Villa Estoril [2005] QBCCMCmr 616 (8 November 2005)

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

I hereby order that the co-owner of lot 1, Keith Leong, and the owner of lot 4, Donald Robert Richards, did not owe a body corporate debt as at 5 October 2005 and the minutes of the extraordinary general meeting held on 5 October 2005 shall be amended to reflect this finding.

I further order that the minutes of the extraordinary general meeting held on 5 October 2005 shall be further amended to record "No" votes on behalf of lots 1 and 4 in relation to all motions considered at the meeting.

I further order that motions 5, 6 and 8 shall be deemed to have been passed by ordinary resolution at the extraordinary general meeting held on 5 October 2005, notwithstanding that they were shown on the voting paper as requiring a special resolution.

I further order that the body corporate shall agree to the proposal by the owners of lot 2 to install a gas cooktop in their lot, notwithstanding that the amended voting in respect of motion 7 as a result of this order would otherwise have caused the motion to be defeated.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0723-2005

"Villa Estoril" CTS 16553

ORDERS SOUGHT

The applicant has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act):-

That Mr Leong and Mr Richards be declared financial at the meeting date of 5 October 2005, and that their votes be allowed to be counted for the motions presented at that meeting, and that the minutes of that meeting be amended to reflect same.

The applicant has also sought the following interim orders of an adjudicator under the Act:-

That the owners of lots 2, 3 and 5 be prevented from implementing motions 5, 6, 7, 8 and 9 (considered at the extraordinary general meeting held on 5 October 2005), and

That the body corporate be prevented from implementing motion 2 (considered at the extraordinary general meeting held on 5 October 2005) until investigation reveals the financial state of all owners as at meeting date 5 October 2005.

JURISDICTION

The application evidences a dispute between the owner of a lot included in a community titles scheme and other owners of lots included in the scheme (section 227(1)(a) of the Act).

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

(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) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances of the application.

SCHEME DETAILS

Villa Estoril is a community titles scheme comprising 5 residential lots and common property which registered under a building unit plan of subdivision (now described as a building format plan) on 14 November 1995. The scheme is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module).

BACKGROUND

The applicant explained that there has been a level of disputation within the scheme over the last two years, which has, most relevantly to this application, resulted in certain legal costs being debited to the applicant’s levy account as well as to the levy account of the owner of lot 1, Mr Leong.

The applicant stated that in his view the legal costs should not have been debited to his and Mr Leong’s levy accounts at this stage, as the costs are still to be quantified by the District Court. The applicant considered that the costs had been debited to the accounts as a tactic to render them unfinancial for the meeting held on 5 October 2005 so that certain motions which had been proposed as special resolutions by the owners of lot 2 and 5 would be passed, in the absence of his and Mr Leong’s votes, which, had they been counted would have meant that the motions were defeated.

The body corporate manager and the owners of lots 2, 3 and 5 were invited to respond to the application.

Submissions were received from the owners of lot 2, from the body corporate manager and from the solicitors for the body corporate. In essence, the submissions denied that there had been any ulterior motive in debiting the applicant’s and Mr Leong’s levy accounts with the legal costs.

I have considered all of the material submitted, and will refer specifically to various parts of it in the course of my determination.

DETERMINATION

Section 49A(2) of the Standard Module provides:

corporate debt at the time of the meeting.

"Body corporate debt" is defined in the Dictionary of the Standard Module as follows:

owner

It is the body corporate’s position that the applicant, and one of the co-owners of lot 1, Mr Keith Leong, owe a body corporate debt comprising legal costs consequent upon the dismissal (by consent) of an appeal which had been filed in the District Court by the applicant , his wife (an occupier of lot 4) and Mr Leong. The body corporate was the respondent to the appeal.

The Notice of Agreement to Dismissal of Appeal dated 31 January 2005, a copy of which was included in the body corporate’s submission, recorded the following agreement between the parties:
The first and second appellants and respondent agree-

The body corporate further contends that, when the amount of costs could not be agreed upon between the parties, the amount was quantified on 12 August 2005 by a costs assessor who provided an assessment in the amount of $5287.80. On this basis the body corporate contends that the applicant and Mr Leong each owe the body corporate the sum of $2643.90.

However, the body corporate stated in its submission:

"On 24 August 2005, Herdlaw at the instruction of the body corporate filed an application in the District Court for the costs assessment and costs statement. This is only to hear any argument by Mr Richards and Mr Leong as to the amount of the debt incurred." (emphasis added)

The application for assessment of the costs was set down for hearing on 10 October 2005. At that time, it appears the application was adjourned for a further period of two months to allow the applicant’s solicitor sufficient time to peruse the files.

