Sandcastles At Noosa [2005] QBCCMCmr 26 (18 January 2005)

Last Updated: 5 July 2005

REFERENCE: 0371-2004

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	9412
Name of Scheme:	Sandcastles At Noosa
Address of Scheme:	1 Hastings Street, NOOSA HEADS QLD 4567

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

John Andrew McDermott and Linda Patricia McDermott, the co-owners of lot 14

I hereby order that the application by John Andrew McDermott and Linda Patricia McDermott, the co-owners of lot 14 for orders that – 1. The adjusted lot entitlements for the contribution schedule have effect as and from 21 May 2004; 2. The levies imposed on the applicant on 21 May 2004 in respect of the refurbishment be reduced $9848.14; 3. The body corporate reimburse the applicants the costs of obtaining the expert’s report, namely $5264.60, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0371-2004

"Sandcastles At Noosa" CTS 9412

The applicants, John Andrew McDermott and Linda Patricia McDermott, the co-owners of lot 14 have sought the following orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote –

The adjusted lot entitlements for the contribution schedule have effect as and from 21 May 2004.
The levies imposed on the applicant on 21 May 2004 in respect of the refurbishment be reduced $9848.14.
An order that the body corporate reimburse the applicants the costs of obtaining the expert’s report, namely $5264.60.

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)).

The scheme is a subdivision of 18 lots recorded under a building unit plan (now a building format plan) of subdivision. The regulation module applying to the scheme is the Accommodation Module. This application is one of two almost identical applications, the other being 373 of 2004. Both applications seek the same relief. Initially both applications sought orders for adjustment of the contributions lot entitlement schedule. However, on 2 November 2004, the body corporate resolved in general meeting to adjust the contribution schedule lot entitlements for the scheme. This negated the necessity for a determination on this and associated issues. It also meant that the amended application might be the subject of departmental adjudication rather than specialist adjudication.

The respondent body corporate has objected to the amendment of the application. However, I note that the Commissioner has accepted the amendment of the application on certain conditions, and that the application has proceeded on this basis.

I have before me a considerable amount of material and information, including:

• the original application;
• a submission from the body corporate in respect of the original application;
• the amendment request and further information by the applicants;
• a further submission by the body corporate in response to the applicants’ amendment and further information.

Whilst I have considered all the material in my determination, given the extent of it, I will only be referring to those aspects necessary to explain my determination.


In this application, the applicants are seeking, in part, a calculation of contributions for a refurbishment program being undertaken otherwise than in accordance with the contribution schedule lot entitlement which applied at the time the contributions for the refurbishment program were struck. The refurbishment program, and associated contributions, were approved by the body corporate at an EGM held on 21 May 2004. The contributions notice, payable in two equal instalments in June and July respectively, was issued immediately thereafter. At the same EGM in May, the body corporate failed to resolve a motion submitted presumably by the applicants (or the applicants together with the owners of lot 9) seeking to adjust the contribution schedule lot entitlement. However, the body corporate did resolve to this effect at the EGM in November, and a new CMS was recorded with the Registrar of Titles on 17 November 2004.

The applicants are now seeking by this application that the contribution schedule lot entitlement resolved by the body corporate at its meeting in November be used as the basis for calculation of the contributions for the refurbishment program resolved at the EGM in May. This would result in the applicants being liable to contribute some $9848.14 less towards the refurbishment program than would be the case if the previous contribution schedule lot entitlement were applied. The applicants allege that the contributions, calculated on the basis of the original contribution schedule lot entitlement, "were, in all the circumstances, unreasonable and should be adjusted by each applicant’s contribution to those levies being reduced by the excess amount ($9848.14)".

Certain provisions of the legislation are specifically relevant to this application, quote:

Section 46(9) of the Act relevantly provides -
(9) A change to a lot entitlement takes effect on the recording of a new community management statement incorporating the change.

Section 47, headed Application of lot entitlements relevantly provides -
(1) This section states the general principles for the application of lot entitlements to a community titles scheme, but has effect subject to provisions of this Act providing more specifically for the application of lot entitlements.
(2) The contribution schedule lot entitlement for a lot is the basis for calculating--
(a) the lot owner’s share of amounts levied by the body corporate, unless the extent of the lot owner’s obligation to contribute to a levy for a particular purpose is specifically otherwise provided
for in this Act;12 and
(12 The regulation module applying to a community titles scheme might provide that a lot owner’s contribution to some or all of the insurance required to be put in place by the body corporate is to be calculated on the basis of the lot’s interest schedule lot entitlement).

Before proceeding with any consideration of the grounds for the alleged unreasonableness as submitted by the applicants, I note that the body corporate in both of its submissions has argued that –

At the time the special levy was imposed, no application had been made to adjust the lot entitlements. As an adjustment of lot entitlements cannot be made retrospectively (see Banks v. Noosa on Beach [2000] QCA 146) then the special levy must be imposed on the contribution schedule lot entitlements as recorded ... at the time. ...

