The Avenues on Palm Meadows Drive [2005] QBCCMCmr 159 (22 March 2005)

Last Updated: 5 July 2005

REFERENCE: 0065-2005

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30189
Name of Scheme:	The Avenues on Palm Meadows Drive
Address of Scheme:	136 Palm Meadows Drive CARRARA QLD 4217

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

B&W Taylor, L&Z Walker, R&L Layton, J&H Zschunke, P&B McHutchinson, J&N Sommerville, the Owners of lots 46, 76, 31, 49, 30 and 17.

I hereby order that the Body Corporate Committee refrain from granting approval to the making of improvements valued at more than $250 in exclusive use areas until final orders are made.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0065-2005

"The Avenues on Palm Meadows Drive" CTS 30189

The Application
This application for an interim order has been brought by a number of owners who are of the view that previous body corporate committees for this scheme have wrongly approved the construction of various structures on exclusive use areas.

It is contended that the original by-laws for the scheme gave lot owners exclusive use of specific areas of common property but did not authorise owners to make improvements on the exclusive use areas. The scheme contains 135 lots and it is claimed that there are now some 45 structures in place for which appropriate approvals have not been obtained.

This dispute resolution application was made on 31 January 2005 followed by an amended application on 2 February. The applicants are seeking the following interim orders:

1. That resolution 4 purportedly carried by special resolution on 4 November 2004 can only apply to alterations to the exterior of lot buildings for retrospective approvals.

2. That resolution 4 purportedly carried by special resolution on 4 November 2004 can not apply to structures on exclusive use common property because as a motion without dissent was required to ratify the exclusive use by-laws.

3. That the previous body corporate manager, Stewart Silver King & Burns should reimburse the body corporate for:

- cost of preparing the CMS and convening the EGM referred to above;

- costs of preparing the previous CMS and convening the previous EGM; and

- any costs which may be incurred by the body corporate in relation to structures constructed on common property without proper approval.

Having regard to the complexity of this application and the numerous references to Body Corporate records, I decided to seek a submission from the Body Corporate Committee. Although this step is not essential in the determination of an interim application, I considered that the issues raised were of such a serious nature that the Body Corporate Committee should be given an opportunity to respond to the various allegations of non-compliance with the Act. A submission was received from Hynes Lawyers on behalf of the Body Corporate on 2 March 2005 and a reply by the applicants was received by this Office on 10 March.

At this point in time, I have been primarily concerned with the threshold issue of whether an interim order is warranted. In any consideration of an application that seeks the making of an interim order, it is necessary to determine whether, because of the nature or urgency of the circumstances relating to the application, an interim order is in fact necessary or appropriate. The examples included in the Act under section 279 are suggestive of the usual circumstances where an interim order might be made.

Jurisdiction

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)).
Section 279(1) & (2) provide that -

(1) The adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates.
(2) An interim order
(a) has effect for a period (not longer than 1 year) stated in the order; and
(b) may be extended, varied, renewed or cancelled by the adjudicator until a final order is made;
and
(c) may be cancelled by a later order made by the adjudicator; and
(d) if it does not lapse or is not cancelled earlier, lapses when (i) the application is withdrawn; or

(i) the commissioner gives the person who made the application a written notice under section 241 rejecting the application; or

(iii) a final order is made by an adjudicator to whom the application is referred.

Outcomes Sought

In addition to interim relief, the applicants are seeking the following final outcomes:

1. That the body corporate prepare a new CMS and convene another EGM for eventual approval by resolution without dissent by the body corporate of changes to by-laws applying to exclusive use areas, as required by the Act and Regulations.

2. That the previous body corporate manager, Stewart Silver King & Burns should reimburse the
body corporate for:
- cost of preparing the CMS and convening the EGM referred to above;
- costs of preparing the previous CMS and convening the previous EGM; and

- any costs which may be incurred by the body corporate in relation to structures constructed on common property without proper approval.

Background

The applicants have provided a large amount of material including extracts taken from numerous records of the body corporate. The relevant mailers are summarised below in chronological order.

1. The original by-laws for the scheme were registered on 11 April 2002 and provided as follows:

13(a) Pursuant to section 133 of the Act, the owners of lots shall have exclusive use and enjoyment of the area designated in the second column of schedule E for the Community Management Statement for the opposite each such respective lot number, which area is identified on the exclusive use plan attached to Schedule E.

2. The original by-laws, including by-law 13, were adopted at the first AGM of the body corporate on 26 September 2002.

3. At a meeting of the committee held on 14 May 2003 it was resolved that:

The committee in conjunction with the Developer would look at making a change to the exclusive use By-Laws in an attempt to make permission for work carried out over the value of $200 to the yards of lots obtainable without the need for a General Meeting.

4. A similar resolution was made at committee meetings held on 15 July 2003 and 19 September 2003, to take the approval process for certain things down from a General meeting level down to a Committee meeting level.

