Professional Documents
Culture Documents
CIVIL DIVISION
OWNERS CORPORATIONS LIST
CATCHWORDS
Owners Corporations Act 2006 ss 74, 76, 83, 87, 89, 94 and 122 application to remove manager of
owners corporation and to find that the manager breached its duties complaints regarding calling of and
conduct of meetings of the owners corporation complaints regarding proxies - allegation that manager
required or demanded an owner to provide a proxy complaints that manager refused to call a special
general meeting and for a postal ballot - none of the complaints against manager found proven
application dismissed
1ST APPLICANT
Henry Babray
2ND APPLICANT
Anne Horell
3RD APPLICANT
Joe Merlino
4TH APPLICANT
Giselle Merlino
RESPONDENT
WHERE HELD
Melbourne
BEFORE
A Dea, Member
HEARING TYPE
Hearing
DATE OF HEARING
DATE OF ORDER
21 March 2013
CITATION
ORDER
A Dea
Member
APPEARANCES:
For Applicants
For Respondent
Mr Wilkinson, Solicitor
REASONS
The applicants seek the removal of the manager and findings that manager
breached 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 care
and diligence in the performance of those functions and made improper use
of the its position for gain for itself or another person. Mr Babray, Ms
Horell and Mr Merlino gave evidence and made submissions about a
number of specific events and actions of the manager.
The manager denies each of the allegations. It says further that the
applicants have no standing to seek an order that it be removed where the
applicants 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.
Background
For a period of some years before late in 2011, Ms Horell was the
Chairperson of the owners corporation. She gave undisputed evidence that
she was contacted by the manager (and its predecessor) from time to time
about maintenance and other matters. She was asked for approval for
works to be undertaken including minor repairs and the removal of rubbish
left behind by tenants.
The plan of subdivision shows that there are eight residences and a car
space adjoining each located on the common property. While there is a
question as to the proper execution of licences for the car spaces, it is
1
2
Page 2 of 24
apparent that it has been understood that one car space is allocated to each
residence.
9
10
The fence around common property is at the heart of this dispute. The
applicants say that it is an occupational and safety risk because the tenant of
lot 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 the
common property and that change has not been approved by a special
resolution of the owners corporation as required under the OC Act.
11
12
13
I have decided that none of the allegations made about the manager have
been proven. In these circumstances, the application will be dismissed and
there is no need for me to consider the question of whether the applicants
have 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.
15
16
Page 3 of 24
(b) must exercise due care and diligence in the performance of the
manager'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 convening
and organising meetings, dealing with correspondence and matters that
arise from time to time and providing general advice and assistance to the
owners corporation, including in respect of complaints.
18
The words in good faith must mean more than honesty as otherwise the
phrase would be redundant. In other contexts, the requirement of good faith
is understood to import notions of not acting capriciously and of not acting
to 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 the
legitimate interests of the minority. 3
19
20
Here, the applicants say that the manager acted dishonestly but also in a
manner 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 be
evidence that it is more likely than not that the decisions made and actions
taken by the manager were motivated by that purpose.
21
I will deal with each event raised by the applicants and the allegations
arising in turn.
22
3
4
Anstat commentary to the OC Act, A Vassie, I Lulham and B Steele, paragraph [5.02]
[2012] VSC 466
Page 4 of 24
23
The letter said that Mr Bottiglieri would have the opportunity to show that
he 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 service
and other alterations and noted that a notice to rectify breaches allowed him
28 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 Horell
about 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 to
safety and public liability insurance concerns and is brought to the
attention of the Owners Corporation.
25
26
27
28
There was also a box in which the text of any special or unanimous
resolution 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 a
car space next to his Lots north-west wall (Rear building). The
fences are permanently blocking access to the gas water heater of Unit
8 (Department of Housing). The tenant is climbing over the fences to
light the pilot light of the heater and this situation is creating safety
and public liability concerns for the owners. Mr Bottiglieri to return
the common property land next to his Lot which he is now using as a
fenced private courtyard to a car park space as identified on the plan
of subdivision.
