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Alert · 29 September 2011 |
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MacGillivrays |
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Know When to Hold ‘Em |
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Don’t gamble with your reputation if you receive a prescribed notice under Section 204 of the Accommodation Module to return a Body Corporate’s property. In the recent Adjudicators decision of Casuarina Sphere [2011] QBCCM CMR286 a Body Corporate’s rights to the return of its property were tested against novel arguments made by the scheme’s former Body Corporate Manager.
Background
A Body Corporate Manager had been appointed by the original owner for the scheme (“Manager”) for a term of three years ending 28 April 2011 (“Engagement”).
The scheme’s Committee met and resolved on 15 April 2011 to “terminate” the services of the Manager and request all of the Body Corporate’s records, funds and seal (“Property”) to be collected by a committee member on 3 May 2011.
At the same meeting the committee resolved to engage another Body Corporate Manager, on a month to month basis.
The third Committee motion passed was to call a general meeting of the Body Corporate including to (properly) appoint a new Body Corporate Manager.
On 18 April the Chairperson wrote to the Manager to confirm that the Engagement would expire on 28 April 2011 and requested the Property be available for collection on 3 May 2011.
On 21 April 2011 the Manager rejected the expiry of the Engagement, the Committee’s capacity to terminate the Engagement and to appoint the interim Body Corporate Manager. The Manager also refused to hand over the Property until Section 205 had been complied with.
The Chairperson contacted the Manager on 3 May 2011 seeking to collect the Property; the Manager refused handover pending legal advice.
On 13 May 2011 the Chairperson wrote to the Manager confirming that there had been no compliance with Section 204 of the Accommodation Module and that the Chairperson would attend on 16 May 2011 to collect the Property. When the Chairperson attended the Manager refused handover again.
The Application
The Body Corporate lodged a dispute resolution application seeking return of the Property. The Manager opposed the application.
The Manager argued that:
< conciliation should have taken place before an adjudicators order was made;
< the committee had acted beyond its power to: terminate the Manager’s Engagement; and appoint the interim Body Corporate Manager; and
< the Manager was only obligated to hand over the Property once the Engagement had expired and had not been renewed: as only the Body Corporate in general meeting could decide not to renew the Engagement the conditions in Section 205(1)(c) of the Accommodation Module had not been satisfied.
The Adjudicator rejected these arguments and ordered that the Manager (at its cost) deliver the Property in its possession and control to the Chairperson within 7 days of the date of the order.
Why?
No Need for Expiry
After considering section 204 the Adjudicator determined that there is no requirement for an engagement to have first expired or to have been terminated before a Body Corporate Manager is obliged to return Body Corporate property. A prescribed notice under Section 204 can be given at any time, and the notice can be authorised by a committee resolution.
The Committee having both passed a resolution and served a copy on the Manager, the Property had to be delivered up within 14 days after service.
The Manager argued that the Committee resolution was invalid because it purported to terminate the Engagement. The Adjudicator found that part of the motion could be severed and the rest saved. Further, and in any event, the Committee did not have to do anything to bring the Engagement to an end; it would expire automatically.
The Adjudicator also determined that the Body Corporate did not have to resolve at a general meeting not to continue to use the Manager. At expiry of the Engagement, and by operation of Section 116(3)(b) of the Accommodation Module, once the Engagement had come to an end, the Manager could not act again without a new engagement.
Rights After Termination or Expiry
The Body Corporate was entitled to the Property under Section 204 without the Engagement having been terminated or expired.
However the Body Corporate had only requested return of the Property on dates which fell after expiry of the Engagement. Arguably then Section 205 applied to those requests.
The Manager asserted that it did not have to comply with the requests, because the Body Corporate had to first pass a resolution in general meeting deciding not to renew the Engagement before Section 205 could be complied with.
The Adjudicator considered this argument both irrelevant and a “bizarre” interpretation of the legislation. Section 205 concerns how a Body Corporate may request documents in photographic or electronic form after an engagement has been terminated or expired. The Body Corporate had not made such a request; it had relied on Section 204.
Other Arguments
The Adjudicator also commented on some of the Manager’s other arguments:
< nothing turned on the Committee’s (poor) choice of the word “terminate” in its motion – it was clear the Committee meant ‘not renew’;
< an interim appointment of a new Body Corporate Manager would not be valid, unless it was later ratified – if any owner objected to an interim appointment they could lodge their own dispute resolution application;
< an invalid interim appointment did not mean that the Engagement continued beyond expiry – Bodies Corporate don’t have to have a Body Corporate Manager;
< similarly, a Body Corporate not having a Body Corporate Manager (properly) appointed does not obviate the duty of a former manager to return property. The Body Corporate is entitled to, and capable of, holding its own property.
Breach of the Act
Aside from ordering delivery of the Property, the Adjudicator noted that the Manager had breached Section 204, that there was no reasonable excuse for that breach and that a penalty could be imposed. Having no power to impose a penalty herself, the Adjudicator pointed out to the Body Corporate that it was at liberty to pursue the matter in the Magistrate’s court (following passage of the necessary special resolution).
Things to consider…
When an engagement expires, a Body Corporate Manager cannot act again until there is a new engagement in place.
A request for Body Corporate property, whether the Body Corporate Managers engagement has come to an end or not, must be promptly complied with (if properly authorised and made).
Section 205 does not limit the operation of Section 204; a Body Corporate Managers engagement does not have to have come to an end before a request for Body Corporate property under Section 204 must be complied with.
A Body Corporate does not have to take positive action to bring a Body Corporate Managers engagement to an end by, or after, expiry.
Care should be taken with interim engagements, including to ensure that they are promptly ratified at a general meeting of the Body Corporate, whether the interim Body Corporate Manager is appointed for a term beyond the interim engagement or not.
Article by Michael Kleinschmidt, Partner.
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PLEASE NOTE: This article is not legal advice and our comments are of a general nature only. This document is not to be relied on as substitution for proper detailed legal advice. Liability limited by a scheme approved under professional standards legislation.
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