Castlebrook [2000] QBCCMCmr 159 (27 March 2000)

P G DanielsREFERENCE: 0662-1999

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	19372
Name of Scheme:	Castlebrook
Address of Scheme:	18 Denver Road CARSELDINE QLD 4034

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

Mr Herbert Samuel Ronald Ward the owner of lot 39

P G DanielsI hereby order that the application for the following orders:

1.	To check for any possible maladministration of owner’s funds held in the Castlebrook Administration Account for the purpose of paying the ‘1998 Building Insurance Premium’ that such funds have not been appropriated for other purposes;
2.	That all insurance levies as were due 31 August 1998 and paid and amounting to approximately $4000 be refunded to owners.

is dismissed.

I further order that the Secretary of the Body Corporate must within seven days of receiving this order forward a copy of the order and the accompanying reasons to all owners at the addresses of owners as stated on the roll of the Body Corporate.1n

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0662-1999

“Castlebrook” CTS 19372

The applicant, Mr Herbert Samuel Ronald Ward, the owner of lot 39, has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) that:

1.	To check for any possible maladministration of owner’s funds held in the Castlebrook Administration Account for the purpose of paying the ‘1998 Building Insurance Premium’ that such funds have not been appropriated for other purposes;

2.	That all insurance levies as were due 31 August 1998 and paid and amounting to approximately $4000 be refunded to owners.

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)).

This dispute relates to owners in the scheme paying contributions for building insurance on two occasions. This occurred due to new legislation coming into effect. The background is as follows.

The Body Corporate resolved at an annual general meeting on 19 February 1997 to approve an administrative fund budget in the amount of $68,300 with a contribution of $17.97 per lot of entitlement per year. It was resolved that the contributions would be paid in four quarterly instalments. A further instalment for the next budget period was also approved.

Up to that time, it had been the practice of this Body Corporate to pay the building insurance premium from contributions collected in the previous year. The building insurance policy was renewed around January each year.

In 1998 the building insurance premium was paid in January from contributions collected in the previous year. I do not know the precise amount. However, it was around $4000.

This is where the substance of the dispute arises.

In July 1997 new legislation governing building units and group titles was introduced.

Section 130 of the new Body Corporate and Community Management (Standard Module) Regulation 1997 (the Regulation) provides as follows:

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Premium

130.(1) The owner of each lot that is included in the scheme and is covered by reinstatement insurance required to be taken out by the body corporate is liable to reimburse the body corporate for the proportion of the premium for reinstatement insurance that reflects—

(a) for a lot created under a building or volumetric format plan of subdivision—the interest schedule lot entitlement of the lot; and

(b) for a lot created under a standard format plan of subdivision—the cost of reinstating the buildings on the lot.

(2) The body corporate may adjust the amount payable by a lot owner under subsection (1) in a way that fairly reflects—

(a) the extent to which the fixtures and fittings forming part of the lot are of a higher standard than the fixtures and fittings of lots included in the scheme generally; or

(b) the proportion of the total risks covered by the policy attributable to activities carried on, or proposed to be carried on, on the owner’s lot.

Example of paragraph (b)—

In a community titles scheme, the buyer of a lot starts a small manufacturing business requiring the use and storage of flammable chemicals. The insurance premium for the body corporate policy is increased by the insurer because of the increased risk of damage through fire. The lot owner’s reimbursement liability for the insurance premium will include the amount of the increase.

(3) The reimbursement for which the owner of a lot is liable may be recovered by the body corporate as part of the owner’s annual contribution to the administrative fund.

Section 130(1)(b) applies to this scheme. Owners are liable for paying a proportion of the building insurance premium that reflects the cost of reinstating the building on their lot.

At the Body Corporate’s annual general meeting on 30 April 1998 the Body Corporate resolved to approve an administrative fund budget that did not include the building insurance premium. The minutes noted that the “building insurance component will be invoiced separately on a percentage basis in accordance with the valuation.” The Body Corporate intended to require contributions for the building insurance premium in accordance with section 130 of the Regulation. This would require separate contributions as owners would be paying different amounts based on the cost of reinstating the buildings on their respective lots.

A contribution notice was subsequently forwarded to owners around August 1998 that required payment of part of the building insurance premium as calculated in accordance with section 130(1)(b) of the Regulation.