In Banks & Anor v Body Corporate Noosa on the Beach Community Titles Scheme 6417 [2000] QCA 146 (28 April 2000) the Court of Appeal (McMurdo P, Davies JA and Moynihan J) considered the question of whether, in respect of an application for adjustment of the lot entitlement schedule, the Court could make an order having retrospective effect. This decision was in respect of the former section 46 of the Act, which section has been renumbered 48 in the reprint of the Act coming into force on 4 March 2003. The Court concluded as follows:

[9] The substantive points in the appeal then are whether the learned primary judge had power to make an order under s 46 having retrospective effect; and, if he did not, whether the respondents were nevertheless entitled to an injunction restraining the recovery of any contribution levied as from a date earlier than the date on which the adjustment would take effect.
[10] Section 46 of the Act, pursuant to which the owner of a lot may apply to a District Court for an order for the adjustment of a lot entitlement schedule, provides in s 46(8) that, if a court orders an adjustment of a lot entitlement schedule, the body corporate must, as quickly as practicable, lodge with the registrar a request to record a new community management statement reflecting the adjustment ordered.[3] Sections 48, 49 and 50 then provide for the recording of a community management statement and s 53 provides that a community management statement takes effect only when it is recorded by the registrar as the community management statement for a community titles scheme. It can be seen from these provisions that it is the recording by the registrar of the community management statement, rather than the order of the judge, which causes it to take effect. If there remained any doubt that, consequently, the adjustment of lot entitlement took place only on the recording of the new community management statement, that is removed by s 44(7) which so provides specifically.

In their reply to submissions by the body corporate, the applicants have argued that:

The decision of Banks v. Noosa on the Beach ... is not relevant as the applicants do not seek retrospective effect of the CMS. What the applicants contend is that they should be relieved from paying what is in effect an unfair proportion of the refurbishment levy.

I disagree. The applicants are seeking to apply to the calculation of contributions for the refurbishment program the contribution schedule lot entitlement as resolved by the body corporate, and the CMS recorded by the body corporate, in November. The contributions were calculated and levied in May, 2004 and due for payment in June and July. The contribution schedule lot entitlements applying at the time of calculation of the relevant levies was the former schedule, which resulted in the applicants being charged the higher contributions than other owners. I cannot see how the order which the applicants are seeking does not, as a necessary consequence of what is sought, require that the newly recorded contribution schedule lot entitlement be given retrospective effect. It seems to me that the applicants are attempting to base their argument simply on the premise that the contributions when calculated under the previous contribution schedule lot entitlement, and relevantly, the one applying for the determination of contributions under section 47(2) (see above) at that time, was / is unreasonable. This argument however avoids the fact that in order to achieve the outcome which the applicants seek, the applicants require the contribution schedule lot entitlement now applying to the scheme to have retrospective effect.

I make the observation that the Court decision is, on a strict interpretation, limited to the situation where the Court is making an order pursuant to an application for adjustment of the lot entitlement schedule. The situation here is different: the body corporate has resolved in general meeting to adjust its lot entitlement schedule, and there is no order of the Court under section 48. The question arises whether the denial of retrospectivity is limited to Court order adjustments. I conclude that the better view is that it is not. Whilst court ordered adjustments are dealt with in section 48 of the Act, the provision which the Court relied on to found its determination, namely section 46(9) is found in the section dealing generally with "Lot entitlements". Both sections 46 and 47 appear to me to be sections having general application to situations of adjustments of lot entitlement schedules. That is, whether Court ordered or simply resolved by the body corporate in general meeting.

In the circumstances, I cannot agree with the applicant’s contention that the decision in Banks v. Noosa on the Beach is not relevant. I consider it determinative of the first issue raised in this application, and accordingly, conclude that the first two orders sought by the applicants must be dismissed, without consideration of the applicants’ further arguments regarding these aspects.

The third order sought by the applicants is order that the body corporate reimburse the applicants the costs of obtaining the expert’s report, namely $5264.60.

The applicants state that:

The basis for seeking this order is that the body corporate has utilised the expert report by the applicants to appropriately adjust the contribution schedule lot entitlements and it is only reasonable and fair that the body corporate reimburse the applicants the cost of obtaining that report being $5264.60 in total. The body corporate, having utilised and obtained the benefit of the report, should pay for the cost of the report and that cost should not be borne solely by the applicants (it should be borne by all lot owners).

The body corporate has opposed the making of this order. The body corporate submits that:

• it "did not rely solely on the report obtained by the applicants";
• it had no input into the instructions for the preparation of the report, and had not budgeted for the report.

The body corporate submits that it "in making its decision, took many factors into account". Relevantly, this included the "recent court of appeal decision". I am aware that there was a significant decision regarding the interpretation and application of the provisions in section 48 of the Act delivered in the latter part of 2004, which clarified such matters significantly. I suggest that with the benefit of this decisions, bodies corporate’s considering an adjustment of their lot entitlement schedule would have been able to proceed on a more certain footing.

In considering the requested order, I note that had this application proceeded on the original basis, that is, by way of an application to a specialist adjudicator for the adjustment of the lot entitlement schedule, then the current applicant to recover the costs of the report would have been precluded. Section 48(2)(c) provides that each party to the application is responsible for the party’s own costs of the application. Consequently, it is only on the basis that the adjustment of the lot entitlement schedule has been independently resolved, that the applicants are able to now bring this claim.

I do consider however that the legislature intended that parties to an application for the adjustment of a lot entitlement schedule should bear their own costs pertaining to such application. The cost of the report is clearly a cost associated with the initial application seeking the adjustment of the lot entitlement schedule. I am mindful of the fact that the body corporate had no input into the decision to obtain the report, nor its contents. Moreover, whilst clearly the body corporate did rely on the report, the extent of that reliance is disputed. In all the circumstances, I intend to dismiss the application to recover the cost of the report.