Service Central [2003] QBCCMCmr 42 (1 August 2003)

Last Updated: 17 May 2005

REFERENCE: 0041-2003

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	16975
Name of Scheme:	Service Central
Address of Scheme:	1 Dan Street CAPALABA QLD 4157

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

I hereby order that the pylon sign and the illuminated sign boxes installed in the pylon, are common property under the control and administration of the body corporate, but that the current use of the sign boxes may continue pending the final determination of this application excepting that any successor in title upon sale of a lot in the interim will not acquire any rights in respect of the use of sign boxes. I further order that the body corporate committee must – a. arrange a meeting of owners for the purpose of reaching a fair and equitable settlement regarding the right of individual owners to use the pylon for advertising the business of their respective lots, including whether individuals need to be compensated for any loss of sign space or their inability to use a current sign, but that Exclusive Investments Pty Limited is not liable to pay to the body corporate those moneys received from owners for the sale of sign space unless it agrees to do so; and b. report the outcome of the meeting, or meetings, to me within three months of the date of this order for either an extension of the period for settlement, or the making of an appropriate final order to the application.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0041-2003

"Service Central" CTS 16975

The applicant body corporate has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 ("the Act") -

"Ownership of Sign Space – how to deal with sign space that has been sold to some proprietors by the Original Developer (Exclusive Investments).

JURISDICTION:
This is a dispute between the body corporate (the applicant) and an owner (the respondents Exclusive Investments Pty Limited, the developer/original owner for the scheme, and the owner of Lots 4 and 5), concerning the ownership of the advertising spaces on the scheme pylon sign installed on common property. This is a matter falling within the disputes resolution provisions of the legislation (see sections 227, 228,276 and Schedule 5 of the Act).

Section 279 of the Act provides that an adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates. An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 284 of the Act).

General powers of an Adjudicator in making an order:

Section 276(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 contractual matter about –
(i)	the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or
(ii)	the authorisation of a person as a letting agent for a community titles scheme.

An order may require a person to act, or prohibit a person from acting, in a way stated in the order (section 276(2) of the Act). An adjudicator’s order may contain ancillary or consequential provisions the adjudicator considers necessary or appropriate (section 284(1) of the Act).


APPLICATION AND SUBMISSIONS:
In accordance with section 243 of the Act, a copy of the application was provided to the respondent Exclusive Investments Pty Limited and to all other owners, with an invitation to respond to the matter of dispute raised in the application. The respondent lodged a written submission, as did two owners (Lots 6 and 8). The applicant did not exercise its right to view and reply to the submissions (see sections 244 and 246 of the Act).

The Dispute Resolution provisions of the Act provides for alternative means of resolving disputes, including mediation with the Disputes Resolution Centre of the Department of Justice and Attorney-General. It was considered that this dispute could be best resolved through mediation and the application was referred to the Centre. The Centre has advised this office that the parties were unable to reach a mediated settlement and the matter has been referred to adjudication.

From the information before me, the brief facts of the matter are as follows.

The respondent, as the developer/original owner of the scheme, erected a pylon sign on common property. It subsequently included spaces for advertising by owners, which the developer installed and offered at $875 for a single-sized space with a back-lit sign box, including that owners could opt either not to purchase a space or could purchase a double space for double the cost. The date of the circular letter containing the offer is 20 April 1995, some two months before the actual registration of the scheme with the Registrar of Titles, and therefore was addressed to prospective purchasers who had contracted "off the plan".

One owner has submitted that, at the outset, the respondent had promised a sign with 8 individual spaces and light boxes, one for each lot, however this never eventuated. Initially, it seems that the following purchase of spaces took place: the owner of Lot 1 purchased 2 spaces; Lot 2 bought 1 space; Lot 4 bought 2 spaces. The spaces were then treated as tradeable items amongst owners, taking into account the wishes of respective tenants.

