Hope Harbour Marina [2000] QBCCMCmr 13 (18 January 2000)

RA MeekREFERENCE: 0434-1999

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	20955
Name of Scheme:	Hope Harbour Marina
Address of Scheme:	John Lund Drive, Hope Island, GOLD COAST Q 4212

TAKE NOTICE that pursuant to an application made under the abovementioned Act by

Lund Investments Pty Limited, the owner of lot 7, Mariner Cruises (International) Pty Ltd, the owner of lot 6, Marina Developments Pty Limited, the owner of lots 48 and 73, and Townsand Pty Ltd, the co-owner of lots 29, 30, 46, 57 and 68


RA MeekI hereby order that motion 16, headed Sharing of Facilities (Roadways), which was carried by the body corporate of Hope Harbour Marina at the AGM of the body corporate held on 6 July 1999, is invalid and of no effect.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0434-1999

“Hope Harbour Marina” CTS 20955

The applicants, Lund Investments Pty Limited, the owner of lot 7, Mariner Cruises (International) Pty Ltd, the owner of lot 6, Marina Developments Pty Limited, the owner of lots 48 and 73, and Townsand Pty Ltd, the co-owner of lots 29, 30, 46, 57 and 68 have sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

... that motion no. 16 “Sharing of Facilities (Roadways)” together with the related motions 14 and 15 on the voting paper attached to the notice of AGM forwarded to owners under cover of a letter of 8 June 1999 from Body Corporate Services in preparation for the AGM to be held on Tuesday, 6 July 1999 at 10.00 am, be declared invalid as the motions attempt to effect a breach of regulation 118(2) of the Standard Module of the Body Corporate and Community Management Act 1997.

The applicants also sought an interim order and on 14 July 1999, the following interim order was made –

RA MeekI hereby order that motions 14, 15 and 16 as set out in the Notice of AGM of Hope Harbour Marina, and purported carried by the body corporate at that meeting held on Tuesday 6 July 1999, shall not be implemented or otherwise acted upon until a final order to this application is made, this application is withdrawn, or this order is of no effect by operation of law.

Section 223(1) provides that an adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about –

a) a claimed or anticipated contravention of the Act or the community management statement; or

b) the exercise of rights or powers, or the performance of duties, under this Act or the community management statement; or

c) a claimed or anticipated contravention of the terms, or the termination of, or the exercise of rights or powers under the terms of, or the performance of duties under the terms of an engagement contract or an authorisation contract.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 223(2)). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1)).

Motions 14, 15 and 16 considered at the AGM of the body corporate held on 6 July 1999 are headed Extension of Roadway, Additional Car Parks, and Sharing of Facilities (Roadways) respectively. Each motion was submitted by the committee and each was stated to require a special resolution.

The minutes of the meeting record that each of the three motions were carried, each with a yes vote of 25, a no vote of 2, with 1 abstention. According to departmental records, there are 85 lots in the scheme.

Submissions were sought in respect of the initial application, and the body corporate and others responded to the contents of the original application. The applicants then made a reply to the submission made by the body corporate regarding their application. Ordinarily this is the point after which this office does not allow further responses from any party. However, on reading the reply submitted by the applicants to the body corporate’s submission, I formed the view, and still hold the view, that the reply contained substantial additional material in the nature of grounds to the application. That it, it went beyond a reply to matters submitted by the body corporate. I informed all parties of my view regarding this aspect, and advised that in the circumstances, I intended to allow the body corporate a further right to respond to the additional material submitted by the applicants. I am now in possession of the further responses from the body corporate, and its lawyers.

In the initial application, the applicants alleged in their grounds that –

1.	The proposed shared facilities agreement was invalid as it is between a body corporate and certain individual owners; not the body corporate of another community title scheme as required by section 118(2) of the Standard Module;
2.	There was no authorisation either in the Act or by-laws authorising the body corporate to enter into the proposed shared facilities agreement;
3.	That any agreement between the parties should take the form of an easement or a lease and not an agreement for the sharing of facilities;
4.	That the decision of the body corporate to enter into the proposed shared facilities agreement is not a decision regarding the administration, management and control of the common property which is made reasonably and for the benefit of lot owners under section 114 of the Act.

