Royal Harbour Food Court and Night Markets [2001] QBCCMCmr 647 (26 March 2001)

Last Updated: 19 November 2007

RA MeekREFERENCE: 0503-2000

ORDER OF A REFEREE

MADE UNDER PART V

BUILDING UNITS AND GROUP TITLES ACT 1980

Number of Scheme:	BUP 105873
Name of Scheme:	Royal Harbour Food Court and Night Markets
Address of Scheme:	73-75 The Esplanade, Cairns QLD 4870

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

Philip Parker Pty Ltd and Carlo Monte Pty Ltd, the owners of lots 1 and 12 respectively

RA MeekI hereby order that body corporate for Royal Harbour Food Court and Night Markets shall, prior to the next annual general meeting, re-calculate all "out of hours" charges which it has levied on lots 1 to 12, by applying such charges to all lots (ie. 1 to 133 excepting lots 128 and 129 which do not exist) in shares proportional to their voting entitlement as set out in the schedule accompanying the plan. y This order was appealed on 17 April 2001 at the Magistrates Court in Cairns. This Office was advised that on 25 July 2001 that Magistrate K P Lynn ordered the following: 1) Appeal allowed 2) The order made by the referee, Mr RA Meek, be revoked for want of jurisdiction 3) The application made by Philip Parker Pty Ltd and Carlo Monte Pty Ltd, the owners of Lots 1 and 12 respectively, be dismissed.

STATEMENT OF REFEREE’S REASONS FOR DECISION - REF 0503-2000

"Royal Harbour Food Court and Night Markets" BUP 105873

The applicants Philip Parker Pty Ltd and Carlo Monte Pty Ltd, the owners of lots 1 and 12 respectively have sought the following order of a referee under the Building Units and Group Titles Act 1980 (the BUGT Act), quote -

We require the administration fund be struck down and recalculated for this year and prior years.

Section 77(1) of the BUGT Act provides that a referee may make an order for the settlement of a dispute or the rectification of a complaint with respect to the exercise or performance of, or the failure to exercise or perform, a power, authority, duty or function conferred or imposed by this Act in connection with that parcel.

This application is being considered under the Building Units and Group Titles Act 1980. It is acknowledged between the parties that this is the applicable legislation for the resolution of a dispute arising under certain specified pieces of legislation, including the Mixed Use Development Act 1993 (the MUD Act), as was the case with this scheme.

In the supporting grounds, the applicants state that they seek adjudication on the recovery of expenditure that is classified as "out of hour" based on the following points:-

• No representation about a special levy being charged by the body corporate for Food Court tenants was made upon the leases being signed;

• Lots 1 and 12 are positioned on the footpath and can operate outside standard hours and therefore have no need for the additional costs to run the Food Court area out of hours;

• The body corporate is allocating the Administrative Fund not in accordance with Lot entitlement but in relation to a combination of Lot entitlements and a calculation based on Hours, thereby given an additional proportion of the Administration Fund being called "Out of Hours" charged to Lots that share the Food Court.

In respect of the first point made by the applicants, I consider this is irrelevant to me, or at least not a matter within my jurisdiction. Certainly a body corporate is not bound to act in accordance with the terms of any lease entered into between the owner of a lot and a tenant. Rather, the body corporate must act in accordance with its obligations under the relevant legislation.

Secondly, the fact that the applicant’s lots are positioned on the footpath and have no need for the additional costs of running the food court area out of hours, is also irrelevant. The applicants must acknowledge that they are the owners of lots in a body corporate. The body corporate has associated community property and / or precinct property. Section 177(1)(b) of the MUD Act provides that the body corporate must –

(b) properly maintain and keep in a state of good and serviceable repair--

(i) the community property or the precinct property held by it, including any improvements on the community property or the precinct property; and
(ii) any personal property vested in it; and
(iii) any road, wharf or land leased by the body corporate under section 164 and any improvements on the road, wharf or land;

Given this, it is irrelevant for the owner of a lot in a body corporate to argue that they don’t require the accompanying community property or precinct property held by the body corporate, and therefore should not be responsible to contribute to the cost of its maintenance. There is a statutory obligation to this effect that can’t be avoided by such owners.

