Cannington Court Garden Villas [2004] QBCCMCmr 666 (24 December 2004)

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

I hereby order that the secretary of the body corporate, Boris Tworek, must instruct the body corporate manager to call a committee meeting to be held within one month of the date of this order.

I further order that all owners may attend the committee meeting on giving the secretary 24 hours’ written notice of their intention to attend the meeting. Further, the committee may allow any person to attend the meeting even if no written notice is given.

I further order that, at the committee meeting, the committee must make reasonable endeavours to:

1. Specify alternatives for the maintenance of the foundation structures of all villas in a structurally sound condition. Information regarding each alternative is to distributed to owners including a brief description of the work, the likely and the maximum cost of the work, any period for which the work is guaranteed, details of any independent engineering advice, any implications for insurance of the scheme, and details of the likely time frame and inconvenience to occupiers;
2. Specify alternatives for any legal action to seek recovery of the costs from a third party. Information regarding each alternative is to be distributed to owners including a brief description of what the action would involve and where it would be taken, the likely and the maximum cost of the action, and details of any legal advice received on the prospects of success;
3. Prepare administrative and sinking fund budgets, including fixing the amount of contributions pursuant to those budgets; and
4. Prepare estimates of any special contributions necessary if owners adopt any of the above alternatives.

I further order that if the committee makes reasonable endeavours to achieve the above matters at the committee meeting but is unable to do so, then the secretary must instruct the body corporate manager to call another committee meeting. This further committee meeting must be held within one month of the original committee meeting.

I further order that, pending a final determination, the body corporate is restrained from proceeding against any owners who have not paid the special levy of 26 July 2003 for the purpose of underpinning units with screw piers as described in the report from P Fryatt & Associates, insurance loss assessors and investigators. Pending a final determination, the body corporate is not to impose any penalties or refuse any discounts as a result of non-payment of this special contribution by an owner.

I further order that, within 14 days, a copy of this order must be sent to all owners.

This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0656-2004

"Cannington Court Garden Villas" CTS 7132

This is a dispute about work the body corporate needs to perform to maintain the defective foundations of some of the villas in the scheme.

The applicants claim that all owners have not been sufficiently consulted in relation to this work, that owners have voted to adopt a particular proposal that is now recognised as inappropriate, that certain committee members are proposing an alternative method without consultation with owners, that a qualified and independent engineer should be engaged to advise owners, and that any proposal for special levies should be accompanied with complete costings to allow owners to raise finance based on the costings.

The interim orders relate particularly to a vote to raise a special levy on 26 July 2003 and a claim that this levy is unlawful as there were no proper quotations and the body corporate no longer proposes to do the work that the levy was raised for.

One of the applicants says that the value of all villas is likely to rise substantially once the foundations are fixed and all owners are no longer under an obligation to contribute to the cost of fixing those villas with defective foundations. However, he says that it is necessary for the body corporate to provide details costings and substantiation of what work is to occur in order for him to be able to raise the necessary finance to pay the special levies that will be required.

An interim order will not be granted unless is it necessary due to the nature or urgency of the circumstances to which the application relates (Act, 279). Further, any orders granted must be just and equitable in the circumstances (Act, 276).

For it to be just and equitable to grant relief at this stage, before full and final consideration of all the issues raised, I would need to be satisfied that the application raises a serious question to be determined. I would also need to be satisfied that the balance of convenience between the parties justifies the grant of injunctive relief. That is, I would need to balance the inconvenience to the body corporate of allowing interim relief when the basis for that relief may not subsequently be established against the inconvenience to the applicants of refusing relief pending a final determination.

I am satisfied that there is a serious question to be determined. In particular, the submissions suggest that owners voted on 26 July 2003 to raise a levy to pay for a particular course of action but that course of action has not been proceeded with. There is evidence in a report from McConnell Consulting and an email from Glynn Tucker Consulting Engineers that there were serious flaws with that proposed course of action.

This is a situation where both submissions concede that there are serious problems with the foundations of four of the villas. As Cannington Court is established under a building format plan with equal lot entitlements, any costs of maintaining the foundations of these villas will be shared by all owners equally. While these problems remain, it is understandable that they will affect the values of all lots in the scheme and any worsening of the problems is likely to impose an even greater financial burden on all owners. In this context of this problem not yet being fixed despite owners voting to raise a levy to attempt to fix the problem over eighteen months ago, I also agree that there are serious questions to be determined about the management of the scheme and the involvement of owners in the attempt to fix this problem.

For schemes under a building format plan, the body corporate is under a statutory obligation to maintain foundation structures, roofing structures and essential supporting framework in a structurally sound condition (Standard Module, 109(2)). It does not matter which particular villa is requiring repair, it is the responsibility of all owners to ensure that their body corporate carries out its obligations. Further, the body corporate is required to insure buildings within the scheme (Standard Module, 128) and the delays in rectifying the foundations are likely to affect the ability of the body corporate to obtain this insurance cover.

