No. 9 Port Douglas Road [2006] QBCCMCmr 300 (14 June 2006)

Number of Scheme:	24368
Name of Scheme:	No. 9 Port Douglas Road
Address of Scheme:	9 Port Douglas Road PORT DOUGLAS QLD 4871

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

I hereby order that, within three weeks, the body corporate for No. 9 Port Douglas Road must pay the applicant $2,708.99 to compensate the applicant for the costs of repairs to the ceiling of lot 9 resulting from the failure of the body corporate to comply with its maintenance obligations.

I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0469-2005

"No. 9 Port Douglas Road" CTS 24368

No. 9 Port Douglas Road Community Titles Scheme (Port Douglas Road) is an 18 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. Lot boundaries are designated under a building units plan (now known as a building format plan).

This is an application by Michael McEvoy, owner of lot 9 (applicant) seeking orders against the body corporate for Port Douglas Road (respondent).

The dispute concerns a claim by the applicant that the body corporate is liable for damage caused to his unit through water penetration from the slab above. The applicant seeks an interim order to require the body corporate to reimburse the costs of repairing the ceiling for the 2005 high season and claims he has suffered severe hardship as a result of repair costs and the loss of rental for the past six months. The applicant also seeks repayment of expenses incurred for replacement of ceilings over the five preceding years.

The applicant has provided submissions to the effect that the roof of the building leaks and that, for a number of reasons, this has not been fixed over approximately five years during which the applicant has owned the unit. He seeks a determination of whether the body corporate is liable for the damage, immediate repayment of the most recent repair costs, repayment of expenses over the past five years, and damages for loss of rental income.

Submissions have been made by the body corporate and other owners. All submissions are available for the parties to inspect upon request and it is unnecessary for me to summarise these submissions in detail. However, the main submissions are to the effect that:

A response from the applicant is to the effect that the leaks in unit 9 are much worse than the leaks into other units, that the applicant did not contribute to the problems, that the membrane installed in 2001 to fix the problem failed within a few weeks of being installed, and that a new roof covering the area would have been the best option to stop leaks but he was unable to get a meeting called at which owners could discuss this proposal.

Significant quantities of rain water have been entering apartments from the roof area. It seems likely that this is at least partly due to the body corporate failing to keep the waterproofing membrane in good condition. In the circumstances I conclude that the body corporate has failed to maintain in good condition roofing membranes that are not common property but provide protection for lots or common property (Accommodation Module, 108(2)(a)(iii)). It is possible that the rain water entering apartments is also due to design defects, water tracking through besser brick walls, and the developer not installing appropriate waterproofing membranes in all necessary areas. Based on the submissions it seems likely that at least some factors of this nature have contributed to the problem. I therefore further conclude that the body corporate has contravened the legislation by failing to maintain common property in good condition and failing to maintain roofing structures providing protection in a structurally sound condition (Accommodation Module 108(1), 108(2)(b)(ii)).

The applicant is seeking to recover damage to the ceiling of his unit pursuant to a provision of the legislation that allows an adjudicator to order compensation where an applicant has suffered damage to property because of a contravention of the Act (Act, 281). The body corporate’s lawyers have not disputed the ingress of rain water into the applicant’s lot and say that the body corporate has engaged an engineer to inspect the problem and is proposing to take reasonable steps to fix the problem. However, it is submitted that any liability to compensate the applicant is not a strict liability that arises immediately on any water damage occurring. Rather, that the requirement of the body corporate to maintain these parts of the scheme is subject to the general requirement that the body corporate act reasonably in administering the common property for the benefit of owners (Act, 152).

I accept that the body corporate’s liability is not a strict liability that accrues automatically on any damage occurring. The applicant will need to show the body corporate has contravened the legislation. However, it is sufficient for the applicant to show that the body corporate has contravened its maintenance obligations and there is no need to show that the body corporate has also contravened its general obligation to act reasonably in carrying out its functions.

The requirement for the body corporate to maintain certain parts of the scheme in good condition or in a structurally sound condition is in addition to any requirement to administer, manage and control the common property and body corporate assets reasonably and for the benefit of owners. The body corporate is under a general obligation to act reasonably in performing its functions (Act, 94). However, the critical point is that the body corporate must still perform its legislative function. This means that the body corporate cannot allow roofing membranes to deteriorate and attempt partial fixes that prevent water ingress except in heavy rain. The maintenance obligations of the body corporate are only satisfied if significant water ingress is prevented in all normal weather conditions.

This requirement to maintain does not amount to strict liability in all circumstances of damage. For example, if the body corporate had maintained all relevant areas in good condition and a freak storm caused substantial damage to lots then the body corporate would not have contravened the legislation. Owners would need to repair any damage themselves or seek to recover pursuant to any relevant insurance policies. However, the situation is different if the body corporate allows a roof to fall into a state of disrepair and damage occurs as a result.

I understand from submissions that owners have faced some peculiar difficulties in respect of the roof. It is possible to contemplate a situation where engineers could give the body corporate advice that it would be unreasonable to fix a roof that is structurally flawed or in complete disrepair. However, this advice does not relieve the body corporate of the legislative requirement to maintain parts of the building in good condition or a structurally sound condition. Owners are instead placed in a position where they may consider it better to terminate the scheme rather than pay the costs of maintaining the building in good condition. If all owners wish to terminate the scheme then they are entitled to do that by resolution without dissent or, alternatively, an individual owner can apply for an order of the District Court to terminate the scheme (Act, 78).

While the scheme is actually in operation, owners will need to find the funds necessary for contributions to the body corporate to pay the costs of maintenance according to the body corporate’s legislative obligations. In some circumstances owners may be able to mortgage their lots under an agreement with a bank allowing them to draw down funds to contribute to the costs of work being performed by the body corporate. If an owner cannot obtain any funds to pay the contributions then they will be liable to the body corporate for the failure to pay those contributions and it may be better that they sell the lot to someone who can afford to pay the contributions.