The applicants next allege that the body corporate is allocating the Administrative Fund not in accordance with lot entitlement, but rather a combination of Lot entitlements and a calculation based on Hours. Given that the lots in the Food Court operate during "Out of Hours" periods, then the body corporate is allocating the "Out of Hours" related body corporate expenses to the 12 Food Court lots only, and not all lots in accordance with the schedule of lot entitlements. For the 12 lots in the Food Court, these amounts are added to the standard contributions calculated in accordance with lot entitlements, and charged accordingly. The question for me to determine is whether this practice is in accordance with the governing legislation.

The first issue to consider is what is the governing legislation. The BUGT Act establishes a regime under which bodies corporate set contributions, and levy owners. I note that the MUD Act does not specifically adopt this regime. Rather the MUD Act appears to establish its own regime. In Part 9, headed Bodies Corporate, the MUD Act establishes a regime for the matters applying to community and precinct bodies corporate. This regime includes aspects such as -

• Meetings of Bodies Corporate (section 172);

• Voting entitlements (section 173);

• Levies by Bodies Corporate on members (section 174);

• Duties of Bodies Corporate (section 177);

• Insurance by Bodies Corporate (section 183);

• Voting rights (section 184);

• Constitution of executive committee (section 185)

This list is not exhaustive, but rather illustrative of the regime which the MUD Act seeks to establish. Moreover, the MUD Act does not then adopt the provisions of the BUGT Act to the extent which they are not inconsistent with the MUD Act provisions relating to bodies corporate. I can only conclude that it is intended that the provisions of the MUD Act are exhaustive in their regulation of bodies corporate, and are not to be applied in conjunction with the BUGT Act provisions.

Given this conclusion, I intend to consider the validity of the body corporate action under the MUD Act provisions, and not the BUGT Act.

Section 174 of the MUD Act, headed Levies by bodies corporate on members provides in part as follows –

(2) Contributions must be levied, and are payable by the members of the body corporate, in shares proportional to their voting entitlements at the time the contributions are levied.

Section 177(1)(j) provides that the body corporate must levy, under section 174, on each person liable, a contribution to raise the amounts mentioned in paragraph (h). That paragraph provides -

(h) not later than 14 days after its incorporation and whenever necessary after that, determine the amounts necessary in its opinion to be raised by way of contributions--

(i) for the purpose of meeting its actual or expected liabilities incurred or to be incurred under paragraph (b); or

(ii) for the payment of insurance premiums, rates or any other liability of the body corporate (other than amounts referred to in paragraph (l)); and ...

I have already referred to the body corporate’s duty in section 177(1)(b) to properly maintain and keep in a state of good and serviceable repair the community property or the precinct property held by it.

I therefore conclude that in levying contributions, the body corporate must comply with section 174(2). Namely, contributions must be levied, and are payable by the members of the body corporate, in shares proportional to their voting entitlements at the time the contributions are levied. Voting entitlements are dealt with in section 173 of the MUD Act, and the applicable rule appears to be that each proprietor who is a member of a precinct body corporate has the voting entitlement set out in the schedule accompanying the plan that creates the lot. The schedule in question is contained on pages 6(a-d) of the plan. I assume this is the same schedule of entitlement the applicants believe the additional "out of hours" charges should be levied in accordance with.

The respondent body corporate has stated in its submission, in response to the applicant’s submission, that –

Agree – normal services based on lot entitlements, utilities based on direct apportionment.

The submission then states that the body corporate apparently resolved at an EGM held in December 1997 that the committee determine core trading hours, and that operators who trade outside of core trading hours would contribute to operating costs incurred by such trading.

What is not specific regarding this resolution is what the "operating costs" relate to. It seems generally agreed that the "operating costs" are referable to the additional maintenance of the common property necessitated by the extended trading. This appears confirmed when the components of the "Extra hrs" are considered, and neither party has suggested that this is not the case.

The body corporate submission provides that –

... the initial budget was based on a 9 hour trading. The centre trades for approximately 14 – 15 hours per day. The budgeted amount was sufficient to meet a daily clean at the end of each day and spot clean of toilets and removal of rubbish on two further occasions. Originally, the bussing service was to be operated from an area made available by the developer for dishwashing and ti was to be operated on a "user pays basis". The tenants opted not to use this services, the outcome being that the body corporate had to provide a "bussing services" to keep the food court in a sanitary state. Accordingly, it is out opinion that the bussing service is not the province of the body corporate in that it does not constitute normal maintenance duties. It is a utility service provided to operators.

