vcat on goodfaith

8/10/2019 Vcat on Goodfaith

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VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL

CIVIL DIVISION

OWNERS CORPORATIONS LIST VCAT REFERENCE NO.OC1825/2012

CATCHWORDS

Owners Corporations Act 2006 ss 74, 76, 83, 87, 89, 94 and 122 application to remove manager ofowners corporation and to find that the manager breached its duties complaints regarding calling of andconduct of meetings of the owners corporation complaints regarding proxies - allegation that managerrequired or demanded an owner to provide a proxy complaints that manager refused to call a specialgeneral meeting and for a postal ballot - none of the complaints against manager found proven application dismissed

1STAPPLICANT Henry Babray

2NDAPPLICANT Anne Horell

3RD

APPLICANT Joe Merlino

4THAPPLICANT Giselle Merlino

RESPONDENT Whittles Australia Pty Ltd (ACN 139 486 678)

WHERE HELD Melbourne

BEFORE A Dea, Member

HEARING TYPE Hearing

DATE OF HEARING 30 January 2013 & 19 February 2013

DATE OF ORDER 21 March 2013

CITATION Babray & Ors v Whittles Australia Pty Ltd

(Owners Corporations) [2013] VCAT 327

ORDER

The application is dismissed.

A Dea

Member

APPEARANCES:

For Applicants Mr Babray, Ms Horell & Mr Merlino in person

For Respondent Mr Wilkinson, Solicitor


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VCAT Reference No. OC1825/2012 Page 2 of 24

REASONS

1 Ms Horell and Mr & Mrs Merlino own lots in an owners corporation inTravencore. Mr Babray is a former owner of a lot and is the partner of MsHorell. There are eight residences but there are 10 lots in the plan ofsubdivision. Ms Horell and Mr & Mrs Merlino collectively hold 23% of

the lots.

2 The respondent is the manager of the owners corporation. The respondentwas originally appointed in around 2009 and that appointment was renewedon 22 March 2012 for a further term of one year. Ms Horell signed that

appointment agreement on behalf of the owners corporation.

3 The applicants seek the removal of the manager and findings that managerbreached its duties under the Owners Corporations Act 2006 (OC Act).The applicants say that the manager failed to act honestly and in good faith

in the performance of its functions, failed or refused to exercise due careand diligence in the performance of those functions and made improper use

of the its position for gain for itself or another person. Mr Babray, MsHorell and Mr Merlino gave evidence and made submissions about a

number of specific events and actions of the manager.

4 The manager denies each of the allegations. It says further that theapplicants have no standing to seek an order that it be removed where theapplicants do not represent the owners corporation and do not have the

majority lot owners support. Evidence was given by Ms B Ashby, Strata

Manager and Mr N Saunders, State Manager of the respondent.5 Before turning to the particular matters raised by the applicants, it is

necessary to refer to some background which informs the dispute.

Background

6 As the owners corporation comprises less than 13 lots, it is not required tohave a committee.

1 The owners corporation did not make rules by special

resolution and so the model rules contained in Schedule 2 of the OwnersCorporations Regulations 2007(model rules) apply.2

7 For a period of some years before late in 2011, Ms Horell was theChairperson of the owners corporation. She gave undisputed evidence thatshe was contacted by the manager (and its predecessor) from time to timeabout maintenance and other matters. She was asked for approval forworks to be undertaken including minor repairs and the removal of rubbish

left behind by tenants.

8 The plan of subdivision shows that there are eight residences and a carspace adjoining each located on the common property. While there is aquestion as to the proper execution of licences for the car spaces, it is

1Section 100 OC Act2Section 139 OC Act


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apparent that it has been understood that one car space is allocated to each

residence.

9 The evidence indicates that in or around 1999 Mr Bottiglieri constructed apaling fence around the car space for lot 7. He apparently also made other

alterations to the exterior of that unit, including the installation of frenchdoors onto the enclosed area. The fence encloses not only the car space butalso the hot water service for lot 8, owned by the Director of Housing(DOH).

10 The fence around common property is at the heart of this dispute. Theapplicants say that it is an occupational and safety risk because the tenant oflot 8 must climb over it to access the hot water service. Further, they say

that, by building it, Mr Bottiglieri has changed the boundaries of thecommon property and that change has not been approved by a specialresolution of the owners corporation as required under the OC Act.

