Galileo Tower [2005] QBCCMCmr 152 (16 March 2005)

Last Updated: 5 July 2005

REFERENCE: 0557-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	14193
Name of Scheme:	Galileo Tower
Address of Scheme:	12 Mullen Street HAMILTON Q 4007

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

Andrew James MACKENZIE, owner of Lot 4; Marie Yvonne DAWSON, owner of Lot 5; IGNATATUS PTY LTD (J Gorman), owner of Lot 3; CRATBURN PTY LTD (H Lithgo, E Meixner), owner of Lots 1 and 2; Timothy Caesar LOWNE, owner of Lot 6; and Yvonne Muriel Renee McCOMB, owner of Lot 9,

I hereby order that the application for the following order – "To rule that the renovations and repairs work proposed in Motion 2 and Motion 3 be carried out and levies struck. Motions refer to EGM of 12/8/04," is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0557-2004

"Galileo Tower" CTS 14193

The applicants, Andrew Mackenzie of Lot 4 and 6 other owners, have sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 ("the Act") -

"To rule that the renovations and repairs work proposed in Motion 2 and Motion 3 be carried out and levies struck. Motions refer to EGM of 12/8/04."


JURISDICTION:
This is a dispute between a number of owners (the applicants) and the body corporate (the respondent) concerning the failure of a special resolution for certain renovation works to be carried out to the scheme building and the supervision of that work, at an extraordinary general meeting of the body corporate held on 12 August 2004. This is a matter that falls within the dispute resolution provisions of the legislation (see sections 227, 228 and 276 of the Act) and may be determined by a departmental adjudicator.

General powers of an Adjudicator in making an order:

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 this Act or the community management statement; or
c)	a claimed or anticipated contractual matter about –
(i)	the engagement of a person as a body corporate manager or service contractor for a community titles scheme; or
(ii)	the authorisation of a person as a letting agent for a community titles scheme.

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


APPLICATION AND SUBMISSIONS:
In accordance with section 243 of the Act, a copy of the application was served on the respondent body corporate (committee) which was also required to serve copies (first 8 pages and balance on demand) on all other lot owners, along with a copy of the department’s notice inviting the committee and each other owner to make a written submission on the dispute raised in the application.

Submissions were received from P Spottiswood of Lot 11, James Dawes of Lot 12, and Mahoney Lawyers for Carmford Pty Ltd, Brezville Pty Ltd and Peachbroom Pty Ltd (P Hollis) of Lots 7, 8 and 10 respectively, all opposing the application.

The applicants inspected the submissions and subsequently lodged a reply to those submissions (see sections 244 and 246 of the Act).

This is one of three applications for this scheme that concern repairs and renovations to various parts of the common property, the others being Application No’s. 701-2004 and 717-2004. Given the commonality of disputes in the three applications, I shall determine them together and orders for all three with be issued together. The reasons for all three orders should be read together and copies of all three have been sent to all applicants, respondents and parties making a submission to any of the three applications.

The broad facts of the common dispute are as follows.

The building is now over 30 years old and parts of the common property are in need of repair, some repairs being of more pressing concern than others. Owners are facing the same decisions that as other owners in other, similar buildings; that is, whether to merely repair items or replace them with a modern equivalent, or some combination of both. In regard to machinery items such as the elevator subject of this application, the decision includes whether to take advantage of new technology which may offer a smoother ride, be more reliable, stave off future repairs for a much longer period, etc (see later). The decisions include questions of cost, the availability of replacement parts, the ability of some owners to pay, how does the benefit fall on owners, a prioritisation of repairs, expert guidance in identifying necessary repairs, whether renovation costs will be reflected in added value to lots, and how the different options must be resolved.

The owners have been considering these questions for some time. The applications and the outcomes of the extraordinary general meeting held on 12 August 2004 ("the meeting") show that owners have varying opinions on what should be done. There is reference to a "Master Plan" being decided on by the body corporate in general meeting in 2000 which was to be prepared setting out details for refurbishment (repairs and improvements) of the building. The body corporate engaged Norman Disney Young, Consulting Engineers, ("NDY") to review the existing lift equipment; it subsequently produced a "Lift Condition Report" dated 18 July 2003, recommending certain changes to the lift. Also around that time, the body corporate engaged Leary and Partners, Building Surveyor ("Leary"), to identify building defects and make repair recommendations. Leary subsequently carried out an inspection of the building and produced a report titled "Defects & Occupational Health & Safety Report" dated 27 August 2003 setting out details of the defect, the recommended repair, a prioritisation of the repairs, and a rough cost of the repair.

The meeting was held for owners to votes on various repairs and replacements. The first motion following confirmation of minutes, Motion 2, is a "motion with alternatives", comprising a principal motion and two alternative motions containing tenders by Milson Projects Pty Ltd ($479,358) and James Trowse Constructions Pty Ltd ($498,724) respectively. The cost per owner (all have equal lot entitlements) is around $33,000 (see section 42B of the Standard Module). The principal motion was put as a special resolution in recognition of the improvements it contained (see section 113 of the Standard Module). The motion failed and Application 557-2004 lodged by 7 owners is for an order to give effect to the motion – while the grounds do not specifically say that the opposing votes were unreasonable, that is easily inferred from their words and I have proceeded on that basis. The application also seeks a similar order for Motion 3 which is the appointment of a supervisor over the renovation works contained in Motion 2 – of course its fate will be decided by the order in respect to Motion 2.