As I have indicated, in their reply the applicants submitted additional grounds to this application. I intend to canvass all matters as part of these reasons, to the extent that I consider matters to be relevant to my determination of this application. It is also relevant to note at this point that on Wednesday 13 October 1999 I undertook an inspection of the scheme, essentially to assess physical aspects of the development, and of the proposals the subject of the motions. I did meet with several parties on site (both for and opposed to the application), however I consider that nothing discussed at this meeting in any way prejudiced the position of any party not represented at the meeting, or in any way prejudiced my ability to further determine this application.

Section 118 of the Standard Module Regulation provides as follows –

ú
Sharing facilities
118.(1) This section has effect despite anything else in this part.
(2) The body corporate may, in the name of the body corporate, and if authorised by a special resolution of the body corporate, enter into an agreement with the body corporate of another community titles scheme under which the owners or occupiers of lots included in the scheme and lots included in the other scheme may share the use and enjoyment of—
(a) facilities forming part of the common property of either scheme; or
(b) body corporate assets for either scheme.

Example—

The body corporate may enter into an agreement under subsection (2) with the body corporate for another community titles scheme under which the owners or occupiers of lots included in the scheme may use a tennis court forming part of the common property for the other scheme.

The first ground relied on by the applicants in their original application is that, under section 118, a body corporate is only entitled to enter into agreements with the body corporate of another community title scheme. The applicants content that the arrangements proposed by motion 16 do not satisfy the requirements of section 118, since a body corporate has not been established for lots 166 – 170 on RP 80019 (the adjoining land).

Motion 16 proposes that the body corporate enter into a deed with the owners of the adjoining land to the effect that when the owners cause the registration of a plan of subdivision for the adjoining land creating lots and common property and records the CMS, that the Hope Harbour Body Corporate will immediately enter into a deed, termed a Facility Sharing Agreement, with the new body corporate formed for the adjoining land. It is at this point that a shared facility will come into existence. The form of the Facility Sharing Agreement (the FSA) was attached to the notice of meeting.

Given that the developers of the adjoining land will, on registration of the plan, be the owners of all lots in the new scheme, then in my view there is no impediment to the FSA being executed. The Agreement as to Facility Sharing is not a facility sharing agreement in terms of section 118. Rather it is an agreement whereby the Hope Harbour body corporate agrees to enter into a facility sharing agreement in the future. I consider such an agreement to be valid. It is akin to an agreement to enter into a lease of premises at some future time, usually on completion of a building the subject of a lease. Moreover, a body corporate does have power to enter into contracts (see section 88(1) of the Act) necessary to carry out its functions. A function of the body corporate is to administer the common property (see section 87(1)). The agreement relates to common property of the body corporate.

In the circumstances, I consider the agreement proposed by motion 16 to be valid.

The applicants next allege that unless there is express authorisation in the by-laws or the Act permitting the body corporate to enter into an agreement of the nature proposed, the body corporate is not entitled to enter such an agreement. The applicants rely on the decision of the High Court in Humphries v Proprietors “Surfers Palms North” GTP No. 1955 as authority for this proposition.

The determination of the High Court in the Humphries case related to the provisions of the previous Act, namely the Building Units and Group Titles Act 1980. As noted above, the new Act provides both an express power for a body corporate to enter into contracts in order to carry out its functions, and further, an express power to enter in facility sharing agreements. Whilst I acknowledge that the agreement proposed by motion 16 is not a facility sharing agreement, but rather an agreement binding the body corporate to enter into such an agreement upon the occurrence of a future event, I nevertheless consider that the current Act and standard module sufficiently authorise the arrangements proposed such that an empowering by-law is not required. The decision in the Humphries case is distinguishable, primarily on the basis of the changed legislative provisions.

The applicants next allege that motion 16 has the effect of granting an easement over common property of the body corporate, and that as such the motion requires a resolution without dissent on the basis that section 112 of the standard module provides that –

The body corporate may, if authorised by a resolution without dissent ... grant an easement over the common property, or accept the grant of an easement for the benefit of the common property.

The applicants contend that if a roadway is to be proposed then it ought properly be dealt with as the granting of an easement or a lease rather than entry into a sharing of facility deed.

The standard module makes a clear distinction between the granting of an easement over common property and the entering into of an agreement for the sharing of facilities. In particular, the granting of an easement requires a resolution without dissent whereas the entering into of a shared facility agreement requires a lesser special resolution.

The body corporate in its submission states as follows –

Whether or not a sharing of facilities agreement gives rights similar to an easement is irrelevant. The Act acknowledges and allows that these types of agreements, whether or not they have elements normally found in an easement, are especially allowed. It is a purposeful recognition within the Act that such an agreement does not need all of the formalities of an easement for the members of one body corporate to share anothers property and vice versa. ...