11 While it is unsurprising that individual lot owners would have concernsabout dealings of this kind with common property, those individual lotowners cannot act upon such concerns other than through the ownerscorporation. This proceeding has not been brought in the name of theowners corporation against Mr Bottiglieri and so the legality or otherwise ofthe construction of the fence or any other alterations are not matters whichare before me for decision.

12 The complaints made in this proceeding by the applicants against themanager concern various meetings at which the fence and related concerns

were discussed and the role played by the manager in respect of thosemeetings. There are also complaints that the manager did not call a further

meeting or arrange for a postal ballot about matters relating to the fence andthe owners corporation.

13 I have decided that none of the allegations made about the manager havebeen proven. In these circumstances, the application will be dismissed and

there is no need for me to consider the question of whether the applicantshave standing to seek the removal of the manager.

14 I will first discuss relevant provisions of the OC Act and then turn to the

particular complaints.

The managers duties under the OC Act

15 An owners corporation may appoint a manager under section 119 of the OCAct. Where there is no committee, a manager has the functions and powersthat are delegated to the manager by the owners corporation at a general

meeting.

16 Under section 122, a manager:

(a)must act honestly and in good faith in the performance of the

manager's functions; and


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(b)must exercise due care and diligence in the performance of themanager's functions; and

(c)must not make improper use of the manager's position to gain,directly or indirectly, an advantage personally or for any other

person.17 The meaning of the phrase honestly and in good faith depends on the

context. Here it is appropriate to have regard to the functions allocated to

the manager by the owners corporation. Those functions include conveningand organising meetings, dealing with correspondence and matters that

arise from time to time and providing general advice and assistance to theowners corporation, including in respect of complaints.

18 The words in good faith must mean more than honesty as otherwise thephrase would be redundant. In other contexts, the requirement of good faith

is understood to import notions of not acting capriciously and of not actingto further an ulterior purpose. An example of such action might be if a

majority acted in such a way as to further their own interests over thelegitimate interests of the minority.

3

19 As to the phrase due care and diligence, in Giurina v OwnersCorporation No 1579 & Ors,4Lansdowne AsJ noted that similar words in

relation to the duties of directors imposed an objective standard, being whatan ordinary person, with the knowledge and experience of the director,

might be expected to have done in the circumstances if he was acting on hisown behalf.

20 Here, the applicants say that the manager acted dishonestly but also in amanner consistent with acting to benefit Mr Bottiglieri over their interests.

In order to show that was the case, it would be necessary for there to beevidence that it is more likely than not that the decisions made and actionstaken by the manager were motivated by that purpose.

21 I will deal with each event raised by the applicants and the allegationsarising in turn.

Ms Horells 3 November 2011 meeting

22 On 20 October 2011, Ms Horell wrote a letter to Mr Bottiglieri. It carriedthe following heading:

Notice is hereby given to members of the Owners Corporation Plan ofSubdivision No. 24189, 117-119 Mooltan St, Travencore, that aGeneral Meeting will be held on Thursday 3rdNovember 2011 at6:30pm at the Springthorpe Country Club, Springthorpe Boulevard,Macleod. (Opposite Grand Avenue).

This meeting is called under section 6(5) of the Model Rules inrelation to breaches brought to the attention of the Owners

3Anstat commentary to the OC Act, A Vassie, I Lulham and B Steele, paragraph [5.02]4[2012] VSC 466


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Corporation and identified in the Notice to Rectify Breaches sent toyou as the owner of Lot 7.

23 The letter said that Mr Bottiglieri would have the opportunity to show thathe had not breached the model rules at the meeting. It referred to concerns

about the fence and lot 8s tenants limited access to the hot water serviceand other alterations and noted that a notice to rectify breaches allowed him28 days to rectify the breaches. A proxy form was provided.

24 The letter said that the tenant of lot 8 had made complaints to Ms Horellabout accessing the hot water service. The letter said that the tenant having

to climb the fence to re-light the pilot light, is unacceptable in relation tosafety and public liability insurance concerns and is brought to the

attention of the Owners Corporation.

25 The letter was signed by Ms Horell as Chairperson.

26 Attached to that letter was a standard form notice headed Notice ofGeneral Meeting. Beneath that heading appear the words:

Owners Corporations Act 2006 Section 76, Owners CorporationRegulations 2007 and Owners Corporation Rules. This Notice must

be given to each Lot Owner 14 days before the meeting.

