The Anchorage Apartments [2006] QBCCMCmr 619 (24 November 2006)

Last Updated: 19 December 2006

REFERENCE: 0713-2006

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	5471
Name of Scheme:	The Anchorage Apartments
Address of Scheme:	QUEENSLAND

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

Mr John Carbines co-trustee of the Arabella Grace Super Fund, the Owner of lot 24

I hereby order an application for an order "to have the latest by-laws changed back to the original by-laws when [the Applicant] purchased Lot 24" is dismissed. In lieu I order as follows – 1. that the body corporate lodges a new community management statement and pay the requisite fee to the Registrar of Titles within 21 days of the date of this order; 2. the new community management statement shall amend the current community management statement lodged on 30th January 2006 in the following particular – At By-law 15(d) the word "shall" is to be replaced with the word "may." 3. that the body corporate shall amend the body corporate records accordingly in respect of item 6 of Motion 18 of the annual general meeting of 29th November 2005 also within 21 days of the date of this order.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0713-2006

"The Anchorage Apartments" CTS 5471

THE APPLICATION

This application is made on 27^th August 2006 and amended on 8^th September 2006 by John Carbines, co-owner under a trust of Lot 24, (the Applicant) against the body corporate for The Anchorage Apartments (the body corporate) for an order that the by-laws for the scheme should be changed back to the by-laws in existence when the Applicant purchased Lot 24.



JURISDICTION

"The Anchorage Apartments" Community Title Scheme 5471 is a community title scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Accommodation Module). There are currently 23 lots in the scheme created under 5 different Building Unit Plans and Building Format Plans of subdivision.

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)).



SUBMISSIONS

The Applicant is co-owner of Lot 24 with Tracey Weeks (Ms Weeks), under a family trust. Ms Weeks own Lot 25. They contracted to buy Lot 24 on or about 12^th May 2005. At that time, the scheme by-laws stated in the community management statement registered on 3^rd Feb 2003 that Lot 24 may be used as restaurant. (By-law 15(d)).

On 29^th November 2005, prior to the Applicant becoming the owner of Lot 24, the body corporate at its annual general meeting resolved by special resolution to change By-law 15(d) so that it read "Lot 24 shall be used as a restaurant." The change to the By-law was part of Motion18 which incorporated 7 separate changes to by-laws. It was passed by 12 votes to 3.

The Applicant and Ms Weeks settled on Lots 24 and 25 on 6^th January 2006.

The new community management statement was recorded on 30^th January 2006.

The Applicant says that when he was negotiating for the purchase of Lot 24, the restaurant based in the lot was closed, and he checked the by-laws to make sure that he was not obliged to run a restaurant from the premises. He has no interest in running a restaurant.

He believes the action of the body corporate to be "completely illegal" and that it is outside the powers of the body corporate, to direct what a lot owner can do within the boundaries of an owner’s lot. The Applicant and Ms Weeks are anxious to sell Lot 24 and Lot 25. The Applicant is prevented from selling Lot 24 until the can clearly tell prospective purchasers the status of the lot. He requests an urgent resolution.

When he placed advertisements in the Courier Mail in August 2006, stating that the two units could be used as one large unit, or as a restaurant or conference centre, the body corporate’s solicitors wrote to the Applicant stating that Lot 24 must be used as a restaurant, and that whilst Lot 25 was residential, " it is understood that the fire wall operating the two units has now been removed" so that if Lot 25 was to be used as a residential unit, and Lot 24 as a restaurant, the firewall would have to be replaced.

In accordance with section 243(2) (b) Act, submissions were invited from all lot owners.

Peter Bayard, (Mr Bayard) who is the caretaking service contractor for the scheme, and owner of Lot 30, says that Lot 24 has been run as a restaurant since 1984 and from his personal knowledge since 2002. It was then operated by the owner of the lot who leased it out in January 2004, but the lessee left early in 2005. The owner then decided to sell it as a going concern. She signed contract with "entities associated with the Applicant" on 6^th May 2005. He says that the restaurant never ‘went broke’ as alleged by the Applicant, and that the Applicant was "at all times informed by the selling agent" that Lot 24 must be used as a restaurant and that the Applicant "would meet resistance" if he tried to turn it into an apartment. This fact put off other prospective purchasers. As the caretaker, Mr Bayard relies on the restaurant for conference facilities, as he has a conference room in his title.

He adds that the Applicant has not paid body corporate levies and is in arrears; that he has altered the property without the authorisation of the body corporate by removing a dividing wall, so removing the fire protection from the restaurant; he has continued to do renovations despite being told to stop by the body corporate; and that Lot 24 would need body corporate approval to convert to residential use.

