Clearwater On Burleigh Cove [2006] QBCCMCmr 289 (6 June 2006)

Number of Scheme:	27394
Name of Scheme:	Clearwater On Burleigh Cove
Address of Scheme:	36-42 Beachcomber Court BURLEIGH HEADS QLD 4220

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

I hereby declare that:

1. Each individual lot owner is solely responsible for the painting of walls, doors and fittings solely located within the boundaries of their lot;

2. Each individual lot owner has joint responsibility with the body corporate for the painting of the walls, doors and fittings located on the boundary of their lot adjoining common property and the consent of both the individual lot owner and the body corporate is necessary for any painting of those walls, doors and fittings;

3. Adjoining lot owners have joint responsibility for the painting of the walls, doors and fittings located on the boundary adjoining their lots; and

I hereby order that:

4. The application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0759-2005

"Clearwater On Burleigh Cove" CTS 27394

Application

Clearwater On Burleigh Cove Community Titles Scheme (Clearwater) is a 41 lot scheme under the Body Corporate and Community Management Act 1997 (Act) and the Act’s Standard Module Regulation (Standard Module). The scheme is designed for residential purposes.

This is an application by Graeme Gates, joint owner of lot 6 (applicant) seeking orders against the body corporate for Clearwater (respondent). The orders sought are:

Facts

The relevant facts are not in dispute.

Clearwater was developed between 2000 and 2001. Faults with the paint on render walls had been an ongoing problem with most units. The developer eventually paid $40,000 to the body corporate towards the cost of repainting the render walls of the common property and all walls of all units.

The minutes of the annual general meeting from 27 January 2005 record these relevant motions:

"4. Sinking Fund Budget Ordinary Resolution

9. Exterior painting of the Complex (Motion With Alternatives) Ordinary Resolution

On 28 February 2005, Mr Gates requested the body corporate manager to advise whether it is correct to pay for the painting of private units from the Clearwater sinking fund. The body corporate manager wrote to Mr Gates advising that apportionment of responsibility between the body corporate and lot owners for maintenance is determined by the type of plan. Clearwater is a staged development, but each plan is registered as a building format plan.

On 2 March 2005, the body corporate committee held a quarterly committee meeting, chaired by Mr Gates. Relevant extracts from the minutes of the meeting are:

"Following on from the Committee Meeting with the Painting Contractor and Representative of the Paint Company, a further discussion took place regarding the question of whether the Body Corporate could be in breach of [the Act] for using funds from the Sinking Fund to paint the whole complex (i.e. Common Property assets plus the Villas/Townhouses with the complex).

The Chairman is apprehensive of possible future litigation because Clearwater on Burleigh Cove CTS 27394 is registered under the Building Format Plan and the Standard Format Plan.
The By-laws state that the owners may not paint or repaint any part of the exterior of their unit building; therefore it must follow that the Body Corporate has to do the painting.

The Law states that money taken from the Sinking Fund is for Capital Expenditure. The definition of Capital Expenditure is expenditure which adds value to our fixed asset. The painting of our asset has to be seen to add value; if it is not painted it loses value.

Therefore...we are entitled to paint unit buildings and common property and to take money from the Sinking Fund for this purpose.

Owners should be aware that Section 119 of the Standard Module permits a Body Corporate to provide a service (such as painting a building on a lot) to an owner. The Body Corporate can only provide this type of service with the agreement of the lot owner. The cost is met by the owner but only to the extent necessary to reimburse the Body Corporate for supplying the service.

[A committee member] states that we held an Annual General Meeting which moved that the units (including walls, guttering, pergolas and doors) and common property be painted. To this end we are charging the Body Corporate for this service from their levies and have increased the Sinking Fund Levy so we are covered."

On 20 June 2005, the body corporate committee held another quarterly meeting. Mr Gates again voiced his concerns about using the sinking fund for maintenance of private property. Other committee members replied that the issue was resolved as it had been voted on at the annual general meeting.

