The Moroccan [2006] QBCCMCmr 729 (18 September 2006)

Last Updated: 29 March 2007

REFERENCE: 0162-2006

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	17574
Name of Scheme:	The Moroccan
Address of Scheme:	14 View Avenue SURFERS PARADISE QLD 4217

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

Magog Pty Ltd, the Owner of lot 1

I hereby order that that the Body Corporate implement the resolutions carried at the EGM on 11 April 2006 whereby it was resolved that Building Rectification Services Pty. Ltd be engaged to effect repair works to the podium level to enable the body corporate to fulfil its obligations under section 109 of the Body Corporate and Community Management (Standard Module) Regulation. I further order that the Body Corporate is to require Building Rectification services Pty. Ltd. to commence repair work as per their quotation dated 12 January 2006within two months of the date of this order or such other period as may be specified in a supplementary order made by an Adjudicator from this Office. I further order that the Body Corporate is to require GK Consulting Engineers Pty. Ltd. to be appointed as project manager for the works within two months of the date of this order or such other period as may be specified in a supplementary order made by an Adjudicator from this Office.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0162-2006

"The Moroccan" CTS 17574

APPLICATION

The Moroccan is a 59 lot scheme regulated by the Body Corporate and Community Management Act (Act) and the Standard Module Regulation (Standard Module) and consists of both residential and commercial lots.

The applicant, Magog (No.15) Pty. Ltd., is the owner of lot 1 and sought the following final Outcomes against the Body Corporate for The Moroccan (respondent):

1. The Body Corporate forthwith repair and rectify the podium level of the scheme , where the podium appears at level C of Build Units Plan Number 101652, forming a roof structure above Lot 1, by:

(a) The excavation of the gardens situated on the podium level above the commercial lots;

(b) The removal of the defective waterproof membrane;

(c ) Installation of a new waterproof membrane;

(d) All other repairs and rectification works as required thereby preventing water penetration from the podium level into lot 1 and to other of the commercial lots namely lots 2 to 6 inclusive of the scheme.

2.	That the Body Corporate carry out such further or other repairs and rectification works as necessary for the Body Corporate to give effect to an order that it repair the common property.

The interim Orders sought were as follows:

1. The Body Corporate forthwith on an emergency basis, prevent the continuing water penetration of Lot 1 by way of immediate installation of drainage trays in the ceiling of Lot 1.

2. That the Body Corporate carry out such further or other repairs as necessary for the Body Corporate to give effect to an order that it prevent the continuing water penetration of lot 1.

BACKGROUND

The Moroccan is a 59 lot scheme under the Body Corporate and Community Management Act (the Act) & the Standard Module Regulation (Standard Module) and consists of both residential and commercial lots. Lots 1 to 7 are commercial lots located on the ground floor opening to Elkhorn Avenue Surfers Paradise. Lots 8 to 60 are residential lots commencing at level C on a podium above the commercial lots and a parking area located on level B. The podium level consists of the residential tower, gardens and other common property. I understand that the building is now more than 10 years old.

Magog (No.15) Pty. Ltd. is the owner of lot 1, a commercial lot (consisting of "up market" shop premises) located on level A which it has leased to Prada Australia Pty. Ltd. (Prada). On 6 June 1999 the applicant experienced water penetration from the rooftop garden above the shop causing damage to fixtures, fittings and stock, and notified the applicant. Apparently, the BSA had ordered the builder to effect certain repairs but the builder failed to do so.

On 28 June 1999, the applicant’s agent sent a letter to the body corporate manager requesting that the body corporate attend to the water leakage which was identified in a building inspection report. Reports were obtained from two firms of Engineers, both of whom concluded that the leaks were attributable to failure of the waterproofing membrane under the gardens.

In August 2002 the tenant once again experienced water penetration through the ceiling and internal damage to the shop. At an EGM convened on 27 August 2002 it was resolved that repairs would be effected at a cost of $12,544 plus supervisory costs of $2,637. Although these repairs were undertaken, the applicant experienced further water penetration and damage in December 2002, November 2004 and December 2004.

Further correspondence ensued between the parties including a letter from the body corporate manager dated 17 December in which it advised that further waterproofing repairs had been competed. However these repairs were also unsuccessful as further water penetration occurred on 30 June 2005 and in March 2006. The carpet inside the shop was water-soaked and ruined and the plasterboard ceiling was water damaged. The occupier of the lot continues to suffer damage to fixtures, fittings and stock as well as disruption to its business. The applicant also continues to suffer loss of rental income.

Owing to the obvious urgency of the matter I sought and received an urgent submission from the body corporate’s solicitors regarding the requested interim orders by close of business on 9 March 2006.

The respondent body corporate advised that immediately upon receipt of the application on 7 March, the body corporate retained an engineer (GK Consulting Engineers Pty. Ltd.) and a plumber (Adams & Moore) to provide advice. From the material provided, I note that the Engineers have previously undertaken an assessment of the premises and provided advice as to how water leakage from the common property can be rectified. I also note that Adams & Moore, Plumbers, have undertaken similar work on the subject premises.

GK Consulting Engineers Pty. Ltd. advised as follows:

• Water penetration was observed midway down the eastern side of the building;
• In lot 1 a repair patch to the ceiling was observed as well as water staining to an area of carpet approximately 4 metres long by 2 metres wide, water leakage in the office area and water damage to the stairwell area.
• Drip trays would provide temporary relief until the water penetration problems can be properly resolved by repair/ replacement of the waterproofing membrane in the podium area although it is difficult to exactly pinpoint the source of leakage until it is actually raining;
• There are certain limitations regarding installation of drip trays owing to the presence of air conditioning vents and ducting.
• Continued water penetration could lead to short circuiting of electrical wiring and fittings located in the ceiling cavity;
• Finally, they advised that the installation of drip trays in lot 1 would only provide temporary relief until the water penetration problems can be properly resolved by repair/ replacement of the waterproofing membrane in the podium area as recommended in their report dated June 2003.