The body corporate is comprised of all owners. If the body corporate has failed to perform its maintenance obligations and a particular owner suffers damage as a result then an adjudicator may order that the body corporate compensate that owner (Act, 281). The body corporate will fund this liability through contributions from all owners, including the applicant, in line with each owner’s respective lot entitlements.

Some submissions have been made to the effect that the applicant was on the committee and failed to take appropriate steps to have the necessary maintenance done. However, it seems to me that owners as a whole over the last few years have lacked the motivation to take appropriate steps to stop water coming through from the roof area.

The applicant has satisfied me that, shortly before this application was lodged, he had to expend $2,708.99 on fixing his ceiling. This work was needed because of rain water ingress that occurred because the body corporate failed to meet its legislative obligations concerning maintenance of the roofing areas and the applicant’s repair costs do not appear to be excessive for the nature of damage suffered.

It is just and equitable in the circumstances that the body corporate compensates the applicant for these costs. Where damage results as a result of a failure of all owners to ensure that the body corporate complies with its legislative obligations it is not fair that only those particular owners who are unfortunate enough to suffer the damage should pay the costs of rectifying the damage. Rather, all owners should contribute to the costs of rectifying all damage that resulted from the body corporate’s failure to maintain regardless of whose lot has been damaged.

I will therefore order that the body corporate pay the applicant $2,708.99 to compensate the applicant for the costs of repairs to the ceiling of lot 9 resulting from the failure of the body corporate to comply with its maintenance obligations. Presumably the body corporate will need to raise a special levy to pay this amount and any amounts payable for subsequent repairs or repairs of other owners who have suffered similar damage. All owners, including the applicant, will need to contribute to this special levy in accordance with their contribution schedule lot entitlements.

Where loss of rent is sought on the basis of a contravention of the Body Corporate and Community Management Act 1997 then the procedures of this office may well constitute a process for the resolution of the dispute that acts to exclude resolution by any other process (Act, 229).^[1] However, unless the application is dismissed to a court as part of this process,^[2] the authorities suggest that there is no power for an owner to obtain an award of damages for loss of rent based on a claim under the dispute resolution provisions of the Act.^[3] Specifically, section 281 only allows compensation for damage to property. For this reason, I will dismiss any claim for lost rent. This is on the basis that any claim of that nature should be dealt with in a court of competent jurisdiction (Act, 270(1)(b)).

There are a number of additional obstacles in respect of a claim for reimbursement of the costs of repairs from previous years.

Firstly, some of this damage existed at the time the applicant purchased his lot. Submissions on behalf of the body corporate suggest that the applicant obtained the lot at a reduced price because of this damage and that the applicant accepted responsibility for fixing the damage. Further, it is arguable that delay by the applicant has allowed significant damages to be incurred over a number of years without the body corporate being put on notice that these damages would be claimed against it. This may have affected decisions made by the body corporate as well as made it more difficult for the body corporate to assess and challenge the amount of compensation claimed.

I consider the power for an adjudicator to make an order for reimbursement of repairs carried out to property to be discretionary and based on principles of what is just and equitable in all the circumstances. The applicant bought the lot in a state of disrepair and initially accepted responsibility for rectification of damage caused by water ingress. This continued for a number of years but, in 2005, the applicant decided to claim the repairs for that year and also all the previous years. I have ordered that the applicant be compensated for the cost of repairs carried out shortly prior to lodgement of the present application. However, I do not consider it just and equitable that I make an order pursuant to this application also compensating the applicant for repairs carried out in the number of years preceding the making of this application. In coming to this decision I have reviewed the various submissions made by the parties. The most relevant submissions were that the applicant bought the unit with knowledge of previous damage and initially repaired damage without seeking compensation.

The applicant bought the unit with knowledge of problems of water ingress and initially accepted responsibility for rectifying related damage. However, this does not mean that the applicant cannot claim for damage caused subsequently through a continued failure by the body corporate to comply with its legislative obligations.

Recent correspondence from the applicant indicates that he suffered further damage in 2006. This damage is not the subject of the present application that was lodged prior to the alleged further damage. The applicant and body corporate may be able to come to an agreement regarding compensation for the alleged further damage. Otherwise, a new application can be lodged.

A few other owners have indicated that they also suffered damage. Similar to the earlier damage suffered by the applicant, these owners may have obtained their unit with knowledge of the water ingress and taken responsibility for this damage. However, it seems just and equitable that other owners be compensated for repair of any damage that has occurred recently.
The applicant lodged the present application within a reasonable time of damage occurring from heavy rains in 2005. All owners have been on notice since that time that particular owners who were continuing to suffer damage as a result of the defective roof might seek compensation for damage occurring pending the roof being fixed. In the same way that all owners will need to contribute to the costs of fixing the roof, all owners may also need to contribute to the costs of fixing those particular units that are suffering damage as a result of the presently defective roof. If a number of units are presently damaged then it may even be more efficient for the body corporate to engage a single contractor to rectify all the damage at once.

Hopefully owners will be able to agree on an appropriate way to resolve any disputes of this nature between themselves. If any owners are unable to reach agreement with the body corporate regarding rectification of damage caused by water ingress then this office can deal with any particular disputes on a case by case basis.

^[1] James v Aarons Community Titles Scheme, [2003] QCA 329, Davies, Jerrard JJA and MacKenzie J, at paragraph 12.
^[2] Refer to sections 250 and 270 of the Act.
^[3] James v Aarons Community Titles Scheme, supra, at paragraph 19.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

No. 9 Port Douglas Road [2006] QBCCMCmr 300 (14 June 2006)