Whalewatch Ocean Beach Resort [2004] QBCCMCmr 588 (24 November 2004)

Last Updated: 30 September 2005

REFERENCE: 0472-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	27344
Name of Scheme:	Whalewatch Ocean Beach Resort
Address of Scheme:	7 - 15 Samarinda Drive, POINT LOOKOUT QLD 4183

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

Krackob Pty Ltd, the owner of lot 22

I hereby order that within 1 month of the date of this order the body corporate shall pay to the applicant, Krackob Pty Ltd, the sum of $511.89, being 60% of the amount expended by the applicant in plumbing expenses relating to a blocked drain which was properly the responsibility of the body corporate to maintain. I further order that the application for the remaining orders is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0472-2004

"Whalewatch Ocean Beach Resort" CTS 27344

ORDERS SOUGHT

The applicant, Krackob Pty Ltd, has sought orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) as follows:

1. Recognition of all or lesser of blocked drain costs of $853.15 incurred by Krackob Pty Ltd from 31/12/99 to 03/01/01 as a cost of body corporate Whalewatch.
2. Recognition of payment by Krackob Pty Ltd of (1) as an advance on body corporate levies.
3. Withholding of $1,000.00 payment of levy fees in January 2004 in light of (1) to be considered as reasonable and not attract penalties.
4. Refund of amount in (1) now that $1000.00 payment offer made on 16/07/04 as full settlement.
5. Refund in (4) to attract interest.
6. Krackob Pty Ltd be entitled to reimbursement of reasonable costs should body corporate Whalewatch be found lacking in duty of care to Krackob Pty Ltd.
7. Establish precedent for any such future outlays.
8. Both body corporate Whalewatch and Body Corporate Services be made fully aware of any failure in their duty of care (if any) to Krackob Pty Ltd.

JURISDICTION

The application evidences a dispute between an owner of a lot included in a community titles scheme and the body corporate for the scheme (section 227(1)(b) of the Act).

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)).

SCHEME DETAILS

Whalewatch Ocean Beach Resort was established as a building format plan on 4 October 1999 and comprises 40 lots. It is regulated by the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation Module).

BACKGROUND

The applicant provided a chronology of events, which has been supplied to the respondent body corporate and all owners. I do not propose to set out that detail again. Suffice to say, the applicant experienced drainage problems (manifesting as a blocked kitchen sink) from late December 1999 to early January 2001. The applicant engaged a plumber, Mr Garry MacFarlane, who carried out work on 6 separate occasions in an effort to unblock the sink. The applicant stated, in a letter dated 9 January 2004 to the body corporate manager, that "on all occasions the body corporate manager was kept informed and he accepted the reports as a basis to put before the committee for reimbursement." The applicant did not claim to have obtained actual body corporate approval prior to having the work carried out by Mr MacFarlane.

In a submission lodged on behalf of the body corporate committee, the chairperson stated, in part, as follows:

"The problems of drains blocked in the complex by building debris on the handover of the properties to the owners was a common one which affected other units including my own. The builder of the complex has subsequently gone into liquidation. This is a matter that should have been taken up at the time with the builder or the BSA but now exceeds the time limits for claiming from the BSA. To my knowledge the body corporate has not reimbursed any other unit holders in relation to defects related to the building of the site. I consider it would be unfair for present owners to have to bear costs back-dated from this time particularly given that many of the units have recently changed hands and the new unit owners would be expected to bear the cost through their body corporate for something that occurred almost five years ago."

The chairperson also rejected the applicant’s action in withholding his levies as an offset against the amount claimed for plumbing costs.

DETERMINATION

I note that the body corporate committee considered the applicant’s claim for reimbursement of plumbing expenses at a meeting held on 30 December 2003. The committee rejected the claim on the basis that the blockage occurred within the applicant’s lot.