On 8 July 2005, the body corporate committee held another meeting, again chaired by Mr Gates. Relevant extracts from the minutes of the meeting recorded by the body corporate secretary are:

"...the Chairman kept insisting that we obtain a ruling from the Department... to safeguard any objections there may arise in future regarding using the Sinking Fund to pay for painting of units which are privately owned.

The [body corporate manager] refuted this need as the Body Corporate went to the 2005 AGM with the motion that it is entitled to pay for it out of the funds contributed to the Sinking Fund by this Body. The motion was passed and there were no abstentions."

The contract for the painting was paid from the Sinking Fund.

Submissions

In accordance with the Act, the Commissioner called for submissions and provided a copy of the application to the body corporate committee, and to the body corporate manager for distribution to the owner of each lot (excluding the joint owners of lot 6). In support of his application, Mr Gates provided grounds in his application on how he considers the body corporate is improperly using the Sinking Fund. These were to the effect that:

The body corporate provided submissions through its solicitors. These were to the effect that:

Jurisdiction

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)).

Decision

Responsibility to paint common property

Contrary to the belief of Mr Gates, Clearwater is not registered under the Building Format Plan and the Standard Format Plan. Rather, a search of the Survey Plans of the lots registered under the Clearwater scheme reveals that Clearwater is registered as a Building Format Plan only.

Section 109 of the Standard Module provides –

"(1) The body corporate must maintain common property in good condition, including, to the extent that common property is structural in nature, in a structurally sound condition.

(2) To the extent that lots included in the scheme are created under a building format plan of subdivision, the body corporate must –

As Clearwater is registered as a building format plan (formerly known as a building units plan), the boundary of each lot is the centre of each wall of the lot, except to the extent permitted under a direction given by the Registrar of Titles (section 49C(4) of the Land Title Act 1994). Paragraph 9.17 of The Registrar of Titles directions for the preparation of plans (version 3.5) provides for private yards within a building format plan. A reading of the principles applying to these private yards reveals that where the walls of buildings are within the boundaries of a lot in a building format plan, those walls are part of the lot and are not common property. Clearly, doors and fittings are also within the boundaries of each lot, and are therefore part of each lot.

However, where a wall of a building adjoins lots or a lot and common property, the position is less clear. Section 109 of the Standard Module is based on the assumption that the walls define the boundaries in a building format plan. However, it is clear that from a reading of the Survey Plans for Clearwater that the walls of the lots in the scheme do not form the boundaries. Neither the Act nor the Standard Module contemplates the situation where lots in a building format plan have their own private yards, as it is for Clearwater. A similar scenario was considered in Order No. 475-2005, where Adjudicator Toohey stated at page 4:

"It seems to me that the provision requiring the body corporate to maintain railings and doors situated in boundary walls was intended to cover the typical arrangement under a building format plan where a single building is divided into a number of separate lots and each lot has similar doors, railings and windows that form part of a common building and require maintenance in a similar manner.

[The relevant scheme] comprises separate buildings that are located within their respective lots and any fences on the lot boundaries would appear to be outside the contemplation of a provision requiring the body corporate to maintain railings, doors and windows that are situated in boundary walls of lots under a building format plan. Rather, it seems that the Registrar of Titles Directions for the Preparation of Plans made pursuant to the Land Title Act 1994 have changed to allow for the registration of different types of subdivision without corresponding changes to the Body Corporate and Community Management Act 1997."

In these circumstances, I am guided by Order No. 475-2005. There the scheme was also comprised of separate buildings under a building format plan, with each building surrounded by a private yard delineated by survey pegs. Applying the reasoning from Order No. 475-2005 here, each individual lot owner is responsible for the maintenance of doors and fittings situated on their own private lot.

