Terranova [2000] QBCCMCmr 44 (2 February 2000)

P G DanielsREFERENCE: 0572-1999

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	14315
Name of Scheme:	Terranova
Address of Scheme:	21 Kidston Street ALBION QLD 4010

TAKE NOTICE that pursuant to an application made under the abovementioned Act by
John Francis and Marlene Janice DOUGLAS, the co-owners of lot 4

1. P G DanielsI hereby order that the Body Corporate must within four (4) months pay to the co-owners of lot 4, John Francis Douglas and Marlene Janice Douglas, the sum of $5,000.

2.	I further order that the Secretary of the Body Corporate must, within fourteen (14) days of the date of this order, call a general meeting of the Body Corporate

3.	I further order that the Secretary must place on the agenda for the meeting a motion that fixes a special contribution to be levied on the owner of each lot towards the liability detailed in order 1.

4.	I further order that except as provided in this order, the meeting and all related matters must be conducted in accordance with the Body Corporate and Community Management Act 1997 and the Body Corporate and Community Management (Standard Module) Regulation 1997.1y

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0572-1999

“Terranova” CTS 14315

The applicants, John Francis and Marlene Janice DOUGLAS, the co-owners of lot 4, have sought an order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) that:

We be reimbursed the sum of $5626.00 paid by us to Bell Plumbing Maintenance of Everton Hills for cost of repairs to burst water pipe in floor slab of our unit No.4 which also caused serious water leaks to ceiling of unit 2 below.

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)).

Some time during June 1999 a water pipe servicing lot 4 in this Body Corporate began to leak. The pipe was located in the floor of lot 4 which is also the roof of lot 2. The common floor and roof is a cement slab.

The problem was originally noticed when water leaked out of the external brickwork of the building. Subsequently, water began leaking from the pipe into the kitchen of lot 2. The leaking into lot 2 became progressively worse.

The applicants contacted the Body Corporate Manager about the problem who in turn contacted the Secretary. The Manager informed the Secretary that the bill would be in the order of $400 to $500. The Secretary passed this information on to the owners of other lots in the building.

It seems the applicants contacted two plumbers for quotes to do the work. They were Bardon Plumbing and Bell Plumbing Maintenance. Bell Plumbing quoted $5,626 for the job. The applicants engaged Bell Plumbing.

There are two pipes that run parallel to each other in the cement slab that could have been responsible for the leak. There is a pipe bringing cold water to the kitchen tap and a pipe from the kitchen bringing hot water to the remainder of the unit. There was a hot water system in the kitchen. Mr Bill Cuderman of Bell Plumbing ascertained that it was the cold water pipe that was leaking. He was able to make that determination from conducting a pressure test.

The work that Bell Plumbing performed was not simply fixing the cold water pipe at the location(s) where it was leaking. Bell Plumbing installed a totally new cold water piping system. The reason for this is explained in a letter from Bell Plumbing dated 24 August 1999 as follows:

“The reason a complete by pass was required is that that there was no way of determining the location of the leak or leaks. We have enquired before and the pipe locators are unable to pin point the location or locations of the leaks. Even if they were able, imagine the damage alone to a unit below if a jackhammer was used to start digging into the structural floor, looking for a pipe or pipes.

The method we used was the most economical, professional and permanent.”

It was also decided to install a new hot water piping system even though the hot water pipes were not leaking. The reason for installing new hot water pipes is twofold. I am advised by Mr Bell of Bell Plumbing that it would not have been long before the hot water pipes started to leak as they were of the same type and age as the cold water pipes. The extra cost involved of installing a new hot water pipe was relatively small. It could run next to the cold water pipe. I am informed by Mr Graeme Bell of Bell Maintenance that it would only cost about 10-15% more to install the hot water pipes.

The applicants decided to change the location of the hot water system from the kitchen to the laundry. This meant, of course, that the new hot water pipes would run from the laundry to the remainder of the unit. The applicants paid the cost of installing the new hot water system.

Overall, new cold and hot water pipes were installed in the lot.

The applicants paid the bill of $5,626 and have unsuccessfully sought reimbursement from the Body Corporate. It is clear from the material presented to me that the Committee were shocked to receive the bill as they were expecting to pay only around $500 to $600.

The bill relates to the cost of installing the new pipe system and not the new hot water system. The application raises the issue of who is responsible for payment of the bill.