It seems that owners were not informed that it had been decided that the contributions collected as a result of the notices forwarded around August 1998, were for payment of the building insurance premium in January 1998. It had been decided that contributions would be collected in arrears rather than in advance.

Subsequently, in 1999 contribution notices were sent out that required payment of the insurance premium in arrears.

The problem of which the applicant complains is that owners effectively paid contributions for the 1998 insurance policy on two occasions. These are contributions paid since the 1997 AGM and the specific insurance contribution paid around August 1998. I have conducted a tele-conference with Mr Holmes of Barard Management, the body corporate manager and the applicant. Mr Holmes does not dispute that this occurred.

In my view it was lawful for the Body Corporate to require that owners contribute to the insurance premium paid in January 1998 in accordance with section 130 of the Regulation. As the premium had been paid by August 1998 when contribution notices were sent out, it was not lawful to require that owners pay it entirely again. It would have been appropriate at that stage for the Body Corporate to have adjusted the payments. As all owners had paid the same amount for the insurance premium in January 1998, as at August 1998 some owners should have been required to pay an extra amount and some owners should have been refunded some money based on the value of the buildings on their lots. At the same time, owners should have been alerted to the fact that they would be required to contribute to the insurance premium in arrears rather than in advance.

This did not occur. When the Body Corporate changed from payment in advance to payment in arrears an excess of money of around $4000 was created in the administrative fund.

The question that needs to be addressed now is whether orders should be made as requested by the applicant.

I am not inclined to make an order requiring the refund of $4000. Since the extra money was paid, the Body Corporate held an annual general meeting on 8 April 1999. At that meeting, it was resolved to approve a new administrative fund budget. The budget that was approved indicates that the administrative fund had a balance of $16,595.76 as at 1 February 1999, the start of the new budget period. That balance included the extra money that was paid. Since the extra money was paid, at least one new budget has been prepared and approved by the Body Corporate on the basis of the extra money in the administrative fund. A further budget will be approved at the next annual general meeting on 13 April 2000.

There is no evidence before me that there has been maladministration of owners’ funds in the administrative account or that funds have been appropriated for other purposes. The 1999 budget indicates how money in the administrative fund was spent for the period 1 February 1998 to 31 January 1999. This is the period in which the extra insurance payment was made. The applicant can consult that document if he so desires. The applicant can also inspect all Body Corporate records under section 162 of the Act and 151(1) of the Regulation which provide as follows:

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Information to be given to interested persons

162.(1) This section provides for the giving of information by the body corporate for a community titles scheme from the body corporate’s records.

(2) Within 7 days after receiving a written request from an interested person accompanied by the fee prescribed under the regulation module applying to the scheme, the body corporate must—

(a) permit the person to inspect the body corporate’s records; or

(b) give the person a copy of a record kept by the body corporate.

(3) The body corporate must, within 7 days after receiving a written request from an interested person accompanied by the fee prescribed under the regulation module applying to the scheme, issue a certificate (a “body corporate information certificate”) in the approved form giving financial and other information about the lot.

(4) A person who obtains a certificate under subsection (3) may rely on the certificate against the body corporate as conclusive evidence of matters stated in the certificate, other than to the extent to which the certificate contains an error that is reasonably apparent.

(5) In this section—

“interested person” means—

(a) the owner, or a mortgagee, of a lot included in the scheme; or

(b) the buyer of a lot included in the scheme; or

(c) another person who satisfies the body corporate of a proper interest in the information sought; or

(d) the agent of a person mentioned in paragraph (a), (b) or (c).

Fee for information given to interested persons—Act, s 162

151.(1) For section 162(2)33 of the Act—

(a) the prescribed fee for inspection of the body corporate’s records is—

(i) if the person inspecting the records is a lot owner—$10; or

(ii) if the person inspecting the records is not a lot owner—$20;

and

(b) the prescribed fee for obtaining a copy of a record kept by the body corporate is 50c for each page supplied.

I do not propose making an order requiring an audit of the administrative fund where there is no evidence of maladministration or that funds have been appropriated for other purposes.

Given the importance of this issue and the effect on the whole body corporate, I have decided to make an order requiring the Secretary to forward a copy of the order and reasons to all owners. Owners can read my reasons and understand how I have addressed the issues involved.

In light of my findings above, I dismiss the application for orders sought by the applicant.