27 The notice is address to The Lot Owner. It states that a generalmeeting would be held on the date and at the location specified above andthat, at the meeting, the members can vote on issues affecting the ownerscorporation. The form has a box in which the agenda may be noted. It had

been completed as follows:

1. Notice to Rectify Breaches issued to the owner of Lot 7 Mr Rick Bottiglieri.

2. General business.

28 There was also a box in which the text of any special or unanimousresolution to be vote on at the meeting is attached or specified below.That box was completed as follows:

Mr Bottiglieri to remove the 2 fences he erected without approval on acar space next to his Lots north-west wall (Rear building). The

fences are permanently blocking access to the gas water heater of Unit8 (Department of Housing). The tenant is climbing over the fences tolight the pilot light of the heater and this situation is creating safetyand public liability concerns for the owners. Mr Bottiglieri to returnthe common property land next to his Lot which he is now using as afenced private courtyard to a car park space as identified on the planof subdivision.

Mr Bottiglieri to remove the French doors he installed withoutpermission; and to re-instate the window, security grill and bricks heremoved without permission from the north-west load bearing double

brick wall of the rear building. The Owners Corporation to approvethe building works.


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29 Ms Horell as Chairperson was shown as the person giving the notice.

30 A document purporting to be a notice to rectify defects had been issued byMs Horell in her capacity as Chairperson on 18 October 2011. The defects

and steps to be taken are essentially the same as set out in the proposed

resolution above.31 On 31 October 2011, the manager wrote to all lot owners to report on the

outcome of separate Tribunal proceedings between Mr Babray and Ms

Horell as applicants and the manager and Mr Bottiglieri as respondents.Relevant here, the orders made by the Tribunal on 27 September 2011 state

that they do not deal with any car space, the installation of gates on any carspace or the installation of french doors in lot 7.

32 The letter included the following:

As Owners Corporation managers it has come to our attention that a

Notice of General Meeting has been called for the (sic) 3 November2011. We impartially note that the elected chairperson Anne Horellhas the power to call this meeting but has not given members therequired timeframe notification of 14 clear days and as such themeeting and any decisions made will be invalid.

We further note, an unauthorised Notice to Rectify Breach issued inthe name of the Owners Corporation by Anne Horell is not valid.

33 A meeting proceeded on 3 November 2011. Present were Ms Horell, MrBottiglieri, Mr & Mrs Prolisko (joint owners of lot 1) and Mr Babray. Theminutes for the meeting, prepared by Ms Horell, show that proxies were

received from the DOH, in favour of Ms Horell, and from the owner of lot 3,Biotech Com. Pty Ltd. While the minutes state that the latter proxy was in

favour of Ms Horell, in fact it gave a proxy to the director of the lot owner.

34 The minutes show that a resolution on the above terms was passed with MsHorell voting in favour for herself and on behalf of DOH and the owner oflot 3. Mr Bottiglieri and Mr & Mrs Prolisko voted against the resolution.

35 On 10 November 2011, Ms Horell wrote to the manager saying in part Iprovide the following documents that are required for filing of records in

relation to the Owners Corporation General Meeting held on 3rd

November

2011. Attached were copies of minutes, proxy forms, the notice of themeeting, the notice to rectify breaches and the covering letter to MrBottiglieri. The letter referred further to concerns about the tenants access

to the hot water service and gave contact details for the DOH. The letterasked that Mr Bottiglieri be asked to remove the fence as soon as possible.

The letter was signed by Ms Horell as Chairperson.

36 On 16 November 2011, the manager wrote to all lot owners. The letterreferred to a special general meeting (SGM) to be held on 7 December 2011.The letter explained that the SGM had been called as a result of the 3

November 2011 meeting. The letter stated:


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We impartially note again that the elected chairperson Anne Horellhad the power to call this meeting but had not given members therequired timeframe notification of 14 clear days and as such themeeting and any decisions made are considered invalid.

We have been advised by members that attended the meeting that the

minutes as supplied to members are factually incorrect, are not a truereflection of the meeting and the resolutions purportedly passed areinvalid.

. . .

Please find attached Notice of Special General Meeting. We have thepower to convene the meeting and do so in response to matters ofconcern raised by some owners. They are calling for the removal ofthe chairperson and the election of a new chairperson. It is time toclear up all outstanding issues.

37 The letter also said that, as the proxy for Biotech Com. Pty Ltd, was infavour of the director who did not attend, there was no quorum such thatany valid resolutions could be passed at the 3 November 2011 meeting.