It has been suggested that the body corporate may be able to recover the costs of this work from the original developer, the local council that approved the building work, structural engineers who supervised earlier remedial work, or relevant insurers. However, the issue of any legal action that can be taken is separate from the legal obligation of the body corporate to perform this work. The
body corporate may wish to formally give these potential defendants the opportunity to perform suitable work at their own cost. However, if this is not agreed then the body corporate must perform suitable work itself and then take legal action to recover its costs if appropriate. For these purposes, it would appear highly beneficial for the body corporate to obtain independent advice about its options from structural engineers and from legal counsel.

In particular, I am concerned by a statement that no committee meetings have been held during this financial year of the body corporate. As not all owners can be directly involved in the day-to-day management of the body corporate, owners elect committee members to perform this function on their behalf. Membership of the committee is a significant responsibility and it is necessary to have an effective committee to both make decisions on behalf of owners and to call meetings and provide owners with material that will allow owners themselves to make decisions concerning the scheme.

The body corporate is under a statutory obligation to maintain the foundations of the villas in a structurally sound condition. I am satisfied that the application justifies interim orders requiring the committee to meet to discuss alternatives regarding both the maintenance of the foundations of the villas and any legal recourse the body corporate may have.

All owners are entitled to notice of committee meetings (Standard Module, 28) and are entitled to attend committee meetings provided they give the secretary 24 hours written notice (Standard Module, 32B(2)). Further, as this issue affects the value of the properties of all owners and all owners will need to contribute to the costs of the work, I consider it appropriate to order that a summary of each alternative be provided to all owners. Similarly, a summary should be provided to assist owners in considering whether they wish to consider legal action to seek to recover losses resulting from the defective foundations.

If there are alternative views then it is for owners to consider those views and owners will ultimately decide their preferred course of action by vote in general meeting. The summary provided may be insufficient to assist owners in making an informed decision but owners wanting more detailed information about any issue are entitled to access the body corporate’s records (Standard Module 150,151).

On the specific issue of the levy raised at the meeting of 26 July 2003, I am aware that owners will be required to contribute additional funds to deal with the problem and I do not consider it appropriate for an interim order to require return of this levy. However, given the challenge to the validity of this levy, I consider it appropriate on an interim basis to prohibit the body corporate issuing any proceedings to recover this levy or impose any penalty for non-payment of this levy. A final determination on the validity of this levy can be made in due course.

For these reasons, I make the interim order above.

The application will be allowed to proceed to submissions and a final determination in the normal course.

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

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0656-2004A

"Cannington Court Garden Villas" CTS 7132

Cannington Court Garden Villas Community Titles Scheme (Cannington Court) is a 24 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module).

On 24 December 2004 I issued an interim order in relation to an application by Boris Tworek and Neil Weston, the owners of lots 10 and 15 respectively (applicants) seeking orders against the body corporate for Cannington Court (respondent). These orders included an order that Boris Tworek call a committee meeting at which the committee was to, among other things, make reasonable endeavours to prepare budgets and specify alternatives for maintaining the foundation structures of all villas in a sound condition.

Boris Tworek complied with the interim order by instructing the body corporate manager to call the committee meeting for 21 January 2004. However, the body corporate manager contacted this office requesting an extension as proper notice of the committee meeting had not been sent on time due to the treasurer being in hospital and not completing the photocopying on time.

The body corporate manager has said that all the documents are now prepared and can be sent to owners in time for a committee meeting on 28 January 2005. Boris Tworek has since contacted this office and confirmed that he has spoken with the body corporate manager and agreed that the committee meeting should be held on 28 January 2005.

I am satisfied that it is appropriate to grant a short extension to allow for the committee meeting to be held on 28 January 2005 (Act, 279(2)).

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

I hereby order that, pending a final resolution of this dispute, any resolution passed by the body corporate at its general meeting called by notice dated 22 March 2005 for 5:30pm on 20 April 2005 is deemed ineffective to authorise the body corporate to engage a contractor to perform works to stabilise units.

This is an interim order and will remain in effect for a period of not longer than two months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0656-2004B

"Cannington Court Garden Villas" CTS 7132

Cannington Court Garden Villas Community Titles Scheme (Cannington Court) is a 24 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module).

Lot boundaries are designated under a building units plan (now known as a building format plan).

On 24 December 2004 I issued an interim order in relation to an application by Boris Tworek and Neil Weston, the owners of lots 10 and 15 respectively (applicants) seeking orders against the body corporate for Cannington Court (respondent). The application concerned a dispute about work the body corporate needs to perform to maintain the defective foundations of some of the villas in the scheme. The orders given included an order that Boris Tworek call a committee meeting at which the committee was to, among other things, make reasonable endeavours to prepare budgets and specify alternatives for maintaining the foundation structures of all villas in a sound condition.

In particular, this order stated that information regarding each alternative for maintenance of the foundation structures of the villas was to be distributed to owners including a brief description of the work, the likely and the maximum cost of the work, any period for which the work is guaranteed, details of any independent engineering advice, any implications for insurance of the scheme, and details of the likely time frame and inconvenience to occupiers.

