12 East Gordon Street [2006] QBCCMCmr 508 (10 October 2006)

Last Updated: 19 December 2006

REFERENCE: 0795-2005

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	908
Name of Scheme:	12 East Gordon Street
Address of Scheme:	12 East Gordon Street MACKAY QLD 4740

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

Ernest Garry Cornwell, the Owner of lots 3, 5 and 6

1. I hereby order that the body corporate shall repair the footings and foundations to the building to a structurally sound standard as per the advices of Mehrtens Underpinning and Construction and Ullman and Nolan Civil & Structural Engineers within five (5) months of the date of this order. 2. I further order that the owners of lots 1, 2 and 4 shall each within four (4) months of the date of this order reimburse Ernest Garry Cornwell the sum of $1,200.00 (a total reimbursement of $3,600.00) for costs incurred by him to date in obtaining reports from consulting geotechnical and structural engineers in relation to the repair of the footings and foundations of the building. 3. I further order that the body corporate shall fix a special contribution to be levied on the owner of each lot including the applicant (in accordance with the contribution schedule lot entitlements) to meet the body corporate’s liability referred to in paragraph (1) above, as inadequate provision has been made in the budget to meet this liability of the body corporate. 4. I further order that all lot owners shall make payment of the special contribution referred to in paragraph (3) above within four (4) months of the date of this order. 5. I further order that the application for an order that the body corporate be ordered to repair the internal walls and floors to units 5 and 6 to a structurally sound standard (and so that unit 6 is habitable) within three (3) months of the date of this order is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0795-2005

"12 East Gordon Street" CTS 908

ORDER SOUGHT

The applicant has sought orders of an adjudicator under the Body Corporate and Community Management Act 1997 (the Act) as follows:

1. That the body corporate be ordered to repair the footings and foundations to the building to a structurally sound standard as per the advices of Mehrtens Underpinning and Construction and Ullman and Nolan Civil & Structural Engineers and to pay the unpaid balance of the engineer’s report fees pursuant to section 281(1)(a) Body Corporate and Community Management Act 1997;
2. That the body corporate be ordered to reimburse the applicant $6,319.50 for costs incurred by him to date in consulting geotechnical and structural engineers for their advices on how to repair the footings and foundations to the building within three (3) months of the date of this order pursuant to section 281(1)(b) Body Corporate and Community Management Act 1997;
3. That the body corporate be ordered to resolve to fix a special contribution to be levied on the owner of each lot (in accordance with the contribution schedule lot entitlements) to meet the body corporate’s liability referred to in paragraphs (1) and (2) above, as inadequate provision has been made in the budget to meet this liability of the body corporate – pursuant to section 95(2) of the Body Corporate and Community Management (Standard Module) Regulation 1997 and section 276(2) Body Corporate and Community Management Act 1997;
4. That all lot owners be ordered to make payment of the special contribution referred to in paragraph (3) above within three (3) months of the date of this order;
5. That the body corporate be ordered to repair the walls and floors (internally and externally) to units 5 and 6 to a structurally sound standard (and so that unit 6 is habitable) within three (3) months of the date of this order (the costs of which will not be known until the underpinning process referred to in paragraph (1) has been completed) – pursuant to section 281(1)(a) Body Corporate and Community Management Act 1997

JURISDICTION

The application evidences a dispute between an owner of a lot included in a community titles scheme and the body corporate for the scheme (section 227(1)(b) 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

(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)).


SCHEME DETAILS

12 East Gordon Street is a community titles scheme comprising 6 lots and common property. The scheme was established upon registration of the building units plan (now described as a building format plan) on 14 June 1998. The scheme is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module).

BACKGROUND

The applicant outlined the nature and cause of damage to the footings and foundations of the building; the extent of the damage; his attempts to resolve the issue with the body corporate; and the legal basis for the outcomes sought. The applicant concluded that the body corporate had failed to maintain the common property in good condition, and was therefore in breach of the Act.

Submissions were sought from the other three owners. The views expressed were as follows:

• The damage to lots 5 and 6 should be covered by the body corporate insurance, and if it is not, then because the applicant knew the condition of the lots when he purchased them, he should bear the cost of repair
• The applicant knew the condition of lot 6 when he purchased it, probably at a very good price
• The applicant proceeded to obtain a geotechnical and structural engineer’s report without obtaining body corporate approval and assumed that the body corporate would reimburse him

The applicant replied to the submissions. The applicant acknowledged that he was aware of the condition of the building’s foundations when he purchased his lots, but that this knowledge did not relieve the body corporate of the responsibility of maintaining common property in a good and structurally sound condition. The applicant further acknowledged that he had obtained the geotechnical and structural engineer’s report without body corporate approval, but pointed out that without such a report it would have been impossible to identify the extent of the work required to repair the building’s foundations. The applicant concluded his reply by pointing out that nothing in the submissions suggested that he was responsible for the body corporate’s failure to properly maintain the common property, and that, therefore, he was not liable to bear the entire cost of repairing the damage to the building.

Teleconferences were held with the parties on 17 May 2006, 31 May 2006, 28 June 2006 and 28 July 2006. Considerable discussion took place concerning the proposals put forward by the applicant. Owners also expressed concern that the cost of the remedial works might be prohibitive and might also not guarantee that the problem would be solved permanently, given the general tendency to subsidence in the area.

At the last of the teleconferences, the principal of Mehrtens Underpinning was initially to participate and provide information to all owners, but then was unable to do so because of a family emergency. However, all owners had been provided with the reports and quotations, and had been invited to communicate directly with any of the professionals involved so as to satisfy themselves on any aspect of the proposed work.