In my view, until the costs have been assessed by the taxing officer of the District Court, the amount owing to the body corporate cannot be said to have been quantified. All of the references in the definition of "body corporate debt" are to amounts which can be quantified; namely a contribution or a penalty or another amount such as specified in the examples given in the definition above.

I therefore find that the applicant, and Mr Leong, did not owe a quantifiable body corporate debt at the time of the meeting held on 5 October 2005, and therefore, they should not have been ruled ineligible to vote at the meeting.

I propose to order that the minutes shall be amended to reflect this finding.

Having made such a finding, this application might ordinarily have been at an end. However, I am required to make orders that are just and equitable to resolve disputes.

I have been provided with a copy of the minutes of the extraordinary general meeting held on 5 October 2005, (the subject meeting), and note that, with the exception of motion 4, which was withdrawn, all motions are recorded as having been carried with 3 votes in favour of the motion and no votes against the motion in every case. Although no voting papers were lodged for the meeting, the applicant has stated in his application that it had been his intention to have voted against all motions, both on his own behalf and also on behalf of Mr Leong, for whom he had a proxy.

If such voting had been recorded, then any motion requiring an ordinary resolution would have been carried, regardless of the votes of the applicant and Mr Leong. On the other hand, any motion requiring a special resolution would have been defeated. The level of disputation in this scheme over the past few years makes it quite clear to me that if I were to simply allow the motions in dispute to be overturned on the basis of the reinstated votes of the applicant and Mr Leong, the body corporate would once again be placed in a stalemate on these issues.

I note that motion 2, and motions 5-9 considered at the subject meeting were listed as requiring special resolutions.

Motion 5 related to the installation of shade cloth across the front and rear patios of lot 2. The registered plan reveals that these patios (described on the plan as balconies) are wholly contained within the boundaries of lot 2. Accordingly, provided the shade cloth was to be installed wholly within such boundaries (that is, not extend onto common property) then the installation should only have been subject to such restrictions as might be placed upon it by virtue of the by-laws. At my direction, a member of the Commissioner’s staff, Mr Frank Hemeter, telephoned Mr Douglas, a co-owner of lot 2, on 7 November 2005 to ascertain whether the shade cloth was intended to be installed wholly within the boundaries of lot 2. Mr Douglas stated that the shade cloth would be installed in a similar fashion to the installation of shade blinds (which are of different material) in lot 4, and it would be wholly within the boundaries of his lot. Mr Douglas later delivered photographs to illustrate the proposed installation.

By-law 9 deals with alterations to a lot, and states that an owner must not make or permit a change to the external appearance of a lot (which is stated to include the erection of an external blind or awning) or make any structural alterations to a lot, except with the consent in writing of the body corporate committee. The by-law further details the procedure by which an owner would obtain the necessary consent to the proposal, which included final consideration at a general meeting.

In this case, the installation of the shade cloth merely constitutes a change to the external appearance of the lot. There is no structural consideration. In either event the motion did not require a special resolution, but could have been determined by ordinary resolution. A special resolution would only have been necessary for the authorisation of an improvement to common property (assuming it did not fall within the exceptions detailed in section 114 of the Standard Module). As the shade cloth is to be installed within the boundaries of lot 2, section 114 is not applicable. I have therefore ordered that notwithstanding that motion 5 was listed as requiring a special resolution, it did in fact only require an ordinary resolution, and was validly passed at the subject meeting.

Motion 6 related to the installation of bi-fold doors in lot 2, in place of the existing sliding glass doors. The doors open onto the front and rear balconies of the lot and the proposed installation would similarly be wholly within lot 2. Under by-law 9 the installation therefore only required authorisation of the body corporate by ordinary resolution. I have therefore ordered that notwithstanding that motion 6 was listed as requiring a special resolution, it did in fact only require an ordinary resolution, and was validly passed at the subject meeting.

Motion 7 related to the installation of a gas cooktop within lot 2. Although the cooktop itself would be wholly within the lot, the owners of lot 2 stated in their submission that it was their intention to install a new gas meter with the line running parallel to that of Mr Leong and entering lot 2 from below and approximately 3 feet from Mr Leong’s entry point. A photograph of Mr Leong’s gas line revealed that it traverses common property and enters lot 1 through common property, just as the pipe bringing gas into lot 2 would do if installed as Mr Douglas intends it to be.

