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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 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

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

REASONS

Ms Horell and Mr & Mrs Merlino own lots in an owners corporation in


Travencore. Mr Babray is a former owner of a lot and is the partner of Ms
Horell. There are eight residences but there are 10 lots in the plan of
subdivision. Ms Horell and Mr & Mrs Merlino collectively hold 23% of
the lots.

The respondent is the manager of the owners corporation. The respondent


was originally appointed in around 2009 and that appointment was renewed
on 22 March 2012 for a further term of one year. Ms Horell signed that
appointment agreement on behalf of the owners corporation.

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.

Before turning to the particular matters raised by the applicants, it is


necessary to refer to some background which informs the dispute.

Background

As the owners corporation comprises less than 13 lots, it is not required to


have a committee. 1 The owners corporation did not make rules by special
resolution and so the model rules contained in Schedule 2 of the Owners
Corporations Regulations 2007 (model rules) apply. 2

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

Section 100 OC Act


Section 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 a


paling fence around the car space for lot 7. He apparently also made other
alterations to the exterior of that unit, including the installation of french
doors onto the enclosed area. The fence encloses not only the car space but
also 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. 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

While it is unsurprising that individual lot owners would have concerns


about dealings of this kind with common property, those individual lot
owners cannot act upon such concerns other than through the owners
corporation. This proceeding has not been brought in the name of the
owners corporation against Mr Bottiglieri and so the legality or otherwise of
the construction of the fence or any other alterations are not matters which
are before me for decision.

12

The complaints made in this proceeding by the applicants against the


manager concern various meetings at which the fence and related concerns
were discussed and the role played by the manager in respect of those
meetings. 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 and
the owners corporation.

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.

The managers duties under the OC Act

15

An owners corporation may appoint a manager under section 119 of the OC


Act. Where there is no committee, a manager has the functions and powers
that 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 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

As to the phrase due care and diligence, in Giurina v Owners


Corporation No 1579 & Ors, 4 Lansdowne AsJ noted that similar words in
relation to the duties of directors imposed an objective standard, being what
an ordinary person, with the knowledge and experience of the director,
might be expected to have done in the circumstances if he was acting on his
own behalf.

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.

Ms Horells 3 November 2011 meeting

22

On 20 October 2011, Ms Horell wrote a letter to Mr Bottiglieri. It carried


the following heading:
Notice is hereby given to members of the Owners Corporation Plan of
Subdivision No. 24189, 117-119 Mooltan St, Travencore, that a
General Meeting will be held on Thursday 3rd November 2011 at
6:30pm at the Springthorpe Country Club, Springthorpe Boulevard,
Macleod. (Opposite Grand Avenue).
This meeting is called under section 6(5) of the Model Rules in
relation to breaches brought to the attention of the Owners

3
4

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

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Corporation and identified in the Notice to Rectify Breaches sent to


you as the owner of Lot 7.

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

The letter was signed by Ms Horell as Chairperson.

26

Attached to that letter was a standard form notice headed Notice of


General Meeting. Beneath that heading appear the words:
Owners Corporations Act 2006 Section 76, Owners Corporation
Regulations 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 general


meeting would be held on the date and at the location specified above and
that, at the meeting, the members can vote on issues affecting the owners
corporation. 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 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.

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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 by


Ms 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 car
space 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 November
2011. We impartially note that the elected chairperson Anne Horell
has the power to call this meeting but has not given members the
required timeframe notification of 14 clear days and as such the
meeting and any decisions made will be invalid.
We further note, an unauthorised Notice to Rectify Breach issued in
the name of the Owners Corporation by Anne Horell is not valid.

33

A meeting proceeded on 3 November 2011. Present were Ms Horell, Mr


Bottiglieri, Mr & Mrs Prolisko (joint owners of lot 1) and Mr Babray. The
minutes 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 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

On 10 November 2011, Ms Horell wrote to the manager saying in part I


provide 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 the
meeting, the notice to rectify breaches and the covering letter to Mr
Bottiglieri. The letter referred further to concerns about the tenants access
to the hot water service and gave contact details for the DOH. The letter
asked 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 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:

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We impartially note again that the elected chairperson Anne Horell


had the power to call this meeting but had not given members the
required timeframe notification of 14 clear days and as such the
meeting 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 true
reflection of the meeting and the resolutions purportedly passed are
invalid.
...
Please find attached Notice of Special General Meeting. We have the
power to convene the meeting and do so in response to matters of
concern raised by some owners. They are calling for the removal of
the chairperson and the election of a new chairperson. It is time to
clear up all outstanding issues.

