Question: Is a ‘lump sum motion’ for legal expenses valid? It states “…seek advice as is required from time to time from the body corporate solicitors and other industry experts….”.
At our recent AGM the Committee proposed the following motion:
Body Corporate Solicitors
That the body corporate seek advice as is required from time to time from the body corporate solicitors and other industry experts to assist the committee in relation to dispute resolutions, recovery of amounts owing to the body corporate, service contracts and Building Management Group issues at a cost not to exceed the major spending limit of the body corporate.
Our maximum spend limit is $395,000. Is such a ‘lump sum motion’ valid?
Answer: The motion does not describe the contractor, scope of works or amount of expenditure for each engagement and, on balance, is vague and unenforceable.
The motion does not describe the contractor, scope of works or amount of expenditure for each engagement and, on balance, is vague and unenforceable.
In Xanadu East [2011] QBCCMCmr 64 the adjudicator provides:
In relation to Motion 16, I note that no quotations were sent to owners regarding any of the proposed works. Further, I note that the explanatory notes contained no specific information regarding any of the works actually proposed by the motion. As set out above, section 94 of the Act requires a body corporate to act reasonably in anything it does. In the absence of any quotations or details regarding the works proposed by Motion 16, I am not satisfied that the level of information presented to owners regarding the proposed works was reasonable.
This is, however, a matter of interpretation and it would be open for an adjudicator to decide the motion was sufficiently certain. Even if the motion was found to be valid, it has little practical effect as it only makes a preliminary decision to seek expert advice.
In Redlynch Grove Apartments [2009] QBCCMCmr 195 the adjudicator relevantly provides (our emphasis):
As mentioned above, Motion 3 was that independent legal advice is to be obtained by the body corporate to investigate the past conduct of the current committee but this motion was ruled out of order on the following grounds:
It does not name a legal adviser or provide a mechanism for choosing a legal adviser;
It did not include quotes to enable the body corporate to approve the expenditure;
There is no provision for this expenditure in the current budget and there was no mention of a special resolution to raise funds for this proposal.
I believe it is quite plausible that the purpose of this motion was to make a preliminary decision as to whether or not legal advice should be obtained and was not an expenditure motion. In the event that the motion was carried, a further motion to engage legal representatives could be placed on the agenda for the next general meeting. Accordingly, I do not believe that this motion should have been ruled out of order.
Ultimately a further resolution is required to properly authorise the engagement and expenditure of a particular consultant. If the engagement exceeds the relevant limit for major spending for the Scheme, then a second quotation would need to be obtained and considered by the Body Corporate. The relevant limit for major spending is:
- the amount set by ordinary resolution of the body corporate at a general meeting; or
- if there is no amount set, the lesser of:
- $1,100 multiplied by the number of lots in the scheme; or
- $10,000
This post appears in Strata News #625.
Holly Dunne
Mahoneys
E: tgarsden@mahoneys.com.au
P: 07 3007 3753
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