Allen House [2004] QBCCMCmr 249 (14 May 2004)

Last Updated: 30 September 2005

REFERENCE: 0654-2003

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	7610
Name of Scheme:	Allen House
Address of Scheme:	Corner Elizabeth Avenue & Gold Coast Highway BROADBEACH QLD 4218

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Darlington Weir Pty Ltd, the owner of lot 3

I hereby order that the application by Darlington Weir Pty Ltd, the owner of lot 3 for - 1. An order giving effect to the motion as proposed on the basis that the motion considered by the general meeting of the body corporate on 18 July 2003 which required a resolution without dissent was not passed because of opposition in the circumstances that was unreasonable; and 2. An order requiring the body corporate to lodge a request to record a new community management statement which is to include a revised allocation of the exclusive use areas in the form of, or substantially similar to, the proposed survey plan annexed to this application, is dismissed. I further order that within two months of the date of this order and at its expense, the body corporate shall, prepare, lodge for recording with the Registrar of Titles, and attend to all requirements necessary to obtain registration of a new Community Management Statement containing a new exclusive use by-law 22 reflecting 1. The relinquishing of the exclusive use allocation of lot 3 over the driveway and this area returned to unallocated common property; 2. The relinquishing of the exclusive use allocation of lot 2 over the area immediately adjacent to the entrance to lot 3 (approximately 31m2) and this area returned to unallocated common property. I further order that the owners of lot 2 shall continue to enjoy exclusive use of the two planter boxes which are located within the line created by their second entrance door with the external point of the common property over which they hold exclusive use.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0654-2003

"Allen House" CTS 7610

The applicant, Darlington Weir Pty Ltd, the owner of lot 3 has sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote –

1. An order giving effect to the motion as proposed on the basis that the motion considered by the general meeting of the body corporate on 18 July 2003 ... which required a resolution without dissent was not passed because of opposition in the circumstances that was unreasonable; and
2. An order requiring the body corporate to lodge a request to record a new community management statement which is to include a revised allocation of the exclusive use areas in the form of, or substantially similar to, the proposed survey plan annexed to this application.

Section 276(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 the 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)). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (section 284(1)).

The scheme

The scheme is a subdivision of 3 lots registered under a building unit plan (now a building format plan). The regulation module applying to the scheme is the standard module.

The application and submissions

This office sought submissions in respect of the application from the body corporate committee and all owners. Only the owner of lot 2, Nicola Lapenna and Anna Lapenna (Lapenna) have responded by way of submission. The owners of lot 1 did not –

• Vote in respect of the motion the subject of this application;
• Make a submission in respect of this application; or
• Attend the inspection and meeting held on Wednesday 7 April 2004 at the scheme.

The motion the subject of this application proposed that "the body corporate approve the exclusive use areas marked on the attached plans ... and should this approval be carried then the body corporate secretary be instructed to prepare a new CMS which is to be approved at an EGM".

The following "comments" appears in the minutes for the meeting, quote –

Mr Widen (Lot 3) explained that he believed that an error had occurred in the original building plans which showed the entrance ramp to the car park as his allocated exclusive use area when in fact he believed that his exclusive use area should have been the entrance to his lot. The problems that both parties expressed were that the area in front of the entrance to lot 3 was also the back entrance of lot 2, and Mr and Mrs Lapenna were not willing to lose their exclusive use to lot 3 as they were concerned that their patrons could lose access to their back entrance. Mr Widen expressed the same concern about his lot. However Mrs Lapenna advised that she was willing to offer this exclusive use area as common property to all owners. Mr Widen did not agree to this proposal and stated that he would be pursuing the matter legally. ...

The motion (numbered 7) which was defeated proposed that the body corporate approve "the exclusive use areas as marked on the attached plans" and prepare and lodge a new CMS reflecting these new plans. The proposed change to the exclusive use areas does not affect lot 1, except generally in so far as it is common property being effected. All parties are aware of what is being proposed, and I do not consider it necessary to set out the position except in general terms.

The applicant seeks to give up or surrender its exclusive use of part of the common property driveway, but in exchange, to be allocated exclusive use of part of the common property immediately adjacent to the entrance to its lot 3 which is presently the subject of an exclusive use allocation to lot 2. The "proposed survey plan" indicates that the area in question is approximately 31 m2. Practically, the applicant’s proposal requires that the owners of lot 2 (Lapenna) relinquish part of their common property exclusive use allocation. Lapenna oppose the allocation of the area as exclusive use common property for the benefit of lot 3, but are prepared to relinquish their own exclusive use of this area such that it reverts to unallocated common property available for the use of all owners.