The applicants complaints

38 The applicants say that the manager was incorrect to say that proper noticehad not been given for the meeting on 3 November 2011. They say that itwas not an SGM but rather a meeting under the dispute resolution

procedures set out in the model rules. They say those rules require that theparties to the dispute meet within 14 days and so there is no requirement for

14 clear days notice to be first given. They further say that the form used isnot only for general meetings. By the inclusion of the reference to themodel rules beneath the form heading, it is clear that it is the appropriateform to be used to call a dispute resolution meeting. The applicants say that,as the manager is incorrect about its understanding of these matters, it hasfailed to act with due care and diligence.

39 Further, the applicants say that the managers acted dishonestly and in badfaith in writing the above letters and expressing views about the validity ofthe 3 November 2011 meeting. They did not point to any evidence ofdishonesty or bad faith but say that the managers were acting to support Mr

Bottiglieri over them. In this way, the manager was said to be actingimproperly to obtain a gain for Mr Bottiglieri. It was implied that the gain

was Mr Bottiglieri not being required to remove the fence but no directevidence of this was given.

40 Ms Ashbys evidence was that she wrote the above letters after discussingthe events with Mr Sanders and that he helped her finalise their terms. Mr

Sanders gave evidence that he believed the contents of the letters to becorrect and true. The manager denies the allegations made as to its

competence, honesty and good faith.


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Dispute resolution under the rules and the OC Act

41 Rule 6 of model rules deals with disputes. In broad terms, the rule sets outa process to be applied where there is a dispute involving a lot owner,

manager, or an occupier or the owners corporation. The process differs

slightly depending on whether the owners corporation has or does not havea grievance committee. There is no such committee here.

42 Rule 6(2) requires that the party making the complaint must prepare awritten statement in the approved form. Mr Sanders gave evidence thatthose forms are available from the Director of Consumer Affairs and copies

can be provided by the manager on request.

43 All lot owners are then to be notified of the dispute by the complainant,whether or not they are a party to the dispute (rule 6(4)).

44 Rule 6(5) then says:

The parties to the dispute must meet and discuss the matter in dispute,along with either the grievance committee or the owners corporation,within 14 days after the dispute comes to the attention of all parties.

45 Taking into account the requirement that an approved form be completedand sent to all lot owners, this means that the meeting ought to be heldwithin the 14 day period after that form has been received by lot owners.

46 Leaving to one side for the moment the form of the documents Ms Horellproduced, she was entitled to make a complaint, notify other lot ownersabout it and to have a meeting with the owners corporation to try to resolve

the dispute.

47 If a dispute is unable to be resolved, the parties may then exercise theirrights to take further action under Part 10 of the OC Act. Under Part 10:

A lot owner can make a complaint to the owners corporation aboutan alleged breach by another lot owner of an obligation imposed

under the OC Act or under the rules. That complaint must be madeusing an approved form (section 152)

The owners corporation must decide to take action under Part 10 inrespect of the alleged breach, or apply to the Tribunal for an orderrequiring the breach to be rectified or to take no action. That

decision can only be made after the dispute resolution processunder the rules has been used and has not resolved the dispute(section 153)

If the owners corporation decides to take no action, it must givenotice of the decision to the complainant and include reasons

(section 154)

If the owners corporation decides to take action, it must give noticeof the alleged breach to the person alleged to have committed the

breach and allow them 28 days to rectify the breach. That notice


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must be in the approved form. Where the breach concerns an act of

a lot owner, a copy of that form must be given to all lot owners(section 155)

If the breach is not rectified, more time may be allowed, a final

notice may be given or no further action may be taken (section 156) A final notice must be in writing in the approved form, give a

further 28 days to rectify the breach and state that, if the breach isnot rectified, the owners corporation may decide to apply to the

Tribunal for an order requiring rectification of the breach (section157)

48 So, where the rules process has not resolved a dispute and the complainantsays that there has been a breach of an obligation, the process described

under Part 10 applies. That requires decisions to be made by the owners

corporation, one of which may be to issue a breach notice.49 Where the breach is not rectified and a final notice has been given, the

owners corporation may decide to commence a proceeding in the Tribunal.

Under section 18, a special resolution is required for legal proceedings to becommenced, unless an individual lot owner applies to represent the owners

corporation.5 Such a resolution can only be passed at a properly convened

meeting.

50 Ms Horell, even as Chairperson had no power to issue a breach notice to MrBottiglieri. While an individual lot owner may initiate the processes found

in the rules and Part 10, a decision to issue a breach notice may only bemade by the owners corporation. The consequence is that her breach notice

was invalid and cannot be said to have fallen within the rules disputeresolution processes.