D’Arcy and Lorna Marshall, (Mr and Mrs Marshall) owners of Lot 2 , say that they oppose the application. They have been owners for 14 years and Lot 24 has always been used as a licensed restaurant. It is not operating but as far as they are aware it did not ‘go broke’. They say that the scheme needs a restaurant for conferences and existing owners will suffer financially if conferences can no longer be catered for within the scheme. They say the purchaser should have made further searches before completing the sale eight months after signing the contract, and think this a matter for the Applicant as purchaser and the outgoing lot owner as vendor, that is, it is not a body corporate matter.

The body corporate committee made submissions through its solicitor. It points out that "the original Town Planning approval issued by the Redland Shire Council for Lot 24 on SP 118749 specified that the lot was to be used for the purposes of a restaurant only." Using it for any other purpose is "therefore illegal "under the current town plan. The by-law which stated that Lot 24 "may" be used as a restaurant was misleading in that it implied that lot 24 could be lawfully used for purposes other than a restaurant, and that is why the body corporate changed it to resolve the uncertainty.

The Applicant exercised his right of Reply. He says that Restaurant was not a going concern in May 2005, but was operating on a part time basis. It is his understanding that the lessee had left because the business was not financially viable. The lessee owed money to the owner and this was told to him by the outgoing owner.

He and Ms Weeks contracted to buy 2 lots one of which had restaurant equipment. It was not sold to him as a business or as a going concern.

He denies that the non-operation of the restaurant will cause financial hardship. Since the restaurant has not been operating full time since at least May 2005, Mr Bayard has been using the nearby bowls club to cater for his conferences. Even if Lot 24 operated as a restaurant, there is no obligation for Mr Bayard to use the restaurant for his conferences. He says that Mr Bayard is incorrect that he was told by the selling agent that he must use Lot 24 as a restaurant. Mr Bayard was not involved in any transaction where the selling agent was present. He obtained copies of the by-laws and discussed the matter with Redland Shire Council himself, prior to signing the contract. The zoning of the property allows for other activities.

He does not see that the matter of non-payment of body corporate contributions is relevant although he admits that fees are owed. The fact is that until he and Ms Weeks can sell Lot 24 and /or Lot 25 they are under "severe financial pressure."

With regard to alterations made, such alterations are governed by By-law 13. He says that since no load-bearing walls have been removed by him, By-Law 13 (which requires body corporate approval in such cases) does not apply. He has removed an interior wall between Lot 24 and Lot 25. He also denies that the removed wall was a "fire retaining wall." The only other renovations have been the removal of some cupboards, and decorating works.

He feels that the body corporate has not set out to "tidy up" the by-laws or correct an uncertainty but has deliberately decided to limit the use which can be made of Lot 24. Lot 24 has a "multitude of uses" that would comply with the Town Plan. He also queries the way in which Motion 18 was in 7 parts to be voted on "globally." Lot owners were faced with an "all or nothing" vote. The body corporate has caused him financial hardship, interfered with his sale, and devalued his property.

The Reply ends with reviewed orders sought. The Applicant now seeks an order that the annual general meeting held on 29^th November 2005 was invalid; and/or a declaration that by-law 15 as amended was oppressive, unreasonable or invalid and that the earlier by-law is reinstated; and that lot 24 is not required to operate as restaurant now or in the future and may be used for any lawful purpose under the Town Plan; as well as an appropriate order for costs.

I sought further information from the Applicant on 18^th October 2006 about whether or not Lot 24 could be a "residential lot" under the uses approved by the town plan. On 24^th October 2006, the Applicant replied that he had contacted the Redland Bay Shire Council by phone and that the Council confirmed that Lot 24 is currently zoned "Point Lookout Tourist Zone." The Council will not give advices in writing, but suggested that the Applicant engage the services of a town planner. On 23^rd October 2006, Gateway Survey and Planning Pty Ltd provided a report which the Applicant forwarded to this Office.

The report concludes that Lot 24 can be legally used for a number of other uses other than a restaurant, particularly those relating to "tourist accommodation" or "refreshment establishment."

I invited the body corporate to comment on the report, but on 15^th November 2006, it decided to make no further submissions.


DETERMINATION

To start at the end, the Applicant’s revised outcomes sought cannot now be put to the body corporate for submissions. The aim of the Reply is to give the Applicant the right to deal with any matters raised in submissions. It is not an opportunity to say the same things again, introduce more material left out of the application, or change the outcomes sought. Such a structure would make for endless ‘pleadings’ and disputes would not be resolved. I have no jurisdiction to award costs save in the situation where a frivolous or vexatious application is dismissed and costs may be awarded to the respondent. Further, the Applicant has consistently sought expedition of this somewhat complex matter because he says that he is in a dire financial situation about which he makes no bones.

