Osprey Mackay [2004] QBCCMCmr 35 (20 January 2004)

Number of Scheme:	MCP 103361
Name of Scheme:	Osprey Mackay
Address of Scheme:	11 Bridge Road MACKAY QLD 4740

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Robert James HARRIS and Robyn Anne HARRIS, as the co-owners of Community Development Lot 7,

I hereby order that the application for the following orders -

1. An order pursuant to section 90 of the Building Units and Group Titles Act 1980 declaring By-law 11(a) to be invalid.

2. An order pursuant to section 90 of the Building Units and Group Titles Act 1980 declaring all references to "gymnasium" in By-law 26 to be invalid,

is dismissed.

STATEMENT OF REFEREE’S REASONS FOR DECISION - REF 0348-2003

"Osprey Mackay" MCP 103361

The applicants, Robert and Robyn Harris of Community Development Lot 7, have sought the following orders of a Referee appointed under the Building Units and Group Titles Act 1980 –

JURISDICTION:
This is a dispute between an owner (the applicants Harris, who are also the resident managers) and the body corporate (the respondent) seeking an order that a particular by-law be declared invalid and as a consequence, references to a particular term in a further by-law be declared invalid and severed from the by-law.

"Osprey Mackay" is a Mixed Use Development scheme approved under the Mixed Use Development Act 1993, being one of a number of pieces of legislation defined as a specified Act under section 326 of the Body Corporate and Community Management Act 1997. Section 325(2)(a) of the latter legislation provides that the Building Units and Group Titles Act 1980 ("the Act") continues to regulate building unit plans registered under the Act for a specified Act, as is the case for this scheme.

Under an amendment to the Mixed Use Development Act 1993 ("the MUD Act") which took effect on 4 March 2003, section 214B provides that a dispute about the operation of the MUD Act or rights and obligations under the MUD Act, may be dealt with by a Referee under part 5 of the Act.

Accordingly, the scheme is regulated under both the Act and the MUD Act, and a Referee has jurisdiction to deal with a dispute brought under section 90 of the Act which empowers a Referee to declare a by-law invalid when it is considered that the body corporate did not have the power to make the by-law, upon the application of a person entitled to vote at a body corporate general meeting. As the applicant has such an entitlement as an owner of a community development lot, I consider I have jurisdiction to determine the application in respect of the two orders sought.

I would also make the general observation that in regard to aspects of the operation of the body corporate and the rights and responsibilities of persons (including the body corporate), it can be a difficult exercise to determine whether the provisions of the Act or the MUD Act apply. I have commented previously on the unsatisfactory nature of the hybrid regulation of schemes under the specific Acts when before the recent amendment I and a delegate referee made several orders rejecting jurisdiction to determine applications by owners of lots in such schemes (see for example Orders 141-2001 and 628-2000). I would also comment that the amendment of 4 March 2003 does not provide a satisfactory dispute resolution process for the following reasons. Firstly, the relevant Minister has inappropriate powers, for example, only the Minister can provide for the holding of the first body corporate meeting out of time or changing the time for annual general meetings (see sections 172(12) and 172A(1) of the MUD Act) both matters of little importance that should be subject of a referee’s order. Secondly, parts of the Act have been reproduced rather than applying by reference, subsequent amendments to the Act leave the MUD Act with antiquated and inadequate provisions in several areas. Lastly, the sole reference to a referee in a MUD Act is in sections 186(7) to (10) where specific power is given for a referee to order a meeting be convened for the purpose of filling casual committee vacancies – a very minor function and obviously an oversight when the legislation was put together using tracts from the Act but not always with the proper changes to fit MUD circumstances. The legislation, including a disputes resolution provision, needs a total review.

APPLICATION AND SUBMISSIONS:
In accordance with section 23 of the Act, a copy of the application was required to be provided by the body corporate to all owners and the body corporate committee with an invitation to make a submission on the matter of dispute. Six owners made a submission with all opposing the orders sought, namely J & I Hipwell; J & M Fogg; K Louey and D Nash; G & J Bishop; R Sellers and R & L Green. The body corporate committee did not make a submission. The applicant inspected the submissions but did not elect to make a reply.

The brief facts of the matter are as follows.

By-law 11 (see later) states that the gymnasium contained within the applicant’s Lot 7 can only be used for the purpose of a gymnasium. By-law 26 refers to the method of use of gymnasium equipment installed by the body corporate in the gymnasium.

The applicant submits that section 30(6) of the Act states that no by-law shall be capable of operating to prohibit or restrict the devolution of a lot or a transfer, lease, mortgage or other dealing therewith, and therefore By-law 11 contravenes this section as it restricts their dealing with the lot by prohibiting them from subdividing the existing lot into 2 separate lots. The second order sought concerns By-law 26(c) that includes references to the gymnasium which, if By-law 11 is invalid, would also be invalid and need to be severed from the by-law.