Further, at page 4 of Order No. 475-2005, Adjudicator Toohey stated:

"Based on the survey plans provided, parts of the fences are wholly within the individual lot boundary but at least parts of the fence have the face of the wall on the boundary line or on common property. The boundary is formed by survey pegs rather than a line along the centre of the fence so it is not possible to clearly say that the body corporate is responsible for the exterior surface of the fence and the individual owner is responsible for the interior surface. Being a structure that effectively forms a boundary between a lot and common property I conclude that maintenance responsibilities need to be jointly shared by the body corporate and each lot owner of land upon which the fence is partially situated."

The Survey Plans for Clearwater show that parts of the walls of each lot are within the private yard of each lot, while some parts of the walls adjoin lots, or lots and common property. Therefore, it is my finding that Clearwater falls outside the circumstances contemplated by section 109 of the Standard Module. Applying the reasoning in Order No. 475-2005, this means that the body corporate and each lot owner will be jointly responsible for the maintenance of the walls, doors and fittings that are on the boundaries of lots adjoining common property.

Numerous previous decisions of this Office refer to "maintenance" as including painting (for example, Order No. 583-1998, and Order No. 368-1999). I am therefore satisfied that the body corporate and each lot owner are jointly responsible for the painting of the walls, doors and fittings adjoining lots and common property at Clearwater.

The effect of the body corporate and each lot owner being jointly responsible to maintain the walls, doors and fittings on the boundaries of each lot and common property was also set out by Adjudicator Toohey at page 5 of Order No. 475-2005:

"The consequence of joint responsibility for maintenance is that each respective lot owner must form an agreement with the body corporate regarding the maintenance, repair, and any alterations to their respective fences."

Here, Motion No. 9 at the Annual General Meeting was passed authorising the body corporate to have the exterior of Clearwater painted. However, while that amounts to agreement by the body corporate, it does not amount to agreement by each individual lot owner to the painting. Rather, the position is as set out by Adjudicator Toohey at page 5 of Order No. 475-2005:

"...each individual lot owner would need to provide their individual consent before an agreement can be formed between the body corporate and that individual lot owner...The body corporate could consent by committee resolution or ordinary resolution and each lot owner could then provide their individual consent if they wanted any... parts of their fence to be painted...".

Therefore, Resolution No. 9 at the Annual General Meeting cannot authorise the painting of the complex without the agreement of individual lot owners. However, while Resolution No. 9 is ineffective by itself to authorise the painting, it is sufficient to evince agreement by the body corporate to have Clearwater painted. In this regard, I consider Resolution No. 9 to be analogous to a motion that was considered in Order No. 85-2000, where Adjudicator Young held at page 3:

"...the passing of this motion does not carry with it any authority for the body corporate to carry out the painting of a lot building without the owner’s consent. It merely decides that the body corporate can proceed to make arrangements to engage a painter whose services will then be offered to owners. That is, [the lot owner] is under no obligation by this resolution to accept the services of the selected painter."

I note here that the painting was completed in August 2005, apparently without objection. I consider that this acquiescence by individual lot owners is sufficient to amount to agreement by them to the painting.

Even if there were not agreement between the body corporate and each individual lot owner to the painting, I am of the view that to order a refund of money from the body corporate to individual lot owners for their contributions to the painting would serve no practical purpose. This is because the lot owners themselves would need to contribute to body corporate funds to allow the body corporate to make any refund to them. This would equate to essentially the same outcome as not requiring the body corporate to refund lot owners. I therefore consider it just and equitable to not require the body corporate to refund lot owners for their contributions to the painting.

Sinking fund

Resolution No. 4 of the Annual General Meeting fixed the sinking fund budget and levies for the period from 1 November 2004 to 31 October 2005.

Section 100 of the Standard Module relevantly provides –

"(1) The body corporate must establish and keep an administrative fund and a sinking fund.

(2) The body corporate must pay into its administrative fund any amount received by the body corporate that is not required under subsection (3) to be paid into is sinking fund.