The body corporate manager has referred me to section 176(c)(iii) as a justification for the "out of hours" charges being applied to only lots 1 to 12. That section provides, a body corporate may ... –

(c) enter into an agreement for the provision of amenities or services by it or another person to--

(i) a lot; or
(ii) the proprietor or occupier of a lot; or
(iii) a parcel comprised in a building units or a group titles plan;

I do not consider that this section is relevant to this enquiry. There is no evidence before me of the body corporate having entered into an agreement for the provision of amenities or services to individual lot owners or occupiers. Whilst the body corporate might consider that it is providing amenities or services to individual lots, in my view, it is simply maintaining the common property as it is required to do pursuant to section 177(1)(b).

I am of the view that the body corporate is in breach of section 174(2) of the MUD Act in determining to charge "out of hours" expenses only to the owners of lots 1 to 12, and not all owners in accordance with their voting entitlement. I consider that the applicants are entitled to succeed in respect of this question, and that the body corporate should be required to re-assess all previous contributions determined by it on this invalid basis, and make appropriate adjustments between the owners.

As I am not certain for how long the body corporate has adopted this practice, I simply intend to make a general order that the body corporate re-calculate all "out of hours" charges which it has levies on lots 1 to 12, by applying such charges to all lots (ie. 1 to 133 excepting lots 128 and 129 which do not exist) in shares proportional to their voting entitlement as set out in the schedule accompanying the plan. This will result in an adjustment against the owners of lots 13 to 133 in favor of the owners of lots 1 to 12. I expect that this will require an additional (special) levy be imposed against lots 13 to 133, and once this has been raised, a refund might be made to lots 1 to 12 of the additional contributions which have been made by those lots. Alternatively, the body corporate might agree to credit in favor of the contributions account of lots 1 to 12 an amount by which those lots are calculated to have overpaid contributions. This will have the effect of reducing the next contribution payable by lots 1 to 12.

In their grounds, the applicants then make two additional points, in respect of which they also apparently seek adjudication –

1. Adjudication on Capital Expenditure in the administration budget for year ending 30 April 2001. The applicants believe that this should be coming out of the sinking fund budget.

2. Review of how the body corporate can continue to increase the administration budget above prior years when a surplus was created in a prior year.

The applicants have not provided any clear statement of grounds in support of these two further allegations. In respect of the capital expenditure, the applicants are apparently referring to three entries under the heading "Capital expenditure" appearing in the Budget for the period 1 May 2000 to 30 April 2001. The three items are –

• Security and Control systems 15,000

• Foodcourt Refurbishment 12,000

• Compactor Installation 5,000

The body corporate in its submission has responded that –

The budget for the year ending 30^th April 2001 actually deducted $60000 of the Administration surplus still leaving additional surplus of approximately $43000.00 in the Administration Fund. The Capital Expenditure items as noted in the Administration Fund budget ($32000) would utilise this surplus balance. Therefore it is not necessary to use any of the Sinking Fund balance or raise a special levy for such Capital items.

I concluded previously that the MUD Act establishes its own regime for the operation and management of bodies corporate. It seems to me that the provisions of the BUGT Act have no application, except in the few instances were these have been specifically adopted. I can find no provision under Part 9 Division 4 of the MUD Act for the establishment of separate sinking and administrative funds. Rather, section 177(1)(i) provides that –

On first determining the amounts mentioned in paragraph (h), establish a fund – (1) into which must be paid all amounts received by it ...

The MUD Act does not distinguish between an administration fund account and a sinking fund account. Given that there is no obligation to establish separate funds, I find no basis for the applicant’s allegation.

I do not intend to address the applicants other allegation concerning a surplus in the administration fund, as there is no substantiation or elaboration of this point in the applicant’s grounds. It is not my role in investigating an application to actively seek further evidence to support the point being made, when the evidence available is insufficient to justify a necessary conclusion (see comments by Judge Robin in Tully v. The Proprietors "The Nelson" Body Corporate, an appeal of an order of an adjudicator).

I now intend to consider a further aspect. Whilst the respondent body corporate has not argued a jurisdictional basis for dismissal of the application, this question has recently been considered by this office. Until recently, it had been assumed that a referee under the BUGT Act had authority to resolve disputes arising in a scheme developed under the Mixed Use Development Act 1993 (the MUD Act). However the referee recently had cause to consider this aspect in respect of an application made for a scheme created under the Sanctuary Cove Resort Act 1985 (the SCR Act). The referee concluded as follows -

I agree that, although the BUGT Act has been relied on in certain aspects of the legislation, there is no jurisdiction for a Referee to make orders in respect of a parcel (building units plan or group titles plan) registered under the SCR Act for the following reasons.

