Oceana on Broadbeach [2002] QBCCMCmr 512 (21 August 2002)

RA MeekREFERENCE: 0356-2002

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	24163
Name of Scheme:	Oceana on Broadbeach
Address of Scheme:	100 Old Burleigh Road BROADBEACH QLD 4218

TAKE NOTICE that pursuant to an application made under the abovementioned Act by the Body Corporate for Oceana on Broadbeach

RA MeekI hereby order that if in the future, a motion or motions are proposed by the body corporate committee for the upgrading of the capacity of the common property power supply network, then such motion or motions shall be determined on the basis that all owners in the scheme shall contribute in equal proportions to the cost of the proposed upgrade and the motion shall otherwise be determined in accordance with the requirements of section 113 of the standard module.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0356-2002

“Oceana on Broadbeach” CTS 24163

The applicant, the Body Corporate for Oceana on Broadbeach, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act), quote -

The body corporate seeks the following declaratory orders:

1.	A declaratory order that the matter of the upgrading of the capacity of the common property power supply network to allow for additional apartment air conditioning be put to owners by way of a motion or motions by ordinary resolution at a general meeting should the proposed cost of these works not exceed the “improvement limit” of $250 per lot; and
2.	A declaratory order that the matter of the upgrading of the capacity of the common property power supply network to allow for additional apartment air conditioning be put to owners by way of a motion or motions by special resolution at a general meeting should the proposed cost of these works exceed the “improvement limit” of $250 per lot; and
3.	That the declaratory order specify that the motion or motions allow for the cost of these proposed improvements to be met by all owners other than the owners for the time being of lots 59, 60, 61, 62, 63, 90, 91, 92, 93, 94, 95, 96, 97 and 98 and that the cost be equally apportioned over the remaining eight four lots; or
4.	That the declaratory order specify that the motion or motions allow for the cost of these proposed improvements to be met by all owners other than the owners for the time being of lots 59, 60, 61, 62, 63, 90, 91, 92, 93, 94, 95, 96, 97 and 98 and that the cost be apportioned over the remaining eighty four lots on the basis of the ratio of each lot’s contributions’ lot entitlement to the aggregate lot entitlement.

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)).

Submissions were sought from all owners regarding the application, and a good proportion (approximately 40%) of owners responded, and of these submissions, a wide cross section of views were expressed. Given this I do not intend to restate the grounds, but rather, will shortly express what I consider to be the issues to be determined.

I am somewhat puzzled by the first two declaratory orders sought; namely that I order that the matter of upgrading of the capacity of the common property power supply network be put to owners, either by ordinary resolution or by special resolution, depending on the level of expenditure involved. The body corporate committee, or individual owners for that matter, have the requisite authority and ability under the legislation to “put” motions before owners at a general meeting. I do not consider it my role to require or order a motion (or motions) be put to owners. I therefore do not propose to order as sought in the first and second orders sought.

Whilst I consider the committee has the requisite authority to put the necessary motions, it seems clear nevertheless that there are certain issues relating to the proposal on which there are different views within the body corporate, and which if unresolved, may cause uncertainty in the putting of the motions to owners, and which may reduce the prospect of the motions being carried. It seems to me that it is these issues which I am being asked to address, and to make orders in respect of.

The first issue is whether the cost of the upgrading of the capacity of the common property power supply network should be borne by all (98) owners, or alternatively, whether the 14 owners who currently have the benefit of air conditioning should be exempted from the cost.

The reason for the proposed upgrade is that it is understood that currently there is insufficient electrical capacity in the existing network to air-condition all lots. There was however sufficient capacity to allow for 14 of the lots to be air-conditioned. The grounds to the application conclude that the committee is of the view that:

a) It is not reasonable to expect those 14 owners whose lots have authorisation to have air conditioning and who have air conditioning to be required to contribute to the costs of this magnitude the benefit of which would be to other owners;

b) Were the 14 owners with air conditioning required to contribute their rateable proportion of these projected costs it would be difficult for this motion by special resolution to be successful in this body corporate of 98 lots. ...

c) Given the nature of the proposed expense the most equitable method of allocating it over the 84 owners presently denied the benefits of air conditioning would be on an equal basis each.