The relevant (existing) by-law allocating the exclusive use areas is by-law 22. It is relevant to note the following regarding the by-law –

• It was recorded in early 1987, and consequently has been the recorded and operable by-law for some 17 years now. The reasonableness of the by-law has not been previously challenged;
• Whilst the terms of the allocations to lots 1 and 3 simply refer to the area marked on the relevant plan, and do not specify any use to which the areas might be put, the allocation and nature of use of the area in respect of lot 2 is both detailed and specific, quote –
... and shall use the said area for such purpose or purposes as may be authorised in writing by the secretary ... and which shall include the use of same for the purpose of a restaurant, pizzeria, coffee shop or ... any other use allowable or permissible in terms of the relevant town plan ... from time to time. The proprietor shall be entitled to enclose all or part of such area in a material or materials reasonably suitable for same and in that regard to construct or erect the enclosure and use same and to install a flume through or over the building as may be required by the local authority for the operation of a restaurant. ...

It is further relevant to note that in accordance with the authorisation contained in the by-law, the owners of lot 2 have extended their restaurant to include most of the exclusive use area allocated to them. The extension of the restaurant into the exclusive use area is of a permanent nature, including fixed timber and glass walls creating an internal dining room and not simply an external dining area. Relevantly, Lapenna as part of the extension of their restaurant onto the common property exclusive use area, has not built in the area which the applicant is now seeking be relinquished by Lapenna and reallocated to it. However, in so extending the restaurant to include most of the exclusive use area, Lapenna has created a second entrance to the restaurant, which entrance opens onto the remaining part of Lapenna’s exclusive use area adjoining the entrance to lot 3.

The applicant alleges that the opposition to the motion, requiring a resolution without dissent, was in the circumstances unreasonable. A resolution without dissent requires that there be no vote against the motion. The outcome of the motion was that there was one vote in favour (the applicant) one vote against (Lapenna) and one abstention (Lot 1).

The applicant contends that the original exclusive use allocations were "clearly ... made in error" in that patrons of lot 3 are required to traverse lot 2’s exclusive use area to access the stairs that lead to lot 3, being the only means of access to lot 3. Moreover, the exclusive use area allocated to lot 3 "is positioned upon the access ramp to the basement carpark".

The applicant states –

Lot 3 has only one means of access from the street which is to traverse the exclusive use area allocated to lot 2. In contrast, lot 2 has two (2) entrances. ...

The applicant ... wishes to use the area adjacent to the entrance to lot 3 for the purposes of seating and placement of menu boards for its prospective tenant. This will necessitate that the area adjacent to the entrance to lot 3 be re-allocated as exclusive use for lot 3. ...

The applicant concludes –

... This position is clearly inequitable due to the fact that lot 3 has only 1 entrance (which is now blocked) and lot 2 has two (2) entrances, and further that the main entrance to lot 2 is not at issue. The opposition to the applicant’s proposed motion was, in all the circumstances, totally unreasonable.

The applicant then alleges hardship, stating –

The applicant’s lot has been vacant for over 12 months and continues to be vacant, as prospective tenants have taken issue with the fact that lot 2 is permitted to place tables and chairs across the entrance to lot 3. ...

Fundamentally, a grant of an exclusive right should not be such as to deprive the other lot owners of the benefit of access to and enjoyment of their lots. This is essentially the basis upon which the applicant seeks the order.

Lapenna has responded to the application by way of submission. Lapenna contents that they will "incur significant financial loss if the application is granted". They state the grant of the exclusive use "was a material consideration" in their purchase of the lot. They further state –

The exclusive use area ... is utilised by patrons of lot 2 for the purposes of entering and exiting the restaurant. Potential patrons who walk along Surf Parade can view the restaurant and as such business has increased.

Lapenna further states that they have "owned the property since 1987 and have never interfered with the passage of patrons to lot 3". Further, Lapenna is willing to relinquish exclusive use of the area in question, provided that it becomes "common property to be utilised by both parties".

Further, Lapenna states –

The applicant would have been aware of the configuration of the lots when it purchased. It was the applicant’s responsibility to make all necessary enquiries in relation to exclusive use areas within the body corporate. ...

Lapenna concludes that the applicant stands to be

unjustly enriched by this application. Should a new CMS be lodged granting exclusive use of the area ... to lot 3 the owners of lot 3 would be in a position to block access by our clients and their patrons to the restaurant from the rear and thus cause our client’s financial loss. ... Our client will suffer loss of business and capital loss if the area ... is taken away.

Inspection and Meeting of the parties

On Wednesday 7 April 2004 I undertook an inspection of the scheme and meeting of the parties as part of my investigation of this application. Both the applicant’s representative and the Lapennas were present. I considered the inspection necessary to make a proper appraisal of the application, the merits of it, and the arguments against the applicant’s proposal.

