise provides. The order appointing the administrator in this case will provide that the costs and expenses of the administrator will be borne as laid down in the Act in the first instance but that such order will be able to be varied by this Court upon application by the administrator or any unit holder in the event that any unit holder or group of unit holders is responsible for the administrator expending a disproportionate amount of time or incurring a disproportionate amount of expense such that it would be unjust to visit the whole of such cost and expense on the unit holders as a whole.
Duration of the administration
The administrator will be appointed for a period of 18 months commencing on 1 May 2003 and ending on 1 November 2004. On or before 1 October 2004 the administrator will be required to file an account of his administration with the Court and provide a copy of such account to each of the unit holders. Thus, any party may approach this Court after the account is filed for any appropriate order in respect of the administration before the administration ends. In the absence of any such application the administration will cease on 31 October 2004, on which date the ordinary provisions of the Subdivision Act 1988 and the Subdivision (Body Corporate) Regulations 2001 will apply to the body corporate. Should any unit holder or the administrator consider that the need for administration has ceased at any time during the period of administration an application will be able to be made to the Court to terminate the administrator's appointment and return the administration to the body corporate. The administrator will not be entitled to resign as administrator other than by leave of the Court sought on appropriate notice to the unit holders to enable an alternative administrator to be appointed.
Initial funds of the administrator
The evidence discloses that for some period of time (running into years) Ms Adams has effectively operated as the body corporate. It has already been noted that on 27 March 2002 she purported to appoint a plenipotentiary in the person of Mr Walter Edwards to be the secretary, manager and administrator of the body corporate. The evidence does not permit me to make any finding as to whether the body corporate, at present, has any funds or not. Ms Adams discloses none in her affidavit and at one point said that all of the books and records of the body corporate have been stolen. She makes reference to bank accounts and money that has allegedly disappeared. In the course of argument before the Court she said that she didn't bring the books and papers of the body corporate to court because she didn't know she had to. In due course the Court will make orders compelling all parties to provide all documents of the body corporate which any of them has (including any records evidencing any bank account which the body corporate has) to the administrator. However, it is unlikely that any bank account (if such exists) has any significant funds in it. Accordingly, in order to provide an initial fund for the purposes of the administration there will be an order that each unit holder pay to the administrator the sum of $2,000 in respect of each unit owned by him or her, thus providing the sum of $12,000 to enable the administrator to enter upon the administration and commence work. It is expected that, in the due performance of his functions, the administrator will strike appropriate periodical levies commensurate with a proper budget for body corporate works. However, should the administrator discover any funds of the body corporate in any bank account or elsewhere he will, of course, be entitled to use those funds for the purposes of his administration.
The administrator
The plaintiffs seek the appointment of Mr Maurice J Dunlea, a property manager, as administrator of the body corporate. They rely upon an affidavit sworn by Mr Dunlea on 4 March 2003 in which he agrees to act as administrator at a rate of remuneration of $250 per hour. He deposes that he has read Mr Connors' affidavit and the originating motion in this proceeding and that he is prepared to accept appointment as administrator on the terms set out in a pro-forma document entitled "Appointment of Manager" published by the Institute of Body Corporate Managers. Mr Dunlea's affidavit does not depose to his ever having acted as the administrator of a body corporate in the past although I infer that he has considerable experience in the management of bodies corporate generally.
The pro-forma document exhibited to Mr Dunlea's affidavit is not an appropriate basis upon which he could be appointed as administrator. It contemplates the appointment of a manager to a body corporate by the body corporate itself upon certain terms and conditions. It provides for decisions to be made by the body corporate and for the manager to perform functions at the request of the body corporate. It empowers the manager to act on behalf of the body corporate.
None of the functions and powers set out in the document referred to is appropriate in this case. The appointment of the administrator in this case is by order of this Court. His powers and functions are as set out in the order appointing him and as expressly or impliedly derived from the provisions of the Subdivision Act 1988. I shall return to this matter hereunder.
The other contender for the position of administrator is Mr Walter Percival Edwards to whom reference has already been made. He is proposed by Ms Adams. In an affidavit sworn by Mr Edwards on 6 March 2003 he deposes to having had considerable experience in accounting and bookkeeping going back to 1971. He refers to a number of referees. He is a solicitor who has had involvement with bodies corporate in various roles including the giving of advice. He deposes that in about 1996 or 1997 he was invited by Ms Adams to attend a number of meetings of the body corporate with which this case is concerned for the specific purpose of trying to resolve the issues which then confronted it. He says that he suggested that the body corporate should set up new books and that there should be an investigation into the previous financial management of the body corporate. He says he would be prepared to act in the position of administrator at an appropriate remuneration which is not specified.