It is perhaps unfair to say that the body corporate has caused him to be in that position, but certainly the current inability to sell Lots 24 and 25 in the scheme with any certainty offered as to their respective uses to prospective purchasers, is tying the Applicant’s hands at a time in his life when he needs to liquidate some assets.

I am of the view that whether or not the Applicant is up to date with his body corporate contributions is not relevant to the outcome sought. I am also of the view that whether or not the previously operated restaurant, or a restaurant business at all, was or is viable, is immaterial. The Applicant has never expressed an interest in running a restaurant, and he is not using the restaurant’s viability as an excuse for not operating one. Additionally, what hearsay may exist as to what the Applicant may or may not have been told by the vendor’s agent, is also irrelevant.

The issues reduce to the use which can be made of Lot 24; the renovations done to Lot 24 by the Applicant; and the lawfulness of the scheme by-laws.

The penultimate community management statement, detailed in its by-laws at By-Law 15, the uses of various lots. Each lot must be used as a private residence unless provided otherwise in the by-laws (By-Law 15(a)). Lot 3 may be used as a private residence and for the purpose of providing caretaking/building management, letting and ancillary services (By-law 15(b). An area of Lot 3 on the garage level, other than the car-park, may be used as a conference centre, or for any other commercial use permitted under the relevant Town Plan (By-Law 15(b)). Lots 16 and 17 may be used for retail and commercial activities, but not in competition with the caretaker’s duties (By-Law 15(c). Lot 24 may be used as a restaurant (By-law 15(d)).

It was this by-law upon which the Applicant relied when he signed a contract in May 2005. It is not denied by the body corporate that at that time the restaurant, if operating, was operating spasmodically. What is denied is that the restaurant had "gone broke." Whether the restaurant was doing a roaring trade or not in May 2005 is also immaterial, since any prospective owner could see from the by-laws that, as for the other lots detailed at By-Law 15, the use to be made (as a restaurant) was permissive and not obligatory.

At the annual general meeting held on 29^th November 2005, the body corporate voted at Motion 18 to change the by-laws in 7 particulars. Changes to by-laws which do not concern exclusive use areas, require only a special resolution. The Applicant was not invited to vote at the annual general meeting since he was not in November 2005, an owner.

The Applicant did not complete the sale until January 2006, but by that time he was bound by the contract. Whether or not he had made further searches would not have assisted him, since the new community management statement was not recorded until 30^th January 2006, and by that time he was an owner.

The Applicant says that the way in which the vote was taken in one motion for altering the by-laws in 7 particulars, some of more consequence than others, was unreasonable or unfair. There is no legal reason why the committee could not draft an "all-or-nothing" motion. Any lot owner who was in favour of only parts of the motion could vote "No."

There have been no submissions from lot owners saying that they were confused by the motion or that any lot owner wanted to vote for parts of the motion and not other parts.

However, Section 180 of the Act contains limitations for by-laws and section 180(3) Act states that "if a lot may be lawfully used for residential purposes, the by-laws can not restrict the type of residential use."

I note that by-law 15 is permissive in nature for the uses stated for all the lots mentioned therein, and that the new community management statement now lodged changes only the use of Lot 24 to an obligatory use. All the other lots remain the same, that is, there remains no requirement on the caretaker to use part of his lot as a conference centre, or Lots 16 and 17 ( now lots 28 and 29) to be used as shops or commercial premises. It is therefore somewhat surprising for the body corporate to argue that it changed "may" to "shall" in respect of Lot 24, in order to correct an uncertainty. If this was the case, the other uses should also have been changed to an obligatory status. The ‘uncertainty’ if any, remains in respect of lots 28 and 29, and Lot 3 (now Lot 30.)

Furthermore, if by changing the status of lot 24, from an "uncertain" one to a certain use of that of a restaurant only, the body corporate is admitting that the by-law was "misleading", then the Applicant may have a civil remedy against the body corporate under the Trade Practices Act for implying that Lot 24 could be lawfully used for purposes other than a restaurant, which was in the view of the body corporate "illegal."

I am of the view that the by-laws as drafted were intentionally drafted to show that such uses were allowed by the scheme. The body corporate submits that "the original Town Planning approval issued by the Redland Shire Council for Lot 24 on SP 118749 specified that the lot was to be used for the purposes of a restaurant only." I am not however provided with a copy of this approval to which the body corporate refers. Such approval for use would be likely in my view to mean that the only use approved by the local authority in a residential scheme would be as a restaurant, and for no other commercial purpose. It would not mean that the owner was obliged to use the approval given by the local authority if he did not want to do so.