Mr Bottiglieri to remove the French doors he installed without
permission; and to re-instate the window, security grill and bricks he
removed without permission from the north-west load bearing double
brick wall of the rear building. The Owners Corporation to approve
the building works.
Page 5 of 24
29
30
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 car
space or the installation of french doors in lot 7.
32
33
34
The minutes show that a resolution on the above terms was passed with Ms
Horell voting in favour for herself and on behalf of DOH and the owner of
lot 3. Mr Bottiglieri and Mr & Mrs Prolisko voted against the resolution.
35
36
On 16 November 2011, the manager wrote to all lot owners. The letter
referred 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:
Page 6 of 24
37
The letter also said that, as the proxy for Biotech Com. Pty Ltd, was in
favour of the director who did not attend, there was no quorum such that
any valid resolutions could be passed at the 3 November 2011 meeting.
The applicants say that the manager was incorrect to say that proper notice
had not been given for the meeting on 3 November 2011. They say that it
was not an SGM but rather a meeting under the dispute resolution
procedures set out in the model rules. They say those rules require that the
parties 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 is
not only for general meetings. By the inclusion of the reference to the
model rules beneath the form heading, it is clear that it is the appropriate
form 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 has
failed to act with due care and diligence.
39
Further, the applicants say that the managers acted dishonestly and in bad
faith in writing the above letters and expressing views about the validity of
the 3 November 2011 meeting. They did not point to any evidence of
dishonesty 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 acting
improperly 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 direct
evidence of this was given.
40
Ms Ashbys evidence was that she wrote the above letters after discussing
the 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 be
correct and true. The manager denies the allegations made as to its
competence, honesty and good faith.
Page 7 of 24
Rule 6 of model rules deals with disputes. In broad terms, the rule sets out
a 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 have
a grievance committee. There is no such committee here.
42
Rule 6(2) requires that the party making the complaint must prepare a
written statement in the approved form. Mr Sanders gave evidence that
those 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
45
46
Leaving to one side for the moment the form of the documents Ms Horell
produced, she was entitled to make a complaint, notify other lot owners
about it and to have a meeting with the owners corporation to try to resolve
the dispute.
47
Page 8 of 24
48
So, where the rules process has not resolved a dispute and the complainant
says 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 be
commenced, 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
52
53
54
An individual lot owner may make an application to the Tribunal on behalf of an owners corporation to
resolve an owners corporation dispute and so no resolution is required (section 163(1A)).
Page 9 of 24
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, the
express reference to section 76, the boxes providing for the setting out of
the agenda and any resolutions are all consistent with the form being
concerned with a general meeting. Further, the inclusion of a resolution to
be voted on is consistent with a general meeting rather than a meeting
convened as part of a dispute resolution process which has no decision
making powers.
56
While I have noted that the second paragraph of the heading of the letter to
Mr 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. I
am satisfied that, even though Ms Horell may have believed she was
seeking a meeting for the latter purpose, the manager was entitled to
understand that she was purporting to call a general meeting.
58
In those circumstances, 14 days notice had to be given and was not. The
consequence 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 my
view, would have failed to act with due diligence not to do so. The
manager 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 correct
that the manager sought approval from Ms Horell about small matters of
maintenance 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 2011
meeting are not proven and are dismissed.
Correspondence
61
There was no dispute that the manager had the power to call the SGM on 7
December 2011, however, the applicants say that, in doing so, the manager
chose to side with Mr Bottiglieri. No evidence about that was produced
other than the reference to the opinions of attendees at the earlier meeting
contained in the managers 16 November 2011 letter and referred to above
in paragraph [36].
62
Page 10 of 24
that the failure and refusal to act was unacceptable. Ms Horell set out
alleged breaches of the model rules arising from the construction of the
fence. She then, in her capacity as Chairperson, purported to instruct the
manager to arrange for the removal of the fences using funds from the
owners corporations account and then seek repayment from Mr Bottiglieri.
She said that Consumer Affairs had confirmed that urgent works to ensure
health and safety do not require a special resolution and that a unanimous
resolution is required regarding use of common property. She sought a
response by 30 November 2011.