DETERMINATION

Section 109 of the Standard Module provides as follows:

109 Duties of body corporate about common property--Act,

s 152

(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--

(a) maintain in good condition--

(i) railings, parapets and balustrades on (whether

precisely, or for all practical purposes) the

boundary of a lot and common property; and

(ii) doors, windows and associated fittings situated in a

boundary wall separating a lot from common

property; and

(iii) roofing membranes that are not common property

but that provide protection for lots or common

property; and

(b) maintain the following elements of scheme land that are

not common property in a structurally sound

condition--

(i) foundation structures;

(ii) roofing structures providing protection;

(iii) essential supporting framework, including

load-bearing walls.

(3) Despite anything in subsections (1) and (2)--

(a) the body corporate is not responsible for maintaining

fixtures or fittings installed by the occupier of a lot if

they were installed for the occupier’s own benefit; and

(b) the owner of the lot is responsible for maintaining utility

infrastructure, including utility infrastructure situated on

common property, in good order and condition, to the

extent that the utility infrastructure--

(i) relates only to supplying utility services to a

particular lot; and

(ii) is 1 of the following types--

• hot-water systems

• washing machines

• clothes dryers

• another device providing a utility service to a

lot; and

Examples for subsection (3)(b)--

1 An airconditioning plant is installed on the common property, but

relates only to supplying utility services to a particular lot. The

owner of the lot would be responsible for maintaining the

airconditioning equipment.

2 A hot-water system is installed on the common property, but

supplies water only to a particular lot. The owner of the lot would

be responsible for maintaining the hot-water system and the

associated pipes and wiring.

(c) the owner of the lot is responsible for maintaining the

tray of a shower that services the lot, whether or not the

tray forms part of the lot.

(4) To avoid doubt, it is declared that, despite an obligation the

body corporate may have under subsection (2) to maintain a

part of a lot in good condition or in a structurally sound

condition, the body corporate may recover the prescribed

costs, as a debt, from a person (whether or not the owner of

the lot) whose actions cause or contribute to damage or

deterioration of the part of the lot.

(5) In this section--

prescribed costs means the proportion of the reasonable cost

to the body corporate of carrying out the maintenance that

can, in the body corporate’s reasonable opinion, be fairly

attributed to the person’s actions.

It is apparent from the material that the foundations of the scheme building have been subsiding for some years, and that this problem was not addressed by the body corporate. The report dated 26 July 2005 from Ullman & Nolan Consulting Pty Ltd stated:

"The building is showing distress consistent with differential settlement of the foundations at its northern end ....The exact timeframe of the occurrence of the distress is not known, however it is understood that the building has been showing distress for a number of years."

It is also apparent that the applicant purchased the three lots which he now owns under very favourable circumstances because of this problem.

I have been provided with copies of the contracts of sale for each lot, and in each case the applicant acknowledged having inspected the property prior to the execution of the contract, and also acknowledged the existence of structural defects in lot 6. The prices for which he secured each of the lots were well below that likely to have been achievable if the lots were structurally sound. There is no dispute from any of the parties in relation to this.

Ordinarily, if an owner of a lot in a community titles scheme could demonstrate that he or she had suffered consequential damage to property because of a contravention of the Act or the community management statement (in this case, the failure of the body corporate to repair the foundations of the building) then an adjudicator might make an order that the responsible person or party either carry out stated repairs or pay the owner an amount fixed by the adjudicator as reimbursement for repairs carried out to the property by the owner (Act s281(1)).

In this case, the applicant purchased his lots in the full knowledge that internal repairs would be required to be carried out to make the lots structurally sound, after the external repairs were carried out to the foundations. In such circumstances, it would be inequitable for the other members of the body corporate to have to contribute to the cost of the internal repairs to the applicant’s lots, when the purchase price of each of the lots reflected a significant reduction in contemplation of the costs to be borne by the applicant. Accordingly, I decline to make the order sought to compensate the applicant in this regard.

However, the foundations of the building should have been repaired at the expense of the body corporate when the problem first arose. The fact that such repair was not carried out has obviously increased the cost of doing so now by a considerable margin. The quotes obtained by the applicant have been provided to all owners. It would appear that the repair of the foundations by underpinning is a reasonable and cost effective method of resolving the situation. The company from which the applicant obtained quotes is prepared to give a 10 year guarantee in relation to the work to be performed.

The applicant will also bear half of the cost of repair by virtue of his ownership of half of the lots in the scheme.

I have ordered that the repair be carried out within 5 months. I have allowed this period of time simply because the cost to each of the owners will be significant, and this will hopefully allow owners to arrange their finances in an orderly fashion and pay the special contribution discussed below within 4 months.

Because the cost of the repair has not been budgeted for, it will be necessary for owners to pay a special contribution, as provided for in section 95(2) of the Standard Module. I have allowed owners a period of 4 months within which to pay the special contribution.


The final matter relates to the cost of the geotechnical and structural engineer’s report.

I accept the applicant’s statement that it would have been impossible to ascertain the extent of the work required if such a report were not available to owners. The body corporate had certainly shown a reluctance to address the problem with the foundations up until the time that the applicant purchased his lots, so action was required to be taken.

However, had the body corporate’s formal approval been sought, as should have occurred, then owners would have been provided with at least two quotes for the reports (because the spending exceeded the limit for major spending for the scheme – Standard Module s104). It could well have been that a report from a different firm of engineers, at a more competitive price, might have been obtained.

As owners have been deprived of this opportunity I do not consider that they now should bear the full cost of the report obtained unilaterally by the applicant in these circumstances. I therefore intend to order that a lesser sum be paid to the applicant to reflect this view.