Therefore, an easement would not be necessary in this case. Easements will only be necessary where the other party to the sharing of property is not a body corporate. ...

An easement if granted would enure to the benefit of any owner in the future of the dominant tenement. In this case the agreement will come to an end if the body corporates are terminated, as would not be the case if an easement were granted. ...

Based on the differentiation in the type of resolution required, I consider that the Parliament must have intended some more significant distinction between the two possible mechanisms rather than that submitted by the body corporate; namely that they are essentially interchangeable and that easements will only be necessary where the other party to the sharing of property is not a body corporate. In my view, if the Parliament intended such an interpretation, then it would have made the resolution requirement uniform for both mechanisms.

Moreover, I disagree with the body corporate’s implied assertion that, as between two body corporate’s, a facility sharing agreement will always suffice. In this regard, the body corporate’s own submission provides the reasoning for my difference of view. In the case of an easement, for it to be terminated, it must be surrendered, requiring the agreement of the grantee of the easement. In contrast, a facility sharing agreement could be terminated in accordance with the termination provisions of the agreement (if any) or alternatively, would be automatically terminated by the termination of either scheme, since there would no longer be an agreement between two body corporates. In my view, the relative lack of protection from termination in the case of a facility sharing agreement should necessarily limit the use of such mechanism.

For example, in a staged development, if scheme A was established, followed by scheme B on adjoining land, with the only access to scheme B being via the common property roadway of scheme A. If the use of such roadway by owners in scheme B was governed by a facility sharing agreement, then owners in scheme B would have no absolute protection against loss of access to their lots in the albeit unlikely event of the termination of scheme A. In contrast, if the owners in scheme B had the benefit of an easement for access to their lots, then they would always maintain control of access to their lots.

Section 118 provides an example, namely that –

The body corporate may enter into an agreement under subsection (2) with the body corporate for another CTS under which the owners or occupiers of lots ... may use a tennis court forming part of the common property for the other scheme.

Motion 16 is headed Sharing of facilities (Roadways). The motion itself then refers to the shared use and enjoyment of facilities forming part of the common property for each scheme namely the roadways, paths, gardens, entry facilities and security arrangements. However the explanatory note to the motion refers only to the common use of the interconnecting common property and John Lund Drive. Moreover, the proposed agreement refers to Hope Harbour body corporate making available the facility known as John Lund Drive for the use and enjoyment of owners or occupiers of lots in the adjacent body corporate and the adjacent body corporate making available the facility known as the connecting road for the use and enjoyment of owners and occupiers of lots in the Hope Harbour Body Corporate.

The “facility” proposed to be shared, in the case of the Hope Harbour scheme, is John Lund Drive, a roadway which traverses the length of the scheme, and which provides access to other parts of the scheme, including the marina.

Easements have traditionally been granted for purposes of access or right of way. In contrast, easements have not been granted for the right to use facilities. For example, it would not be appropriate to grant an easement for the right to use a tennis court. Such right of use would traditionally have been authorised by way of some formal or informal agreement between the respective parties, and now (at least between two bodies corporate), under the (Body Corporate and Community Management) Act and standard module, has been formalised as a agreement to share facilities.

In consequence of the above considerations, it is my view that the legislation requires a distinction be drawn between what might be the subject of a shared facility agreement and what should be the subject of a grant of easement. I suggest the point of distinction between the use of these two mechanisms lies not in whether or not the circumstances involve two bodies corporate, as the body corporate here has suggested is the distinction, but rather whether the facility proposed to be shared would be capable, in the absence of a provision such as section 118 which allows a sharing of facilities by way of agreement, of use and enjoyment by another party pursuant to a right conferred under a grant of easement. If the facility proposed to be shared would traditionally be the subject of a grant of easement, then in my view a grant of easement (requiring a resolution without dissent) is required, and a facility sharing agreement (requiring a special resolution) will not in the circumstances suffice.

In the case of a roadway, as is the facility proposed to be shared here, the right to use and enjoy such roadway as a means of access to either the hotel, the marina, or any other facility located or comprised within the Hope Harbour scheme, would traditionally be the subject of an easement, and not an agreement as to the sharing of a facility.