Section 21(1) and (3) of the Act and 109(1) and (3) of the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Regulation) are the relevant legislative provisions. They provide as follows:

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Utility infrastructure as common property

21.(1) Common property for a community titles scheme includes all utility infrastructure forming part of scheme land, except utility infrastructure—

(a) solely related to supplying utility services to a lot; and

(b) within the boundaries of the lot (according to the way the boundaries of the lot are defined in the plan of subdivision under which the lot is created); and

(c) located other than within a boundary structure for the lot.

(3) In this section—

“boundary structure”, for a lot included in a community titles scheme, means a floor, wall or ceiling in which is located the boundary of the lot with another lot or common property.

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Duties of body corporate about common property—Act, s 114

109.(1) The body corporate must maintain common property in good condition, including, to the extent that common property is structural in nature, in a structurally sound condition.

(3) Despite anything in subsections (1) and (2)—

(a) the body corporate is not responsible for maintaining fixtures or fittings installed by the occupier of a lot if they were installed for the occupier’s own benefit; and (b) the owner of the lot is responsible for maintaining utility infrastructure in good order and condition, to the extent that the utility infrastructure—

(i) relates only to supplying utility services to a particular lot; and

(ii) is 1 of the following types—

 hot-water systems

 washing machines

 clothes dryers

 another device providing a utility service of a domestic nature to a lot.

Examples for subsection (3)(b)—

1.	An airconditioning plant is installed on the common property, but relates only to supplying utility services to a particular lot. The owner of the lot would be responsible for maintaining the airconditioning equipment.
2.	A hot-water system is installed on the common property, but supplies water only to a particular lot. The owner of the lot would be responsible for maintaining the hot-water system and the associated pipes and wiring.

The terms “utility infrastructure” and “utility service” are referred to in the above legislation. They are defined in Schedule 4 of the Act, Dictionary, as:

“utility infrastructure” means cables, wires, pipes, sewers, drains, ducts, plant and equipment by which lots or common property are supplied with utility services.

“utility service” means—

(a) water reticulation or supply; or

(b) gas reticulation or supply; or

(c) electricity supply; or

(d) air conditioning; or

(e) a telephone service; or

(f) a computer data or television service; or

(g) a sewer system; or

(h) drainage; or

(i) a system for the removal or disposal of garbage or waste; or

(j) another system or service designed to improve the amenity, or enhance the enjoyment, of lots or common property.

The following observations can be made from the above legislation:

1.	The common property of a Body Corporate includes “utility infrastructure” except where paragraphs (a), (b) and (c) of section 21(1) apply.
2.	A Body Corporate must maintain common property in “good condition”.
3.	However, the owner of a lot must maintain in “good order and condition” that part of the common property utility infrastructure to which section 109(3)(b) applies. This is utility infrastructure of a domestic nature solely servicing a lot.

I will now apply the above legislation to the facts of this case. Both cold and hot water pipes are clearly “utility infrastructure”. They were part of the “common property”. Paragraphs (a), (b) and (c) of section 21 did not apply as the pipes were in a “boundary structure”. The Body Corporate was responsible for maintaining the cold water pipe: section 109(1) of the Regulation. The applicants were responsible for maintaining the hot water pipes: section 109(3)(b) of the Regulation.

In this case, new cold and hot water pipes were installed. The plumber’s bill must therefore be apportioned between the Body Corporate and the applicants. The defective pipe in this case was the cold water pipe. The work would not have been necessary except for the fact that the pipe was leaking. As stated above, Mr Bell of Bell Plumbing informed me that the cost of replacing that pipe alone would have been approximately 10 to 15% less than the cost of replacing both hot and cold water pipes. I apportion the bill between the Body Corporate and the applicants as follows:

Body Corporate $5,000

Applicants $626

The applicants have already paid the bill. I will order that the Body Corporate pay the applicants $5,000.

The Body Corporate Manager raised a concern with me when I inspected the lot on 16 December 1999. He asked me to take into account the fact that there had not been compliance with sections 103 and 104 of the Regulation in respect of the work that was done.

Sections 103 and 104 provide as follows:

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Spending by committee

103.(1) The committee may only carry out a proposal involving spending above the relevant limit for committee spending for the scheme if—

(a) the spending is specifically authorised by ordinary resolution of the body corporate; or

(b) the owners of all lots included in the scheme have given written consent; or

(c) an adjudicator is satisfied that the spending is required to meet an emergency and authorises it under an order made under the dispute resolution provisions; or

(d) the spending is necessary to comply with—

(i) a statutory order or notice given to the body corporate; or

(ii) the order of an adjudicator; or

(iii) the judgment or order of a court.

(2) For this section, if a series of proposals forms a single project, the cost of carrying out any 1 of the proposals is taken to be more than the relevant limit for committee spending if the cost of the project, as a whole, is more than the relevant limit.

