Glencrag [2000] QBCCMCmr 58 (9 February 2000)

P G DanielsREFERENCE: 0631-1999

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	3683
Name of Scheme:	Glencrag
Address of Scheme:	119 Leichardt Street SPRING HILL QLD 4000

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

Dr Terry Allan Beer and Dr Malcolm Ian Godfrey, the co-owners of lot 68

P G DanielsI hereby order that the application for an order that:

Determines whether or not certain members of the Glencrag Body Corporate Committee should be required to reimburse the Body Corporate the sum of approximately $4,000 which was spent to build a fence to protect the Secretary’s car space in contravention of two motions at a previous AGM and EGM not to build the fence.

is dismissed.1y

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0631-1999

“Glencrag ” CTS 3683

The applicants, Dr Terry Allen Beer and Dr Malcolm Ian Godfrey, the co-owners of lot 68, have sought an order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) that:

Determines whether or not certain members of Glencrag Body Corporate should be required to reimburse the Body Corporate the sum of approximately $4,000 which was spent to build a fence to protect the Committee Secretary’s car space in contravention of two motions passed at a previous AGM and EGM not to build the fence.

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)).

Part of the common property for this Body Corporate is used for car parking. Various owners have use of particular car spaces pursuant to an exclusive-use By-law. The owner of lot 31, Millan Pty Ltd, has been given exclusive-use of space 24. The space is on the boundary of scheme land and Portman Lane. The representative of the owner of lot 31, Mr Julian Powell, forwarded a letter to the Chairperson of the Body Corporate, Mr Warren England, dated 16 May 1999, in which he asked that the Committee approve expenditure of funds to construct a fence on the boundary of his carpark and public land. Mr Powell was also the Secretary of the Body Corporate.

Mr Powell stated two reasons for the construction of a fence. Firstly, space 24 “is frequently used for casual parking by visitors to nearby buildings”. Secondly and more importantly, damage to vehicles parked in space 24 due to the “frequent requirement for vehicles to turn around at the top of Portman Lane (which is a cul-de sac).”

Mr Powell attached three quotes to his letter in the sums of $4,105, $3,926 and $4,425. The quote of $4,425 did not include the cost of earthworks and installation which would be done by others. Mr Powell suggested that the cheapest quote of $3,926 be accepted.

The Committee resolved to accept the quote of $3,926. The resolution was passed by voting outside committee meetings as provided by section 35 of the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Regulation). The resolution is dated 22 July 1999. The fence has been constructed.

The applicants have detailed four concerns about the actions of the Committee in their application. I will address each of their concerns separately.

1.	Prior general meeting resolutions

The Body Corporate Manager informed owners of the Committee resolution by letter dated 29 July 1999. That letter stated, in part, that the Committee had determined “that the fence must be suitable for a security gate to be installed at a later date (if required).” This statement does not form part of the Committee resolution however I accept that it was something the Committee determined. The applicants state that at the Body Corporate’s AGM on 9 November 1998 and at an EGM on 16 December 1998 a motion to install a sliding security fence on the rear boundary of scheme land was soundly defeated on each occasion. They question why the fence must be compatible with a security gate when it had been determined by the Body Corporate in two general meetings that a security fence would not be constructed.

In my view it was legitimate for the fence to be constructed in a way such that it would be compatible with the future installation of a security gate. The Body Corporate could decide at a future date that a gate should be installed. There could be a number of reasons for such a change in attitude. For example, change in the ownership of lots or an increase in security problems.

2.	Conflict of interest

The applicants state that two members of the Committee voted in support of the motion to construct the fence while they had a conflict of interest in contravention of section 34 of the Regulation.

Six Committee members voted on the relevant motion. The motion was carried by a majority of 5:1. It should be noted that section 33(2) of the Regulation provides that “...a decision supported by a majority of the votes of the voting members present is a decision of the committee.” The two members who allegedly were in conflict of interest were part of the majority. If their votes are not counted, the motion would still have been carried by 3:1. This ground does not invalidate the motion.

3.	No benefit to the Body Corporate

This is the most important ground raised in the application.

The applicants submission is that the fence was constructed solely for the benefit of the owner of lot 31. As there is no general Body Corporate benefit, the owner of lot 31 should have paid for the fence. The resolution of this issue requires an examination of the relevant legislation.