A search of the Land Titles Registry shows that SP 118749 was created on 22^nd January 2001, and that Lot 24 was created partly out of common property formerly on BUP 9866 and partly out of Lot 23 formerly on BUP 100725. Lot 23 (and Lot 22) was a re-subdivision of Lots 16 and 17. There is no notification on the plan about uses, although that in itself is not conclusive.

A new community management statement was lodged on 14^th March 2001, which included Lot 24. By-law 28 of that community management statement stated that unless otherwise stated lots shall not be used other than for private residences. There were no other uses stated. There is no reference to a restaurant use in Lot 24 or anywhere else in the scheme. It is, in my view, odd that if the newly created Lot 24 was solely for the purpose of a restaurant as required by the local authority, that the new by-laws did not reflect this. In fact, at the time it was created, it was prohibited from being anything other than "a private residence" according to the community management statement.

By-law 15 as a by-law about uses of lots, first appeared in a community management statement lodged on 28^th June 2002 when new by-laws were recorded. By-law 15(d) stated that Lot 24 may be used as a restaurant. This was repeated at By-law 15(d) in a subsequent community management statement lodged on 3^rd February 2003, and Lots 16 and 17 are still referred to at By-Law 15(c) although those lot numbers no longer existed. It would have been this community management statement which would have been seen by the Applicant in or about May 2005, the one prior to the new community statement now lodged on 30^th January 2006.

Town Planner Michael McCrystal of Gateway Survey and Planning Pty Ltd advises that the scheme land is zoned "Point Lookout Tourist Zone" which contains a variety of uses. I am not advised from which time that zoning came into effect. A tourist use of the scheme land is envisaged. This use includes various accommodation types of the sort associated with providing holidays, eg. serviced apartments, resorts, cafes and restaurants.

Such uses are "code assessable" which currently means that they are the type of use which the council envisages and which will be accepted provided that the promoter complies with a code set down by council, without more. The Applicant points out that in lots below Lot 24, the council has presumably approved other uses which are not currently "code assessable" such as a hairdressers and an adventure shop.

Not surprisingly for a town planner, Mr McCrystal has looked only at the whole area of scheme land, and has not been able to detail uses of specific lots within the scheme. His report leaves me with the conclusion that Lot 24 could be used as a restaurant, or as tourist accommodation. This would be in line with the running of a body corporate and the provisions of the body corporate legislation. It is up to a body corporate to allow uses within the scheme, as the by-laws for this scheme have done. Quite often, such by-laws as by-law 15 set out that any envisaged uses must be approved by the body corporate and comply with local authority approvals as well.

The Anchorage Apartments are regulated by the Accommodation Module, the principal purpose of which is to regulate lots in a scheme which consists of predominantly "accommodation lots." An accommodation lot" means a lot which is, or available to be, let for accommodation for long or short term residential purposes.

Any purpose outside a residential purpose, would need permission from the body corporate, such as demonstrated in the historical by-laws for this scheme. If all owners wished merely to live in their apartments or to rent them out on long or short lets, I am of the view that the body corporate could not stop them. Such is the intent of section 180(3) Act.

If residential use is lawful, and I am not persuaded by the body corporate’s statement that such use becomes unlawful simply because Lot 24 has a planning permit from the local authority, then the body corporate cannot limit that residential use in any way.

I am satisfied that under section 276(1) Act, that an adjudicator could make an order that parts of a motion stand whilst others fail, that is, that a motion could be severed and still be valid. Since any amendments to a community management statement will require the lodging of a new community management statement in the Land Titles Registry, I order that the community management statement lodged on 30^th January 2006 be amended in that the word "shall" at By-Law 15(d) is to be replaced with the word "may." The body corporate must lodge the request and requisite fee with the Land Titles Registry within 21 days of the date of this order.

The body corporate records in respect of item 6 of Motion 18 of the annual general meeting of 29^th November 2005 shall be amended accordingly also within 21 days.

I have no evidence before me of the extent of the alterations done by the Applicant. It is not submitted that the Applicant has breached by-law 13 by his renovations, although Mr Bayard says that the Applicant has removed a ‘firewall’. If the Applicant has breached by-law 13 (or any other by-laws) then the body corporate has a process which it can set in motion by issuing a By-Law Contravention Notice to the Applicant, or his successors in title. I note that Lot 24 and Lot 25 appear to have been created out of one lot, but I have no technical details of how this was done, or how the reversion might be safely achieved.

Finally, I recommend that in respect of any future motions to amend the by-laws, that each item of amendment is put to a separate vote.