On 18 April 2005, one of the applicants contacted this office to say that the body corporate was holding an extraordinary general meeting on 20 April 2005 to vote on alternative proposals to secure the defective foundations. The applicant makes submissions to the effect that:

I have reviewed a copy of the voting paper of the meeting which proposes the three alternatives, being:

The explanatory schedule to the voting paper contained the following statement: "The committee recommends that owners accept the quotation from Screw Piers Australia as it is the most cost efficient option and engineers have assured representatives of the Body Corporate that this proposal is an entirely satisfactory resolution to the problem".

It seems extraordinary that the committee expects owners to make an informed decision on the best way to stabilise the units, requiring significant contributions from owners in the form of a special levy, on the meagre information provided with the notice of meeting. The notice does not include information that would appear relevant including a brief description of the work, the likely and the maximum cost of the work, any period for which the work is guaranteed, details of any independent engineering advice, any implications for insurance of the scheme, and details of the likely time frame and inconvenience to occupiers.

In particular, this office has been unable to obtain this information upon making enquiries of the body corporate manager and a committee member. For example, there is a suggestion that warranties offered are only verbal and that guarantees provided may only allow for rectification of defective work but would not allow for recourse for continued damage from further subsidence or provide for any underwriting of liability for defective work. This, together with the failure to provide details of the proposed terms of any agreement, raises serious questions regarding whether the motions put forward, even if passed, can amount to a proper authorisation to engage one of the contractors proposed. In these circumstances, it seems appropriate to grant an interim order that will operate for a short period of time to prevent engagement of any of the proposed contractors pending a final determination of the dispute.

I consider it important to allow the meeting and vote to proceed. I also understand that the situation is reasonably pressing and I would intend to make further orders to resolve the dispute as soon as practicable. Final orders may simply revoke this interim order and allow the body corporate to proceed with any alternatives adopted by the votes of owners. Alternatively, it may be necessary to require a further meeting to allow proposed works to be properly authorised.

For these reasons, I make the interim order above.

The application will be allowed to proceed to submissions and a final determination in the normal course.

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

I hereby order that:

1. The body corporate must hold an extraordinary general meeting on Saturday, 14 May 2005 to consider proposals to rectify subsidence of villas 5, 10 and 15;
2. Notice of this general meeting will be deemed to be valid provided that it is sent by 6:00pm on Monday, 9 May 2005.

I further order that proposals to rectify subsidence of villas 5, 10 and 15 must, whether submitted by the committee or individual owners:

1. Be submitted to the body corporate manager by 9:00am on Monday, 9 May 2005;
2. Specify an amount authorised to be spent pursuant to the resolution and, if above $3,000, be accompanied by at least two alternative quotations unless there are exceptional reasons making it impracticable to obtain two quotations;
3. Be accompanied by an explanatory note of up to 300 words for inclusion with the notice of meeting. Relevant comments may include a brief description of the work (including whether it is part of a staged approach), any engineering advice or guarantee as well as any time frame or known implications for insurance of the scheme. (Any lengthy explanatory material can also be provided to the body corporate and be available for owners to view on request);

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0656-2004C

"Cannington Court Garden Villas" CTS 7132

Cannington Court Garden Villas Community Titles Scheme (Cannington Court) is a 24 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module).

Lot boundaries are designated under a building units plan (now known as a building format plan).

On 24 December 2004 I issued an interim order in relation to an application by Boris Tworek and Neil Weston, the owners of lots 10 and 15 respectively (applicants) seeking orders against the body corporate for Cannington Court (respondent). The application concerned a dispute about work the body corporate needs to perform to maintain the defective foundations of some of the villas in the scheme. The orders given included an order that Boris Tworek call a committee meeting at which the committee was to, among other things, make reasonable endeavours to prepare budgets and specify alternatives for maintaining the foundation structures of all villas in a sound condition.

In particular, this order stated that information regarding each alternative for maintenance of the foundation structures of the villas was to be distributed to owners including a brief description of the work, the likely and the maximum cost of the work, any period for which the work is guaranteed, details of any independent engineering advice, any implications for insurance of the scheme, and details of the likely time frame and inconvenience to occupiers.

On 20 April 2005 owners considered three alternative proposals to secure the defective foundations. The three alternative proposals were:

The explanatory schedule to the voting paper contained the following statement: "The committee recommends that owners accept the quotation from Screw Piers Australia as it is the most cost efficient option and engineers have assured representatives of the Body Corporate that this proposal is an entirely satisfactory resolution to the problem".

This notice and explanatory schedule lacked information that would appear relevant. Quotations were a single page long with a quoted but no maximum price. A technical description of the proposed work was listed on the quotations but not all quotations included a general description of what would be achieved by the work. For example, the proposal is clearly not "an entirely satisfactory resolution" to the problem of subsidence as it does not address the obvious subsidence problems at the centre of units 10 and 15 but only further underpins the southern wall of those units that was already underpinned in 1993. The explanatory schedule also failed to give information about any period for which the work is guaranteed, details of any independent engineering advice, any implications for insurance of the scheme, and details of the likely time frame and inconvenience to occupiers. No proposed terms of any agreement were supplied and it was not clear whether anticipated costs could blow out significantly if difficulties were encountered. In particular, the legislation generally requires owners to be provided with a choice of at least two quotations for work of this nature. The alternatives put to owners involved work directed at different outcomes and did not contain alternative quotations for each different proposal.