I therefore consider that the applicants are entitled to succeed on this basis, at least to the extent of the invalidation of motion 16. This finding however does not extend to the invalidation of motions 14 and 15. The applicants have, either through mistake or inadvertence, failed to provide by way of grounds to the application any basis on which these two motions should be invalidated. They are not invalidated by virtue of my determination that motion 16 is invalid. Motions 14 and 15 are independent of this motion. This distinction leads to the interesting scenario raised by one party at the inspection; namely what if the adjoining owners build a roadway to the boundary of the Hope Harbour scheme, and the improvements proposed in motions 14 and 15 were completed by the owner of lot 1 of Hope Harbour. In my view, it would then be up to the Hope Harbour body corporate to make a positive determination of how it would regulate access to and from the common property of the scheme. Clearly, by passing the requisite resolution, the body corporate would have a right to erect a barrier to prevent or regulate entry to the scheme.

I acknowledge that the above determination is based on my interpretation of the relevant legislative provisions, and their application to this scheme, and as such is a question of law open to appeal. However I will add that I have significant reservations that motion 16 satisfies the so called “benefit test” provided in section 114 of the Act; namely that the body corporate must administer, manage and control the common property and body corporate assets reasonably and for the benefit of lot owners.

In the conclusion to the applicants original grounds, they state that the lot owners of Hope Harbour Marina do not receive any (or any sufficient) financial or other benefit from the construction of the said roadway. The applicants did not elaborate further on this point in the original application, but did so in their reply to the submission of the body corporate. In particular, the applicants allege that –

... although the shared facility purports to “relieve the present traffic system of John Lund Drive” there is currently no need for any such relief and in fact the proposed shared facility will substantially increase the present traffic flow along John Lund Drive.

... the additional population which will result from development on the adjoining lots and the impact of the shared facilities agreement will significantly and adversely impact on the Hope Harbour Marina common property, including the seabed / boat ramp and John Lund Drive which have no design surplus to accommodate increased traffic.

... the assertion by the body corporate committee that the facilities sharing deed bestows no benefit until the body corporate is formed is incorrect. The benefit allows the land to be developed and therefore significantly increases the value of that land. The body corporate committee’s submission that the moneys received will more than compensate for the sharing of its use of the common property facilities is also incorrect.

The purchase price of lots in the Hope Harbour Marina development included, as part of the purchase price, the capital cost of the road and the Harbour. If the adjoining owners are to obtain the benefit of that road, there should at least be some contribution to that capital cost. The adjoining land owners’ benefit (through the significant increase in the value of the land) would be disproportionately greater than the benefit (if any) the Hope Harbour Marina lot owners will obtain.

In contrast, owners who oppose the application have submitted that –

The sharing of facilities agreement gives us, as owners, a far better access to our properties and the body corporate will receive 50% of its budgeted costs each year in compensation for the sharing of its common property facilities. This will benefit us by reducing our body corporate levy.

On the issue of benefit, the body corporate has submitted that –

... both body corporate shall certainly benefit considerably from the ability for their members in a common fashion using each others facilities. At present Hope Harbour Marina body corporate is only served by a restricted piece of common property forming John Lund Drive which connects at either end to external roads. The extra area of common property in the adjacent body corporate shall be very beneficial for the lot owners in Hope Harbour body corporate. The residents will have easier movement to areas internal and external to the body corporate and the commercial lot owners will have less congestion of people and vehicles at the end of the drive. ... Financially, Hope Harbour Marina body corporate will receive significant contributions for the shared use from the other body corporate. It will receive 50% of its budgeted costs each year. This will more than compensate for the sharing of (the) use of its common property facilities.

It is relevant at this time to consider the number of lots which currently exist in Hope Harbour (85) and the number which are proposed for the adjoining land (187 as per Facility Sharing Agreement). When all the proposed lots are constructed, there will be a ratio of roughly two lots on the adjoining land, to each one lot in Hope Harbour.

Potentially, the provisions of the Facility Sharing Agreement will triple the number of users of John Lund Drive (the facility). It is impossible for me to know whether the facility has the capacity to cope adequately with such increased usage. Certainly the applicants suggest that it does not and that the agreement will significantly and adversely impact on the Hope Harbour Marina common property ... which have no design surplus to accommodate increased traffic. This point is not addressed (or refuted) by either the body corporate in its submission, or by owners opposed to the application.

Moreover, the fact that the adjacent body corporate will contribute 50% towards the ongoing maintenance cost of the facility is in my view significantly eroded by the fact that the increased level of usage will presumably lead to increased maintenance costs in any event. Thus the benefit to the owners of Hope Harbour lots of the 50% contribution towards maintenance costs is somewhat illusory in my view.