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 complaints


38

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.

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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 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

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 completed


and sent to all lot owners, this means that the meeting ought to be held
within 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 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

If a dispute is unable to be resolved, the parties may then exercise their


rights 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 about


an alleged breach by another lot owner of an obligation imposed
under the OC Act or under the rules. That complaint must be made
using an approved form (section 152)

The owners corporation must decide to take action under Part 10 in


respect of the alleged breach, or apply to the Tribunal for an order
requiring the breach to be rectified or to take no action. That
decision can only be made after the dispute resolution process
under the rules has been used and has not resolved the dispute
(section 153)

If the owners corporation decides to take no action, it must give


notice of the decision to the complainant and include reasons
(section 154)

If the owners corporation decides to take action, it must give notice


of 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 is
not rectified, the owners corporation may decide to apply to the
Tribunal for an order requiring rectification of the breach (section
157)

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

Ms Horell, even as Chairperson had no power to issue a breach notice to Mr


Bottiglieri. 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 be
made by the owners corporation. The consequence is that her breach notice
was invalid and cannot be said to have fallen within the rules dispute
resolution processes.

The calling of the meeting


51

As noted earlier, Ms Horells documents contained an agenda which


included a proposed resolution concerning Mr Bottiglieris fence and other
alterations. 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 the


Chairperson of the owners corporation and also by a manager where there is
no committee. Accordingly, Ms Horell was empowered to convene such a
meeting.

53

Section 76 requires that a person convening an SGM must give notice in


writing of the meeting to each lot owner at least 14 days before the meeting.

54

On its face, Ms Horells notice purports to call a general meeting. Although


the 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

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)).

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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, 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.

The 7 December 2011 SGM

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

On 23 November 2011, Ms Horell wrote to the manager setting out in detail


her concerns about health and safety risks arising from the hot water service
for 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 that
the 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 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

On 25 November 2011, the manager wrote to all lot owners. It forwarded


the 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 correct
forum 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 power
either. 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 for
over 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 he
intended 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 Mr
Sanders wanted to ensure that as many lot owners as possible attended. Mr
Merlino gave evidence that Ms Ashby said that it was advisable that he
attend 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 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

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 Mr
Babray. Mr Merlino replied that he agreed with some of the points Mr
Babray 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 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:

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Members to consider a resolution that Henry Babray not be granted


admittance to any meeting to be held of the Owners Corporation

70

Ms Ashbys evidence was that she wanted to check that Mr Merlino


intended to appoint Mr Babray as proxy and to check that he was aware of
that agenda item. In evidence she said that she probably should not have
made the second telephone call. She agreed that if Mr Babray was a
properly nominated proxy he could attend the meeting.

71

The applicants contend that by making the second telephone call to Mr


Merlino, Ms Ashby breached section 89 of the OC Act which makes it an
offence for a person to require or demand that an owner provide a proxy
in favour of a person for voting at a meeting and acted dishonestly and in
bad faith.

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

Agenda item regarding Mr Babray


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]

VCAT Reference No. OC1825/2012

Page 12 of 24

76

As to the agenda item itself, the applicants complain that it is indicative of


partisan support for Mr Bottiglieri by the manager which is inappropriate.

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

As a former lot owner, Mr Babray was not entitled to attend owners


corporation meetings in his own right. As mentioned above, he could of
course attend if he was a properly appointed proxy.

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

The complaints regarding the agenda item are dismissed.

Proxy - DOH
81

As discussed earlier, on 24 October 2011, the owner of lot 8, DOH, sent a


completed proxy form to Ms Horell nominating her as proxy for a period
expiring on 24 October 2012. At the 7 December 2011 meeting, Ms Horell
sought to rely on that proxy.

82

A second proxy had been sent to the manager by DOH on 21 November


2011. That proxy nominated Ms Ashby and contained an end date of 21
November 2012.

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.

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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

The applicants complain that Ms Ashby breached section 89 of the OC Act


by seeking the DOH proxy and further that the manager acted in bad faith
in refusing to accept the proxy held by Ms Horell as valid and in supporting
Mr Bottiglieris position.