On 19 November 2004 I spoke by telephone with Mr Garry MacFarlane, the plumber engaged by the applicant. Mr MacFarlane advised me that he could recall doing work on a kitchen sink in this scheme. He advised me that initially he attempted to unblock the sink locally (within the lot). He said that on each occasion it appeared that the blockage had been cleared, but as time went by and he was recalled on several occasions he decided that the blockage had to be within the main line. He explained that finally he used a sewer machine, which has a lead of approximately 30 metres. He said that after the machine had travelled about 5-10 metres, it encountered a significant blockage (well outside the applicant’s lot). I note from Mr MacFarlane’s invoice (No 85) dated 30 November 2000 that he put the machine down the line several times and also put down liquid cleaner "to eat concrete". Ultimately the blockage was cleared. Mr Macfarlane was of the view that the blockage was caused by the builder’s debris.

Under section 108 of the Accommodation Module the body corporate is responsible for maintaining common property in good condition. Section 20 of the Act extends the definition of common property to include utility infrastructure, which, unless falling within the exceptions detailed in section 20(1)(a), (b) and (c), is also required to be maintained by the body corporate. In this instance, I accept the plumber’s advice that the blockage occurred outside of the applicant’s lot in the main drainage line, and therefore the utility infrastructure did not fall within the exceptions.

Accordingly, under normal circumstances, the body corporate would have been responsible for the whole of the costs of clearing the blockage. I note the chairperson’s comments about the builder. However, once the building was completed, and the scheme had been established upon registration of the plan, the body corporate assumed its responsibility notwithstanding that there might have been some redress against the builder for a certain period of time.

However, of more concern in this instance is that owners do not have the right to unilaterally proceed with work which is the responsibility of the body corporate, and then necessarily expect to receive reimbursement at a later date. Firstly, the body corporate did not authorize the work before it was carried out. It was immaterial that the body corporate manager might have been receiving "reports" from the applicant. The body corporate manager did not have the power to authorize work on behalf of the body corporate. Only the body corporate committee could authorize such work, (assuming it fell within the committee’s spending limit), otherwise it would have to have been authorized by owners in general meeting.

Secondly, by proceeding with the work as it did the applicant deprived the body corporate of the opportunity to select a contractor of its choice, perhaps at a more competitive price. Perhaps too the body corporate’s contractor might have decided to use the sewer machine at an earlier time than Mr MacFarlane did, such that the problem was finally resolved with fewer visits and accordingly for a lesser cost.

In its letter dated 9 January 2004 to the body corporate manager the applicant stated that it "was left no choice but to address the urgent nature of the health problem by taking action and instructing a plumber to inspect and report and proceed with our (the applicant and Ray White) approval to fix the problem" because "the body corporate was unable to act immediately". In the absence of any documented approach to the body corporate by the applicant prior to the work being carried out, I am not persuaded that the body corporate was unable to act immediately. In my view there is insufficient evidence that the matter was so urgent that proper approval could not have been sought. A committee meeting could have been called after giving 7 days’ notice, and, in the case of a genuine emergency, the committee could have voted outside a formal meeting under section 33 of the Accommodation Module.

Notwithstanding my reservations about the applicant’s actions, I consider that the body corporate should not be completely relieved of responsibility for the plumbing costs, given that the plumber confirmed that the blockage was ultimately discovered to be in the main line. I have therefore decided that the body corporate should reimburse the applicant 60% of the costs expended by it. I have only allowed this amount for the reasons outlined above. I do not propose to allow interest on this amount, and in any event it is arguable that even if I were so minded that I do not have power to do so.

I shall now consider the applicant’s decision to withhold $1,000.00 of its levies in an attempt to obtain some "positive" action from the body corporate committee.

Levy contributions are payable by owners at pre-determined levels and intervals to enable the body corporate to function in an orderly fashion and attend to payment of accounts as and when they fall due. It would create financial havoc for the body corporate if every owner who thought they might have a claim against the body corporate were to withhold payment of all or part of their levies by way of offset without first having to establish the validity of their claim.