The calling of the meeting

51 As noted earlier, Ms Horells documents contained an agenda whichincluded a proposed resolution concerning Mr Bottiglieris fence and otheralterations. Such a resolution could only be considered at a properly

convened SGM.

52 Under section 74 and relevant here, an SGM may be convened by theChairperson of the owners corporation and also by a manager where there isno committee. Accordingly, Ms Horell was empowered to convene such ameeting.

53 Section 76 requires that a person convening an SGM must give notice inwriting of the meeting to each lot owner at least14 days before the meeting.

54 On its face, Ms Horells notice purports to call a general meeting. Althoughthe form used by her makes reference to the Regulations and model rules,there is nothing else about the form which is consistent with a meeting

5An individual lot owner may make an application to the Tribunal on behalf of an owners corporation toresolve an owners corporation dispute and so no resolution is required (section 163(1A)).


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being called under rule 6, particularly because what is sought is the passing

of a resolution.

55 The use of the words General Meeting in the heading on the form, theexpress reference to section 76, the boxes providing for the setting out of

the agenda and any resolutions are all consistent with the form beingconcerned with a general meeting. Further, the inclusion of a resolution tobe voted on is consistent with a general meeting rather than a meetingconvened as part of a dispute resolution process which has no decisionmaking powers.

56 While I have noted that the second paragraph of the heading of the letter toMr Bottiglieri did refer to the model rules, it also referred to a general

meeting.

57 On balance, the correspondence and notice are more consistent with the

purported calling of a general meeting than a dispute resolution process. Iam satisfied that, even though Ms Horell may have believed she was

seeking a meeting for the latter purpose, the manager was entitled tounderstand that she was purporting to call a general meeting.

58 In those circumstances, 14 days notice had to be given and was not. Theconsequence is that I am satisfied that the meeting was invalid and the

resolution said to have been passed is also invalid.

59 The manager was entitled to advise lot owners of these matters and, in myview, would have failed to act with due diligence not to do so. Themanager was entitled to say that the Chairperson has no power to issue a

notice to rectify breaches under the OC Act. While it may well be correctthat the manager sought approval from Ms Horell about small matters ofmaintenance and repairs in the past, that conduct could not give her the

power to issue such a notice.

60 The complaints about the manager made relating to the 3 November 2011meeting are not proven and are dismissed.

The 7 December 2011 SGM

Correspondence

61 There was no dispute that the manager had the power to call the SGM on 7December 2011, however, the applicants say that, in doing so, the manager

chose to side with Mr Bottiglieri. No evidence about that was producedother than the reference to the opinions of attendees at the earlier meetingcontained in the managers 16 November 2011 letter and referred to abovein paragraph [36].

62 On 23 November 2011, Ms Horell wrote to the manager setting out in detailher concerns about health and safety risks arising from the hot water servicefor lot 8 being located within the fenced area of lot 7. She noted that she

had asked the manager to ask Mr Bottiglieri to remove the fence and thatthe manager had failed to do so or to acknowledge the request. She stated


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that the failure and refusal to act was unacceptable. Ms Horell set out

alleged breaches of the model rules arising from the construction of thefence. She then, in her capacity as Chairperson, purported to instruct themanager to arrange for the removal of the fences using funds from theowners corporations account and then seek repayment from Mr Bottiglieri.

She said that Consumer Affairs had confirmed that urgent works to ensurehealth and safety do not require a special resolution and that a unanimous

resolution is required regarding use of common property. She sought aresponse by 30 November 2011.

63 On 25 November 2011, the manager wrote to all lot owners. It forwardedthe above letter from Ms Horell and stated that Ms Horell had been advised

that the matters raised would be discussed at the SGM, as that is the correctforum in which to deal with such matters. The letter also stated that Ms

Horell did not have the power to authorise action or expenditure on behalf

of the owners corporation and that, as manager it did not have that powereither. It stated that only members of the owners corporation have the

power to so act. The letter noted that gates to lot 7 had been in place forover 10 years and access is available to the hot water service.

64 I will come to the complaints about this exchange of correspondence shortly.

Proxy - Mr & Mrs Merlino

65 On 7 December 2011, Mr Merlino received a telephone call from Ms Ashby.The agreed evidence was that she called to enquire about whether heintended to attend the SGM. Ms Ashbys evidence was that she initiated

the call because, given the nature of the matters to be discussed, she and MrSanders wanted to ensure that as many lot owners as possible attended. Mr

Merlino gave evidence that Ms Ashby said that it was advisable that heattend and that the issues Mr Babray and Ms Horell were pursuing were

going in the wrong direction.