I sighted the pylon sign on 29 July 2003 and it currently comprises (from the top down): a double space (Suntuf); a single blank space; a double space (Sugar & Spice); a blank space; and a possible triple space (Capalaba Cycles). From my observation, the top double and single space are separate boxes; the next double and blank are part of the one box; and the triple space is the one box. The applicant has described these at page 2 of the grounds as currently being owned (after they have been traded between owners) as follows: Lot 1 has no space; Lot 2 has none; Lot 3 has none; Lot 4 has none; Lot 5 has one space; Lot 6 has none; Lot 7 has two spaces; and Lot 8 has two spaces. This information does not agree with the number of spaces I sighted, but this anomaly is not important in my reaching a decision in the matter.

From my reading of the application and the submissions received, apart from attempted mediation through the Dispute Resolution Centre, owners have been trying to resolve the signs problem for some years. The matter has been brought to a head by the intended sale of the last two lots owned by the developer, Exclusive Investments Pty Limited, who evidently lays claim to two remaining sign spaces.


DETERMINATION:
"Service Central" was registered as a building units plan (now termed a building format plan) on 16 June 1995 and comprises 8 commercial lots. It is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module").

From past adjudication of applications for this scheme (Orders 747 and 751-1999 made on 25 May 2000), I am aware of discord prevailing in the scheme and the difficulty in having owners meet to resolve issues. However, I have carefully considered the sign problem and believe that the most appropriate manner of dealing with it is for me to, firstly, make an interim order setting out my view of the law as it relates to the facts, and secondly, for owners then to meet and attempt a mediated settlement of the remaining issues on the basis that, if the matter is successfully settled, for me to make a consent order incorporating the settlement terms, or alternatively if the remaining issues cannot be settled, for me to determine them by making a final order.

That is, this order will resolve a number of the basic issues relating to the dispute, and I am hopeful that, with the benefit of the preliminary order, owners can reach a settlement of the remaining issues. This would be a far preferable outcome to a solution imposed by me. Had this office the ability to carry out its own conciliation meeting with the parties, as has been proposed in future legislation, then I would have been able to deal wholly with this matter by a conciliation process from the outset. However, the manner of dealing with the problem under present legislation is a reasonable one except that it takes more time.

The first and most basic issue is that of the purported ownership of the pylon sign by the respondent (Exclusive Investments Pty Limited) and its ability to sell sign space on the pylon. The pylon is erected on common property and there is nothing to show that it is not part of the common property, in the same manner that, in a building format plan generally, such structures as the perimeter fence, security light poles, swimming pool, and the like, are part of the common property.

In the attachments to the application there is a page of by-laws (Enclosure "5") which includes a By-law 45 headed "Pylon Sign". It provides that the body corporate is to install 8 illuminated sign boxes in a pylon erected by the respondent (or reimburse the respondent if the body corporate installs the boxes), and it is to be maintained by the body corporate but that each owner is to have exclusive use of a sign box and the cost of sign-writing is the responsibility of owners for their respective sign box.

It seems to me that the ownership, and the cost and maintenance responsibilities, represents the ideal situation in the interests of fairness and equity amongst owners. I shall return to this later.

A search of the Registrar of Titles records does not show that this By-law 45, or any other by-law changes from that automatically imposed by the legislation upon registration, have been recorded. Both the previous legislation (see section 30(3) of the Building Units and Group Titles Act 1980) and the current legislation (see section 59 of the Act and section 115L of the Land Title Act 1994, and the transitional provisions of Chapter 8 of the Act), require the recording of any change in by-laws before they have legal effect. Accordingly, By-law 45 is not a valid by-law of "Service Central" and has no force or effect.

If the pylon was proposed to be other than part of the common property, then the respondent would have had to have sought authority for its siting on common property by way of an exclusive use by-law. This would have required a resolution without dissent of the body corporate in general meeting, and then its recording under section 30(3) of the Building Units and Group Titles Act 1980 ("BUGT Act"). No such by-law was recorded on the registered plan for the scheme.

That being so, the pylon was wholly part of the common property under the control and administration of the body corporate (see section 37(1) of the BUGT Act, and sections 94 and 152 of the Act). The installation of the sign boxes in the pylon by the respondent, for eventual sale to owners, would have equally required an exclusive use by-law by resolution without dissent, and again no such by-law is recorded. Even if the pylon or the sign boxes were installed prior to registration of the scheme, appropriate exclusive use by-laws would have had to be passed and recorded after registration.