It has already been noted that in March last year Ms Adams purported to appoint Mr Edwards as secretary, manager and administrator of the body corporate. However neither Mr Edwards nor Ms Adams has put forward any evidence of his having performed any function in this role since his purported appointment.
Having regard to Mr Edwards' association with Ms Adams since at least about 1996 it would be inappropriate for him to be appointed as administrator in this case when there is an apparently completely independent person who is qualified and willing to undertake that role. In excluding Mr Edwards, however, I make it clear that I intend no reflection whatsoever either upon his capacity to act as administrator or upon his actual independence. Having regard to the sorry history of this body corporate it is important that the administrator not only be independent of all of the unit holders but that he also exhibit the appearance of independence.
It follows that the Court will appoint Mr Dunlea as administrator of the body corporate. However, having regard to my above comments as to the terms upon which Mr Dunlea has expressed his willingness to accept such appointment I will not make the orders foreshadowed below until an affidavit is filed by Mr Dunlea deposing to the fact that he has read and understood this judgment and is prepared to accept appointment as administrator in accordance with orders made in those terms.
Debts allegedly owed by unit holders to the body corporate
One of the orders sought in this proceeding is a declaration that the plaintiffs are not indebted to any of the defendants, including the body corporate. The reason for this unusual application is found in the affidavits filed on behalf of the plaintiffs in which the deponents attest to Ms Adams having made various demands upon members of the body corporate for payment of various sums which she alleged each of them owed, either to her (and sometimes her sister and brother in law) or to the body corporate.
For example, Mr Connors exhibits two letters dated 21 December 1990 in which Ms Adams demanded sums of $14,101.60 from some members of the body corporate and $13,320.46 from him. Mr McKinnon deposes to Ms Adams having alleged that he and his wife owed the body corporate (and Ms Adams and her sister and brother in law) various sums ranging from $10,000 to $50,000.
At the commencement of the trial of this matter I was inclined to defer consideration of the plaintiffs' applications for declarations that they were not indebted to the body corporate until the administrator had had the opportunity of examining the books and records of the body corporate which, at that time, I assume existed. However, as the matter proceeded it rapidly became apparent that one of the most serious points of dissension between Ms Adams and the other members of the body corporate was her continued insistence that large debts were owed by those members to the body corporate and had been owing for many years. It was clear that the administrator appointed by Judge Neesham had not been able to resolve the impasse created by Ms Adams' continual assertions of indebtedness and the other body corporate members continued denials of such indebtedness. It seems that unless there is some resolution of this now almost ancient problem the difficulties which will face the administrator who is now to be appointed by the Court will be the same as those which faced Ms Binks and will render his administration the more difficult. It also became apparent that whatever books or records of the body corporate existed they would not assist him to resolve this question, so that the expense of attempting to perform an audit on non-existent or incomplete records up to 14 years old would not be warranted from anyone's point of view. To attempt to do so would undermine the intent of the orders which the Court will make which is to draw a line under all that has gone before and permit the administrator to commence to run the body corporate afresh. I therefore decided to consider the plaintiffs’ application for such a declaration at the same time as considering their application for the appointment of an administrator.
In the course of argument Ms Adams conceded that the amounts she claims are owed by other members of the body corporate to the body corporate itself stem from resolutions passed by her and her sister at a meeting held on 27 July 1990. The validity of this meeting is challenged by the plaintiffs. If the meeting was invalid or if the resolutions passed at the meeting were invalid then the assertions made by Ms Adams as to the plaintiffs' indebtedness to the body corporate are without foundation.