Therefore, by an interim order dated 20 April 2005, I allowed owners to vote on the alternatives put forward by the committee but, on an interim basis, deemed this resolution ineffective to authorise the body corporate to enter into any preferred engagement. The proposal overwhelming favoured by owners was the first proposal involving the installation of three screw piers and two 45 degree anchor points at the southern end of units 5, 10 and 15. However, in the context of this dispute, it appeared important to meet with owners and the contractors who had put forward quotations to obtain additional information about the proposal.

On 26 April 2005, I attended the scheme to inspect the buildings and meet with owners and representatives of the companies who had put forward quotations for underpinning of the units. At this meeting a number of issues were discussed including what work was proposed, potential complications, and the need for urgent rectification of the problems in order for the body corporate to maintain its insurance cover.

The legislation applied by an adjudicator provides that, for lots created under a building format plan, the body corporate must maintain foundation structures and essential supporting framework, including load-bearing walls, in a structurally sound condition (Standard Module, 109(2)). The body corporate is required to perform this maintenance irrespective of any potential legal liability owed by another person. However, the body corporate is able to sue a person whose actions cause or contribute to damage to parts of the common property or a lot that the body corporate is required to maintain (Act 33, 36, Standard Module 109(4)). An adjudicator has limited jurisdiction in respect of disputes between the body corporate and a party external to the scheme (Act, 227). For example, if the body corporate did sue an engineer, developer, local council or contractor for faulty works or negligence then an adjudicator would not have any jurisdiction over that dispute.

An adjudicator does, however, have jurisdiction to make an order that is just and equitable to resolve a dispute between an owner and the body corporate about an alleged failure by the body corporate to comply with its maintenance obligations (Act, 276). In particular, an adjudicator has power to make an order to require the body corporate to carry out stated repairs where an owner has suffered damage to their lot because of the failure of the body corporate to carry out maintenance (Act, 281).

Other legislation is also likely to be relevant to the body corporate. For example, if the body corporate enters into a contract involving structural maintenance of villas within the scheme then the Domestic Building Contracts Act 2000 would appear to be relevant.

An adjudicator has no jurisdiction under any other legislation including the Domestic Building Contracts Act 2000, Building Act 1975 or any Building Code or Australian Standard. If the body corporate, or any owners, have concerns about compliance with building regulations then those concerns should be raised with the appropriate authority.

Given the amount of spending involved and the potentially very serious situation faced by the body corporate, it would seem prudent for the committee and owners to obtain independent legal advice. Similarly, it may be valuable to obtain a report from an independent engineer that considers the various proposals and reports already obtained by the body corporate.

Information can also be obtained from relevant government or statutory bodies. For example, further information about the rights and responsibilities of owners and bodies corporate under the Body Corporate and Community Management Act 1997 can be obtained from this office by telephoning 1800 060 119 or accessing the website http://www.dtftwid.qld.gov.au/disputeres/bccm/.

Information about the legal requirements and statutory warranties for domestic building works can be obtained from the Building Services Authority by telephoning 5575 7999 or accessing the website www.bsa.qld.gov.au. For example, the Building Services Authority has published fact sheets on minimising the risk of subsidence. Reference is made to a Queensland Building Services Board Policy which applies to residential construction work entered into from 1 September 2004. This information discusses responsibilities of the contractor, including giving the engineer information about the site, obtaining written confirmation of soil testing and that the design meets drainage requirements, and certification that the construction complies with the design, Australian Standards and the Building Code of Australia. This information states that failure by contractors to adhere to the minimum requirements of the Queensland Building Services Board Policy may prejudice their ability to claim no fault subsidence under BSA’s Home Warranty Insurance Policy. If the body corporate is to gain any protection under this policy then it should familiarise itself with any requirements under the policy. For example, there may be requirements that the contractor is licensed to do the work and that the body corporate needs to make a claim within three months of any failure of the rectification work becoming evident.

The information provided by the BSA also states that failure by home owners to meet their responsibility to appropriately maintain foundations and footings may prejudice their ability to make a claim under their Home Warranty Insurance Policy. The body corporate should familiarise itself with responsibilities of home owners to maintain foundations and footings as, under a building format plan, it is the body corporate who is responsible for maintaining foundation structures and maintaining pipes and drains that form part of the common property utility infrastructure for the scheme. Under a building format plan owners share responsibility for maintenance of each others’ villas much more than they would under a standard format plan. It seems prudent that the body corporate recognise this by undertaking a regular inspection of the roofing and foundation structures of all villas in the scheme to aid compliance with its maintenance obligations. This will also assist the body corporate to produce more accurate sinking fund estimates to avoid the need for large special levies.

It is generally agreed that villas 5, 10, 15, and 20 are built on a spread footing with external brick walls built on beams supported by piers around the edge of the villa and internal wooden floors supported on additional central piers. It is also agreed that the villas are built on up to several metres of fill on the side of a valley, that original piers went only partway through the fill, and that villas 5, 10 and 15 are suffering from subsidence.