(3) The body corporate must pay into its sinking fund –

It is clear from the minutes of the Annual General Meeting that the sinking fund budget was fixed to take into account anticipated capital expenditure, including repairs and maintenance, and painting. The painting of Clearwater was completed in August 2005, and was paid for out of the sinking fund. As I have stated above, the body corporate is jointly responsible to maintain the walls, doors and fittings on the boundaries of lots and common property. It therefore has full authority to include a component in the sinking fund levies for the cost of painting those walls, doors and fittings. I am therefore satisfied that the body corporate has properly administered the sinking fund in accordance with section 100(3)(a) of the Standard Module.

The painting of Clearwater started in April 2005 and was completed in August 2005. The works were paid for and funded from the Body Corporate Sinking Fund. The evidence is that the painting was done at a total cost of $121,137.50. This was the lesser of the two quotes obtained. The minutes of the annual general meeting held on 27 January 2005 record that both the Sinking Fund Budget (Resolution No. 4), and the painting of the exterior of Clearwater for the lesser quote were unanimously approved (Resolution No. 9).

Section 101 of the Standard Module provides –

"(1) The sinking fund may be applied towards –

(2) All other spending of the body corporate must be met from the administrative fund."

The Standard Module gives an example of capital expenditure at the end of section 101 as "the cost of repainting the common property...would be paid from the sinking fund." Previous Orders of this Office have also cited painting as an authorised expenditure from the sinking fund. For example, in Order No. 247-2000 Adjudicator Young stated:

"The sinking fund provides for anticipated expenditure of a capital nature, that is, expenditure not likely to be incurred annually. Examples of expenditure from the sinking fund include the painting of common property or major roof repairs."
Therefore, the painting of the walls, doors and fittings on the boundaries adjoining lots and common property that the body corporate is jointly liable to maintain is capital expenditure, and has been properly paid by the body corporate from the sinking fund.

Section 104 of the Standard Module provides –

"(1) This section applies if –

(2) The lot owners must be given copies of at least 2 quotations for carrying out the work or supplying the personal property or services.

(3) If the motion is proposed by the committee, the committee must obtain the quotations.

(4) If the motion is not proposed by the committee, the person proposing the motion must obtain the quotations and give them to the secretary.

(5) Copies of the quotations or, if voluminous, summaries of the quotations and advice about where the complete documents may be inspected, must accompany the notice of the meeting at which the motion is to be considered.

(6) If, for exceptional reasons, it is not practicable to obtain 2 quotations, a single quotation must be obtained and must accompany the notice of meeting.

(7) Unless subsection (6) applies, the motion must be stated as a motion with alternatives in the agenda and on a voting paper for the meeting.

(8) Each quotation obtained under this section must be retained as an attachment to the minutes of the meeting at which the quotation is considered.

(9) For this section –

payment for the body corporate manager’s or the service contractor’s services, provided for under the engagement, for the term of any right or option of extension or renewal of the engagement; and

Under section 104(1)(a) of the Standard Module, section 104 will only apply if there is a motion for the carrying out of work or the acquisition of personal property or services. Motion No. 9 of the Annual General Meeting proposed the painting of the exterior of Clearwater by Doug Thomas & Sons Pty Ltd, and is therefore a motion for "the carrying out of work", under section 104(1)(a) of the Standard Module.

Under section 104(1)(b) of the Standard Module, section 104 will only apply if the cost of the proposal exceeds the relevant limit for major spending for the scheme. "Relevant limit for major spending" is defined in the Schedule to the Standard Module as the number of lots in the scheme multiplied by $250. Clearwater is a 41 lot scheme. Therefore, the relevant limit for major spending for Clearwater is 41 x $250 = $10,250. The cost of the painting is $121,137.50 and easily exceeds the relevant limit of $10,250 for major spending. Therefore, section 104 of the Standard Module applies to the painting of Clearwater.