63
64
66
As he could not attend the meeting, later that day Mr Merlino faxed a
completed proxy form to the manager nominating Mr Babray as proxy for
he and Mrs Merlino. The proxy form was signed only by Mr Merlino.
67
68
At the hearing Mr Merlino confirmed that all Ms Ashby asked was why he
had given the proxy to Mr Babray but he read into those words that she was
encouraging him to give the proxy to her or to someone else. He said that
was not proper.
69
Ms Ashbys evidence was that she had asked about Mr Merlinos intentions
regarding the proxy in the context of an agenda item which touched on Mr
Babrays attendance at the meeting. The agenda item said:
Page 11 of 24
70
71
72
On Mr Merlinos own evidence, Ms Ashby did not ask for the proxy to be
given to Ms Ashby or someone else or use words which could meet the
description of a requirement or demand to that effect. While I accept that
Mr Merlino may have believed that to be the implication of what was said, I
also accept Ms Ashbys evidence that she was making the enquiry in the
context of the specific agenda item dealing with Mr Babray. I find no
breach of section 89 of the OC Act.
73
I agree that it would have been preferable for the telephone call not to have
been made. That is not because the call could have amounted to a breach of
section 89 or because it indicates dishonesty or bad faith but rather because,
Mr Babray was entitled to attend if nominated to act as proxy. Mr
Merlinos nomination rendered the telephone call and the agenda item
redundant. I do not consider the decision to make the unnecessary phone
call to be sufficient to base a finding that the managed failed to exercise due
care and skill.
74
The applicants complaints arising from the contact with Mr Merlino are
dismissed.
75
During the hearing, the manager raised a question as to whether the proxy
from Mr Merlino was valid as it was signed only by him and not by Mrs
Merlino, the joint lot owner. As the proxy was accepted as valid at the
meeting, the question is hypothetical. If the proxy had been set aside, there
would have been no change to the voting outcome. In those circumstances,
I am not required to express a final view on this question, however I note
that it would be preferable for joint lot owners to each sign a proxy form so
that it is clear that their joint vote may be exercised by the appointed proxy.
On the other hand, if Mr Merlino was his wifes agent and signed on her
behalf in that capacity, the proxy may have been valid. 6
See discussion of proxies in the context of section 250A of the Corporations Act 2001 (Cth) in Cordiant
Communications (Australia) Pty Ltd v The Communications Group Holdings Pty Ltd [2005] NSWSC
1005, paragraph [30]
Page 12 of 24
76
77
Ms Ashbys evidence was that the item was included at the direction of Mr
Sanders and had not been sought by Mr Bottiglieri. She said that Mr
Babray had been disruptive at previous meetings. Mr Sanders evidence
was that the item was included after Mr Babray had participated in the
earlier Tribunal proceeding and they had, in his words, been unpleasant.
I understood Mr Sanders to consider that Mr Babray was disruptive and his
presence would make the conduct of the meeting more difficult. Mr
Sanders conceded the resolution should have been to provide that only lot
owners or their proxies could attend meetings.
78
79
The inclusion of this agenda item was clearly likely to provoke an adverse
reaction from Mr Babray and Ms Horell. It would have been preferable if
the resolution sought was expressed to be concerned with non lot owners
without a valid proxy rather than naming Mr Babray. Having said that, I
find that the manager breached no duty in taking a step, which had as its
concern the proper and smooth running of an SGM intended to deal with a
matter which was clearly divisive. The agenda item was quite properly
passed over as Mr Babray was appointed as a proxy.
80
Proxy - DOH
81
82
83
At the 7 December 2011 meeting, Mr Sanders decided that the latter proxy
superseded the former and so Ms Horell could not vote on behalf of DOH.
This was disputed by Ms Horell and Mr Babray at the meeting, but Mr
Sanders decision stood.
84
The timing of the proxy indicates that it was sent to Ms Horell in response
to her letter calling the 7 November 2011 meeting.
85
Ms Ashby gave evidence that it was usual for DOH to send a proxy for each
meeting and that the manager was routinely authorised to vote. This was
usual for not only lot 8 of this owners corporation but also for other DOH
owned properties managed by the manager. Ms Ashby said that the proxy
just arrived at the managers office via facsimile.