Documentation supplied by the applicants and the body corporate indicate that:

A report from Soil Surveys Engineering Pty Limited states that the fill underlying units 5, 10, 15 and 20 appears to be unstable as evidenced by previous damage that has occurred to the units and the signs of soil creep, settlement and piping noted during a site inspection. This report recommends that the fill be suitably retained by retaining walls founded into the underlying rock and that development works, including drainage works, be designed and/or reviewed by a suitably qualified and experienced engineer. It also states that suitable underpinning of the buildings will be required.

On making a purely visual inspection of the scheme I was able to observe:

A number of different engineers have provided comments on the situation. One view appears to be that it is necessary to retain the fill to stop any creep before taking steps to underpin the units. The second view is that it will be too expensive to stabilise the fill with a retaining wall and that a retaining wall will not solve the problem of subsidence due to large voids in the fill. On this second view it is argued that underpinning and bracing sufficiently strong to handle any sideways creep is the best method of stabilising the villas.

Engineers comments discussed included comments to the effect that:

The work claimed to be needed to be performed can be broken down into four stages:

One engineer engaged by the body corporate recommended preventing movement of the villas by installation of a retaining wall to restrict movement of the fill. It was proposed that a retaining wall be embedded into rock at a cost of $113,000. It appears that this proposal was discarded by the committee. There have been claims that this proposal was too expensive. It has also be claimed that this proposal would not prevent the subsidence problems from voids in the fill and involved a timeframe that was too lengthy once time was allowed for the fill to settle and subsidence to be fixed by subsequent underpinning.

The proposal preferred by the majority of owners is to stop movement of the villas by underpinning the villas to the rock. A successful underpinning would keep the villas stable irrespective of any creep in the fill. Some of the villas have been underpinned in the past and there is debate about whether the underpinning of villas 10 and 15 in 1993 was sufficient to prevent any movement of those villas.

The preferred proposal of screw piers underpinning the southern walls of villas 5, 10 and 15 is aimed at preventing movement of the villas as well as preventing subsidence of the southern walls of those villas. In order to get the necessary machinery to the area associated works involving creating of a road and installation of rock walls to stop erosion would be involved. Some owners have expressed concern that the piers will be insufficiently strong to handle sideways creep in the fill and will do nothing to prevent or rectify subsidence in other parts of the villas.

It will also be necessary to rectify and prevent subsidence of the villas generally rather than just preventing movement of the villas.

Some owners say that it will be cheap and effective for there to be jacking and packing based on the existing piers, perhaps associated with gel used to fill voids in the fill. Other owners say that jacking and packing has been attempted in the past and has failed due to the poor quality of the fill.

Some concerns have been expressed about whether packing of existing piers will be effective and, particular, that putting in new piers at the centres of the villas may be impossible due to inability to bring the necessary equipment under the centres of the villas. For this reason, there has been a suggestion to use steel beams running under the units from east to west. However, this may require extra new piers under the east and west walls to support the additional weight.

Where an owner has suffered damage to the interior of their lot as a result of the body corporate’s failure to comply with its maintenance obligations the owner may have a claim against the body corporate for rectification of the interior of their lot. Further, the rectification works proposed by the body corporate are likely to cause further damage to the interior of the lots. It seems reasonable for the body corporate to arrange for rectification of the subsidence problem before rectifying any consequent damage to the interior of any villas. However, the body corporate should obviously not delay unduly in doing this.

Some owners have expressed a concern that the body corporate is proposing to adopt cheap fixes to the subsidence that will be of a more temporary nature and cost all owners a lot more in the long term by requiring continual rectification and repairs over the longer term. This is something that owners must weigh up for themselves when choosing between different alternatives. As long as owners comply with the legislation and choose a reasonable alternative an adjudicator will not impose a choice upon owners.

Of the alternatives put to owners, only the third alternative costing $333,254 purported to be a complete solution to the problem of subsidence. The other two solutions were directed primarily towards underpinning the southern wall of the villas to the underlying rock.

One of the objects of the Act is to balance the rights of individuals with the responsibility for self management as an inherent aspect of community titles schemes (Act, 4). Obviously there will be differences between owners about how a body corporate is to fulfil its maintenance obligations. Owners in affected villas will naturally have some preference to a long term solution where they can be confident of no further problems with subsidence of their villas. Other owners may have a preference towards a lower cost solution even if they are not as confident the solution will avoid a re-occurrence of problems some time later.

Owners need to weigh up alternatives and seek sufficient information to satisfy them of the merits of each alternative. There are limited circumstances in which an adjudicator will overturn a decision of owners in general meeting.

One basis upon which an adjudicator may overturn a decision in general meeting is if that decision is unreasonable. A body corporate is required to act reasonably in performing its functions and administering the common property for the benefit of owners (Act 94, 152). If a significant number of owners said that they had been misled about alternatives for rectifying the villas and would have voted differently if they had been given accurate information then this may be a basis for an adjudicator to declare the resolution to be void. However, the applicants have not provided any statements from other owners to this effect. To the contrary, some owners have said that they have had a lot of information about the problem and possible solutions and supported the vote taken in general meeting. Another basis for declaring the resolution void may be if the weight of expert opinion indicates that the proposal adopted is unreasonable. However, the company proposing the underpinning has provided a letter from their engineer supporting the proposal and the company has provided a revised quotation provided for excavation to remove any obstruction that prevents the screw piers reaching the desired depth.

