Kensington Gardens Retirement Village [2005] QBCCMCmr 269 (20 May 2005)

Last Updated: 5 July 2005

REFERENCE: 0115-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30198
Name of Scheme:	Kensington Gardens Retirement Village
Address of Scheme:	45 Glen Kyle Drive BUDERIM QLD 4556

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

Michael Joseph Kehoe, the co-owner of lot 62

I hereby order that the application by Michael Joseph Kehoe, the co-owner of lot 62 for an order that the Body Corporate committee abide by the regulations in all expenditure matters and cease using Sinking fund monies to pay administrative fund debts, is dismissed under section 270(1)(b) of the Act on the basis that the dispute should be dealt with in a court or tribunal of competent jurisdiction, namely a body constituted under the Retirement Villages Act 1999 for dispute resolution. I further order that in future, the body corporate committee shall not use administrative fund monies for the payment of expenses associated with a Christmas party.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0115-2005

"Kensington Gardens Retirement Village" CTS 30198

The applicant, Michael Joseph Kehoe, the co-owner of lot 62 has sought the following order of a adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote:

I would like the Body Corporate committee to abide by the regulations in all expenditure matters.

A. Cease using Sinking fund monies to pay administrative fund debts;
B. Not use Administrative Fund monies to subsidise Christmas Parties or any other private function. ...

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 80 lots. The regulation module applying to the scheme is the standard module. It should be noted that the scheme is also a registered retirement village for the purposes of the Retirement Villages Act 1999 (the RV Act).

After receipt of the application this office sought submissions from interested parties regarding the application. Thereafter a determination was made that the application be the subject of departmental adjudication. In my investigation of the application as I am required to do in my role as an adjudicator, I concluded that there was both insufficient information and clarity regarding the dispute, in particular the first of the orders as sought, in both the application and in the submissions received in response to the application. At that point, I wrote to both the applicant and to the body corporate seeking clarification of issues pertaining to the first order sought.

The actual first order sought is that the body corporate "cease using sinking fund monies to pay administrative fund debts". On its face this would appear a relatively straightforward dispute concerning whether funds from the sinking fund can be utilised to pay an alleged administrative fund debt. In his grounds, the applicant states:

... Total $5500 being paid to the Scheme Operator for administrative expenses. There is no budget item in the forecast of expenses of the administrative Fund for the financial year 2004 / 2005 for administrative expenses therefore my argument is that the money should not have been spent. The amount due to the scheme operator is laid out in the Caretakers Contract dated 9 May 2002 which forms part of our Disclosure Statement and does not include any amount for administrative expenses.

In reply to my request for clarification of this aspect, the applicant replied:

1.	I allege that sinking fund monies are being used to pay a debt incurred by the scheme operator. Namely legal expenses.
2.	As I said in my original complaint, the money due to the scheme operator is laid out in the contract ... No provision was made in this contract for additional expenses eg. Admin/ Legal.
3.	I therefore contend that these payments to the scheme operator are not valid.
4.	...

I conclude that this reply alters the nature of the dispute. Rather than the alleged debt being an administration fund liability being paid out of sinking funds, the allegation now appears to be that the alleged debt was not owing by the body corporate to the party to whom it was paid, namely the scheme operator. The applicant says as much in his statements that there is no provision in the contract (between body corporate and scheme operator) for "additional expenses" and that the payment is "not valid".

Not only does the applicant’s reply in my view fundamentally change the nature of the application, but as well, the further information provided by the body corporate suggests that the issue or dispute is more complex than presented by the applicant. The body corporate has, in response to my further request, provided some background to the dispute. Specifically on the issue of the alleged debt to the scheme operator, the body corporate submits that:

The responsibilities of the Body Corporate to the Scheme Operator are detailed in the PID ...

These Clauses were further reinforced by a form of contract titled "Caretaking Agreement" ... this agreement bound both parties to its requirements, they being that, from the 9^th May 2002 until the 8^th May 2005, the body corporate was to supply the Scheme Operator with given sums of money in return for the provision of certain defined services, there being provision for the financing of administrative costs incurred by the Scheme Operator. I believe that the payments in question were in satisfaction of these responsibilities.

I conclude that this dispute is one fundamentally different in nature than that presented by the applicant. I conclude that the applicant is opposing payments made by the body corporate to the scheme operator. The body corporate clearly believes that those payments were valid and required under its contractual obligations to the scheme operator.

I conclude that this is a dispute not within the jurisdiction of a departmental adjudicator. Firstly, it involves the consideration of matters of a contractual nature. Under the BCCM Act, "contractual matters" are required to be dealt with by specialist adjudication. However, this was not identified at an earlier stage because of the way in which the applicant framed his order sought.

Secondly, and more relevantly however, is that I consider this dispute involves a party in respect of which I do not have jurisdiction, namely the retirement village scheme operator. The Retirement Villages Act 1999 includes it own dispute resolution provisions where are particular to disputes under that legislation. Those provisions are in Part 9 of the RV Act headed Dispute Resolution. I conclude that this dispute is more properly bought under that legislation and I therefore intend to dismiss this aspect of the dispute under section 270(1)(b) of the BCCM Act on the basis that this is a dispute which should be dealt with by a court or tribunal of competent jurisdiction; namely that body constituted for dispute resolution under the RV Act.

The second part of the dispute is more simple; namely that the body corporate not use Administrative Fund monies to subsidise Christmas Parties or any other private function.

The applicant states:

... an amount of $80.60 being spent on a Xmas Party. The money was I believe spent on decorations and door prizes, this is I believe an inappropriate use of body corporate funds.

The committee submission explains that the payment of $80.60 to a Mr and Mrs Tyrer was in reimbursement of "out of pocket expenses" incurred by them in arranging a christmas party to which all residents of the village were invited and intended "to create an oppoportunity for all to become acquainted".

I note that submissions received by many owners oppose this expenditure on the basis that it is not appropriate.

To quote relevant statutory provisions from the standard module:

94 Budgets
(1) The body corporate must, by ordinary resolution, adopt 2 budgets for each financial year--
• the administrative fund budget
• the sinking fund budget.
(2) The administrative fund budget must--
(a) contain estimates for the financial year of necessary and reasonable spending from the administrative fund37 to cover--
(i) the cost of maintaining common property and body corporate assets; and
(ii) the cost of insurance; and
(iii) other expenditure of a recurrent nature; and
(b) fix the amount to be raised by way of contribution to cover the estimated recurrent expenditure mentioned in paragraph (a). ...

101 Application of administrative and sinking funds
(1) The sinking fund may be applied towards--
(a) spending of a capital or non-recurrent nature; and
(b) the periodic replacement of major items of a capital nature; and
(c) other spending that should reasonably be met from capital.
(2) All other spending of the body corporate must be met from the administrative fund.
Examples--
1. The cost of repainting the common property or replacing air conditioning plant would be paid from the sinking fund.
2. The cost of insurance would be paid from the administrative fund.

Section 94 of the standard module provides what the administrative fund budget must provide for. Section 101 then provides what the administrative fund can be applied to; namely all spending of the body corporate which is not sinking fund expenditure.

I conclude that the cost of items associated with a christmas party could not be considered to be within the purposes for which administrative fund contributions are collected as set out in section 94. Whilst it might be argued that a christmas function does benefit the body corporate in a general sense by fostering or improving good relations between members, I conclude that it is not properly a body corporate expense. I suggest that such expenditure should be funded not by the body corporate but rather by individual owners or residents who choose to participate in such activities. In the circumstances, I intend to order that in future that body corporate funds not be used for such activities.