The initial order sought in Application 717-2004 (by three related companies which each own a lot) was directly contrary to 557-2004 in that it sought Motions 2 and 3 remain as defeated motions. The applicants later made a change by adding to the application, permitted under section 245 of the Act but which required the submission process be restarted in respect to the additional matters. The additional orders sought was in effect seeking the invalidation of all of the motions passed at the meeting that related to building works, namely resolutions in respect of Motions 4, 5, 6, 7, 8, 9, 10, 11, 13, and 14.

The orders sought under this application (Application 701-2004, is for the invalidation of the resolutions passed in respect of Motions 4 (the lift), 11 (the garage doors) and 12 (the hot water systems). I have dealt in some depth with these particular resolutions in my Statement of Reasons to the interim order and I will be dealing specifically with them under "Determination" which follows.

Apart from Motion 2 (which was put as a special resolution), the determination of whether resolutions passed should stand or fall depends on whether the subject matter of each motion should be properly characterised as merely a repair, in which case an ordinary resolution is sufficient, or (assuming the cost is above the legislative threshold of $3,600 (12 @ $300 per lot) or alternatively is under the threshold amount but is part of a project of improvements that are in excess of the value) is an improvement, in which case section 113 requires a special resolution. All of the other motions were resolved by ordinary resolution, presumably on the basis that the committee considered all of them were repairs and not improvements, or if an improvement’s cost was under the threshold amount then they were not part of a project over the threshold amount.

I have broadly set out the facts of the matter and the orders sought under the three applications.

I might say at this point that in my Statement of Reasons to the interim order I made the following comment in respect of this and the other two applications –

"While I am ready to deal with the applications in time, perhaps the owners might think a better outcome will be achieved if they were to strive for a negotiated outcome encompassing all of the intended and suggested works, rather than fight each other through the adjudication system and later perhaps through the District Court on appeal. It may be more timely and effective (cost and otherwise) in this instance, to engage a trained mediator for the purpose. In any case, that is a matter for owners to decide."

I thought it may have been possible with the benefit of the comments and references I made in the interim orders to this and 717-2004, that owners might have been able to negotiate a suitable compromise outcome and call a further meeting to formalise that outcome. That obviously did not happen.


DETERMINATION:
"Galileo Tower" was registered as a building units plan (now termed a building format plan) on September 1973 and comprises 12 lots. It is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Standard Module").

There is an important preliminary point I need to make concerning an adjudicator’s jurisdiction to make such an order as the applicants are seeking, namely an order to give effect to a failed motion for the body corporate to carry out improvements to the common property.

The principal motion to Motion 2 was put as requiring a special resolution in recognition of the improvements for which it sought approval (see section 113 of the Standard Module). The cost per owner (all have equal lot entitlements) is a large sum of around $33,000 (see section 42B of the Standard Module).

The legislation does not prevent owners from agreeing to spend such large sums as proposed by Motion 2 on refurbishing the scheme building, but it sets a cost threshold for a higher level of resolution to apply (special resolution) in recognition of the varying needs and desires of owners, and their financial means. This contrasts with the position of the legislation concerning necessary maintenance (repairs and replacement) where no such threshold applies (except to require 2 or more tenders). Owners have no option but to contribute to the cost of necessary repairs whatever the cost may be. But, and rightly so, they do have a right to block any change to the building that is in the nature of an improvement.

That is what has occurred here in Motion 2 failing. What then are the respective powers of an adjudicator to give effect to failing motions concerning improvements. Item 10 of Schedule 5 to the Act provides that adjudicators may give effect to a failed motion that requires a "resolution without dissent" to pass, on grounds that the opposition was "in the circumstances unreasonable". Item 17 provides that an adjudicator can give effect to a failed motion for an owner to make improvements for the benefit of their lot (special resolution) though no grounds are mentioned, however I would suggest that unreasonableness is implied.

But in regard to improvements by the body corporate to common property, such as Motion 2, section 113(1)(c) of the Standard Module provides that an adjudicator may give effect to a failed motion where the adjudicator "decides the improvements are reasonably necessary for the health, safety or security of persons who use the common property". While I leave open the point that the wide powers given an adjudicator under section 276 of the Act may not be limited by this provision in all circumstances, I consider that there must be exceptional circumstances for an adjudicator to give effect to such a motion. At the least the standard should be that of "in the circumstances unreasonable" as in Item 17, though I suggest it should be a high level of unreasonableness.

The circumstances surrounding Motion 2 do not involve substantive issues of health, safety or security, though the applicants have not identified and sought to argue this provision. However, for example, the applicants have generally argued that the balcony railings are corroded and the glass cracked, severely on some balconies. The Leary report identifies the damaged mountings need repair though the committee motion takes the remedy beyond this work. Leary has also identified other instances requiring immediate repair, and repair within a short period.

Clearly there are defects that need to be addressed promptly, however I am not satisfied that the dissenting votes are unreasonable such that improvements catering for those defects to be remedied should be given effect to by an order. However, unless the body corporate is able to gain prompt support for one or more of its improvement work proposals, then it will need to make the repairs necessary for those defects identified by Leary as being urgent or near urgent (ie repair within 6 months), without the remedy being part of an improvement.

In the circumstances I have dismissed the application to give effect to Motion 2 and Motion 3.