On balance, the applicants have failed to show that the screw piers proposal is unreasonable. If the body corporate was refusing to take steps to comply with its obligations then I may have made an order to appoint an administrator to perform those obligations on behalf of the body corporate. The applicants may consider that the body corporate has failed to do this over a long period of time but, since lodgement of the application, I am satisfied that the body corporate has taken steps to comply with its maintenance obligations. In particular, I am not prepared to declare the screw piers proposal unreasonable given the letter dated 26 April 2005 from an engineer, Wil Jutte, recommending a staged approach to rectification of the subsidence.

One owner has claimed that it is unnecessary to install screw piers for villas 10 and 15 as the southern wall of those units has already been stabilised by rectification works in 1993. This may be a basis on which to argue that the work is unnecessary and unreasonable. However, there is no satisfactory evidence provided to me to establish that the southern wall of those units is in a structurally sound condition and other owners have said that it is necessary to perform new work and have the stability certified by an engineer to satisfy insurance requirements. Again, on balance, it has not been established that the proposal to install screw piers for villas 10 and 15 is unreasonable.

Another basis on which an adjudicator may declare a resolution void is if it fails to comply with legislative requirements. For example, for a 24 lot scheme, spending above $3,000 must ordinarily be specifically authorised by an ordinary resolution of the body corporate and spending above $6,000 must ordinarily be accompanied by at least two quotations for carrying out the work (Standard Module 103, 104). In this instance, it is arguable that the alternatives put to owners in general meeting were not sufficiently similar to amount to two alternative quotations for a single project. It is also arguable that the information provided was insufficient to specifically authorise entry into a contract, particularly because it was not clear if complications may arise that would result in costs increasing substantially and the body corporate being left with a half completed job and no authorisation to pay those additional costs.

These arguments raise serious legal questions regarding whether the resolution is sufficient to authorise entry into a contract to perform the underpinning. However, the resolution can still be viewed as an indication by owners that their preferred approach to deal with the problems of subsidence of the villas is to have screw piers added under the southern wall of the villas as an initial step and then take other steps as necessary to address problems of subsidence in the centres or at other parts of the villas. I intend to give the committee an opportunity to apply to put more information and alternative quotations before owners to redress these problems.

The body corporate’s compliance with its insurance policy with CHU is a matter between the body corporate and CHU and is outside the scope of this decision. However, a number of owners have expressed concern that the body corporate’s insurance will be terminated if the underpinning is not completed by 24 June 2005. For that reason, they have requested that the body corporate be allowed to enter into a contract for underpinning based solely on the resolution of 20 April 2005. Alternatively, they seek that any further general meeting be held quickly on a substantially shortened notice period to allow the works to be completed by 24 June 2005.

These owners said that it was very difficult for the body corporate to gain insurance because of the subsidence problem. It is a legislative requirement that buildings under a building format plan that form part of the scheme land must be insured by the body corporate, along with the common property and body corporate assets (Standard Module 127, 128). It may be unreasonable for the owners to adopt a method of rectification that is not satisfactory to the insurance company if there is an alternative method that will be satisfactory to the insurance company.

I requested a copy of the insurance documentation. This included a copy of an email from the body corporate’s previous insurer CGU. This referred to a refusal on 16 November 2004 to renew the policy for the reason that "there are inherent structural defects to the building which cannot readily be rectified without substantial structural alterations and costs. As the building stands at present, we do not consider it a satisfactory risk".

I have also reviewed documents relating to the present insurance with CHU. This includes a copy of a proposal for a residential strata insurance plan with CHU that is not signed or dated but appears to have been filled in on behalf of the body corporate. This proposal has a facsimile header with the date 19 December 2004. In response to question three of this proposal that relates to known defects to buildings the written response is "Subsidence at site of units 5, 10, 15 – Being Rectified".

On viewing the terms of the CHU insurance policy, I note that an endorsement proviso states that the attached policy, inception date 24 December 2004, is strictly subject to the following requirements:

This proviso further states "Written compliance with the requirements should be forwarded to this office within one week of the required completion date. Should the requirements not be completed and confirmation provided as specified, CHU may at its option, cancel the policy and forward the premium pro-rata (less any expenses) for the un-expired period of insurance".

It is by no means obvious that underpinning the southern edge of villas 5, 10, and 15 will amount to compliance with CHU’s requirements in respect of its insurance policy. Of the three alternatives provided at the meeting of 20 April 2005, it was only the third alternative at a cost of $333,254 that proposed a complete solution to rectify the subsidence of those villas. The preferred alternative of underpinning the southern walls of the villas will not rectify the problems of subsidence at the centres of the villas. The contractor made that clear at the inspection and a subsequent letter dated 26 April 2005, from the engineer states "The first priority should be stabilizing the units by installing piers under the Southern wall of the units ... All stormwater pipes shall be replaced and the water shall be discharged in such a way that no scouring or erosion will occur. The levelling and rectifying of the interior of the units is then possible by means of adjustable supports under the bearers on top of the existing piers or by means of steel beams under the units from East to West. This however may require extra new piers under the East and West walls. The total rectification shall be done in stages as nobody can predict what the next problem will be or what next will arise."

