The Importance of Proper Approval and Ratification
The decision of Cascade Gardens Leisure and Retirement Village [2018] underscores the necessity for Body Corporate Committees to comply with legislative requirements when approving expenditure. This case involved two projects where committee members committed funds before obtaining formal approval, later seeking retrospective ratification. The tribunal found that while the Committee acted in good faith, their process was flawed.
Key Issues Identified
- Expenditure was incurred before formal approval was granted. The process was not follwed by the Committee correctly and as a result contractors were engaged and funds spent without the proper approval, contrary to legislative requirements.
- The required two-quote process for major spending was not followed. At least two quotes must be obtained for spending above the committee spending limit.
- The Committee lacked full knowledge of costs when attempting to ratify the expenditure. Ratification requires complete disclosure of material facts, including actual expenditure details, which were absent in this case.
Committee Spending Limits under Queensland Legislation
Legislative provisions set out clear guidelines for committee spending:
- A Committee may approve expenditure up to the Committee spending limit, which is $200 per lot, unless varied by an ordinary resolution of the Body Corporate.
- If an expense exceeds the major spending limit (the lessor of $1,100 per lot or $10,000), at least two written quotes must be obtained before approval.
- If the Committee must approve spending above its limit, it requires authorisation from a general meeting of the Body Corporate.
Tribunal Findings and Takeaways
This decision highlights the importance of:
- Following due process and obtaining approvals in advance.
- Ensuring transparency and full disclosure in financial decisions.
- Adhering strictly to legislative requirements for committee spending limits.
The ruling serves as a critical reminder that good intentions do not override legal obligations in Body Corporate Governance. Committees should exercise diligence to avoid financial mismanagement and ensure compliance with the law.
