Edmund Shores [2006] QBCCMCmr 133 (17 March 2006)

Last Updated: 19 July 2006

REFERENCE: 0768-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	5771
Name of Scheme:	Edmund Shores
Address of Scheme:	Cnr. Arthur and Edmund Streets, Caloundra QLD 4551

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

Neville Woodforth, the co-owner of lot 8 and committee member

I hereby order that the application by Neville Woodforth, the co-owner of lot 8 for an order that the Body Corporate proceed to commission Paul Lukasz Landscapes to refurbish the landscaping for the complex and furthermore that the body corporate raises a special levy to recover the cost of such refurbishment, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0768-2005

"Edmund Shores" CTS 5771

The applicant, Neville Woodforth, the co-owner of lot 8 and committee member, has sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote:

That the Body Corporate proceed to commission Paul Lukasz Landscapes to proceed to refurbish the landscaping for the complex and furthermore that the body corporate raises a special levy to recover the cost of such refurbishment.

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 12 lots recorded under a building unit plan (now a building format plan) of subdivision. The regulation module applying to the scheme is the standard module.

The body corporate obtained a "Building Common Area Safety Audit / Inspection Report" (the report) and at an EGM held on 30 July 2005 resolved, by special resolution, that:

The body corporate accepts a quotation to refurbish the landscaping at the building.

The vote in favour of the resolution was 8 in favour with 1 against.

Motions 3 and 4 considered immediately thereafter dealt with the issue of funding of the proposed refurbishment. Both motions were declared "lost". Motion 3 proposed the raising of a special levy of a minimum of $6500 per lot to fund the refurbishment. The motion proposed as an ordinary resolution, was lost with 5 votes against, and 2 in favour.

Motion 4, requiring a resolution without dissent, proposed the borrowing of the money ($80000) to fund the refurbishment. The motion received 6 votes in favour, but was defeated by the two dissenting votes.

Though not specifically stated, it seems that what has happened is that the body corporate has resolved to undertake the refurbishment of the scheme, but then has disagreed on how this refurbishment shall be funded, with the body corporate not able to approve any method of funding.

The applicant concludes:

... the work needs to be done, that it was implicitly agreed by the body corporate pursuant to Motion 2 ... to carry out such works and if the works are not carried out in the near future the Body Corporate will be exposed to potential claims.

In response to the notice inviting submissions regarding the application, I have received a number of submissions from owners. Further, I have received a reply to submissions by the applicant. In his reply, the applicant concludes:

A special sinking fun levy is a commonly accepted and practical way to fund the proposal. A loan taken out by the body corporate requires a resolution without dissent and it is highly unlikely that this would ever be achieved. Individual owners have greater flexibility to negotiate loans with favourable terms and conditions without imposing costs and loan default conditions on the body corporate.

In effect, the applicant is arguing that I should disregard the significant vote against motion 3 (5 to 2 against) and validated the resolution. The consequence of this would be that a special contribution of a minimum of $6500 per lot would be raised to fund the refurbishment proposal.

Whilst I conclude that an adjudicator has a reasonably wide discretion to make orders which are just and equitable for the resolution of a dispute, I consider that what the applicant is seeking would place an unreasonable burden on owners, in circumstances where the clear majority of owners who voted choose to vote against this proposal. In fact, there is probably a more compelling argument which might be made for overturning the dissenting vote in respect of motion 4 rather than overturning the vote of owners against motion 3. Proportionally, 75% of owners who voted were in favour of implementing the proposal contained in motion 4, with only 25% against. To validate this motion, I would only be overturning the vote of a minority (25%) of owners. In contrast, only 28% of owners were in favour of implementing the proposal contained in motion 3, with a significant majority (71%) against implementing such proposal. To overturn the vote against motion 3 would require me to overturn the vote of the majority of owners who voted. On simply mathematics, it is not easy to sustain the applicant’s argument. In addition to this, at least two owners who responded in submissions have noted the considerable financial imposition the raising of a special contribution would place on owners. Given the very clear rejection of this proposal by a majority of owners, alleged financial hardship is a real and compelling concern in my view.

In the circumstances, I intend to dismiss this application. I simply cannot conclude that it is just and equitable to order in terms as sought by the applicant. I conclude that without agreement on how to fund the refurbishment, then the proposal cannot and should not proceed.

I note that certain of the items contained in the report appear to be in the nature of routine maintenance of common property. All parties should note that there is a significant distinction between maintenance of common property and improvement thereof. Whilst improvement proposals are by and large discretionary, maintenance is not. The body corporate has a duty to control, manage and administer common property reasonably and for the benefit of owners. Section 109 provides that the body corporate must maintain common property in good condition. This duty cannot be avoided or put off. Moreover, the body corporate must raise in its administrative and sinking funds sufficient funds to undertake maintenance of common property.

In the circumstances, I suggest that this body corporate needs to more selectively determine what is maintenance and what is improvement of common property as per the report obtained. In respect of the items of maintenance, the body then needs to determine a schedule for such maintenance based on priorities. Maintenance cannot be avoided simply because funds are alleged to be insufficient. Once maintenance priorities are determined, then the body corporate will need to consider raising sufficient contributions to fund such maintenance.