Charlton on the Esplanade [2006] QBCCMCmr 50 (7 February 2006)

Number of Scheme:	2027
Name of Scheme:	Charlton on the Esplanade
Address of Scheme:	451-452 Esplanade TORQUAY QLD 4655

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

I hereby order that the application by Leonard McNeil & Narelle McNeil, the owners of lot 20 for orders that

• sinking fund monies not be used to fund the installation of 5 hydrants at the compex; and
• the special contribution to be raised be raised on a per lot basis, rather than a per lot entitlement basis; and
• an interim order that resolutions 6 and 7 purportedly carried at the meeting of the body corporate held on 17 December 2005 not be implemented pending a final determination of the validity of these resolutions,

is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0025-2006

"Charlton on the Esplanade" CTS 2027

The application

The applicants, Leonard McNeil & Narelle McNeil, the owners of lot 20 have sought the following order of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) quote:

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

(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)).

Application for interim order

Section 279(1) provides that an adjudicator may make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates.

In any consideration of an application which seeks the making of an interim order, it is necessary to determine at the outset whether, because of the nature or urgency of the circumstances relating to the application, an interim order is in fact necessary or appropriate. The examples included in the Act under section 279(1) are suggestive of the usual circumstances where an interim order might be made. Both examples are in the nature of injunctive relief. Whilst the range of matters which might be the subject of an interim order is not capable of definition, the applicant does need to establish that the circumstances of the application warrant the making of an interim order.

An interim order will not be made, or will be refused, in circumstances where the only urgency relates to the applicant’s desire to resolve or expedite the matters in dispute, or where the nature of the circumstances are such that the matter is not capable of being dealt with in the context of an interim order. Again, it is not possible to define these circumstances. However, given that an interim order may be made ex parte (ie. without reference to, or submission from the respondent named in the matter), then as a guide, where the circumstances or matters in dispute include matters or allegations not capable of objective consideration, or ready determination, or relate to issues of credibility or character, for example, where an interim order would be inappropriate, then the request for an interim order will be refused. It is a matter for an adjudicator to determine in respect of each application.

The interim order sought by the applicants is that resolutions 6 and 7 purportedly carried by the body corporate at an EGM held on Saturday 17 December 2005 (the meeting) "not be implemented pending a final determination" of the validity of these resolutions. Certainly, the nature of the interim order sought is one which is necessary to preserve the status quo, before a final determination might be made. However, I do have significant concerns that if I were to place the implementation of these resolutions on hold pending a final determination, that the body corporate might fail to comply with certain mandatory requirements of the Queensland Fire and Rescue Authority (QFRA).

The submission of the acting Secretary / Manager for the scheme, Trevor Cecil states:

In the circumstances, I consider it necessary, rather then making an interim order, and subsequently a final order, to simply proceed to final determination of this dispute.

Submissions and proceeding to final determination

This office would normally seek submissions from all owners and the body corporate committee before making a final order to an application. However, I note that I am in receipt of a submission from the committee responding to all issues the subject of the application and have noted above the committee’s concern regarding the potential consequences of an interim order in the terms sought by the applicants.

Whilst I do not specifically know the views of owners regarding this dispute, I do however know the outcome of voting in respect of the two resolutions in question (6 and 7 as per the minutes of the meeting). Both motions were passed by the same vote: Yes – 18, No – 1 with nil abstentions. I consider that the voting results are at least suggestive of the views of owners, and further, I consider that owners voted on the motions in question with some significant background and knowledge of the issues involved. I conclude therefore that owners were not voting on the motions in a vacuum.

The orders sought

I am a little perplexed at what the applicants are actually seeking. From the terms of the interim order, it appears the final outcome sought requires a "determination of the validity of the resolutions purportedly carried".

The final orders sought refer to the "non-extraction of sinking fund monies to fund remedial installation ...". This has several possible interpretations. Probably most obvious; that the hydrants be funded from monies other than from the sinking fund. Do the applicants intend from the administrative fund, or rather, a special levy?

Alternatively, are the applicants suggesting that the monies shouldn’t come from the body corporate funds whatsoever. This interpretation of the order sought is open on the basis of the applicants’ grounds, and particularly the concluding statements to those grounds, quote "It must not be acceptable that any Developer should be permitted to be accommodated by a subsequent Body Corporate, by Sinking Fund cover for decade old omissions". Clearly, the applicants believe that the failure to install the hydrants was that of the initial developer. If the applicants are now implying or expecting by their application that the developer now be held liable for this expense, then I regret to inform the applicants that I will not embark on such an investigation or determination. Any dispute as to whether the developer should have installed the hydrants as part of the initial development or has any liability to the body corporate in this regard presently is a matter for a completely different forum, with other parties (namely the body corporate and the developer). I will not consider this aspect further.

The third possible interpretation of the order sought is a more limited one: that in fact the applicants accept the necessity to install hydrants and paint the complex and are only challenging the specific basis on which liability for this should be apportioned between owners.

Perhaps the best view of what the applicants are seeking is a combination of the interim order and my first and third interpretations of the final orders they are requesting. That the resolutions are invalid, and in the alternative, that the expenditure should not be met from the sinking fund, and should be determined on a per lot basis (ie. cost / 21 lots) rather than a per lot entitlement basis.