(3) This section has effect subject to the requirements under this division for spending that is above the relevant limit for major spending.

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Quotes for major spending

104.(1) This section applies if—

(a) a motion to be moved at a general meeting of the body corporate proposes the carrying out of work or the acquisition of personal property or services, including the engagement of a body corporate manager or service contractor, but not including the engagement of a service contractor who also is, or is to be, a letting agent; and

(b) the cost of carrying the proposal into effect is more than the relevant limit for major spending for the scheme.

(2) The lot owners must be given copies of at least 2 quotations for carrying out the work or supplying the personal property or services.

(3) If the motion is proposed by the committee, the committee must obtain the quotations.

(4) If the motion is not proposed by the committee, the person proposing the motion must obtain the quotations and give them to the secretary.

(5) Copies of the quotations or, if voluminous, summaries of the quotations and advice about where the complete documents may be inspected, must accompany the notice of the meeting at which the motion is to be considered.

(6) If, for exceptional reasons, it is not practicable to obtain 2 quotations, a single quotation must be obtained and must accompany the notice of meeting.

Example—

If goods to be acquired by the body corporate are obtainable from only 1 source, a quotation for supplying the goods must be obtained from the source and circulated with the notice of meeting. The fact that goods with the necessary characteristics are only obtainable from a single source would be an exceptional reason for not obtaining 2 quotations for the supply of the goods.

(7) Each quotation obtained under this section must be retained as an attachment to the minutes of the meeting at which the quotation is considered.

It will be observed that a Committee of a Body Corporate can only approve expenditure up to a certain limit. This is defined in the Dictionary of the Regulation as the number of lots times $100. The limit for this Body Corporate is $600 as there are 6 lots.

The Body Corporate in general meeting must approve expenditure above $600 unless 103(b), (c) or (d) applies.

Where the expenditure is more than the number of lots times $200, ie $1200 for this Body Corporate, then the Body Corporate in general meeting can only approve the expenditure if it is provided with 2 quotes.

In this case, the Body Corporate did not vote at general meeting to accept the quote from Bell Plumbing. It was not presented with two quotes.

Clearly, there has been a contravention of sections 103 and 104.

However, the Body Corporate was responsible for maintaining the cold water pipe. It would have been liable to pay for the work. The pipe was leaking and it had to be repaired. The issue that needs to be addressed is whether the Body Corporate could have contracted to have the work done more cheaply. I raised this issue in the presence of the chairperson and secretary during my inspection on 16 December 1999. I was informed that the Body Corporate did no want to present evidence to me that the work could have been performed more cheaply. I therefore accept that the quote from Bell Plumbing was reasonable. I am supported in making this conclusion on the basis of information in a letter from Bardon Plumbing to the applicants dated 13 December 1999. It is stated in that letter, “From the notes taken I remember the verbal estimate of cost I gave you would not be less than $5,500.00.”

I am of the view that the applicants are not precluded from being reimbursed for the work they paid to have the cold water pipes installed even though there has been a contravention of sections 103 and 104 for the reasons discussed in the previous paragraph.

I am informed by the Body Corporate Manager that this Body Corporate does not have sufficient funds to pay the bill. A special levy will need to be struck. The levy will need to be approved by the Body Corporate in general meeting. I will order that the Secretary call a general meeting of the Body Corporate within fourteen days in accordance with the requirements of the Act and Regulation so that the levy may be struck. I refer the Body Corporate to section 95(2) of the Regulation which provides:

(2) If a liability arises for which no provision, or inadequate provision,

has been made in the budget, the body corporate must, by ordinary

resolution—

(a) fix a special contribution to be levied on the owner of each lot

towards the liability; and

(b) decide whether the contribution is to be paid in a single amount or

in instalments and, if in instalments, the number of instalments;

and

(c) fix the date on or before which payment of the single amount or

each instalment is required.

The meeting can of course be called by the Body Corporate Manager if it has appropriate delegated power. The Body Corporate will note that it must pass an ordinary resolution that will cover the liability. I am ordering that the Body Corporate pay the $5,000 to the applicants within four months. This will allow a sufficient time for the meeting to be called and the payments on the special levy to be made. The Body Corporate should take into account the four month limit when determining when the contributions(s) have to be paid. The Body Corporate must pass a resolution that is reasonable.

Mr Douglas, one of the applicants, asked if I would award interest on the $5000 which the Body Corporate must pay to the applicants. The applicants did not seek this as part of their original order. I decline to make such an order.