An upgrade of the capacity of the common property power supply network is an improvement to common property. Such improvements are dealt with under section 113 of the standard module, which provides as follows –

113 Improvements to common property by body corporate—Act, s 121
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;23 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.
23 If the cost of an improvement is more than the relevant limit for major spending for the scheme, quotations may be required under section 104 (Quotes for major spending).



Whether the motion proposing the upgrade is an ordinary or special resolution will be dependent on the cost of the upgrade when quotes are obtained. The question to be determined is whether there is any reasonable basis to exempt the 14 owners from the cost of the proposed improvement. The section simply assumes that the cost of the improvement will be met by all owners, and apportioned on the basis of the contributions schedule lot entitlements.

It is clear to me from the large number of submissions received that, at least of those owners who responded, almost universally they seek the capacity to air condition their lots. Interestingly, support for the proposal is also forthcoming from owners of certain of the 14 lots who currently enjoy the benefit of air-conditioning, but this support is subject to the proviso that this group be excluded from contributing to the cost of the improvement. I say, “almost universally”, as one owner has written stating that the body corporate does not currently have sufficient information to make a decision on this issue, and are “not currently concerned about the lack of air conditioning, and do not wish to pay any substantial costs to have it installed”. This however is very much a minority view, and I can only conclude that this owner is entitled to vote against the proposed upgrade if and when motions are included on the agenda of a meeting.

Given the large number of submissions received, I do not propose to adopt my usual practice of quoting parts of submissions which reflect a particular point of view. Rather I intend to summarise what I consider to be the three predominate views arising in those submissions.

The first is the 14 owners who currently enjoy air conditioning should be exempted from contributing to the cost of the proposed upgrade for the combined reasons that these owners have already paid an increased cost on purchase for the facility which is now being proposed, and further, that these owners will obtain no benefit from the proposed upgrade. The proponents of this view are essentially the 14 owners, and the committee in its grounds.

The second and predominant view expressed in submissions is that all owners, including the 14, should contribute to the cost of the improvement. The reasons expressed in submissions for this are several including that the proposed upgrade will improve the value of units in the complex generally, to a statement that this will compensate the 84 unit owners for not having air conditioning since the complex was built.

The third view is that of owners who support the proposal and who believe that it is fair and reasonable that the cost of the upgrade be met by the 84 owners, and not all owners.

I intend to order that the cost of the proposed upgrade should be met by all owners, and that the 14 owners should not be exempted. This position is in accordance with the legislation. Moreover, on balance, I consider it provides for a just and equitable outcome.

The 14 owners have submitted to me that they should be exempt as they have already paid a premium for the facility which is being proposed, and further will obtain no benefit from the proposed upgrade. I consider there are reasons to dispute both claims.

In my view, what I consider the 14 owners paid an increased purchase price for was the fact of, or capacity to air-condition their lots. Whilst it has been stated to me that this increased purchase price also “reflected the additional electricity capacity”, I conclude that this was in fact incident. Essentially, the lots were paying for air conditioning capacity. There is no evidence before me that the buildings electricity capacity was specifically increased to allow air-conditioning of the 14 lots. An alternative view which has been put to me is that the “air-conditioning (of the 14 lots) took up all the rest of the power on the power boards that were (sic) then not available to the rest of the lots to use that extra power source”.

Secondly, and perhaps more significantly, what is being proposed is in my view a generic improvement. It will increase the electricity supply of the building as a whole. Yes, this will specifically allow the 84 owners to air-condition their lots if they choose, but it will also provide to all owners a sufficient power supply for the future. This in my view is a benefit to all owners, and not simply the 84.

In this regard, I do agree with the statement of one owner that –

The power upgrade should be an upgrade that benefits ALL owners including the 14 lots that have air conditioning and at some other time might want some other power source and supply for whatever reason as the rest of us might want some extra power over and above the air conditioner power issue.

This owner also states that –

Power upgrade is necessary for Oceana for more that just air conditioning (eg Home Theatre cabling, more power for DVD or further Internet capabilities or what ever state of Arts Technology arises ) and needs to be paid for by ALL OWNERS ...