Page 13 of 24
86
The applicants say that, at the 7 December 2011 meeting, during the course
of a discussion about which proxy was to be relied upon, Ms Ashby said
that she had telephoned DOH and that she had been authorised to act as
proxy and had instructions to support Mr Bottiglieri on all motions. Ms
Ashby denied both saying these words and having telephoned DOH about
the proxy.
87
88
Neither the applicants nor the manager called the DOH representative who
signed the proxy form to give evidence. However, the manager produced
an email sent by Ms Ashby to Ms Joanna Fernandez of DOH. Ms Ashby
asked Ms Fernandez to provide a letter explaining the intention of the
provided proxies. The email set out a timeline of events and then said:
Can you please provide a letter advising of your intention in regard to
the proxies provided and noting that the 21 November proxy to myself
revoked the earlier proxy by its issue, even though not revoked. If of
course this was the intention.
89
90
Having regard to this email, which was not challenged by the applicants by
summonsing Ms Fernandez, 7 I consider it more likely than not that DOH
intended, for the purposes of the 7 December 2011 meeting, that the
manager would be its authorised proxy. I am unable to reach a firm
conclusion about what was or was not said by Ms Ashby at the meeting,
however, even if words to that effect were said, there is no suggestion that
Ms Ashby required or demanded the proxy contrary to section 89 of the OC
Act or that she acted improperly in voting at that meeting given she was
intended to be given discretion as to votes.
At the conclusion of the first days hearing I indicated to the parties that they may wish to consider
whether there were witnesses they wished to summons to attend the further hearing. Express reference
was made to Ms Fernandez. No summonses were issued.
Page 14 of 24
91
(b)
(c)
(2)
(3)
(b)
(c)
(d)
(e)
(f)
(g)
(4)
(5)
(6)
(7)
92
The applicants say that, reading (3)(f) and (g) together, an authorisation to
act 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 an
authorisation to act as proxy lapses 12 months after being given or is
revoked by way of a revocation notice.
93
Page 15 of 24
94
95
Taking into account the timing of the proxies and the email material from
Ms Fernandez, I find no breach of the managers duties in relation to the
management of this aspect of the 7 December 2011 meeting. As indicated
above, 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.
97
The applicants say that, contrary to the letter sent by the manager dated 25
November 2011, the health and safety concerns raised by Ms Horell in her
letter 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 issue
was one of access to the hot water service rather than about occupational
health and safety.
98
99
Page 16 of 24
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 a
failure 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 a
meeting that may extend to managing the course of discussions, the
manager does not make decisions. Decisions are made by votes being cast
by 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 Sanders
accepted or rejected anything any decisions made were of the owners
corporation. As I have found that Ms Ashby held a valid proxy for DOH
which contained no express instructions, she was entitled to vote at her
discretion.
102 Second, it is apparent from the minutes of the meeting that a range of
matters were covered in the discussions. While I understand that the
applicants dispute aspects of those minutes, I consider it more likely than
not that the matters giving rise to the health and safety concerns outlined by
Ms Horell in her 23 November 2011 letter were discussed. Further, in my
view it does not matter whether those concerns were more properly
described as health and safety concerns or access issues.
103 I have reached these views taking into account the fact that the breach
notice 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 blocked
by the fence. Further, the SGM followed shortly after Ms Horells meeting.
The minutes she prepared show that there was a detailed discussion about
the health and safety issues for the tenants of lot 8 arising from the
construction of the fence. Finally, having observed Ms Horell and Mr
Babray 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 are
dismissed.
Page 17 of 24
Proxy DOH
111 The applicants complain that at the annual general meeting (AGM) held on
3 March 2012, the manager did not allow Ms Horell to vote as proxy for
DOH. The proxy to be relied upon was that dated 24 October 2011 and
discussed earlier.
112 For the reasons given, I am satisfied that the proxy given to Ms Ashby on
21 November 2011 was notice of revocation of that proxy and so the
manager did not err in not allowing Ms Horell to vote for DOH. This
complaint is, accordingly, dismissed.