In my view, the respondent had no properly authorised right to install, or subsequently sell, the sign box spaces to owners – immediately upon registration of the scheme on 16 June 1995, the respondent, even though it was the developer, had no rights in respect of the common property except those properly authorised by the body corporate as a separate legal entity. The usual sequence of events in such a commercial scheme as this, is for the developer to erect an identification (name and address) sign pylon with sign space for each lot as an integral part of the development, to become part of the common property upon establishment (registration) of the scheme under the control and administration of the body corporate. Owners would then each have access to a space each, or alternatively there may be a by-law giving each owner the exclusive use of a specific sign space. Had either been done here the present problem would not now exist.

From the foregoing, it will be apparent my view is that the respondent had no authority to install or to "sell" the sign boxes located in the pylon. The price of each box was $875 for each of the 8 boxes, and the original sales are now some 8 years old.

The legislation provides at section 276(1) of the Dispute Resolution provisions, that an adjudicator may make an order that is just and equitable in the circumstances to resolve a dispute. It seems to me that, as the first step in resolving this dispute, the most equitable solution in resolving the ownership and sale questions relating to the pylon and sign spaces, is that the respondent not be required to refund sale moneys to the body corporate. I do consider that the respondent should be required to refund this money to the body corporate because of the lengthy time interval from when the sales took place, and because there is no evidence that the respondent acted other than in good faith at the time. However, his loss lies with the remaining sign spaces (which he believed until now were his personal property) being common property.

This then establishes that the pylon and all sign spaces are common property under the control and administration of the body corporate.

I return to my earlier comment that the ideal situation is that each owner has the right to use one of eight available sign spaces. If this were the case, then it would resolve the other problem of all owners having to contribute to the power costs of illuminating the whole sign when some owners do not have an individual sign. Certainly there is a general benefit to all owners in having the scheme identified on the sign, namely the scheme name and address being shown at the top of the pylon, but it is unacceptable that owners should have to contribute to power costs for spaces that were sold. If the situation was originally that each owner had a space and they chose not to have an advertisement sign written on their space, then they could not complain in having to contribute to the power costs, however the situation here is quite different.

The remaining difficulty is how to resolve the matter of some owners having paid money for one or more spaces while others paid nothing, and where three owners have signs that spread across two or more spaces. There are a number of ways the problem can be resolved in attempting to reach the ideal situation of single space ownership.

For example: the body corporate could reimburse all owners for the cost of spaces purchased, or traded, at original cost, and then single spaces be allocated at no cost to all owners in a descending sequence of lot numbers (ie Lot 1 at top, Lot 2 next down...); where an owner has a sign spreading across two or more spaces, then they could also be compensated for the cost of the sign where it will be no use; and there could be an arrangement where a owner’s space could be leased to another owner if they do not want to advertise on the pylon (as is apparently the case with some owners) – this may complicate matters as only an adjacent space owner will be able to utilise the available space, unless, making the situation even more complicated, there is an interchange of spaces to make this possible (either making the interchange temporary or permanent). While this latter arrangement will complicate matters, it is allowing commercial freedom in allowing "demand and supply" choose how spaces will be used.

There could be many variations of the above solution, or perhaps an entirely different solution.

Rather than my selecting a particular course of use and rules for trading/leasing spaces, this aspect of the problem could be better resolved by owners. It will require owners, or their agents where an owner is unable to be present, to meet, either with or without a mediator, in an attempt to choose the most acceptable system of use (including compensation where and if necessary).

I have allowed a period of three months in my order for owners to attempt to resolve the matter and report the outcome to me. Owners are directed to section 276(5) of the Act which allows an adjudicator to make a consent order incorporating the terms of a mediated settlement, provided the terms are not in conflict with the Act. A consent order cannot, like a normal adjudicator’s order, be appealed, though it can still be enforced by any of the parties. It is appropriate where a settlement is reached that is acceptable to all, and the parties wish the settlement to be final and binding.

If after the 3 month period the parties are unable to reach a settlement, then they may wish to either seek to continue to reach a settlement or refer the matter back for adjudication.