The resolutions purportedly passed at the meeting of 27 July 1990 had their origin in a letter written by Ms Adams to the other unit holders on 11 July 1990. This letter, which consists of five closely typed pages, sets out, in extensive detail, a large number of complaints and claims by Ms Adams against the other unit holders. Attached to the letter, as pages 6 to 10, is a document entitled "Statement of Claim". This document details 28 separate items of claim made by Ms Adams against the body corporate. In terms, the letter supersedes earlier claims apparently made by her for some of the items now claimed in this document. In total the 28 claims are said to add up to $32,767.41. Interest is claimed at twenty per cent per annum from 27 July 1990 and notice is given that further claims will be made in respect of repairs to a footpath, lopping tree branches, re-blocking and underpinning and plumbing and re-wiring to a laundry. Included in the statement of claim is an extensive claim for loss of rental allegedly arising from negligence and nuisance committed by the body corporate and a claim for damages for personal injuries caused by Ms Adams slipping on fruit from a tobacco tree apparently within the common property of the units.
The letter and statement of claim described above appears to have been written by Ms Adams in preparation for a meeting which she expected to occur on 27 July. This expectation was engendered by the fact that by letter dated 12 July 1990 her sister, Mrs Macey, had written to Ms Pauline Flynn, the then secretary of the body corporate, requesting a special general meeting of the "Body Corporate Committee" to be held at 8.00 pm on Friday 27 July 1990. She was acting, she said, pursuant to Regulation 603(1). Mrs Macey also asserted in the letter that Ms Adams had given her a "proxy" to ". . . satisfy the regulation." She also asserted that a proxy from an unfinancial member is effective for the calling of a special general meeting.
There are two matters in this letter which cast doubt as to its efficacy in calling a meeting of the body corporate. Firstly it refers to a meeting of the "Body Corporate Committee". Secondly Mrs Macey purports to act not only on her own behalf but on behalf of Ms Adams by reason of having been given a "proxy" which she claimed would satisfy the relevant regulation. But Regulation 603 (1) of the then relevant regulations, (the Subdivision (Body Corporate ) Regulations 1989) required a petition to the secretary to convene a special general meeting of the body corporate to be given by members whose lot entitlements total at least twenty five percent of all lot entitlements for the land affected by the body corporate. There is no provision in that regulation or in Regulation 605 for such a letter to be written by a member holding a "proxy" for another member. Regulation 605 (1) provides that a member may give a proxy to another person to attend, speak or vote in person on the members behalf at a meeting of the body corporate, to vote on the members behalf at a ballot or to represent the member on a committee. The regulation specifically does not permit a person to give a proxy to another person for the purpose of that person petitioning the secretary to call a special general meeting of the body corporate.
In fact a meeting was held on 27 July 1990 and was initially attended by Ms Adams, Mrs Macey, Ms Nanette Carol, the then owner of unit 5 and Ms Pauline Flynn, the then owner of unit 6. Minutes of that meeting which were exhibited to Mr Connors' affidavit showed that it started at 8.00 pm and continued until 1.10 am the following morning, and that Ms Carol and Ms Flynn left the meeting after a discussion about its validity and having declared that they considered it to be invalid. The meeting proceeded with only Ms Adams and her sister Mrs Macey in attendance.
The minutes of the meeting of 27 July record that at the beginning of the meeting Ms Adams paid the sum of $4,532, under protest, for fees and levies which it was alleged she owed the body corporate. She and/or Mrs Macey apparently considered it essential that this amount be paid so that the rest of the meeting could be conducted with Ms Adams being able to vote. That matter having been clarified, the two women proceeded to pass 66 motions, many of which involved declarations that other unit holders were indebted to the body corporate in varying amounts. Any attempt to reconcile these resolutions rationally is fruitless but it seems that, in essence, they are derived from the "statement of claim" which was attached to Ms Adams letter of 11 July although by now the sum claimed had grown to some $43,000 instead of the $32,700 referred to in the earlier document. Other motions passed related to work which had either been performed at the premises or was to be performed. Still others related to the delegation of all of the powers of the body corporate to Ms Adams who was now described as its secretary whilst others related to the body corporate agreeing to pay Ms Adams varying amounts by way of damages and fees.
The method used by Mrs Macey to request this meeting was not valid under the then existing regulations. There was no waiver of that invalidity by any of the members of the body corporate other than Ms Adams and Mrs Macey. Accordingly the meeting so called was invalid and the resolutions purportedly passed at that meeting were of no force or effect.
In any event, even if the meeting had been validly called, most of the resolutions purportedly passed were beyond the powers of the body corporate to consider and pass and the purported levies on members affected by those resolutions were invalid in as much as they constituted special fees or charges designed to cover extraordinary items of expenditure and were more than twice the total amount of the current annual fees set by the body corporate under Regulation 401 (b) of the Subdivision Body Corporate Regulations 1989.[3] They were not passed by the requisite majority of members.