Page 18 of 24
113 The minutes of the meeting note that a proxy dated 23 March 2012 in
favour of Ms Ashby was received that day, too late for the meeting. As a
consequence of DOH not attending in person, no vote was cast for lot 8.
114 The applicants say that Mr Sanders told the meeting that he had cancelled
all proxies granted in 2011 effective 1 January 2012 and that he had
authority to do so. They say that is another reason why Ms Horell was
prevented from voting for DOH.
115 Mr Sanders denied this was said and Ms Ashby also denied hearing such
words. Mr Sanders added that he was aware he had no power to cancel a
valid proxy. He contends that he did make reference to the date 1 January
2012 in the context of explaining that the OC Act had been amended with
effect from that date to change the provision dealing with voting and non
financial lot owners. I will come to that provision shortly. He says that the
applicants have confused the two matters.
116 I prefer the evidence of Mr Sanders about this matter. I find is most
unlikely that, Mr Sanders would believe that he had the power to cancel
valid proxies. Given the matters discussed below regarding Mr & Mrs
Merlinos entitlement to vote, I consider it more likely than not that the
reference to 1 January 2012 concerned the new provisions regarding voting
rights and that Ms Horell and Mr Babray misunderstood what was said.
117 It became apparent in the hearing that, given the 21 November 2011 proxy
was valid for 12 months, it could have been relied upon at the AGM. The
applicants said that, if the 21 November 2011 proxy was valid, then the
managers failure to use it indicates a failure to exercise due care and skill.
The failure to use the proxy was certainly an error but given the plain
evidence that DOHs pattern was to send a new proxy for each meeting, the
error may be excused as a lapse which an objective person would accept
can occur from time to time. These events do not support a conclusion that
there was any deliberate act or negligence on the part of the manager.
118 The complaints regarding the use of the DOH proxy are dismissed.
Proxy Mr & Mrs Merlino
119 Mr Babray attended the meeting as proxy for Mr Merlino. The manager
informed the meeting that, as Mr & Mrs Merlino and lot owner 1 were
unfinancial, they had no right to vote at the meeting. The consequence of
two lots being excluded from voting and no vote being cast for DOH was
that there was a deadlock between Ms Horell and Mr Bottiglieri on a
number of agenda items.
120 Perhaps surprisingly, given the institution of these proceedings, one item
Ms Horell and Mr Bottiglieri did agree on was the reappointment of the
manager for another year.
121 After the meeting, Mr Merlino was told that he was unfinancial because he
had not paid a levy.
Page 19 of 24
122 Mr Merlino produced a receipt showing that he had made a cash payment at
the post office on 19 March 2012 and that payment was directed to the
managers account via the DEFT payment system.
123 Section 94 of the OC Act, which took effect from 1 January 2012, says:
(1)
(2)
(3)
124 The applicants say that a cash payment can be made prior to voting at the
AGM 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 are
cleared 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 at
the 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 under
section 94.
126 In those circumstances, the manager says that, as the payment was only
made three days before the meeting via a payment system, it was not
received four business days before the vote. Accordingly, Mr Merlino was
not 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 a
payment system is not the same as cash because the funds are sent to the
intended 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 method
is 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 it
was not paid within four business days of 22 March 2012 or in cash to the
owners 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 manager
that he was technically unfinancial because he had paid the levy invoice
Page 20 of 24
after the due date and because he owed $0.73 in interest. He was then
informed that invoices for interest alone were not issued and so he queried
how he could be aware that interest was due. The implication was that the
managers changed the reasons for excluding the proxy and those reasons
were tenuous.
130 I have reviewed the emails exchanged about these matters. I am satisfied
that the managers emails correctly identified section 94 as being the
primary reason why Mr & Mrs Merlino could not vote and that the
reference to the interest was included as further information.
131 The complaints regarding the managers exclusion of the Merlino proxy are
dismissed.
Post meeting discussions
132 Mr Babray and Ms Horell complain that, at the conclusion of the meeting,
Mr Sanders invited them to remain for an information session. They say
that he presented copies of correspondence and photographs concerning the
arrangements for the tenant of lot 8 to access the hot water service within
the fenced area of lot 7. Those arrangements included a gate being made
accessible from outside lot 7 and a key having been given to the tenant to
open the gate. The applicants say that they told Mr Sanders that the
information session was unacceptable and that the material relating to the
fence/gate and access should have been sent to all lot owners before the
meeting.