"(The scheme)" is a group title plan registered under the Sanctuary Cove Resort Act 1985 ("the SCR Act") as one of a number of parcels constituting Sanctuary Cove Resort. These bodies corporate are subject to the Sanctuary Cove principal body corporate. While the SCR Act imports certain provisions applying under the BUGT Act, for example that the term "group title plan" shall have the same meaning, it does not import the BUGT Act generally. While both pieces of legislation deal with similar issues, rather than adopting BUGT Act provisions by reference, the SCR Act has set out its own insurance provisions, powers and duties of the body corporate, voting rights of owners, meeting procedure, method of determining and levying financial contributions on owners, information certificates on lots, and so on. Where it does so adopt a provision, then it does it in the particular, for example in section 27(5) by specifically adopting the First Annual General Meeting procedures of Schedule 2, Part 1 of the BUGT Act.

Apart from there being no general adoption of BUGT Act provisions, neither is there any particular provision in the SCR Act importing the Part V "Disputes" provision of the BUGT Act. It is therefore my view that a Referee appointed under the BUGT Act has no jurisdiction to make an order to resolve disputes involving a body corporate under the SCR Act.

My order is therefore that the application is dismissed for want of jurisdiction.

The question arises whether this is similarly the case in respect of an application arising under the MUD Act. I consider that it is.

As with the SCR Act, the MUD Act imports certain provisions applying under the BUGT Act, for example section 4 which provides that -

Unless the contrary intention appears, words and expressions used in he Building Units and Group Titles Act 1980 have the same respective meanings in this Act,

the MUD Act does not import the BUGT Act generally. While both pieces of legislation deal with similar issues, rather than adopting BUGT Act provisions by reference, the MUD Act has set out its own provisions applying to "community and precinct bodies corporate". In particular, Part 9, Division 4 (Ss. 169 – 201) establish a separate regulatory regime applying to bodies corporate created under the MUD Act. For example, meetings of bodies corporate, voting entitlements, levies by bodies corporate on members, duties of bodies corporate, insurance by bodies corporate, voting rights, constitution of executive committee, and so on. Where it does so adopt a provision, then it does it in the particular, for example in section 172(8) and (9) by specifically adopting the First Annual General Meeting procedures and other meeting procedures of Schedule 2, Parts 1 and 2 of the BUGT Act respectively.

Apart from there being no general adoption of BUGT Act provisions, neither is there any particular provision in the MUD Act importing the Part V "Disputes" provisions of the BUGT Act. It is therefore my view that a referee appointed under the BUGT Act has no jurisdiction to make an order to resolve disputes generally involving a body corporate under the MUD Act. There is some specific provision for a referee to make order appointing a person to convene and hold a meeting (see section 186(7)), however this cannot be considered jurisdiction to resolve disputes generally.

Moreover, even if it were argued that it was implied that applications to resolve a dispute might be dealt with by a referee under the BUGT Act, I consider that any such implication is negated by an apparent contrary intention expressed in the MUD Act regarding disputes. Section 136(4) and (5) of the MUD Act provides, in respect of the resolution of disputes arising under Part 6 at least, as follows -

(4) If there is an unresolved dispute between persons bound by a management statement concerning the regulation of a building and its site, the dispute must be referred for final resolution to--

(a) a single arbitrator agreed on between the persons in dispute; or

(b) if the persons do not agree within 14 days of receipt of a written notice given by one person to the other requiring the appointment of an arbitrator--an arbitrator appointed by the local government.

(5) A reference under subsection (4) is an arbitration under the Commercial Arbitration Act

I therefore further conclude that there is no jurisdiction for a referee to resolve of this dispute under the BUGT Act. However, I submit that this does not mean that this order is of no effect. The provisions which I have applied for the resolution of this dispute are those under the MUD Act, not the BUGT Act. There is no question of the validity of the provisions of the MUD Act, but only as to whether a referee has power to make orders under such legislation. I submit that it was probably the intention of the legislature that a referee have such power, so that a mechanism for the resolution of disputes did exist. However, it seems to me that legislature inadvertently failed to incorporate by reference the dispute resolution provides of the BUGT Act to the MUD Act. I recommend to the parties that this order be accepted on this basis. y
y