5. On 31 October the committee resolved to consent to the registration of a new Community Management Statement (CMS) which was registered on 23 December 2003. This CMS purportedly "Amends Schedules A,B,C,D and E of the existing CMS".

In particular, new by-law 13(c) provided as follows:

Each owner to whom exclusive use is given pursuant to this by-law may, with the consent of the Committee first obtained, make improvements to the exclusive use area in the nature of:

i. the addition of paving;

ii. alterations to gardens;

iii. concreting works;

iv. installation of decorative water features;

v. installation of shade structures; and

vi. fencing

provided that:

i. the owner has, prior to application being made, first obtained all necessary consents to the proposed works fmm the relevant local and governmental authorities;

ii. it the works are carried out in the manner described in the application and are carried out to cause no disturbance to any other lot owner or occupant of any lot; and

iii. From the date of approval, the lot owner from time to time shall be wholly responsible for the maintenance, insurance repair and replacement of such improvements.

6. In March 2004, Committee members met with their lawyer to obtain legal advice regarding the status of structures on common property.

In a letter of advice dated 24 March 2004, their lawyer advised as follows:

• Owners who erect improvements on common property or change the appearance of a lot may only do so with the approval of the body corporate;

• The body corporate should (i) clarify what improvements (if any) have been made, (ii) include on a register, (iii) write to those lot owners who have not sought approval to seek the approval of the Body Corporate; and the body corporate may either (i) consent, (ii) consent with conditions or (iii) refuse to give consent and require removal.

7. At a committee meeting held on 30 April 2004, the Secretary, Lincoln Silver gave the following explanation regarding the approval process for erection of structures in exclusive use areas:

In the first stage of the development there was no pm vision apart from the Extraordinary General Meeting for shade structures to be approved by the Body Corporate. After residents had been living in Stage one for a period there was a dissatisfaction that an extraordinary general meeting was required in order to put up a shade and therefore the developer took it upon himself to prepare a new exclusive use by-law which would allow the Committee to make approvals or disapprovals in relation to the erection of shade structures in exclusive use areas. The committee had decided to narrow this down to three different options which were provided and approved by the architect for the scheme... This By-law was approved at an Annual General Meeting.

The applicants dispute that such a by-law was approved at an Annual General Meeting.

8. At the AGM held on 25 June 2004, it was proposed by Motion 16 that the exclusive use by laws be amended by inclusion of new by-law 1 3(c ) set out above, by means of resolution without dissent. The motion was not carried as 44 owners voted in favour of the motion while 4 owners voted against the motion. A resolution without dissent was required.

9. An Extraordinary General Meeting was convened on 4 November 2004 to effect certain amendments to the by-laws and to approve: "the actions of owners who have made alterations to the exterior of their lots without seeking the approval of the body corporate under the existing community management statement

The applicants submit that the exclusive use by-laws contained in the previous CMS and those contained in the new CMS registered on 9 November 2004, are invalid, as a motion without dissent is required to ratify the exclusive use by-laws. It is therefore submitted that a special resolution is required to approve structures in exclusive use areas.

Submissions

The Body Corporate has made the following submissions:

1. A number of the structures were constructed prior to registration of the scheme.

2. The previous CMS dated 23 December 2003, required owners wishing to make improvements to exclusive use areas to make application to a general meeting. To avoid this complex arrangement the developer prepared a list of structures which would be considered for approval by the committee and owners.

3. Many owners chose not to comply with the by-laws in the previous CMS and many alterations and improvements to both lots and common property were undertaken without authorisation.

4. The current committee set up an approval process which was adopted in a new CMS approved on 4 November 2004 and recorded on 9 November 2004. Under the CMS the Committee was granted, by special resolution, power to approve applications by owners in relation to improvements to lots or common property. This was to enable the Committee to deal with applications without submission to a general meeting.

5. An Extraordinary General Meeting was convened on 4 November 2004 to amend the by-laws to set up the approval process and to retrospectively ratify: "the actions of owners who have made alterations to the exterior of their lots without seeking the approval of the body corporate under the existing community management statement". This resolution was passed on the basis of 64 Yes votes, 9 No votes and 5 abstentions.

6. It is submitted that the resolution could only apply to existing, and not future or proposed alterations. There fore the body corporate agrees with the making of Order I above.

7. The reference to by-law 14(c) was a typographical error as 14(c) did not exist at the time. It should read 14(b).

8. It is not appropriate for lot owners to be placed the burden of having to seek approval of a general meeting for existing structures. This process of approval through the Committee is efficient and less cumbersome and voted upon by all but a few dissenting voters.

9. On the balance of convenience and considering potential financial hardship it would be inappropriate to require lot owners to remove structures and improvements which would have been approved in any event.

