QLD: Are developer decisions at the first AGM and a 25-year caretaker contract legal?

This article discusses developer first AGM caretaker contract legality and whether those decisions can be challenged under the Accommodation Module.

Question: During the first AGM, the developer’s director, serving as the original owner’s representative, unilaterally assumed all statutory roles and initiated a 25-year contract with a caretaker linked to their company. Are these actions legal?

During the first AGM, a director of the developer was appointed as the original owner’s representative. This person nominated and accepted themselves for all statutory positions (chair, secretary and treasurer). They determined they had a quorum and declared that the meeting decisions were not restricted items under the BCCM and, therefore, did not require a secret ballot. They executed agreements with a caretaker who is a subsidiary of the company for which they are a director. The agreement is a 25-year contract that no owners reviewed or considered.

Under the accommodation module, what are the requirements for declaring a ‘conflict of interest’ and voting by committee members who are direct or indirect agents for a proposed service provider? Are these actions legal?

Answer: If the activities are unlawful, there are avenues to unwind the approved agreements.

There are a number of elements to unpack, most of which will depend on certain information and circumstances being investigated. However, to provide initial comments:

1. Committee composition – if the developer was the only owner of the lots, then section 14(4) of the Accommodation Module contemplates this taking place, which provides:

   the committee is a committee of 1 consisting of the individual who is the owner, or the nominee of the owner, of the lots, and the individual holds all the executive positions on the committee

2. Quorum – if the developer was the only voter at the meeting, a quorum was reached pursuant to section 89(5)(b) of the Accommodation Module.

3. Restricted items – restricted issues can be considered at a general meeting rather than by the committee.

4. Secret ballot – some motions may require a secret ballot, but this depends on the topic of the motion.

5. Execution of agreements – if new agreements were approved at the meeting, it would be appropriate for them to be entered into.

6. Conflict of interest – there is no conflict of interest in voting at a general meeting.

7. Committee eligibility – there are committee eligibility issues for caretaking associations.

8. Caretaking agreement – usually these are disclosed to buyers as part of any off-the-plan sales arrangements.

9. Are the arrangements lawful – it is not possible to confirm without a detailed review of all the relevant information. In the past, we have been engaged to review and advise bodies corporate and have found some circumstances to be lawful and others to be unlawful. If it is unlawful, there are avenues to unwind the agreements that were approved.

This post appears in the February 2024 edition of The QLD Strata Magazine.

Todd Garsden
Mahoneys
E: tgarsden@mahoneys.com.au
P: 07 3007 3753