One owner’s submission contained a copy of an advertising sheet for the scheme headed "A chance to live like this only comes by once in a lifetime". It includes the comments, "A swimming pool, barbecue area and gymnasium offering the incentives for a healthy and social lifestyle...while the resident manager takes care of general maintenance", and later under "Special Features" the dot point "Health and fitness advisory classes". Most owners stated in their submission that they purchased in the knowledge that a gymnasium was one of the community facilities available for their use. They state that the applicants when purchasing the management rights were aware of their obligations under By-law 11 to provide residents with the use of a gymnasium within their lot. Two state that the applicants were unhappy with their lot entitlement of 5 units from the outset and offers were made by the committee to reduce their lot entitlements by 2 units. Another owner also points out that there have been many disputes over car parking and an additional lot, perhaps with no garage, will worsen the situation; also, the gymnasium site is inappropriately situated close to the driveway with the noise of vehicle movements.

DETERMINATION:
The scheme was developed as a Mixed Use Development Scheme with community development Lots 1, 2, 3, 5 and 6 to be subdivided by building unit plans under the Act, Lot 4 to be either a single or duplex building, and Lot 7 to consist of a manager’s residence shop and gymnasium building.

The by-laws referred to in the orders sought read as follows (with my highlighting) –

The applicant states that by-law 11 is in breach of section 30(6) in that the by-law restricts their dealing with the lot by prohibiting them from re-subdividing the existing lot into 2 separate lots. The terms "transfer, lease, mortgage" all refer to the passing of the interest in property, as must dealings under the following general term "or other dealing" under the ejusdem generis rule. What is in contemplation here is the re-subdivision of the lot into two lots with the intention of selling the lot containing the proposed "transformed" gymnasium building. It is the transfer of title in the new lot which is the subject of section 30(6).

Accordingly, the section does not prevent re-subdivision taking place as the applicant states, though it does operate to prevent any restriction or prohibition on the transfer of title upon the sale of a new lot. The distinction has relevance.

I consider that the terms "prohibit or restrict" relate to the passing of the interest (here the transfer of title) itself and not to the use of lot. That is, a by-law cannot prohibit the sale of a lot or restrict the sale of a lot, for example to a person aged under 55 years or a person according to ethnicity or religion, but it can impose restrictions on the use of the lot that pass with title.

A clear example of this lies in the preliminary words of By-law 11(a) itself, namely that each lot shall be used for residential purposes only except for (Lot 7), which prevents other owners from carrying on the business of residential management (caretaking and the letting of lots in the scheme) from their lots. The by-law effectively applies a restriction on other lots comprised in the scheme that passes with title by virtue of the incoming owner being subject to the body corporate by-laws. By this provision in the by-law, the applicant as the resident manager enjoys a protection of his business interest in the scheme. This is a common by-law in schemes where management rights for caretaking and letting of lots in the building has been contracted between the body corporate and the resident manager, which protects the manager from competition by another owner in the scheme using their lot for letting (but of course does not prevent outside real estate agents letting lots in the scheme for owners).

Further common examples of by-laws that restrict the use to be made of a lot are: the keeping of pets; the colour scheme that must be complied with in painting the lot building; or making improvements to the lot. Similarly, by-laws granting exclusive use parking spaces to owners in a building units plan are usually subject to the spaces being used exclusively for vehicle parking.

In general, section 30(2) of the Act provides that a body corporate may make by-laws for the purpose of, amongst other things, the use or enjoyment of the lots and subsection (6) must be read in conjunction with that provision. Section 203 and 209 of the MUD Act provides similarly for activities by-laws for community and precinct bodies corporate respectively.

Accordingly, and the relevance of the distinction referred to earlier, is that there is nothing to prevent the applicant owner of Lot 7 from re-subdividing the lot and selling the new lot with the gymnasium building, or even a "transformed" gymnasium, however the obligations under By-law 11 to use the gymnasium building for the purpose of a gymnasium for owners (see By-law 26) falls on the purchaser. One might question the practicality of such a re-subdivision, however it may be that the new lot may support a dwelling as well as the gymnasium. In any case, that cannot be my concern in determining this application.

I would also add that section 30(5) of the Act provides that the by-laws bind the body corporate and owners (proprietors), lessees and occupiers to the same extent as if the by-laws had been signed and sealed by the body corporate and each such owner (etc) as if they contained mutual covenants to observe and perform all the provisions of the by-laws. As a number of owners have pointed out, the by-laws were known to the applicants at the time of purchase (attached to their contract) and the serious nature of the gymnasium obligations must have been apparent.

For the foregoing reasons I have ordered that the application is dismissed.

Having said that, and although it has not been raised by the applicant, I note that included in the Fourth Schedule Description of Scheme site plan (see section 28 of the MUD Act), there is provision made, in respect to the lot entitlement of 5 for Lot 7, as follows – A total of 5 in the event that a building unit plan is registered over this community development lot to be divided as the registered proprietor or proprietors of the relevant community development lot at the time see fit.

The developer seems to have envisaged a situation where the applicant’s lot may be re-subdivided and a lot entitlement of more than 1 allows for that. However, this possibility must be read subject to the by-laws and the provision of the gymnasium facility must continue. Perhaps the developer was merely being prudent in providing for all possibilities, including where the gymnasium could be successfully incorporated into a re-subdivision, or circumstances changed (an alternative gymnasium provided elsewhere?) and the by-law is repealed by owners.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Osprey Mackay [2004] QBCCMCmr 35 (20 January 2004)