Further, I do agree that whilst the members of the body corporate proposed for the adjacent land will contribute to the maintenance cost of the facility on an ongoing basis, the agreement in no way contemplates any contribution towards the capital cost of the facility, which I consider would have been substantial.

The body corporate, and several owners, suggest that the major benefit will be improved access by owners / occupier in Hope Harbour to their lots. I note that the applicants have not refuted this, but rather have raised the perceived negative aspects of the increased use of the common property by owners in the adjacent body corporate. It is clear that a considerable number of owners consider that improved access will be a major benefit arising from the Facility Sharing Agreement. The body corporate further submits that currently the Hope Harbour body corporate is only serviced by a restricted piece of common property forming John Lund Drive which connects at either end to external roads.

It does occur to me though that whilst access for Hope Harbour owners and occupiers might be improved, all existing owners nevertheless purchased their lots on the basis of the existing access arrangements, and without any suggestion of the access which is now being proposed. I therefore question the extent to which improved access should be considered a benefit, or more relevantly, a significant benefit, to Hope Harbour owners. Moreover there is no evidence that property values in Hope Harbour will be enhanced, or even affected, by the improved access. I therefore consider that whilst the improved access might be considered a benefit arising from the agreement, it significance is debatable, and certainly, if the proposed access never eventuates, then owners and occupiers will continue to enjoy seemingly adequate access to their lots and common property.

The applicants have however raised the question of access in another context. They point to the benefit which will accrue to the developers of the adjoining land from the agreement by reason of the fact of the agreement giving members of the proposed body corporate immediate access to the marina and other facilities located on the common property of Hope Harbour.

It cannot be denied that the adjoining land is, without the benefit of the agreement, effectively land locked. Whilst it is very proximate to the marina facility, it is separated from this facility by a narrow strip of land (approximately 50 – 100 metres in width) which is common property of Hope Harbour body corporate. Without the access provided by the agreement, owners and occupiers in the body corporate proposed for the adjoining land would only be able to make use of the facilities after taking either of the two existing means of access to John Lund Drive. This would involve walking or driving perhaps 2 or 3, possibly 4 kilometres. I might be slightly out in this estimation, however having visited the scheme, I know that the distance would be considerable. The interesting scenario could easily arise where an owner in the proposed body corporate might easily be able to see from their lot, their boat berthed at the Hope Harbour Marina, but rather than having a short walk of say 100 – 200 metres to their boat, might have to drive two or more kilometres.

I agree with the applicants that the real benefit of access which will be provided by the agreement will in fact accrue to owners and occupiers in the adjoining proposed body corporate. Given this, it is not hard to work out that the benefit of this access will accrue firstly to the developers of the adjoining land, who will be able to market their development fully referring to and taking advantage of the direct access to the marina. Given the number of lots proposed for the adjoining land, it does not take much to work out the enormous value of the agreement to the developers of the adjoining land.

The compensation proposed for such access is 50% of the total sum of the annual budget of the Hope Harbour Marina Body Corporate for each year. Based on motions 3 and 4 resolved at the AGM held on 6 July 1999 for the financial year ending 31 March 2000, the administrative and sinking fund budgets were $117,196 and $18,592 respectively. This is approximately $136,000, 50% of which would be $68,000 annually, based on the current years budget. It is impossible for me to know whether this is fair compensation however, it seems to me relatively insignificant compared to the significantly increased value of the proposed lots through the access provided by the agreement. Moreover, whilst the developers obtain the windfall of the increased value of the proposed lots, it is the owners (as members of the proposed body corporate) who will in fact pay the compensation.

One final consideration is that if the benefit of access is such a two way advantage to both bodies corporate, as the body corporate and several owners allege, then why is it only the proposed body corporate for the adjoining land that is to pay the compensation via the agreement. To my mind, this fact is reflective of where the real benefit of access arising from the agreement accrues.

In all the circumstances, I conclude that it is not for the benefit of owners generally, and nor is it reasonable, pursuant to section 114 of the Act, that this body corporate enter into the facility sharing agreement, at least on the basis of the terms of the current agreement. For this reason also, I intend to invalidate motion 16 as resolved at the AGM held on 6 July 1999. I will add that in coming to this conclusion, I have not had regard to the several other allegations, including conflict of interest and breach of fiduciary duty, as contained in the applicant’s reply to the body corporate’s submission, for the reason that I consider that motion 16 is invalid on two of the four grounds proposed in the applicant’s original application.