133 Mr Sanders evidence was that he simply presented the material to Mr
Babray and Ms Horell to inform them about the arrangements Mr
Bottiglieri had made with DOH and the tenant. He said it was not a
separate session and that the other lot owners at the meeting, Mr Bottiglieri
and Mr Prolisko were either aware of the content already or had left. When
asked why he had not circulated the material in advance of the meeting so
all lot owners were aware of it, Mr Sanders said that the owners corporation
was not a party to the agreement and that the material simply extended the
existing arrangement between lot owners 7 and 8.
134 I have noted that the fence around lot 7 was not the subject of any agenda
item and so it was not a matter before the AGM. On the one hand, it might
have been prudent for the materials to be sent to all lot owners to keep them
all fully informed. On the other hand, only Ms Horell and, through Mr
Babray, Mr & Mrs Merlino had expressed concerns about the fence. In
those circumstances, giving only Ms Horell and Mr Babray a copy of the
documents seems reasonable.
135 Nothing about the information session affected the conduct or outcome
of the AGM and there was no breach of section 122 by the manager in
speaking with Ms Horell and Mr Babray in this way.
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136 On 12 April 2012, Ms Horell sent an email to Ms Ashby which set out a
range of concerns about the conduct of the AGM. The concerns including
the 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 the
agenda item to consider whether the AGM held on 22 March 2012 was
valid given the actions and statements by Mr Sanders.
137 Having received no reply, Ms Horell emailed Ms Ashby again on 17 April
2012. She referred to matters of concern and asked that she be advised of
the 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 of
the business discussed
Consideration of all interim resolutions passed and whether they are
agreed 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 the
alleged alteration of the boundaries of the common property
138 After discussing the matter with Mr Sanders, Ms Ashby replied on the same
day 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 specified
period 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 was
that 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 the
manager had convened the December 2011 SGM at the request of Mr
Bottiglieri and Mr Prolisko who do not constitute 25% of lot owners. She
said 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 a
petition by lot owners but was called by the manager to clear the air of all
issues and give the owners the opportunity to participate. I accept that
evidence.
144 Mr Sanderss view was that the manager was required to take instructions
from the owners corporation not from a minority of lot owners who hold
less than 25% of the lots.
145 The applicants complain that the manager failed to take into account their
interests and acted in bad faith in doing so.
146 The applicants say that the only cost of a meeting is the postage for the
notices. The cost of convening a meeting was said to be around $250. It
was accepted that the amount would have had to be borne by the owners
corporation.
147 In my view, given the history of the matter, including Ms Horells meeting
on 3 November 2011 and the subsequent SGM in December 2011, the
manager was acting consistently with its duties to all lot owners not to
convene a further meeting to discuss matters which had been addressed four
months earlier. It was entitled to draw the conclusion that the owners
corporation had made its decisions and that, in the absence of the required
25% support for a further meeting, to call one would be elevating the
interests of two lot owners above those of the whole.
148 The complaint regarding the refusal to call a further SGM in around April
2012 is dismissed.
The request for a postal ballot
149 On 27 June 2012, Ms Horell emailed Ms Ashby asking that she arrange a
postal ballot to consider a requirement that a unanimous resolution
regarding changes to common property be passed and that there either be
approval of the fence around lot 7 or that it be removed.
150 Ms Ashby acknowledged the email and stated that a postal ballot would not
be raised.
151 Section 83 of the OC Act governs postal ballots and its terms regarding who
can 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 meeting
by 25% of the lot owners, the manager was entitled to refuse to call a ballot
and these events give rise to no breach of its duties.
Conclusion
153 As indicated by the above discussions, there was no evidence before the
Tribunal to show that the manager acted dishonestly or in bad faith. While
some 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 manager
sought to undertake its duties mindful that it is required to act on the
VCAT Reference No. OC1825/2012
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A Dea
Member
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