At the meeting, I allowed the parties to put their respective positions to me. At various times I sought the parties views on particular aspects. I also indicated my preliminary views on certain aspects to the parties. For instance, in its reply, the applicant responded to the Lapenna’s assertion that it should have been aware of the configuration of the lots when it purchased (and that) It was the applicant’s responsibility to make all necessary enquiries in relation to exclusive use areas within the body corporate by stating

Prior to its purchase of lot 3, the applicant obtained all necessary body corporate records from the body corporate manager for the purposes of its due diligence. When viewed, the body corporate records were such in a state that they did not disclose a copy of the notification of change of by-laws. ...

I stated at the inspection, and reiterate now that by-laws for a scheme are a document of public record. A copy of the recorded by-laws is obtainable from the office of the Registrar of Titles. Whilst a purchaser is able to undertake a search of body corporate records to acquaint themselves with the history of the scheme (eg. minutes of meetings, resolutions, financial management issues etc), other relevant and important information regarding the lot should be obtained from the Registrar of Titles. These include a copy of the title for the lot, the relevant plan for the scheme, and a copy of the community management statement which includes the by-laws.

Moreover, every contract for the sale of a unit in Queensland must be accompanied by a "CONTRACT WARNING" statement attached as the first page of the contract. Under the heading "Suggested matters for examination", the following statement is included –

Apart from carrying out normal conveyancing searches for any purchase of real property (land), it is recommended that you take the following additional steps – ...
Obtain a copy of the Community Management Statement for the scheme from the nearest land registry office of the Department of Natural Resources, Mines and Energy.

Subsequently in the document, the term Community Management Statement is defined to include the by-laws for the scheme.

I consider the applicant’s due diligence enquiries were insufficient and incomplete. The applicant or its legal representative were able to make the necessary search in the Registrar of Titles office to obtain a copy of the CMS (including by-laws). It failed to do so. Its failure to do so cannot be attributed to any other party. The alleged incomplete records of the body corporate manager did not prevent the applicant from obtaining a copy of the CMS from the Registrar of Titles. Had the applicant or its legal representative done so it would have been in a position to know the terms of the exclusive use by-laws and to identify the error which the applicant now alleges.

I consider that the failure to obtain a copy of the CMS and recorded by-laws and for the applicant to acquaint themselves with the relevant by-laws has led to the applicant’s current position, which the applicant is now seeking relief from.

The other finding (of fact) which I made at the inspection, and which I outlined my reasoning for to the parties was the relative significance to the owners of lot 2 of the entrance to their lot which has been created as part of the extension to the common property exclusive use area and which would be lost if the application as sought succeeds. The applicant’s initial grounds state that this entrance is not the main entrance to the lot, and by implication, attributes no significance to this entrance, or the potential loss of this entrance. In contrast, the Lapenna’s state that they will suffer financial loss if the applicant was in a position (through being granted exclusive use of the area) to block access to lot 2’s patrons via the second entrance (the entrance adjoining the disputed common property area).

I concluded that the position of the Lapenna’s is to be preferred. I consider that the entrance in question is significant to the continuing success of the Lapenna’s restaurant. The front entrance to lot 2 opens to a non-descript carpark and beyond that, the Gold Coast Highway. I conclude that patronage for the restaurant would significantly be drawn from the owners (locals) and holiday makers occupying the numerous properties to the east of the scheme. This area around Broadbeach is thriving in Gold Coast terms. The entrance most of use and of aesthetic appeal to potential patrons arriving from east of the scheme would be the second entrance. I therefore consider the second entrance to be of significant value and importance to the Lapennas, and that its loss might very well result in financial loss to the Lapennas. Moreover, I conclude that the applicant has failed to recognise this aspect and to deal with it in its application.

At the inspection and meeting of the parties, I proposed an alternative solution for the parties consideration. Namely, that a new second entrance be created for lot 2, to be paid for by the owner of lot 3. The proposed location of this new second entrance for lot 2 was indicated to the parties, and is hard to describe here. However, I am satisfied that the parties know the location of the proposed new second entrance. The applicant was almost immediately agreeable to the proposal. The Lapenna’s almost immediately opposed to it. I proposed a period for consideration of the merits of the proposal by both parties, and for the applicant to obtain a quote for the potential cost of the work required to re-locate the second entrance. Given the Lapenna’s opposition to the proposal, the applicant requested that I continue with my adjudication rather than allowing a period for consideration. I declined to do so and indicated to both parties that I would allow two weeks for their submission of a written response to the proposal.