The fence was constructed on the boundary of scheme land and public land. The scheme land was common property, part of which was car space 24 which was subject to an exclusive-use By-law in favour of the owner of lot 31.

A Body Corporate has power to make improvements to the common property pursuant to section 113 of the Regulation. A similar power is provided to the owner of a lot pursuant to section 114 of the Regulation. Where an owner wants to construct an improvement on common property subject to an exclusive-use By-law, then section 124 provides the appropriate specific power. I will set out section 113 of the Regulation as it is the power that must have been exercised by the Body Corporate through its Committee in approving the construction of the fence. Section 113 provides as follows:

ú

Improvements to common property by body corporate—Act, s 121

113. The body corporate may make improvements to the common

property if—

(a) the cost of the improvements, or, if the improvements together with associated improvements form a single project for improvement of the common property, the cost of the entire project, is not more than an amount worked out by multiplying the number of lots included in the scheme by $250; or

(b) the improvements are authorised by special resolution; or

(c) an adjudicator, under an order made under the dispute resolution provisions, decides the improvements are reasonably necessary for the health, safety or security of persons who use the common property and authorises the improvements.

On its own, section 113 would empower the Body Corporate through its Committee to approve the erection of the fence where the cost was within the limit for Committee spending: see section 103 and the Dictionary of the Regulation.

However, sections 87 and 114 of the Act provide an important constraint on all resolutions and decisions of the Body Corporate whether they are made in general meeting or at a Committee meeting. Sections 87 and 114 provide as follows:

ú

Body corporate’s general functions

87.(1) The body corporate for a community titles scheme must—

(a) administer the common property and body corporate assets for the benefit of the owners of the lots included in the scheme; and

(b) enforce the community management statement (including the by-laws affecting the common property); and

(c) carry out the other functions given to the body corporate under this Act and the community management statement.

(2) The body corporate must act reasonably in anything it does under subsection (1).

ú

Body corporate’s duties about common property etc.

114.(1) The body corporate for a community titles scheme must—

(a) administer, manage and control the common property and body corporate assets reasonably and for the benefit of lot owners; and

(b) comply with the obligations with regard to common property and body corporate assets imposed under the regulation module applying to the scheme.

(2) Nothing in this part, or in a regulation made under this part, stops—

(a) an item of personal property that is a body corporate asset from becoming part of the common property because of its physical incorporation with common property; or

(b) a part of common property from becoming a body corporate asset because of its physical separation from common property.

It will be observed that the Body Corporate must administer, manage and control the common property and body corporate assets reasonably and “for the benefit of lot owners”. Body corporate assets include money in the administrative and sinking funds.

A Body Corporate cannot validly pass resolutions that do not satisfy the test of “for the benefit of lot owners”. In this case, it is clear to me that the fence was erected for the sole benefit of lot 31. Teys McMahon, Solicitors have made a submission on behalf of the Committee. They have submitted that there are two overall Body Corporate benefits. They are, added security to the building and prevention of the common property being used as a turn-around area. These may be incidental benefits. However, I am of the view that the fence would not have been constructed but for the fact that the owner of lot 31 wanted it built for the reasons I discussed above.

I am of the view that the Body Corporate had no power to approve the construction of the fence or the expenditure of funds for the fence. If the owner of lot 31 wanted a fence constructed, then it should have sought approval under sections 114 and 124 of the Regulation and paid for the construction itself.

Teys McMahon have submitted that section 258 of the Act applies to this case and makes the Body Corporate responsible for the construction of the fence. Section 258 provides that the Body Corporate is taken to be the owner of scheme land for the purposes of the Dividing Fences Act 1953. The Dividing Fences Act 1953 provides a mechanism whereby an owner of land can compel the owner of adjoining land to contribute to the cost of constructing or repairing a common boundary fence. In this case, the fence was not built as a result of the owner of the public land adjoining the common property invoking the procedure provided by the Dividing Fences Act 1953. I find that section 258 is irrelevant to this application. Teys McMahon have referred to the case 89-99 Symes v. Body Corporate in which it was stated that section 258 would make a Body Corporate responsible for the replacement of a fence. Symes is clearly distinguishable on the basis that this case relates to the initial construction of a fence solely for the benefit of one lot whereas Symes related to the maintenance of an existing fence.