[3]Regulation 402 Subdivision (Body Corporate) Regulation 1989.
As Ms Adams conceded in argument that the only basis upon which she had asserted, over 13 years, that the other members of the body corporate owed the body corporate large sums of money was that those members had been levied by the meeting of 27 July1990. It follows that if that meeting was invalid and the resolutions purportedly passed at it ineffective her claims are and have been without foundation. As she makes no claim that any of the other members have since become indebted to the body corporate for unpaid fees or the like there is now no basis whatsoever for her to assert that any such member owes the body corporate anything.
The plaintiffs seek a declaration to the effect that they are not indebted to the body corporate. I have found that they are not. The question then is whether that finding should become the subject of a declaration.
I was referred by counsel for the plaintiffs to a number of cases in which so-called negative declarations were discussed. In Hume & Others v Monro & Others[4] Latham CJ acknowledged the existence of the jurisdiction to make a declaration of the non-existence of a claim (although there he was concerned with an equitable claim) but said that before this jurisdiction should be exercised it should appear quite clearly that such a claim has been formulated in definite terms. His Honour considered that the procedure enabling a court to make declarations of right without consequential relief is not to be used to enable a person who thinks that another person may make some kind of claim against him to make that person a defendant to proceedings for a declaration so as to fix upon him the responsibility of supporting some claim which he may or may not determine to make. His Honour referred to In Re Clay; Clay v Booth.[5] The plaintiff must establish that the claim made against him is sufficiently definite and intelligible in its terms to be a proper subject of adjudication and he must also:-
". . . exhaust the possibilities and show that the claim cannot possibly be supported. It is not for the defendant in such a proceeding to make a claim and to justify that claim."
[4](1943) 67 CLR 461
[5](1919) 1 CH 66
In a recent case, Messier-Dowty Ltd & Anor v Sabena SA & Others[6], Lord Woolf considered that in an appropriate case the use of negative declarations can be valuable and constructive. Whilst the deployment of negative declarations should be scrutinised and their use rejected where it would serve no useful purpose, where it would help to ensure that the aims of justice were achieved the courts should not be reluctant to grant such declarations.
[6][2001] 1 All ER 275
That the broad discretion conferred upon this court to grant declarations of right without consequential relief should not be fettered is well accepted.[7] Provided a real and not a theoretical question exists, provided the person raising it has a real interest in raising it and provided there is a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought the jurisdiction may be exercised if it is in the interests of justice to do so.[8]
[7]Forster v Jododex Aust Pty Ltd (1972) 127 CLR 421
[8]Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 per Lord Dunedin at 448 see also Aussie Airlines Pty Ltd v Australian Airlines Limited and Ors (1996) 139 ALR 663.
In the present case there is clearly an interest in the plaintiffs having the declaration they seek. Ms Adams' assertions of their indebtedness to the body corporate has been at the heart of the dissension which has now given rise to the need to appoint an administrator. Further, doubt over a unit holder's indebtedness to a body corporate inevitably affects the saleability of units in the subdivision. Provisions in the regulations providing for the granting of certificates by a body corporate as to indebtedness require some certainty as to that indebtedness if their purpose is to be fulfilled. In the circumstances I consider it appropriate that the plaintiffs have the declaration that they seek. They are clearly not indebted to the body corporate. Even if they were, such indebtedness has now been long statute barred and could never be the subject of a judgment in favour of the body corporate if the unit holders relied upon their statutory rights under the Limitations of Actions Act 1958.
Although the plaintiffs also seek a declaration that they are not indebted to Ms Adams, I do not consider that the Court should grant such a declaration in an action brought for the appointment of an administrator to a body corporate, even though there is no evidence of such indebtedness which I can find in the material before the Court.
Other relief
As well as the principal relief with which I have already dealt the plaintiffs in this case seek a number of ancillary orders. Specifically, paragraph 2 of the prayer for relief in their originating motion seeks a number of orders relating to the administrator’s functions. As I have described those functions in this judgment and have concluded that they are a necessary concomitant of his appointment, the relief sought in paragraph 2 is largely unnecessary. The appointment of the administrator effectively deprives the body corporate of all power to act and the Act itself specifically empowers the administrator to perform all acts which the body corporate or its committee could have performed.
