$1.5m and the Southport body corporate war
MEMBERS of one of Australia’s biggest body corporates are rebelling against its committee after an extraordinary dispute over use of almost $1.5 million from its sinking fund for property investment.
Motions have been put forward to the upcoming AGM at Southport Central Residential seeking to replace the body corporate’s committee, manager and legal firm in the wake of controversy over it.
A damning judgment from the Office of the Commissioner for Body Corporate and Community Management (BCCM) found the committee had acted contrary to the Body Corporate Act in transferring $1,488,200 to a company which purchased units at the scheme.
At its AGM in October 2020, the body corporate passed a motion authorising the committee to invest funds in accordance with advice from a licenced financial Adviser and the Trusts Act.
The BCCM judgment states a company, CTS 35751 Investments Pty Ltd, was subsequently established on April 1, 2021.
“The director, secretary and sole shareholder at the time was Colin Buckley, the then body corporate chairperson, secretary and treasurer,” the judgment states.
Following the company’s establishment it moved quickly to make purchases, scooping up four units within Southport Central in just over one month.
According to property records: On April 22, 2021 it agreed to purchase a two-bed unit for $390,000. On April 23 it purchased a one-bed unit for $295,000. On May 18 it purchased a one-bed unit for $310,000. On May 25 it purchased a two-bed unit for $390,000.
Resolutions were passed by the body corporate committee on May 22 and June 16 authorising an investment worth $1,488,200 in the company, enough to cover the purchase costs of the four units.
The buying spree came to a halt when some scheme members objected and were granted an interim order by the BCCM adjudicator on 28 June, 2021. The interim order prevented the body corporate investing any further funds in the company.
“(Applicants say) the body corporate paid $1,448,200 to the company when there was no budget for investment and when there was (at the time) no invoice or committee resolution for some of the amounts,” the judgment states.
“The application refers to transfers from 28 April to 11 June, 2021, to a Herdlaw trust account (Herdlaw being the body corporate’s solicitors in this matter).”
On September 16, this year the adjudicator issued their final determination on the matter.
The adjudicator found that resolutions passed by the committee in May and June 2021, authorising the investment in the company, were “not valid”.
The adjudicator ordered the body corporate must not purchase any more units at
Southport Central, either directly or through the company created, and must, “within a reasonable time”, divest itself of its shareholding in CTS 35751 Investments Pty Ltd and recover the funds it had already invested.
“I have concluded on the evidence that, in investing in the Company, the body corporate has acquired an interest in a lot contrary to the Act, that it is carrying on a business contrary to the Act, that these were not the investments of a prudent person, and the decisions and actions were not reasonable,” the adjudicator wrote.
“Moreover, I am satisfied that the committee chairperson has a conflict of interest in respect of decisions about the Company while they are a director and shareholder of the Company.”
Since the controversy blew up, Colin Buckley has stepped down as chairman of the body corporate and been replaced by John Beerwald.
On October 22 last year Mr Beerwald also replaced Mr Buckley as director of CTS 35751 Investments Pty Ltd.
The secretary of that company, appointed on 24 May 2021, is 76-year-old Leone Allen. Ms Allen is also Director and CEO of Complete Management Group, which is the Body Corporate Manager for Southport Central Residential.
The contact address for CTS 35751 Investments Pty Ltd is listed as PO Box 180, Maroochydore, which is an address used by solicitors Herdlaw.
Aggrieved owners at the three-tower scheme have now put forward motions for the body corporate’s AGM seeking to appoint a new committee, replace the body corporate manager and to no longer employ the services of Herdlaw.
The AGM takes place on October 31.