One issue that has not been raised in submissions, but of which I am aware by reason of an earlier application by the body corporate (which was withdrawn), is the inter-related issue of the infrastructure currently supplying air conditioning to the 14 lots. Currently there is a by-law (31) which allocates exclusive use of the utility infrastructure providing air conditioning to the 14 lots, to those lots, and which renders those lots responsible “for the scheduling and cost of the repair, maintenance and replacement of the condenser units / air conditioners and all other associated equipment which services those lots”.

Application 0299 of 2002, made by the body corporate, sought a declaration that by-law 31 is invalid on the basis that it conflicts with s.109(3)(b) of the standard module. As I said, this application was withdrawn, however the letter of withdrawal states –

... the committee has resolved to withdraw the current application, and proceed with an application at a later date when these further investigations have taken place.

This clearly contemplates that a further application will be made in the future. I intend to make no statement of the prospects of success of such an application. However I do intend to canvass a possible outcome, namely if the by-law is ruled invalid. In this eventuality, responsibility for the scheduling and cost of the repair, maintenance and replacement of the condenser units / air conditioners and all other associated equipment which service the 14 lots, will become that of the body corporate, whose duty it is to maintain utility infrastructure. This will mean that all owners become responsible for the cost of repairing and maintaining the utility infrastructure which in fact services, and benefits, only 14 lots. Owners generally might perceive this as being unreasonable.

This in my view provides a further reason for ordering that all owners be responsible to contribute to the cost of the proposed upgrade. Firstly, if all owners were in future to be responsible for the repair and maintenance of utility infrastructure servicing only 14 lots, then in my view, it is reasonable that all owners also be responsible for the cost of a proposed upgrade of the electrical supply network, which will not only benefit the significant majority of lots (84 of the 98) but in fact, all lots. However, I acknowledge that the question of the validity of by-law 31 is still, if ever, to be determined and my determination that all owners should be responsible for the cost of the proposed upgrade is made independently of the possibility that in the future, all owner might be responsible for the cost of repairing and maintaining the utility infrastructure currently servicing the 14 lots only.

In particular, all owners, and not only the 84 lots owners will be able to install air conditioning relying on the increased capacity. In the future, it is probable in my view that some of the 14 owners may choose to opt out of the current arrangement, and choose to install individual air conditioning systems. They may choose this option for a number of reasons including potential flexibility, or simply to upgrade to newer technology and efficiencies. In any event, it will be an option from which they are not precluded. Given this, it is further unreasonable in my view that they be exempted from contributing to the cost of the proposed upgrade.

The second issue for determination is on what basis all owners should contribute; equally, or as per the contributions schedule lot entitlement. The latter is the legislative requirement. The question is whether it is just and equitable that I order that the cost be borne equally between the 98 owners.

In submissions, there is less division on this issue. Whilst many owners believe it reasonable that all owners should contribute, the majority do not indicate that it should be on the basis of the contributions schedule lot entitlement, if they address this issue at all. On the other hand, submissions from the 14 indicate that if they were to be included in contributing to the cost of the proposed upgrade, then to be required to pay on the basis of the contribution schedule lot entitlement would be unreasonable since these owners would end up contributing proportionally more for an upgrade which they claim they will not benefit from.

I have already concluded that I consider all owners will benefit from the proposed upgrade, and that consequently all owners should be required to contribute to the cost of such upgrade. However, I do accept that it would be unreasonable to allow those contributions to be determined on the basis of the contribution schedule lot entitlement. In my view, the proposed upgrade has the potential to benefit all lots equally, and consequently, the cost of the proposed upgrade should be borne in equal proportions by all owners. I intend to order to this effect.

I now propose to comment on one final issue. It has been suggested that if the 14 owners are required to contribute to the cost of the proposed upgrade, then it may result in these owners voting “no” to the proposal, which may result in the proposal failing, which in turn would arguably disadvantage the 84 lot owners currently without air-conditioning. All I can say to this is that each owner is entitled to vote how they choose in respect of any motion or proposal. Additionally, on the application of a single owner or group of owners, this office has the capacity to investigate the reasonableness or otherwise of a motion not being carried, and to make an order “that is just and equitable in the circumstances to resolve a dispute”.