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

Ms Fernandez replied as follows:


A proxy was incorrectly signed on behalf of the Department for Ms
Anne Horell, who was incorrectly acting on behalf of the Owners
Corporation, to act as a proxy for a private owners committee meeting
arranged by her on 23 November 2011.
It was the intention of the Department to appoint the Body Corporate
Manager of [address] to represent the Department and act on the
Departments (sic) best interests during a special general meeting
convened by Whittles for the 7 December 2011.
When appointing a proxy to represent the best interests of the
Department during an owners corporation meeting, a proxy is always
given to the Body Corporate Manager.

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.

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91

The applicants placed significant weight on section 87 of the OC Act which


deals with proxies. That section says:
(1)

A lot owner may authorise a person in writing to act as proxy for


any of the following
(a)

to attend, speak or vote on the lot owner's behalf at a


meeting 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 owners


corporation.

(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 owners


corporation; and

(e)

is effective from the beginning of the first meeting of the


owners corporation held after it is delivered to the
secretary; 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 in


good faith and exercise due care and diligence.

(6)

A lot owner may revoke an authorisation given under this


section and vote at a meeting or in a ballot instead of the person
who was authorised.

(7)

(not relevant here)

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

Mr Sanders gave evidence that there is no standard form for a notice of


revocation. He stated that, based on his many years experience and legal
advice 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 is
the valid proxy.

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94

While it is correct that section 87(3)(g) refers to notice of a revocation


being given, it makes no reference to how that is to be done. There are
many provisions in the OC Act which require that a particular form be
used 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 there
be a written notification of revocation of an existing proxy. I accept the
proposition that a proxy which post dates an existing proxy could amount to
such a notice.

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.

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 breach
issued in the name of the Owners Corporation to Lot 7 but without
authority of the Owners Corporation. Members to consider a
resolution that this matter has been dealt with many years ago and is
no 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 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

The applicants further say that Mr Sanders accepted a verbal agreement


made between Mr Bottiglieri and the DOHs tenant, to the effect that the
tenant could access the hot water service as required through lot 7s
bedroom. After the above motion was passed, Mr Babray suggested that a
postal ballot be held for all owners to consider approving Mr Bottiglieris
arrangement 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 owners


corporation back to 2001 and they showed that the alterations had been
discussed. 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 that
there 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 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.

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Meeting at the managers office 16 January 2012


105 The applicants attended the managers office on 16 January 2012. They say
that Mr Sanders and Ms Ashby confirmed that the owners corporation
register does not contain an approval for the fences erected on lot 8 and that
he does not have a car park or courtyard licence. They say that Mr Sanders
said that he had not asked Mr Bottiglieri to remove the fences because he
had received no direct complaints from the DOH tenant.
106 The applicants say that complaints had been received by them from the
tenant and that Mr Sanders had been notified of those via Ms Horells
correspondence. They further say that it is not surprising that the tenant
may not have raised concerns about access to the hot water service with
DOH, because s/he would not want to be known as a troublesome tenant.
They say they put this to Mr Sanders.
107 Mr Sanders agreed that there is no approval for the fences in the register
and that there is no licence for the car space. He says that none of the car
space licences for the lots have been executed but that they have been
treated as valid and the interest in each has been treated as passed on the
sale of lots from time to time. He maintains that the erection of the fence
and other alterations were accepted by the owners corporation many years
ago.
108 As discussed earlier, in making these complaints, the applicants appear to
misunderstand the role of the manager as compared to the owners
corporation constituted by the lot owners. Decisions about the construction
or removal of a fence on common property are for the owners corporation
to make.
109 If the manager had not received direct complaints from DOH about access
or health and safety, it was entitled to say so. Given that these matters were
the subject of discussion and a vote at the meeting a little over a month
earlier, it is difficult to see what the applicants could ask of the manager in
January 2012.
110 These events do not establish any breach of the managers duties.
The 22 March 2012 annual general meeting

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.

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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.

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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)

Subject to subsection (2), a lot owner who is in arrears for any


amount owed to the owners corporation is not entitled to vote,
either in person, by ballot or by proxy, unless the amount in
arrears is paid in full.

(2)

A lot owner who is in arrears for any amount owed to the


owners corporation is always entitled to vote in a case where a
special resolution or unanimous resolution is required.

(3)

For the purposes of subsection (1), except in the case of a


payment in cash, an amount is only taken to be paid in full if it
is 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 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

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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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The request for an SGM

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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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

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