66 As he could not attend the meeting, later that day Mr Merlino faxed acompleted proxy form to the manager nominating Mr Babray as proxy forhe and Mrs Merlino. The proxy form was signed only by Mr Merlino.

67 Within a short time he received a second telephone call from Ms Ashby. Mr

Merlinos evidence was that she asked why he had given his proxy to MrBabray. Mr Merlino replied that he agreed with some of the points MrBabray was making and that he wanted Mr Babray to represent him.

68 At the hearing Mr Merlino confirmed that all Ms Ashby asked was why hehad given the proxy to Mr Babray but he read into those words that she wasencouraging him to give the proxy to her or to someone else. He said thatwas not proper.

69 Ms Ashbys evidence was that she had asked about Mr Merlinos intentionsregarding the proxy in the context of an agenda item which touched on Mr

Babrays attendance at the meeting. The agenda item said:


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91 The applicants placed significant weight on section 87 of the OC Act whichdeals with proxies. That section says:

(1) A lot owner may authorise a person in writing to act as proxy forany of the following

(a) to attend, speak or vote on the lot owner's behalf at ameeting of the owners corporation;

(b) to vote on the lot owner's behalf at a ballot;

(c) to represent the lot owner on the committee of the ownerscorporation.

(2) The authorisation may set out how to vote on particular matters.

(3) An authorisation under sub-regulation (1)

(a) must be in writing in the prescribed form; and

(b) must authorise a named individual; and(c) must not be transferred by the holder of the proxy to a

third person; and

(d) must be delivered to the secretary of the ownerscorporation; and

(e) is effective from the beginning of the first meeting of theowners corporation held after it is delivered to thesecretary; and

(f) lapses 12 months after being given or, if there is an earlier

date specified in the authorisation, on that date; and(g) is revoked on the date that notice of the revocation is

delivered to the secretary.

(4) (not relevant here)

(5) A person authorised to act as proxy must act honestly and ingood faith and exercise due care and diligence.

(6) A lot owner may revoke an authorisation given under thissection and vote at a meeting or in a ballot instead of the personwho was authorised.

(7) (not relevant here)

92 The applicants say that, reading (3)(f) and (g) together, an authorisation toact as proxy does not lapse and may not be superseded with the nomination

of a new proxy or be cancelled by the manager. They say that anauthorisation to act as proxy lapses 12 months after being given or isrevoked by way of a revocation notice.

93 Mr Sanders gave evidence that there is no standard form for a notice ofrevocation. He stated that, based on his many years experience and legaladvice he has received in the past, he believes that a later in time proxy

amounts to a revocation of any earlier proxy and so the latter document isthe valid proxy.


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94 While it is correct that section 87(3)(g) refers to notice of a revocationbeing given, it makes no reference to how that is to be done. There aremany provisions in the OC Act which require that a particular form beused relevant here the appointment of a proxy must be done using the

prescribed form (section 87(3)(a) above). In the absence of a reference to a

prescribed or specific form in section 87, I read it to require only that therebe a written notification of revocation of an existing proxy. I accept the

proposition that a proxy which post dates an existing proxy could amount tosuch a notice.

95 Taking into account the timing of the proxies and the email material fromMs Fernandez, I find no breach of the managers duties in relation to the

management of this aspect of the 7 December 2011 meeting. As indicatedabove, the evidence before me does not support a finding that there was a

breach of section 89 in respect of the giving of the DOH proxy to the

manager.Conduct of the meeting

96 The agenda item dealing with lot 8s fence said:

Courtyard Lot 7

Members to consider the invalid issue of a Notice to Rectify breachissued in the name of the Owners Corporation to Lot 7 but withoutauthority of the Owners Corporation. Members to consider aresolution that this matter has been dealt with many years ago and isno longer an issue the Owners Corporation wishes to pursue and is

considered finalised.

97 The applicants say that, contrary to the letter sent by the manager dated 25November 2011, the health and safety concerns raised by Ms Horell in herletter of 23 November 2011 were not discussed. They say that Mr Sanders

said those matters were not on the agenda and so would not be discussed.Mr Sanders denies making that statement. His evidence was that the issuewas one of access to the hot water service rather than about occupationalhealth and safety.

98 The applicants further say that Mr Sanders accepteda verbal agreement

made between Mr Bottiglieri and the DOHs tenant, to the effect that thetenant could access the hot water service as required through lot 7s

bedroom. After the above motion was passed, Mr Babray suggested that apostal ballot be held for all owners to consider approving Mr Bottiglierisarrangement with both tenants and his fences. The applicants say that Mr

Sanders rejected a postal ballot.

