Meetings of Bodies Corporate

Meetings of Bodies Corporate

Unit Titles Act 2010

One of my memorable 2014 engagements was to act an independent chair of a disorderly body corporate, and this required careful consideration of the Unit Titles Act 2010 and its 2011 Regulations. Despite being reasonably recently enacted (and amended) the Act and Regulations are strangely deficient in directing how body corporate meetings are to be called and conducted. This article focusses on those deficiencies of which I am aware – if any reader knows of other issues please let me know.

Calling and Chairing Body Corporate General Meetings – many imponderable questions

The following issues relate to AGMs (ignoring the first AGM, in respect of which some provisions are different):

  • Section 89(3) states that, after the first annual general meeting, “annual general meetings must be held once every calendar year and not later than 15 months after the previous annual general meeting” (emphasis added). If a body corporate does not hold an AGM during a calendar year that is prima facie unlawful – then what?
  • Section 90(1) and Regulations 5(2)(b), and 6(2)(b) state that AGMs “must be called by the chairperson in accordance with the regulations” (emphasis added), and Section 90(2) and Regulations 7(1) and 8(1) require that extraordinary general meetings be called by the chairperson or body corporate committee. If notices are issued by the secretary or manager and not in the name of the chairperson or body corporate committee, is the meeting unlawful?
  • Section 101(2) provides that “Except as otherwise provided for in this Act, all other matters to be decided by the body corporate at a general meeting must be decided by ordinary resolution,” while Regulation 10(1) requires that “A body corporate must elect a chairperson by ordinary resolution at every annual general meeting of the body corporate.” How did the draftsperson anticipate the meeting would decide whom to elect by resolution if there is more than one candidate without a conventional election poll being conducted? What, if any, preliminaries to a resolution are lawful? Most elections are conducted by poll on a first-past-the-post basis and the Act or Regulations should reflect this.
  • In contrast, Regulation 24 does refer to electing the body corporate committee, but gives no guidance as to how elections should be conducted (or does section 101(2), discussed below, trump Regulation 24?), including whether, if there are insufficient nominations, further nominations can be accepted at the meeting.
  • Regulation 10(5) requires that “As soon as practicable after the annual general meeting at which he or she is elected, the chairperson must notify every unit owner in the unit title development, by each owner’s preferred method of contact, of his or her election to that office.” If that is not done (or it is done by someone other than the chairperson, what, if any, are the consequences? In respect of all General Meetings:
  • The Act and Regulations appear to be silent on the question of who may attend and speak at a body corporate general meeting. Conventionally, the only people entitled to attend and speak are members, duly appointed proxies and people necessary for the efficient running of the meeting, such as personnel from the body corporate manager and a lawyer. Is that also true for bodies corporate?
  • Regulation 11(1)(c) provides that one of the duties of the chairperson is “to chair each general meeting (unless it is agreed at the start of a general meeting that another person will chair that meeting).” If a body corporate has no duly appointed chairperson present at the beginning of a general meeting (perhaps because the former chairperson was removed and no replacement was elected as required by Regulation 12(2), or for other reasons), the Act and Regulations give no guidance as to who should open the meeting and deal with an election of a meeting chairperson under Regulation 11(1)(c). That was the case in 2014 when I was requested to chair the body corporate meeting mentioned at the beginning of this article.

Body Corporate Quorum, Voting and Proxy Issues

Section 95(1), Unit Titles Act, provides that “At a general meeting of a body corporate, the persons entitled to exercise the voting power in respect of not less than 25% of the principal units or their proxies constitute a quorum, provided that if the body corporate contains 2 or more members a quorum must be at least 2 members.” Sub-section (2) then provides that “Except as otherwise provided for in this Act and the regulations, no business may be transacted at a general meeting of the body corporate unless a quorum is present at the time.”  Section 96 defines eligible voters, and Section 102 provides for proxies, and is supplemented by Regulation 14 (noting that a proxy must be appointed for each meeting).

Section 95 is good, as far as it goes, but the following issues concerning body corporate general meetings require legislative attention:

  • Section 79(h) confirms the right of owners of principal units to attend meetings, but, apart from checking proxy and quorum requirements, the legislation is silent on checking voting eligibility and recording who attends.
  • The eligibility under Section 96 of each person seeking to vote needs to be verified, and the proper appointment of any proxies under Section 102 and Regulation 14(4) (including corporate and joint owners) needs to be checked (potentially mammoth tasks in larger bodies corporate).
  • Section 102(4) states that “If there are 2 or more eligible voters who own 1 principal unit and they are jointly entitled to exercise 1 vote and wish to do so by proxy, that proxy must be jointly appointed by them and may be 1 of them.” Other than when casting a postal vote (see Form 12 in the Regulations) there is no other reference to how multiple owners may vote, so I infer from this section that they can only vote by proxy appointed under this section.
  • The quorum requirements are found in Section 95 and Regulation 13, but neither of them directly addresses what happens if the quorum is lost during a meeting – presumably the body corporate manager should keep watch on the presence of a quorum, as business conducted without a quorum present is invalid – Re Dannevirke Motor Co Ltd [1920] GLR 266.
  • The Act and Regulations provide for postal voting. Section 103 provides that “An eligible voter or his or her proxy may exercise the right to vote at a body corporate meeting by casting a postal vote,” “Every postal vote must be in the prescribed form,” and “A postal vote must be sent to the chairperson or to the person authorised by the chairperson to receive and count postal votes.” Regulation 15(1) then provides that “If the text of a motion to be decided by resolution at a general meeting is materially amended at the general meeting, a postal vote cast on the motion must not be counted in relation to that motion, but may still be counted for the purposes of regulation 13(1)” (assessing the quorum). Presumably motions can be amended in the normal manner, but what does “materially amended” mean, and who should make that decision at a meeting?
  • Some additional practical issues also need to be considered – such as recording votes at meetings, clarifying how candidates for election are to be nominated and elections conducted (Regulations 5(4), 6, 7(2), 10, 15 and 24), amending Form 12 to facilitate postal voting for chairperson and committee members, providing voting cards (to make it easier to assess a majority without a formal poll), whether scrutineers can or should be appointed, checking that voters are financial (Section 96(3)), a method of recording and calculating votes cast in a poll against the required majorities (Section 100), and how long voting records (including voting papers) should be retained.
  • Finally, the body corporate’s own rules may create other problems.

What needs to be done?

In the case of other corporate entities, failure to follow required pre-meeting processes may well render the meeting and its decisions unlawful, and in my opinion this principle applies to bodies corporate.  In the event of such non-compliance I doubt that a Court would disapprove of a reasonable and pragmatic response to these issues, but the legislative lacunae should be filled.

The unit title concept has largely replaced company-owned and cross-leased multiple unit developments. Now, body corporate developments are an increasingly popular and important mode of residential, commercial and industrial development.  To avoid potential for disputes and/or to minimise potential disruption at a meeting, someone competent should be asked to check to ensure that all requirements relating to eligibility and the appointment of proxies in the Unit Titles Act and Regulations have been complied with.  However, the legislation needs to be urgently reviewed to reduce the other uncertainties and problems (and associated costs) of calling and running body corporate meetings.

 

This is one of a series of articles on societies and charitable trusts. If any reader has examples of issues that have arisen or questions about societies or charitable trusts that might be a suitable subject for one of these articles please contact Mark at mark.vondadelszen@bvond.co.nz.