Under section 114 of the Standard Module motion 7 did require a special resolution. However, there are a number of issues with which I propose to deal in considering this motion. Firstly, the applicant did not provide any reason in his supporting grounds for opposing this motion. He simply gave a general explanation that he and Mr Leong "would like more information" before they agree to "structural work at our complex". In my view this motion does not involve structural work.

Furthermore, Mr Leong already had a gas cooktop installed in his own lot, as has the owner of lot 3. Mr Douglas pointed out that he has been unable to find any record of a special resolution authorising Mr Leong’s gas cooktop. He stated that he could only find a reference in general business at the annual general meeting held on 3 February 1998. (The minutes of that meeting record that the then body corporate manager stated that a motion would need to be proposed for consideration at a general meeting, and that it would require resolution without dissent. The first piece of advice is correct, the second is incorrect).

Secondly, Mr Leong and his co-owner have recently sold lot 1. Settlement was effected on 28 October 2005, and the transfer was recorded in the Titles Office on 4 November 2005. In my view it would be manifestly unfair to allow Mr Leong’s "No" vote to be recorded against this motion when he is no longer an owner in the scheme, and when there does not appear to have been any justifiable concern in relation to the installation of the type of cooktop which he himself had installed in his own lot. One of the orders of an adjudicator specifically contemplated under Schedule 5 of the Act is an order requiring the body corporate to agree to a proposal if satisfied the body corporate’s decision about the proposal by the owner of a lot to make improvements on or changes to common property is an unreasonable decision. I have so ordered.

Motion 8 related to the installation of shade blinds across the front and rear balconies of lot 5. On 7 November 2005 Mr Hemeter telephoned the owner of that lot, Ms Fitzgerald, who confirmed that the blinds were intended to be installed wholly within the boundaries of her lot. For similar reasons outlined above, in relation to motion 5, this motion did not require a special resolution. I have therefore ordered that notwithstanding that motion 8 was listed as requiring a special resolution, it did in fact only require an ordinary resolution, and was validly passed at the subject meeting.

Motion 9 related to a proposal by Ms Fitzgerald to erect a roof over the large balcony at the side of her lot. During Mr Hemeter’s telephone conversation with Ms Fitzgerald on 7 November 2005, Ms Fitzgerald explained that there is a roof over half of the balcony, and her intention is to have a roof constructed over the whole balcony. However, she stated that if the cost is too prohibitive she may not proceed with the plan.

This motion would require a special resolution as any new roof would have to be linked with the existing roof and common property would be involved in that exercise. Although I note that the motion merely seeks provisional approval subject to plans being presented to the body corporate, I am not minded to over rule Mr Leong’s "No" vote and deem this motion to have been passed at the subject meeting, because in my view, although Mr Leong no longer has an interest in the scheme, the incoming owner of lot 1 should be entitled to express his view of the proposal.

Similarly, in relation to motion 2, relating to the installation of gutter guard, I do not propose to overturn Mr Leong’s "No" vote, even though he no longer has an interest in the scheme.

Motion 2 has properly been proposed as a special resolution, involving as it does the expenditure of funds in excess of the limit allowed under section 113(1)(a) of the Standard Module. The undated report from Opat, (attachment 11 to the submission from the owners of lot 2) states that the life expectancy of the gutters will be increased if the build-up of leaf litter and debris is stopped by the gutter guard. However, Mr Douglas stated that the applicant considers the product selected by the committee to be inferior and favours a more expensive gutter guard. Mr Douglas claims that the product favoured by the applicant is twice as expensive and is not cost effective. I do not have sufficient information to make a finding either way. The applicant did not provide any detailed explanation for his opposition to motion 2 in the application. In any event I consider that the new owner of lot 1 should have the opportunity to consider both products and record his views. I therefore have not ordered that this motion be deemed to have been passed at the subject meeting.

I also note that motion 3 passed at the subject meeting authorised the committee to lodge a dispute resolution application in relation to the gutter guard issue if the proposal to install them was not carried at the meeting. Might I suggest that before any such application is made, the body corporate committee canvasses the views of the new owner of lot 1 and depending on those views, weighs up whether it would be more cost effective to call a further general meeting to approve the installation, rather than expending further legal costs in bringing an application here. If such a meeting were to be held it might also provide a further opportunity for consideration of the proposal by the owner of lot 5 for the erection of a roof over her deck.

The orders I have made have disposed of the application in its entirety, and there is no need for any further order to be made.

Number of Scheme:	16553
Name of Scheme:	Villa Estoril
Address of Scheme:	102 Indooroopilly Road TARINGA QLD 4068

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Villa Estoril [2005] QBCCMCmr 616 (8 November 2005)