The applicant wrote "agreeing in principle to the concept of lot 3 contributing funds to the construction of a new entrance to Lots 2’s exclusive use area". The applicant included a quotation for the work required to re-locate the entrance to lot 2. This written correspondence was sent to the Lapenna’s for a response. The response of the Lapenna’s was that "they are not agreeable to the proposal put forward by the applicant for the erection of a new entrance to lot 2 being erected from Elizabeth Street".

Given the subsequent rejection of the proposal by the Lapenna’s I do not propose to further consider the proposal. I do not consider this dispute should be resolved by the imposition on the parties of a proposal which was not initiated by either party to this dispute, and which is clearly opposed by one party.

Determination

I consider that there are three possible outcomes for this dispute, namely:-

1. To dismiss the application, and allow the status quo to continue;
2. To order as proposed by the Lapenna’s and rejected by the applicant: to return the area in question to unallocated common property for the joint use and enjoyment of both parties;
3. To order in terms sought by the applicant and rejected by the Lapenna’s: to order that the area in question be changed from the exclusive use of lot 2 to the exclusive use of lot 3.

The applicant has raised two grounds in support of the order it is seeking; error and hardship. On the basis of these, the applicant argues that the "no" vote of the Lapenna was opposition which in the circumstances was unreasonable.

Whilst all parties I think are prepared to concede that there has been some error in the drawing of the relevant exclusive use plan, the extent of this error is debatable. The Lapenna’s state that the existence of the exclusive use area influenced their decision to purchase lot 2. Moreover, I have already pointed out that the "error" which the applicant now alleges was discoverable prior to purchase of the records of the Office of the Registrar of Titles.

As for the second ground relied on by the applicant, namely hardship, allegedly in relation to the letting of its lot due to the existence of the exclusive use allocation in favour of lot 2, I am not satisfied that in consequence of the grant of exclusive use to lot 2 over the area in question, that the applicant has been deprived of the benefit of access to and enjoyment of its lot, as it implies in paragraph 3.3 of its grounds. The applicant has conceded that the Lapenna’s have never interfered with the passage of patrons across the exclusive use area to lot 3. At best, the applicant states that the application is made "to correct the legal anomalies and prevent any future interference with the enjoyment of its lot". The applicant is concerned a future owner of lot 2 may not be so accommodating of the requirement for access to lot 3. However, notwithstanding the exclusive use allocation, I consider that any use of the area by lot 2 which causes a nuisance or hazard, or interferes unreasonably with the use or enjoyment of lot 3 by its owner or patrons, would be precluded under the Act (see section 167 headed Nuisances).

Moreover, I conclude that the applicant’s proposal, if implemented is likely to cause financial loss to the owners of lot 2. I have already canvassed the significance in my view of the second entrance door to the operation of lot 2’s business. I find the second entrance to lot 2 to be material to the operation of the business conducted there, and that the business will be materially affected if such entrance is lost. The proposal of the applicant, if implemented, would result in the loss of this door. The applicant’s proposal, and grounds generally, fail to acknowledge this outcome, or to address it in any way. I conclude that this is a significant deficiency in the applicant’s proposal and justifies a "no" vote to the proposal by the Lapenna’s. Given this circumstance, I am not satisfied that the no vote of the Lapenna’s was unreasonable in the circumstances. In the circumstances, I am not prepared to order in terms sought by the applicant.

I am empowered to make orders which are just and equitable in the circumstances for the resolution of the dispute. Whilst I do not consider the applicant’s proposal to be a just and equitable outcome, I do conclude that the Lapenna’s counter proposal to be so. This proposal is that –

1. The exclusive use allocation of lot 3 over the driveway be relinquished and this area return to unallocated common property;
2. The exclusive use allocation of lot 2 over the area immediately adjacent to the entrance to lot 3 (approximately 31m2) be relinquished and this area return to unallocated common property.

I intend to order that the body corporate shall, within two months of the date of this order, and at its expense, prepare, lodge for recording with the Registrar of Titles, and attend to all requirements necessary to obtain registration of a new Community Management Statement containing a new exclusive use by-law 22 reflecting the above changes. Practically, this will require the amendment of by-law 22 by the deletion of the exclusive use allocation which currently exists in favour of lot 3, and the preparation and recording of a new plan of exclusive use allocations to accompany the amended by-law 22. The new plan will show the exclusive use allocation for lot 1 as it currently exists. For lot 2, the new plan will show the exclusive use allocation reduced by the approximate 31 m2 of common property which adjoins both the entrance to lot 3 and its own second entrance. To remove any doubt I declare that the owners of lot 2 shall continue to enjoy exclusive use of the two planter boxes which are located within the line created by the door with the external point of the common property. Subject to this the area of common property relinquished by lot 2 will henceforth be common property of the body corporate available for the use and enjoyment of all owners, occupiers or invitees.