I cannot make any determination about whether CHU will be satisfied with the underpinning proposal. However, it would be unfortunate if the underpinning was done but CHU said that it was insufficient to rectify the subsidence and terminated the policy. This is particularly as a number of owners have said that it was very difficult for the body corporate to find any company wiling to ensure the scheme and that termination of the insurance by CHU is likely to amount to a default that will allow their financiers to foreclose on their mortgages. Due to the potential serious consequences, it may be prudent for owners to gain their own legal advice and/or ensure that the body corporate gains legal advice. In particular, the body corporate may wish to clarify with CHU that a staged approach to rectifying the subsidence will be satisfactory to CHU. To assist in this, owners may wish to conditionally adopt a proposal to address the second stage of rectification at the upcoming extraordinary general meeting. If CHU refuses any extension it may be that only the third alternative declined at the meeting of 20 April 2005 would completely rectify subsidence of the villas on an immediate basis.

Owners who consider that further underpinning of the southern walls of units 10 and 15 is unnecessary due to the substantial underpinning in 1993 may also want to determine if it is possible to satisfy CHU that the 1993 underpinning was sufficient and that it is appropriate to proceed directly towards a solution that will address the problem of subsidence at parts of the units other than the southern wall. This may require provision of local council records and engineering reports from 1993.

On 6 July 2002 the body corporate in general meeting resolved to raise a special levy of $54,000 plus GST to undertake structural repairs to Units 5, 10, 15 and 20 and to rebuild the southern side embankment. These works were not proceeded with and on 26 November 2004 the applicants lodged this application which challenged the validity of this levy. It is submitted that the levy was premature and poorly conceived and, further, that one of the applicants sought finance to cover his portion of an expected levy to perform a complete rectification of the structural problems but was refused approval because the structural problems with his villa and resultant damage meant that the unit was insufficient security.

On 24 December 2004 I granted an interim order preventing the body corporate to take any steps to enforce payment of the levy. It was clear by that time that the body corporate had not acted on the resolution passed in 2002 which raised serious questions about the validity of the special levy. The body corporate should be adopting proper administrative and sinking fund budgets each year and setting levies on the basis of those budgets (Standard Module, 95). In particular, the sinking fund budget should take into account anticipated expenditure of a capital or non-recurrent nature over a ten year period (Standard Module, 94). Special levies should only need to be raised for liabilities for which there was inadequate provision in the budget and should be raised for a particular liability. In this instance, it seems that the body corporate should raise a new levy for the particular rectification work necessary to comply with the body corporate’s maintenance obligations. However, on a just and equitable basis, it appears fair that owners who contributed to payment of the special levy for the aborted works proposed in 2002 should be credited for the amount paid pursuant to that levy, including interest earned on that payment.

The majority of owners have expressed a preference for a first stage of rectification involving installation of screw piers at the southern ends of villas 5, 10, and 15. One contractor has provided a revised quotation that allows for a contingency plan if the screw piers cannot penetrate debris underground and a further letter from their engineer saying that the total rectification should be done in stages. This revised quotation also states that the quotation is valid for 30 days and work can be started immediately on acceptance of the quotation and will take approximately three to four weeks with weather permitting.

Another contractor has said they will provide a comparative quote for screw piers on the southern walls of those units. If that contractor does not provide a quotation then the body corporate should urgently seek an alternative quote. There are several other contractors listed in the yellow pages as providing underpinning services in the Gold Coast Area.

Particularly given the concerns about insurance for the scheme I consider that I should make an order allowing a significantly reduced notice period for a meeting at which owners can consider two alternative quotations for installation of screw piers at the southern ends of villas 5, 10 and 15. I will require the meeting to be held on Saturday, 14 May 2005. If the screw piers proposal is adopted then this should give sufficient time to complete the work before 24 June 2005.

It would seem prudent that the committee contact their insurer and seek agreement on what is necessary to meet the insurer’s requirements. For example, if it is necessary for the body corporate to also adopt a proposal to rectify the subsidence at the centres of villas 10 and 15 before 24 June 2005 then the committee may wish to put forward proposals for that work or seek an extension from the body corporate’s insurer to complete that work based on the recommendation from an engineer that the work to rectify subsidence be completed in stages.

Owners who wish to suggest different proposals can rely on the general power to submit agenda motions to put forward their proposal (Standard Module, 41). Owners submitting their own motion should be aware of the opportunity to submit an explanatory statement of up to 300 words and the general requirement to submit two alternative quotations for a proposal involving spending above the relevant limit for major spending (Standard Module 42C, 104).