10. It would be just and equitable to allow the committee to consider such applications and approve the applications in accordance with current by-laws.

11. If it is considered that the motion is invalid due to the absence of a resolution without dissent, that motion should not be overturned for the following reasons:

a. the procedure voted upon does not disadvantage any member of the Body Corporate and was voted against without legitimate concern.

b. It is likely that the applicants will again dissent in which case it would not be possible to ever obtain a resolution without dissent.

c. Until the structures are approved, the may not be covered by relevant insurance policies. The contemplated procedures streamline the approval process and would allow insurance coverage to be effected.
d. The cost associated with a further meeting would be wasteful and cumbersome.

e. The Body Corporate has been given a mandate to receive and consider applications for improvements to common areas.

12. While the applicants submit that by-laws I 3(c ) & (d) are invalid, as a resolution without dissent was required, the Body Corporate submits that by-laws 13(c) & (d) do not constitute exclusive use by-laws, but rather, implements a mechanism for an existing exclusive use by law previously approved. On this basis section 113 of the Act would not apply and a resolution without dissent would not be required.

13. In default, it is submitted that if this argument is not accepted, the dissenting votes should be overturned for the stated reasons and SSKB should not be liable for the cost having regard to the overwhelming majority support for the motion.

Response by Applicants

I. The applicants submit that the additions to exclusive use by-laws contained in the previous Community Management Statement and repeated in the latest version were never voted on in general meeting by resolution without dissent. The latest version of the CMS which purports to remedy this flaw contains the same exclusive use by-laws adopted by the Committee on 22 September 2003.

2. It is submitted that:
a. no structures were erected by the developer prior to registration of the scheme;

b. the developer constructed 3 structures in stage 2 and I structure in stage 4 after registration.
c. The remaining structures have been built with or without approval of the Body Corporate.

3. A few, rather than many, owners built structures without approval and this was caused by the confusion regarding the approval process which was never clarified by SSKB.

4. The applicants dispute that an "overwhelming majority of lot owners" have voted in favour of the mechanism for approval of the improvements.

5. The procedures voted upon at the EGM, setting up the approval process, presume that the previous changes to exclusive use by-laws were lawfully. Because these changes were not lawful, the structures cannot be approved by way of ordinary resolution.

6. The applicants submit that by-laws 13(c) & (d) can only be made by resolution without dissent in accordance with section 171(2)(a). It is submitted that these amendments were not approved by either a general meeting or by committee resolution.

Determination

The fact that a lot owner has exclusive use over an area of common property does not necessarily
• entitle that person to make improvements to the common property. The making of improvements to exclusive use .areas is normally achieved in one of two ways:

(i) A by-law may specifically authorise the making of improvements to exclusive use areas.

(ii) If specific authorisation is not contained in a by-law, then the improvement should be approved by special resolution.

It is argued that the original by-laws did not contain any such authorisation and that attempts to amend the exclusive use by laws were unsuccessful. This is because a resolution without dissent is required for the amendment of an exclusive use by-law. In this regard I note the applicants’ contention that notwithstanding the registration of a new CMS, the attempt to amend the exclusive use by-laws on 25 June 2004 was unsuccessful as 44 owners voted in favour of the motion while 4 owners voted against the motion and a resolution without dissent was required.

On the face of the material provided to me I am of the view that there is some substance to this argument.

The next matter for consideration is whether the improvements to exclusive use areas have been approved by special resolution as contemplated by Section 123 of the Accommodation Module Regulation which provides as follows:

123 Improvements

(1) An exclusive use by-law may authorise the lot owner who has the benefit of the by-law to make stated improvements to the part of the common property to which the by-law applies.

(2) Without limiting subsection (1), improvements stated in the by-law may include the installation of fixtures on the common property and the making of changes to the common property.

(3) If the exclusive use by-law does not author/se the lot owner tO make an improvement, the lot owner may make the improvement only if the body corporate authorises it to be made.

(4) However, the making of the improvement mentioned in subsection (3) must be authorised by a special resolution of the body corporate if the value of the improvement is more than $250.

I note from the material provided that a number of such approvals have been granted by way of special resolution. For example at the AGM held on 25 June 2004, it was resolved by special resolution that approval be given to the making of improvements to common property by the owners of lots 132, 58, 113, 111, 64, 76, 86, 9, 62 and 37. However it is claimed that there are at least 45 structures erected in exclusive use areas.

Taking these mailers into consideration I propose to grant an interim order that the Body Corporate
Committee refrain from granting approval to the making of improvements valued at more than
$250 in exclusive use areas until final orders are made.

For the purposes of making final orders, submissions will be sought from all lot owners as required by section 243 of the Act and where necessary, further information will be sought from the applicants and body corporate.

Order

That the Body Corporate Committee refrain from granting approval to the making of improvements valued at more than $250 in exclusive use areas until final orders are made.