Section 104(2) and (3) of the Standard Module then requires the body corporate committee to give lot owners copies of at least two quotations for the work. Here, quotations from Doug Thomas & Son Pty Ltd, and De Boer Bros were provided in accordance with section 104(2) and (3).

Section 104(7) of the Standard Module then requires the motion to be a motion with alternatives. The minutes of the annual general meeting clearly record Motion No. 9 as being a "Motion With Alternatives" (the quotations from Doug Thomas & Son Pty Ltd, and De Boer Bros).

Section 104(8) of the Standard Module then requires each quotation to be attached to the minutes of the meeting. I have only been provided with a copy of the lower quotation from Doug Thomas & Son Pty Ltd. However, I note that Mr Gates has not raised in his application any allegation of the quotations not being attached. Moreover I note that Motion No. 9 was unanimously carried by those present (including Mr Gates). In the circumstances, I am unable to find any breach of section 104(8).

I am therefore satisfied that the procedural requirements under section 104 of the Standard Module for the expenditure on the painting of Clearwater have been complied with.

Conclusion

I have found that the Act and the Standard Module oblige the body corporate and individual lot owners to be jointly responsible to maintain the walls, doors and fittings on the boundaries adjoining lots and common property at Clearwater. This is because although Clearwater is a building format plan, its layout is more akin to a standard format plan. It therefore falls outside the circumstances contemplated by a strict reading of section 109 of the Standard Module. I have therefore found that the body corporate was authorised to pay for that maintenance from the Sinking Fund.

However, it would seem impractical in future for owners to require the body corporate to contribute to the costs of maintaining walls, doors and fittings on the boundaries adjoining lots and common property. This is because these body corporate contributions will be raised from the owners themselves. To guide the owners at Clearwater in addressing this issue in future, I quote the following extracts from Adjudicator Toohey in Order No. 475-2005 at page 6:

"...while owners and the body corporate will have a joint responsibility in respect of the fences it would seem practicable for each owner to be solely responsible for the expenditure necessary to maintain and repair their individual fence...there would appear to be little advantage for owners to require the body corporate to make a contribution to them when the owners will themselves have to make the contribution to the body corporate necessary for the body corporate to make the contribution back to them.

Even if owners took on the financial responsibility for the fences themselves, the owners would still require the permission of the body corporate to make any changes to the fences...this permission by the body corporate could be in the form of a general resolution authorising owners to change their fences by painting the wood a certain colour (Standard Module 113, 114). To assist in implementing this, the body corporate could also resolve to engage a particular contractor to perform the painting for any individual owners who agree, the cost of this service to be recovered from those owners (Standard Module, 119)...
Other owners may want to maintain and repair the fences themselves rather than agree to accept the services of a contractor engaged by the body corporate. These owners should be aware that there is an obligation on owners to maintain their lot in good condition and that a failure to do so would entitle the body corporate to carry out the necessary work and recover the reasonable costs from the owner (Standard Module 120, 121)..."

As the Clearwater by-laws were not raised in submissions and I have decided this application under the Act and the Standard Module, there is no need for me to consider the applicability of the Clearwater by-laws. However, I would draw to the body corporate’s attention that there may be questions about the validity of some by-laws in the Community Management Statement for Clearwater, due to their inconsistency with the Act and the Module. For example, by-law 24 referred to in the minutes of the committee meeting of 2 March 2005 appears to conflict with section 163 of the Act. By-law 24 could therefore be declared invalid under section 180(1) of the Act in any future application in which it is raised. It may therefore be prudent for the body corporate to review the by-laws in the Community Management Statement for Clearwater.

13.24	(1/2/05 - 30/4/05)
13.24	(1/5/05 - 30/7/05)
13.23	(1/8/05 - 31/10/05)

(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 be reasonably met from capital.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Clearwater On Burleigh Cove [2006] QBCCMCmr 289 (6 June 2006)