The dispute

The applicants grounds are largely irrelevant and I do not propose to consider much of what is contained there. In particular, for the reason explained above, I will not be considering any aspect of the dispute which suggests or seeks that the original developer is liable. This dispute, if it is to be considered at all, is for another forum and involving other parties.

Further, it is completely irrelevant for the determination of this dispute that the applicants are resident owners in a scheme which is almost completely investor owners. That is, it is irrelevant that the majority of owners are members of the letting pool or that, as alleged by the applicants, this aspect affects the way these owners vote, and as well, their numbers are such as to control the outcome of motions.

Differences in the types of ownership in a scheme (resident v. investor owners) have only very limited significance for the legislation. If the applicants are suggesting that I should consider their circumstances more sympathetically because they, as resident owners, are outnumbered, then again I am sorry to disappoint the applicants. Arguments advance on this basis are without merit.

On page 5 of their grounds, the applicants appear to muse over various of the preceding motions considered at the meeting in question. As the applicants have not challenged the validity of these motions, or resolutions, then I am not interested in considering them further. In my view, their validity is not in dispute, and it is not necessary to consider the applicants view on motions other than those in dispute.

Finally, on the foot of page 5 of their grounds the applicants arrive at "The Dispute".

They approve the sinking fund "extraction" for painting, then state:

The applicants objection to resolution 6 is that the fire hydrant expense of $60000 is being funded out of sinking funds and not by the raising of a special levy.

Chairperson Leitch has responded that:

It seems to me that the applicants have missed the point of resolution 7 in that it in fact is what they are seeking relative to resolution 6. The applicants are satisfied that the painting money should be taken from the sinking fund, but consider that the hydrant money should be raised by special levy. This practically however is the effect of resolution 7. Whilst it lumps the two expenditures (painting and hydrants) together, it then proposes the raising of an "interim special levy for the purpose of the installation of the Fire Hydrant System and external painting of the building".

When you look at the figures which were accepted, the total of the two expenditures as per the quotes is $129,464.60. The combined effect of motions 6 and 7 are that to fund the two expenditures, the body corporate is using $60000 of sinking fund monies, and raising the balance of almost $70000 by levying a special contribution on owners. Given that the painting quote was for $80300, then in fact, the body corporate is taking less from the sinking fund then it technically should, and choosing to raise more by way of special contribution than it otherwise would have to to fund the hydrants. As I understand the information, the practical effect of what the body corporate has done is that approximately 75% of the cost of painting is being funded from the sinking fund, and the balance of the cost of painting and the full cost of the hydrants is being funded by a special levy on owners, and not from the sinking fund.
This is in fact more than what the applicants were seeking. In the circumstances, the applicants submission on this aspect misunderstands the effect of the relevant resolutions, and misinterprets the practical effect of the transaction.

Part 5 of the Act, sections 46 and 47 relevantly provide:

PART 5--LOT ENTITLEMENTS
46 Lot entitlements
(1) A "lot entitlement", for a lot included in a community titles scheme, means the number allocated to the lot in the contribution schedule or interest schedule in the community management statement.
(2) The "contribution schedule" is the schedule in a community management statement containing each lot’s contribution schedule lot entitlement.
(3) The "interest schedule" is the schedule in a community management statement containing each lot’s interest schedule lot entitlement.
(4) The "contribution schedule lot entitlement", for a lot, means the number allocated to the lot in the contribution schedule.
(5) The "interest schedule lot entitlement", for a lot, means the number allocated to the lot in the interest schedule. ...

47 Application of lot entitlements
(1) This section states the general principles for the application of lot entitlements to a community titles scheme, but has effect subject to provisions of this Act providing more specifically for the application of lot entitlements.
(2) The contribution schedule lot entitlement for a lot is the basis for calculating--
(a) the lot owner’s share of amounts levied by the body corporate, unless the extent of the lot owner’s obligation to contribute to a levy for a particular purpose is specifically otherwise provided
for in this Act;12 and
(b) the value of the lot owner’s vote for voting on an ordinary resolution if a poll is conducted for voting on the resolution.
12 The regulation module applying to a community titles scheme might provide that a lot owner’s contribution to some or all of the insurance required to be put in place by the body corporate is to be calculated on the basis of the lot’s interest schedule lot entitlement.
(3) The interest schedule lot entitlement for a lot is the basis for calculating--
(a) the lot owner’s share of common property; and
(b) the lot owner’s interest on termination of the scheme, including the lot owner’s share in body corporate assets on termination of the scheme; and
(c) the unimproved value of the lot, for the purpose of a charge, levy, rate or tax that is payable directly to a local government, the commissioner of land tax or other authority and that is calculated
and imposed on the basis of unimproved value.
(4) Neither the contribution schedule lot entitlement nor the interest schedule lot entitlement for a lot is used for the calculation of the liability of the owner or occupier of the lot for the supply of a utility service to the lot if the amount of the utility service supplied to each lot is capable of
separate measurement, and the owner or occupier is billed directly.

On the basis of section 47(2) of the Act, which provides relevantly that the contribution schedule lot entitlement for a lot is the basis for calculating the lot owner’s share of amounts levied by the body corporate, the applicants argument that the apportionment of the special levy contribution should be on a per lot basis, and not a per lot entitlement basis, must fail. It is without substance.

This application is dismissed in its entirety.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Charlton on the Esplanade [2006] QBCCMCmr 50 (7 February 2006)