Section 94 of the Accommodation Module provides:

94 Notice of contribution payable [SM, s 96]

(1) At least 30 days before the payment of a contribution, or instalment

of a contribution, is required, the body corporate must give the owner of

each lot written notice of--

(a) the total amount of the contribution levied on the owner; and

(b) the amount of the contribution, or instalment of contribution, of

which payment is currently required; and

(c) the date (the "date for payment") on or before which the

contribution, or instalment of contribution, must be paid; and

(d) any discount to which the owner is entitled for payment of the

contribution, or instalment of contribution, by the date for

payment; and

(e) any penalty to which the owner is liable for each month payment

is in arrears; and

(f) if the owner is in arrears in payment of a contribution or

penalty--the arrears.

(2) The written notice under subsection (1) may also include notice

about an amount payable by a lot owner to the body corporate for--

(a) a specially contracted service enjoyed by the owner; or

(b) an exclusive use or special right over common property enjoyed

by the owner.

(3) A written notice under this section may be served on a lot owner at

the lot owner’s address for service, or in the way directed by the lot owner.

Section 96 of the Accommodation Module provides:

96 Penalties for late payment [SM, s 98]

(1) The body corporate may, by ordinary resolution, fix a penalty to be

paid by owners of lots if a contribution, or instalment of contribution, is not

received by the body corporate by the date for payment fixed in notices of

contribution given to the owners.

(2) The penalty must consist of simple interest at a stated rate (of not

more than 2.5%) for each month the contribution or instalment is in arrears.

Example--

Suppose that--

• a contribution of $400 is payable in 4 instalments of $100 and the body

corporate has fixed a penalty interest rate of 2% per month

• an account requiring payment of an instalment of $100 by 31 March is given

to the owner of a lot

• the instalment is not paid until 27 June.

In this case, the instalment has been in arrears for 2 months and a penalty of $4 is

payable.

Section 97 of the Accommodation Module provides:

97 Payment and recovery of body corporate debts [SM, s 99]

(1) If a contribution or contribution instalment is not paid by the date for

payment, the body corporate may recover each of the following amounts as

a debt--

(a) the amount of the contribution or instalment;

(b) any penalty for not paying the contribution or instalment;

(c) any costs ("recovery costs") reasonably incurred by the body

corporate in recovering the amount.

(2) If the amount of a contribution or contribution instalment has been

outstanding for 2 years, the body corporate must, within 2 months from the

end of the 2 year period, start proceedings to recover the amount.

(3) A liability to pay a body corporate debt in relation to a lot is

enforceable jointly and severally against each of the following persons--

(a) a person who was the owner of the lot when the debt became

payable;

(b) a person (including a mortgagee in possession) who becomes an

owner of the lot before the debt is paid.

(4) If there are 2 or more co-owners of a lot, the co-owners are jointly

and severally liable to pay a body corporate debt in relation to the lot.

(5) If an owner is liable for a contribution or a contribution instalment,

and a penalty, an amount paid by the owner must be paid--

(a) first, towards the penalty; and

(b) second, in reduction of the outstanding contribution or

instalment; and

(c) third, towards any recovery costs for the debt.

(6) If the body corporate is satisfied there are special reasons for

allowing a discount of a contribution, or waiving a penalty or liability for

recovery costs, the body corporate may allow the discount, or waive the

penalty or costs in whole or part.


The body corporate was within its rights to impose a penalty on the applicant when the applicant failed to pay its levy contribution in full for the January 2004 quarter. Subsequent debits for penalties and interest followed that event and they should stand. I have therefore dismissed the remainder of the application.

In closing I note that there does appear to have been a significant delay before the body corporate advised the applicant that it did not propose to reimburse the claimed expenses. Whilst I can see from the chronology of events that there were a number of issues preoccupying the body corporate (the liquidation of the building company, a change of body corporate manager, adjustments of budgets to address deficit) the body corporate should ensure in future that owners’ correspondence receives prompt attention.