99 Mr Sanders evidence was that he had reviewed minutes of the ownerscorporation back to 2001 and they showed that the alterations had beendiscussed. He took the approach that these matters had been dealt with by

the owners corporation previously. He told the meeting that a special

resolution is required for legal proceedings to be commenced. He said thatthere was a discussion about the matter including about access to the hot


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water service. He told the meeting about the arrangement made between

Mr Bottiglieri and the DOH and its tenant.

100 The applicants complaints of bad faith on the part of the manager and of afailure to exercise due care and diligence in respect of the discussion about

the fence must be dismissed for two reasons.101 Firstly, the applicants appear to have a misunderstanding about the role of a

manager and the decision making powers of an owners corporation. While

there can be little doubt that a professional manager will have influence at ameeting that may extend to managing the course of discussions, the

manager does not make decisions. Decisions are made by votes being castby lot owners or their proxies. The minutes show that the above resolution

was passed three votes to two. It is not correct to say that Mr Sandersaccepted or rejected anything any decisions made were of the ownerscorporation. As I have found that Ms Ashby held a valid proxy for DOH

which contained no express instructions, she was entitled to vote at herdiscretion.

102 Second, it is apparent from the minutes of the meeting that a range ofmatters were covered in the discussions. While I understand that theapplicants dispute aspects of those minutes, I consider it more likely thannot that the matters giving rise to the health and safety concerns outlined byMs Horell in her 23 November 2011 letter were discussed. Further, in my

view it does not matter whether those concerns were more properlydescribed as health and safety concerns or access issues.

103 I have reached these views taking into account the fact that the breachnotice issued by Ms Horell was referred to in the agenda and that document

included reference to lot 8s access to the hot water service being blockedby the fence. Further, the SGM followed shortly after Ms Horells meeting.

The minutes she prepared show that there was a detailed discussion aboutthe health and safety issues for the tenants of lot 8 arising from theconstruction of the fence. Finally, having observed Ms Horell and MrBabray at the hearing of this matter, I have no doubt that they would have

been more than capable of raising all of their concerns at the meeting.

104 The complaints regarding the conduct of the 7 December 2011 meeting aredismissed.


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122 Mr Merlino produced a receipt showing that he had made a cash payment atthe post office on 19 March 2012 and that payment was directed to themanagers account via the DEFT payment system.

123 Section 94 of the OC Act, which took effect from 1 January 2012, says:

(1) Subject to subsection (2), a lot owner who is in arrears for anyamount owed to the owners corporation is not entitled to vote,either in person, by ballot or by proxy, unless the amount inarrears is paid in full.

(2) A lot owner who is in arrears for any amount owed to theowners corporation is always entitled to vote in a case where aspecial resolution or unanimous resolution is required.

(3) For the purposes of subsection (1), except in the case of apayment in cash, an amount is only taken to be paid in full if itis paid not less than four business days before the vote in

question.

124 The applicants say that a cash payment can be made prior to voting at theAGM and that it is not dependent on where the cash payment is made.

They say that the manager refused to allow Mr Babray to vote for Mr &Mrs Merlino due to bath faith.

125 Mr Sanders evidence was that payments made via the DEFT system arecleared to their account after four days. The manager says that, section 94

allows for a cash payment to be made to the owners corporation, usually atthe managers office. As the payment in issue here was made at the post

office and not at the managers office, it cannot be a cash payment undersection 94.

126 In those circumstances, the manager says that, as the payment was onlymade three days before the meeting via a payment system, it was notreceived four business days before the vote. Accordingly, Mr Merlino wasnot entitled to vote himself or through a proxy.

127 The managers reading of section 94(3) must be correct. Read in context,the reference to a cash payment only makes sense if it refers to payments of

cash made direct to the owners corporation. It allows a lot owner to secure

their voting rights even at very short notice. A payment made through apayment system is not the same as cash because the funds are sent to theintended recipients account and must be cleared. While it is often the case

that such payments can be cleared in one or two days, that payment methodis not the same as a cash payment direct to the owners corporation.

128 As there is no dispute that there was an amount of $87.70 outstanding and itwas not paid within four business days of 22 March 2012 or in cash to theowners corporation, it was correct for the manager to refuse to accept the

proxy given to Mr Babray.

