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Another resident manager's option is saved

By Frank Higginson04 Jan 2008

We wish you all the best for 2009.

It is extremely unusual to see instances of disputes between managers in the same complex, primarily because there are very rarely buildings with different caretaking and letting entities, but we were recently engaged with respect to one.

The dispute related to a building in which Stella had previously held both the caretaking and letting rights. At the time of the dispute it no longer held the caretaking rights but it still retained the right to let units on behalf of owners.

The body corporate had since engaged a resident manager, who resides on site, through a formal agreement similar to any caretaking agreement.

A variation of the caretaking agreement was approved at the AGM on 6 September 2008. The documents that were sent to owners with respect to the variation were prepared by the committee. The documents did not include a BCCM Form 20, which is the compulsory explanatory note that must be provided to owners whenever a variation in relation to the term of a management rights agreement is considered. The body corporate voted 91 to 16 in favour of granting the option.

The resident manager immediately exercised the three year option created by this variation.

The body corporate then became aware of the apparent defect in the documents circulated with the agenda for the meeting. There was a further EGM to be held on 13 December 2008, and the same variation motion was put up as previously approved, but this time the BCCM Form 20 was included with the agenda.

Stella, which still owns a lot in the scheme through a subsidiary company, then lodged an application three days before the expiry of the three month period to challenge the validity of the variation passed at the September AGM. It also sought an interim order to prevent the body corporate from considering the motion at the December EGM.

We were engaged by the resident manager to oppose the application on an urgent basis, as a successful challenge by Stella would have created considerable uncertainty and have had major financial consequences for our client.

The application by Stella was dismissed.

The request for the interim order was dismissed as:

  • Stella delayed making the application. Stella’s application was made on 3 December 2008, which was almost exactly three months since its solicitors first wrote to the body corporate regarding the apparent defect in the September AGM notice; and
  • Stella was held to have to filed the application ‘to gain a personal advantage…and [was] not acting simply to bring attention to the possible failure of process by the body corporate.’

This decision again highlights the ability of an adjudicator to make an order that is just and equitable in the circumstances.

Previous decisions have seen the failure to include a BCCM Form 20 fatal to an approved variation in relation to term, but those decisions have related to applications made before a variation was executed.

It was also held that the adjudicator does not have jurisdiction where:

  • the resident manager had acted in good faith; and
  • the resident manager had acted in reliance on the variation after it was approved.