4.	Time of construction

The applicants state that construction may have commenced prior to the time that owners were informed of the resolution. Teys McMahon in their submission, have provided a letter from Mr Powell to the body corporate manager dated 10 September in which it is stated that construction did no commence prior to the committee resolution. Mr Powell states that he granted the contractor ultimately chosen “...permission to check the foundations of the fence alignment so as to be confident that the quoted price would not be exceeded by unforseen problems with the substrata.” The applicants’ assertion is not supported by any reliable evidence. I accept the explanation provided by Mr Powell.

I do wish to point out to the Committee that section 37 of the Regulation provides that a Committee cannot carry out a resolution until seven days after a copy of the resolution has been served on the owner of each lot. Within that seven day period, the owners of lots are given an opportunity to oppose the resolution. If half of the owners sign a notice of opposition then the resolution cannot be carried into effect. Cases provided by sub-sections 4 and 7 of section 37 are exceptions to this rule. I will set out section 37 of the Regulation for the benefit of the Committee. It provides as follows:

ú

Carrying out resolutions of committee meetings

37.(1) A copy of a resolution passed at a meeting of the committee must be given to the owner of each lot included in the scheme (other than a lot owner who has instructed the secretary that the lot owner no longer wishes to be given copies of committee resolutions and who has not withdrawn the instruction), whether separately or as a part of a copy of minutes of the meeting at which the resolution was passed, in 1 of the following ways—

(a) giving it to the lot owner personally;

(b) sending it by mail;

(c) sending it by facsimile.

(2) A notice (a “notice of opposition”), signed by or for the owners of at least half the lots included in the scheme, may be given to the secretary, opposing the carrying out of the resolution.

(3) A notice of opposition must be given to the secretary within 7 days after action taken under subsection (1) is completed (the “required period”).

(4) The committee may carry out the resolution only if—

(a) no notice of opposition is received by the secretary within the required period; or

(b) the resolution is necessary to deal with an emergency, and—

(i) the amount required to put the resolution into effect is within the relevant limit for committee spending for the scheme; or

(ii) an adjudicator acting under the dispute resolution provisions authorises the committee to carry out the resolution; or

(c) the resolution is ratified by ordinary resolution of the body corporate.

(5) If there is a body corporate manager, and powers of the committee have been delegated to the manager, the references in this section to a resolution of the committee extend to a decision of the manager made under the delegated powers, other than a decision to pay an account—

(a) of a routine, administrative nature; or

(b) on the basis of an authorisation given by the body corporate in a general meeting.

(6) In a proceeding involving a challenge to the right of the committee to carry out a resolution, or a body corporate manager to carry out a decision made in the exercise of delegated powers, the burden of proving that action required to be taken under subsection (1) was in fact taken lies on the person asserting the right of the committee or body corporate manager to carry out the resolution or the decision.

(7) Subsections (1) to (6) do not apply to a resolution passed at a meeting of the committee authorising a committee member to carry out a stated function of the body corporate if—

(a) the cost of acting under the resolution, including the amount of any commitment incurred, is not more than the greater of—

(i) $200; or

(ii) $5 multiplied by the number of lots included in the scheme; or

(b) the function involves a decision of a routine, administrative nature.

There is no evidence before me that the resolution was carried into effect partly or wholly within the seven day period. I decline to find that there has been a contravention of section 37 of the Regulation. In any event, I have found that the Committee did not have power to approve the erection of the fence. The real issue remaining is what order should be made, if any.

Order

It should initially be noted that an adjudicator has power to make a “just and equitable” order. The order suggested by the applicants is that the Committee members reimburse the Body Corporate. I am not inclined to make such an order. I think the effect of such an order would be too severe on the Committee members taking into account that there has been no fraud or abuse of office involved. It is relevant to note that the funds were expended on scheme land as opposed to being overtly improper such as paying the private bills of a Committee member. I also take into account that the Committee did not attempt to hide the decision from the Body Corporate but openly published it. This application was made a significant time after the work was completed. No application was made for an interim order before or at the time the fence was being constructed.

I have also considered whether the owner of lot 31 should be made to pay for the construction of the fence or part of the cost. I do not think such an order would be just and equitable. The owner may well have decided not to construct the fence if its directors knew that the company would have to pay for it.

I have come to the view that I am unable to make the Committee or the owner of lot 31 liable for the cost of the construction of the fence.

In these circumstances I must dismiss the application for the order sought. I can only suggest to the applicants that if they wish to challenge the expenditure of Body Corporate funds in future cases, then it is usually better to make application at an early stage for interim and final orders.