One exception to the above proposition is the order sought for delivery up of books of account, records and documents of the body corporate. As I have already indicated the evidence as to the existence of body corporate records is inconclusive. I do not accept Ms Adam's assertion that they were "stolen". On her own admission she is in possession of some records of the body corporate even if they date from a later period. There will be an order that she (and any of the plaintiffs who are holding any body corporate documents) deliver up all such documents to the administrator.
Paragraphs 3 to 8 of the prayer for relief seek various orders relating to the governance of the body corporate. They are likewise not required having regard to the administrator's powers.
Paragraph 9 of the prayer for relief seeks a declaration that the plaintiffs do not owe any sum to any of the defendants by way of unpaid levies or otherwise. As already indicated the Court will make a declaration as to the plaintiffs not being indebted to the body corporate. In the circumstances, having regard to the nature of this proceeding, it would be inappropriate to extend that declaration to include Ms Adams. In light of what I have said regarding the meeting of 27 July 1990 and the matters there discussed it would seem extremely unlikely that Ms Adams would attempt to press any claim against any of the plaintiffs. If she did so such claim would be defeated if for no other reason than that it was statute barred.
Relief by way of injunction against the first defendant as claimed in paragraph 8 of the plaintiffs' prayer for relief is unnecessary. The first defendant can no longer act as secretary of the body corporate and cannot sign certificates pursuant to the Subdivision (Body Corporate) Regulations 2001 whilst the body corporate is under administration. At the end of the administration period there will need to be elections to the body corporate, provided the administration is not continued. Should there be any difficulties encountered by the body corporate in operating past that date those difficulties will have to be addressed at that time.
Orders
The Court makes the following declaration:-
1.That none of the plaintiffs is indebted in any sum whatsoever to Body Corporate Strata Plan Number 17739.
The Court will make the following orders upon its being satisfied that Maurice Dunlea has made the affidavit referred to in paragraph 53 of this judgment:-
2.That Maurice Dunlea be appointed administrator within the meaning of s 38 (6) of the Subdivision Act 1988, of Body Corporate Strata Plan Number 17739 upon the following terms and conditions:-
(a) The administration will commence on 1 May 2003 and end on 31 Oct 2004 or upon further order of this Court.
(b)During the period of the administration or until further order of this Court the administrator may do anything which the body corporate or the committee referred to in the Subdivision (Body Corporate) Regulations 2001 can do.
(c)The administrator will record each decision made by him in the course of his administration in a record to be kept by him and filed with the Court as part of the account of his administration as required by paragraph (f) hereunder.
(d)In the case of any decision made by the administrator in the course of his administration which involves the expenditure of more than $500 the administrator must provide a copy of such decision and any other document which he has relevant to such decision to each unit holder not less than seven clear days before putting such decision into effect.
(e)In the event that any unit holder makes application to this Court concerning a decision of the type referred to in (d) the administrator will must not put such decision into effect until such application has been dealt with by the Court.
(f)The administrator must file with the Court and serve on each unit holder an account of his administration, including an account of the costs and expenses thereof, verified by affidavit, for the period 1 May 2003 to 31 July 2004, such account to be filed by 1 October 2004;
(g)The administrator shall be entitled to resign as administrator, but only upon 30 days notice given to each of the unit holders and with the leave of the Court.
3.That on or before 10 May 2003 the plaintiffs and the first defendant deliver up to the administrator all books, records, papers, cheque books, pay-in books, correspondence and all other documents and copy documents the property of Body Corporate Strata Plan Number 17739 in their possession.
4That on or before 10 May 2003 each unit holder pay to the administrator the sum of $2,000 in respect of each unit owned by him or her, such sum to be used by the administrator for the purposes of the administration.
5.That the remuneration and expenses of the administrator be borne, in the first instance, as provided for in s 38 (7) of the Subdivision Act 1988 with specific liberty to all parties and the administrator to apply to this Court with respect to such remuneration and expenses, either past or future, and as to whether such costs and expenses should be borne in proportions other than those set out in s 38 (7) of the Subdivision Act 1988;
6.That the plaintiffs, the defendants and the administrator have liberty to apply generally to this Court in respect of the administration upon three days notice to each other party.
I shall hear the parties on the issue of the costs of this proceeding.
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