Alexandra Beach Resort [2005] QBCCMCmr 469 (23 August 2005)

Last Updated: 30 September 2005

REFERENCE: 0301-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30867
Name of Scheme:	Alexandra Beach Resort
Address of Scheme:	Alexandra Parade, ALEXANDRA BEACH QLD

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

Thomas Melvyn Dodd and Anne Frances Barry, the co-owners of lot 4

I hereby order that the application by Thomas Melvyn Dodd and Anne Frances Barry, the co-owners of lot 4 for an order that the amount of $21567.06 paid to Mr B and Mrs I Kaufmann (owners of lot 51) by the Alexandra Beach Body Corporate for personal legal costs incurred in challenging a change to the Contributions Schedule, be reimbursed to the body corporate, and all owners be refunded their special levy, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0301-2005

"Alexandra Beach Resort" CTS 30867

The applicants, Thomas Melvyn Dodd and Anne Frances Barry, the co-owners of lot 4, have sought the following order of an Adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote:

That the amount of $21567.06 ... that was paid to Mr B and Mrs I Kaufmann (owners of lot 51) by the Alexandra Beach Body Corporate for personal legal costs incurred in challenging a change to the Contributions Schedule, be reimbursed to the body corporate, and all owners be refunded their special levy.

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 226 lots recorded under a building unit plan of subdivision. The regulation module applying to the scheme is the accommodation module.

The application seeks the invalidation of a resolution headed Reimbursement of Legal Fees carried by the body corporate at the AGM held on 7 February 2005. The motion was carried by a yes vote of 37 with 10 no votes and 8 abstentions. The resolution approved the reimbursement of $21,567.06 to the owners of lot 51 Ilse Pauline Kaufmann and Bernhard Albert Kaufmann (Kaufmann) for "the legal costs incurred by (Kaufmann) of the court case that involved the change in Contribution Schedules for the scheme".

The facts are not in dispute. What is disputed by the applicants, who are the owners of one of the commercial lots (but who were not the party who commenced the District Court proceedings for adjustment of lot entitlements) is that the body corporate, including the commercial lot owners, should now reimburse the Kaufmann’s their legal costs of defending those proceedings. This reimbursement the body corporate has approved, and the applicant here is challenging that reimbursement. The applicant states that they have no issue with the Kaufmann’s being reimbursed by the residential lot owners "on a voluntary basis outside the auspices of the body corporate".

I consider this question a relatively straightforward one to determine in that it is in my view determined by the terms of the legislation itself. Section 48 of the Act provides:

48 Adjustment of lot entitlement schedule
(1) The owner of a lot in a community titles scheme may apply--
(a) to the District Court for an order for the adjustment of a lot entitlement schedule; or
(b) under chapter 6, for an order of a specialist adjudicator for the adjustment of a lot entitlement schedule.
(2) Despite any other law or statutory instrument--
(a) the respondent for an application mentioned in subsection (1) is the body corporate; and
(b) at the election of another owner of a lot in the scheme, the other owner may be joined as a respondent for the application; and
(c) each party to the application is responsible for the party’s own costs of the application.
(3) An owner who elects, under subsection (2)(b), to become a respondent for the application must give written notice of the election to the body corporate.
(4) The order of the court or specialist adjudicator must be consistent with--
(a) if the order is about the contribution schedule--the principle stated in subsection (5); or
(b) if the order is about the interest schedule--the principle stated in subsection (6).
(5) For the contribution schedule, the respective lot entitlements should be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal.
(6) For the interest schedule, the respective lot entitlements should reflect the respective market values of the lots included in the scheme when the court or specialist adjudicator makes the order, except to the extent to which it is just and equitable in the circumstances for the individual lot
entitlements to reflect other than the respective market values of the lots.
(7) If a lot mentioned in subsection (6) is a subsidiary scheme, the market value of the lot is the market value of the scheme land for the subsidiary scheme.
(8) For establishing the market value of a lot created under a standard format plan of subdivision, buildings and improvements on the lot are to be disregarded.
(9) If the court or specialist adjudicator orders an adjustment of a lot entitlement schedule, the body corporate must, as quickly as practicable, lodge a request to record a new community management statement reflecting the adjustment ordered.
Maximum penalty for subsection (9)--100 penalty units.

From the provisions of the section a number of matters are clear:

• It is an owner in a scheme who might apply for an adjustment of lot entitlements;
• The body corporate is the respondent to that application "despite any other law or statutory instrument", although an owner might be "joined" as a respondent;
• Each party to the application is responsible for the party’s own costs of the application.

I convened a teleconference to determine who had commenced the proceedings in the District Court for adjustment of lot entitlements. The then owner of the commercial lots commenced those proceedings. I note from the order made by the District Court that the respondent was "Condah Bay Investments Pty Ltd". I have no idea how this party came to be the respondent. I can find no reference to this company other than in minutes as the owner of lots 103 and 119. Why though they were named as respondent in the District Court application is beyond me. I note however that although the body corporate is not named as respondent to the application, the order made applies directly to the body corporate, adjusting the lot entitlements schedule for the scheme.

I further note from the teleconference that the Kaufmann’s defended the proceedings in the District Court. The body corporate submission explains this as follows:

Mr Kaufmann contact (sic) the body corporate committee, who strongly opposed the proposed entitlement scheme by the previous shop owners. For the body corporate to oppose the new entitlement scheme, a class action would have had to be field (sic) at a much greater cost to all lot owners. Therefore the body corporate fully supported Mr Kaufmann as he was prepared to take on all legal cost if his action did not have a positive outcome.

The applicants state that they seek their order on the basis that:

• The action taken by the Kaufmann’s was a private matter.
• It was not endorsed by the body corporate at the time.
• It is discriminatory against the commercial shop owners, who, by virtue of their minority, are being forced to pay for a legal challenge against themselves.

I disagree with the applicant’s position and intend to dismiss this application. The legislation contemplates that the proper respondent to an application to the District Court for adjustment of lot entitlements is the body corporate. Further, the legislation provides that each party shall bear their own costs.

I do not know how the application to the district court was even commenced with the body corporate not being named as respondent. Surely given the clear requirement of the legislation, a correction to this aspect should have been required. In any event, the body corporate should have been the respondent to the application, and further, each party is required to bear its own costs. I see the position of the Kaufmann’s as no more than standing in the shoes of the body corporate, in circumstances which the body corporate was, for whatever reason, unable or unwilling to defend the proceedings in question.

In the circumstances, whilst the defence of the proceedings might have been by the Kaufmann’s I am satisfied it was undertaken with the knowledge of and implicit approval of the body corporate. Moreover, the commercial lot owners would in any event, as members of the body corporate, have been responsible for the costs of the body corporate respondent in the same way as the resident lot owners. These owners are not being "forced" to pay on the basis of their minority status; rather they are being required to pay their share of a body corporate expense, as members of that body corporate. There is nothing inequitable or discriminatory in this. This application is dismissed.