COMMITTEE MEMBER REIMBURSEMENT PART 2

Our prior article detailed the limitations on what bodies corporate can use their funds for expenditure on – due to bodies corporate being creatures of statute.

That article introduced the issue of committee members seeking reimbursement from the body corporate for gifts that they may have decided to give at Christmas time. Unsurprisingly, the legislation does not contemplate bodies corporate giving gifts – so any reimbursement to committee members on that basis would be unlawful.

But even if gift-giving was allowed under the legislation, there is a prescribed process that must be followed when any payments are made to committee members. Consistent with the theme of these articles – this is the process set out in the legislation.

The committee is given the power to make decisions on behalf of the body corporate except for decisions that are a restricted issue. One category of restricted issues includes:

to pay remuneration, allowances or expenses to a member of the committee unless, under section 45 [of the Accommodation Module], the decision is not a decision on a restricted issue for the committee.

Section 45 of the Accommodation Module (which is similarly replicated in other modules) provides that payment to committee members can be made in two circumstances, being:

1. Firstly:

a. the payment is for reimbursement of incurred costs;

b. the payment to be made is less than $50;

c. the reimbursement relates to attendance of a committee member at a committee meeting; and

d. the payment would not exceed a total reimbursement to the committee member of $300 in a 12-month period.

2. Secondly:

a. approval is obtained by ordinary resolution;

b. the resolution states the full amount of remuneration, allowance or expenses (and why it was incurred); and

c. an explanatory schedule is included in the agenda which states the full details of the payment.

In Imperial Surf [2016] QBCCMCmr 89, the adjudicator relevantly provided:

“Payments of ‘remuneration, allowances or expenses’ may be made to committee members pursuant to section 43 Standard Module [now s.53 SM 2020]. That section requires that the decision to pay committee members is made by ordinary resolution; that the motion states the full amount of the remuneration, allowances or expenses; and that if the payment relates to expenses, the reason that the expenses were incurred is stated. In addition, the motion requires that an ‘explanatory schedule stating full details’ of the money to be paid accompanies the voting paper.

The committee may approve reimbursement of ‘expenses …incurred in attending a committee meeting’ of up to $50 of its own accord, without going to a general meeting, provided that it does not approve an amount of more than $300 to one committee member in a 12-month period…

…

An analysis of section 43 Standard Module [now s. 53 SM 2020] leads me to the conclusion that there is a difference between a payment of “remuneration and an allowance” on the one hand, and a payment of “expenses” on the other. In both cases the approval must be by ordinary resolution of the body corporate.

In both cases, the “full amount” must be stated in the motion. But in the case of “expenses”, the motion must also state “the reason the expenses were incurred” (my underlining). In both cases an explanatory schedule “stating full details” must accompany the voting paper.

It seems to me therefore, that “expenses” have to have been incurred before an approval can be given for their payment, unlike “remuneration” or “an allowance” which may be fixed beforehand. That is, all payments to committee members must be known quantities before an approval can be given.”

As can be understood from this reasoning, there is a high threshold to meet to properly authorise (through disclosure to all owners) payments being made to committee members. This is for good reason too. It would be imprudent to facilitate rogue committee members from authorising payments to themselves (of owners’ money) without the appropriate checks and balances in place. Such payments would also:

1. naturally appear in the accounts of the Body Corporate; and
2. usually be disclosed (but not fully authorised) as part of the lot owner’s nomination as committee member.

Accordingly, committee members should take care that in seeking any payment from the Body Corporate they ensure that:

1. their nomination sets out any intention to claim a payment from the body corporate;
2. the payment is approved by passing a motion at general meeting;
3. the motion clearly sets out:

a. if the payment is remuneration, allowance or expenses; and

b. the reason the payment was incurred; and

4. the full details of the payment are disclosed fully and frankly in an explanatory schedule that is included in the general meeting agenda.

Article Contributed by Todd Garsden, Partner at Mahoneys Lawyers and Advisors.