129 The applicants also complain that Mr Merlino was later told by the managerthat he was technically unfinancial because he had paid the levy invoice


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The request for an SGM

136 On 12 April 2012, Ms Horell sent an email to Ms Ashby which set out arange of concerns about the conduct of the AGM. The concerns includingthe refusal to accept the DOH proxy given to Ms Horell and Mr & Mrs

Merlinos proxy and the conduct of the information session discussed above.She ended the email asking that the manager convene an SGM with theagenda item to consider whether the AGM held on 22 March 2012 wasvalid given the actions and statements by Mr Sanders.

137 Having received no reply, Ms Horell emailed Ms Ashby again on 17 April2012. She referred to matters of concern and asked that she be advised ofthe date of the SGM at which the following resolutions would be discussed:

Whether the minutes of the 22 March 2012 AGM are a true reflection ofthe business discussed

Consideration of all interim resolutions passed and whether they areagreed to by the owners

Whether the manager should be replaced

The election of a committee and chairperson

A requirement that Mr Bottiglieri apply for unanimous approval for thealleged alteration of the boundaries of the common property

138 After discussing the matter with Mr Sanders, Ms Ashby replied on the sameday and noted that 25% of the lot owners would be required to object to the

decisions of the AGM before an SGM could be called.139 That response arises from section 78 of the OC Act which has the effect

that, where there is no quorum of 50% of lot owners (as occurred here),

interim resolutions may be passed which come into effect after a specifiedperiod unless the resolutions are the subject of an SGM. Under section 74

of the OC Act, such a meeting can be called by at least 25% of lot owners.Where there is no committee, the manager may also call such a meeting(section 74(d)(iii)).

140 Ms Horell next asked for an SGM to be called by the manager.

141 There were further emails between the parties. The managers view wasthat it was not appropriate for it to call another meeting where the matters

of concern to Ms Horell had been discussed as recently as December 2011.Ms Ashby expressed the view that, given past history, few owners would

attend and they would be unimpressed at incurring costs for such a meeting.The manager said that if 25% of lot owners called for a meeting then one

would be convened.

142 Ms Horell objected to this position. In particular she noted that themanager had convened the December 2011 SGM at the request of Mr

Bottiglieri and Mr Prolisko who do not constitute 25% of lot owners. Shesaid that the manager was applying the OC Act inconsistently.


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143 Ms Ashby stated in reply that the earlier meeting was not related to apetition by lot owners but was called by the manager to clear the air of allissues and give the owners the opportunity to participate. I accept thatevidence.

144 Mr Sanderss view was that the manager was required to take instructionsfrom the owners corporation not from a minority of lot owners who holdless than 25% of the lots.

145 The applicants complain that the manager failed to take into account theirinterests and acted in bad faith in doing so.

146 The applicants say that the only cost of a meeting is the postage for thenotices. The cost of convening a meeting was said to be around $250. Itwas accepted that the amount would have had to be borne by the ownerscorporation.

147 In my view, given the history of the matter, including Ms Horells meetingon 3 November 2011 and the subsequent SGM in December 2011, themanager was acting consistently with its duties to all lot owners not toconvene a further meeting to discuss matters which had been addressed four

months earlier. It was entitled to draw the conclusion that the ownerscorporation had made its decisions and that, in the absence of the required

25% support for a further meeting, to call one would be elevating theinterests of two lot owners above those of the whole.

148 The complaint regarding the refusal to call a further SGM in around April2012 is dismissed.

The request for a postal ballot

149 On 27 June 2012, Ms Horell emailed Ms Ashby asking that she arrange apostal ballot to consider a requirement that a unanimous resolutionregarding changes to common property be passed and that there either beapproval of the fence around lot 7 or that it be removed.

150 Ms Ashby acknowledged the email and stated that a postal ballot would notbe raised.

151 Section 83 of the OC Act governs postal ballots and its terms regarding whocan call for a ballot mirror those contained in section 74.

152 For the same reasons as given above, in the absence of a call for a meetingby 25% of the lot owners, the manager was entitled to refuse to call a ballotand these events give rise to no breach of its duties.

Conclusion

153 As indicated by the above discussions, there was no evidence before theTribunal to show that the manager acted dishonestly or in bad faith. Whilesome small errors were made, they did not amount to a failure to exercise

due care and diligence. I am satisfied on the evidence that the managersought to undertake its duties mindful that it is required to act on the


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instructions of the owners corporation for the benefit of the owners

corporation as a whole.

154 For the reasons given the application will be dismissed.

A Dea

Member

vcat on goodfaith

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