Cardiff [2003] QBCCMCmr 419 (11 March 2003)

Last Updated: 10 September 2007

C G YOUNGREFERENCE: 0627-2002

ORDER OF AN ADJUDICATOR

MADE UNDER PART 10 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	7933
Name of Scheme:	Cardiff
Address of Scheme:	173 Musgrave Avenue LABRADOR QLD 4215

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

Frankie Kwong Lap SO, as the owner of Lot 2,



C G YOUNGI hereby order that the owner of Lot 2, Frankie So, is liable to pay one-third of the premium for the body corporate building and public liability insurance policy, after the "business interruption" component relating to Lot 1 is first deducted.2n


STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0627-2002

"Cardiff" CTS 7933

The applicant, Frankie So of Lot 2, has sought an order of an adjudicator under the Body Corporate and Community Management Act 1997 ("the Act") that –

"To let Mr W Kurtze know that I have no responsibility to his business, I would not pay an insurance premium which included business concern."

JURISDICTION:

This is a dispute between an owner (the applicant So of Lot 2) and another owner (the respondents Werner and Liduina Kurtze, the co-owners of Lot 1) concerning what is the correct portion payable by So of the annual premium for the body corporate damage and public liability policy. This is a matter that falls within the dispute resolution provisions of the legislation (see sections 182, 183, and 223(1)(a) of the Act).

General powers of an Adjudicator in making an order:

Section 223(1) of the Act 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) of the Act). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 230(1) of the Act).


APPLICATION AND SUBMISSIONS:

In accordance with the requirements of section 194 of the Act, a copy of the application was provided to the respondents (the Kurtzes) with an invitation to respond to the matters raised in the application. The Kurtzkes made a submission to the application which the applicant subsequently inspected and made a reply to.

The substance of the dispute is that So objects to paying any portion of the premium for the body corporate combined damage and public liability, that relates to the Kurtzke’s business. He states that he is happy to pay his share of the premium that does not involve the business, which he understands is one-third because Lot 2 has a lot entitlement of 1 whereas the Kurtzke’s Lot 1 has a lot entitlement of 2.

He has forwarded a copy of a letter from the Kurtzkes dated 18 September 2002 regarding his share of the premium for insurance cover by Heritage ($365.50). While this cover was later withdrawn by Heritage due to a quoting error, So’s point is that in this letter the Kutzkes acknowledged he was not liable for paying any part of the premium which related to the insurance cover of "business interruption" for Lot 1. The first paragraph contains this acknowledgement in the following words-

"that we mistakenly added in the Business Interruption costs, we apologise for the error."

However, on 24 September and later on 1 October 2002, the Kurtzke’s advised So that the premium with Australian Unity General Insurance Limited was $1,829.38 and that his portion was $609.80, being one-third, as they had been informed by the Department of Natural Resources that all body corporate costs are divided by lot entitlements, regardless of whether the lots are residential or commercial.

However, in a later letter dated 11 October 2002, the Kurtzkes advised So that the insurance payment expired on 20 September (to protect their interests, the Kurtzkes evidently paid the full premium in the interim) and to settle the matter they would deduct the "business interruption" portion, reducing his premium to $581.99.

The submissions by the Kurtzkes also states: they are tired of administering the body corporate without any assistance from So; So does not maintain his lot properly; some common property repair costs have not been charged to So; and they wish to engage a Body Corporate Manager to conduct the affairs of the body corporate (which So agrees to).

DETERMINATION:
"Cardiff" was registered as a building unit plan (now termed a building format plan) on 22 April 1986, and comprises two lots. Lot 1 is evidently used for commercial purposes while Lot 2 is used for residential purposes – evidently the scheme is zoned commercial, however that is not relevant to this dispute.

Section 95 of the Standard Module regulations states as follows –

Contributions to be levied on owners.

95(5) The contributions levied on the owner of each lot (other than contributions payable for insurance and any other matter for which, under the Act or this regulation, the liability attaching to each lot is calculated other than on the basis of the lot’s contribution schedule lot entitlement) must be proportionate to the contribution schedule lot entitlement of the

lot.

That is, the general expenses of a body corporate are apportioned amongst owners according to the Contribution Schedule of Lot Entitlements (which is 2:1 for Lots 1 and 2). Note that in section 95(5) above, there is an exception for insurance apportionment, and sections 127 and 130(1)(a) of the Standard Module provides that insurance apportionment for a building format plan is according to the Interest Schedule of Lot Entitlements. Because the Interest Schedule lot entitlements for "Cardiff" is the same as the Contribution Schedule, being 2:1, then Lot 1 pays two-thirds of the premium and Lot 2 pays one-third.

However, section 130(2)(b) provides that the body corporate may adjust the portion of premium payable for a lot where the premium includes an amount for risks attributable to the activities carried on in another lot (for example, where flammable solvents are used in fibreglass manufacture). I do not believe that the additional premium of $83.44 relates to risk activities, but relates to certain business cover that is only of benefit to Lot 1. Accordingly, So is not liable to contribute to this additional premium cover as it is not part of the insurance cover required to be insured by the legislation (see definitions of building and damage in section 126).

That is, while the general statement that the costs of the body corporate in a building format plan are apportioned according to lot entitlements (either Contribution or Interest as specified), the "costs" cannot include payment that is beyond what the legislation requires, such as this "business interruption" cover. Accordingly, I have ordered that So is liable to pay one-third of the premium remaining after the "business interruption" component relating to Lot 1 is first deducted. That is, one-third of $1,829.38 less $83.44, which is $581.98 So is liable to pay.