I will make an order that any additional quotations and proposals must be provided to the body corporate manager by 9:00am on Monday, 9 May 2005. I will further order that the notice of meeting must be posted by 6:00pm on Monday, 9 May 2005 and that the meeting must be held on Saturday, 14 May 2005. This is a very short time frame but I will order that the body corporate distribute a copy of this order to owners as soon as possible to ensure owners are aware of this timeframe.

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

I hereby order that:

3. The body corporate must hold an extraordinary general meeting on Saturday, 11 June 2005 to consider proposals to rectify subsidence of villas 5, 10 and 15;
4. Notice of this general meeting will be deemed to be valid provided that it is sent by 6:00pm on Wednesday, 1 June 2005.

I further order that proposals to rectify subsidence of villas 5, 10 and 15 must, whether submitted by the committee or individual owners:

4. Be submitted to the body corporate manager by 9:00am on Tuesday, 31 May 2005;
5. Specify an amount authorised to be spent pursuant to the resolution and, if above $3,000, be accompanied by at least two alternative quotations unless there are exceptional reasons making it impracticable to obtain two quotations;
6. Be accompanied by an explanatory note of up to 300 words for inclusion with the notice of meeting. Relevant comments may include a brief description of the work (including whether it is part of a staged approach), any engineering advice or guarantee as well as any time frame or known implications for insurance of the scheme. (Any lengthy explanatory material can also be provided to the body corporate and be available for owners to view on request);

I further order that any owner who paid the special levy adopted in July 2002 for rectification of subsidence of the villas must be credited the amount paid towards that levy (including interest earned) in respect of any request to pay a levy for a current rectification proposal adopted by the body corporate.

I further order that the body corporate must, as soon as practicable, distribute a copy of this order to all owners.

This is an interim order that cancels and replaces my interim order of 29 April 2005. This order will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0656-2004D

"Cannington Court Garden Villas" CTS 7132

Cannington Court Garden Villas Community Titles Scheme (Cannington Court) is a 24 lot scheme under the Body Corporate and Community Management Act (Act) and the Act’s Standard Module Regulation (Standard Module). Lot boundaries are designated under a building units plan (now known as a building format plan).

On 29 April 2005 I issued an interim order in relation to an application by Boris Tworek and Neil Weston, the owners of lots 10 and 15 respectively (applicants) seeking orders against the body corporate for Cannington Court (respondent). The application concerned a dispute about work the body corporate needs to perform to maintain the defective foundations of some of the villas in the scheme. The orders given included an order requiring the body corporate to hold an extraordinary general meeting on Saturday, 14 May 2005 to consider proposals to rectify subsidence of villas 5, 10 and 15. The order gave the committee an opportunity to submit a motion and two alternative quotations for a proposed first stage of rectifying subsidence. Other owners also had the opportunity to submit any alternative proposals for rectifying the subsidence including the submission of two alternative quotations. Motions and quotations were required to be submitted by 9:00 am on Monday 9 May 2005.

On Friday 6 May, one of the applicants provided this office with a copy of an order of the Commercial and Consumer Tribunal.^[1] This order indicated that the registration of the engineer who was to certify one of the proposals put forward by the committee had been cancelled. Concerns were therefore raised about the effectiveness of the proposal, the extent of any recourse if the proposal failed, and whether insurance cover would be refused if the proposal was not certified by a registered professional engineer.

The body corporate committee has subsequently sought an extension of 30 days to enable them to appoint legal representation and source an alternate engineer to assist them to comply with my interim order of 29 April 2005. I note also that the body corporate manager has contacted the body corporate’s insurer and received confirmation that the insurer will extend operation of the proviso under its insurance policy by three months to give the body corporate adequate time to repair the affected subsidence areas of the complex.

In these circumstances, I consider it appropriate to issue a new interim order on similar terms to my order of 29 April 2005 but with a longer timeframe for compliance. I will extend the date of the meeting to four weeks after the original date. To still allow reasonable notice of this meeting, I will extend the date by which the committee or owners need to submit motions and quotations for the meeting to three weeks from today.

^[1] Board of Professional Engineers of Queensland v Jutte [2004] CCT K005-03, P Lohrisch, 24 March 2005.

Number of Scheme:	7132
Name of Scheme:	Cannington Court Garden Villas
Address of Scheme:	24 Cannington Place HELENSVALE QLD 4212

Number of Scheme:	7132
Name of Scheme:	Cannington Court Garden Villas
Address of Scheme:	24 Cannington Place HELENSVALE QLD 4212

Number of Scheme:	7132
Name of Scheme:	Cannington Court Garden Villas
Address of Scheme:	24 Cannington Place HELENSVALE QLD 4212

Number of Scheme:	7132
Name of Scheme:	Cannington Court Garden Villas
Address of Scheme:	24 Cannington Place HELENSVALE QLD 4212

Number of Scheme:	7132
Name of Scheme:	Cannington Court Garden Villas
Address of Scheme:	24 Cannington Place HELENSVALE QLD 4212

1.	That building and common area contents, legal liability and office bearers liability "will exclude indemnity on all claims ... relating to landslides, subsidence and structural defects"; and
2.	"It is further declared that rectification works to be completed by 24/06/2005."

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Cannington Court Garden Villas [2004] QBCCMCmr 666 (24 December 2004)