Having regard to the body corporate’s obligations under section 109 of the Standard Module Regulation, I made the following Interim Orders on 14 March 2006:

• that Adams & Moore, plumbers be engaged by the body corporate to install drainage trays in the ceiling cavity of lot 1 to catch water penetrating the concrete slab roof forming the roof of lot 1. in accordance with their estimate provided to the body corporate on 9 March 2006 whereby the plumbers are to install as many trays as practicable to catch leaking water, having regard to the presence of air conditioning vents, ducting and other utility infrastructure in the ceiling cavity.
• that the body corporate engage a contractor to re-paint the ceiling after the installation of the trays and replacement of plasterboard.
• that the body corporate engage a contractor to repair the water damaged carpet in Lot 1.

After making Interim Orders on 14 March 2006, I referred this application back to the Commissioner and affected parties, including all lot owners, were afforded the opportunity to make written submissions about the application for final orders by 26 April 2006.

On 26 April 2006 a submission was received from Hynes lawyers on behalf of the body corporate which included the following statements:

• the body corporate has agreed to conduct repairs to the podium level as per the first final outcome sought by the applicant and on 11 April 2006 the body corporate passed the following resolution:

That a contractor be engaged to effect repair works to the podium level to enable the body corporate to fulfil its obligations under section 109 of the Body Corporate and Community Management (Standard Module) Regulation

• after consideration of two quotations the Body Corporate approved the appointment of Building Rectification services Pty. Ltd. (BRS) to perform all necessary rectification works however as the body corporate currently has insufficient funds, lot owners will be required to pay a special levy in August 2006 and it is anticipated that by the end of August the body corporate will have sufficient funds to enable BRS to complete the works;
• GK Consulting Engineers Pty. Ltd. have been retained as supervising engineers and are scheduled to commence work in August 2006;
• The body corporate objects to the making of the second requested order is it is too vague and uncertain to be capable of compliance. (That the Body Corporate carry out such further or other repairs and rectification works as necessary for the Body Corporate to give effect to an order that it repair the common property.)
• As there had been no nominations for membership of the committee at the AGM held on 11 April it was suggested that the following additional order be made:

In reply to the above, the applicant submitted that the resolution dated 11 April 2006 is insufficient or unreasonable in respect of the timeframes for commencement of works because:

•	The water penetration commenced in June 1999;

• The body corporate has been aware of water penetration into lot 1 from the podium level since 28 June 1999;

•	There was a possibility that further water damage could occur before the end of August.

• The applicant repeats and confirms the orders sought in the application but in the alternative submits that the following orders could be made :

-	BRS be engaged to attend to the repairs as per their quote dated 12 January 2006;
-	GK Consulting Engineers Pty. Ltd. be appointed to project manage and certify the works for $33,000 (excluding GST);
-	A 10% contingency to be added for unforseen circumstances/ costs;
-	The special levy is to be paid no later than 21 June 2006;
-	BRS is to commence repair works no later than 21 July 2006.

• the second requested order to "repair the common property" is to be read in conjunction with the first requested order to mean common property as pertinent to the podium level.

Subsequently, on 27 June 2006 this office received correspondence from the Body Corporate’s solicitors advising that their client had become aware of a less expensive method of repairing the common property. This went on to state:

"we are instructed to request that any decision in this matter be withheld pending the urgent further investigations being undertaken at the request of our client. We will contact you as soon as the further Expert’s report is received regarding obtaining leave to file further submissions."

On 1 August this Office received further correspondence from the Body Corporate’s solicitors advising that the body corporate had obtained advice from another Engineer that leakage of water into lot 1 could be remedied by re-waterproofing and replacing the waterproof membrane on approximately 200 square metres of the podium area at a cost of approximately $60,000. If this was not successful a further adjoining area of about the same size could also be repaired in the same manner at about the same cost.

I note that the correspondence from Mr. Graeme Moulston, a Structural Engineer, included the following comments:
Upon inspection I found that the unit is on the first floor and faces Elkhorn Avenue. The unit has several shops located underneath it that are experiencing water leakage from the unit when it rains. The unit has a garden and lawn that sits on .5 metres of soil. The slab is a grid type system that creates a series of pool like structures allowing soil to be contained within them.
Waterproofing and drainage does exist however over time they have begun to fail.
The grid system runs from north to south above the shops and is the Western section of the grid that appears to be causing the majority of the leakage concerns.
I recommend that the soil and vegetation be removed one grid at a time to check and replace/ repair all drainage and the sealing of the slab as this is the only guaranteed way of determining where the leaks originate and repairing them satisfactorily.

The attached scope of works refers to the "First Stage" which involves an area of approximately 200 square metres and the attached cost estimate of $60,000 (with an upper limit of $70,000) from "Buildcheck" relates to the waterproofing of a 200 square metre area.

Although this correspondence was received well outside the period for making of submissions, I decided to consider this material pursuant to my powers of investigation under section 271 of the Act. On 7 August this Office forwarded a copy to the applicant for comment.

In a reply dated 11 September, the applicant advised as follows:

• The water ingress problems to Lot 1 (the subject of this application) originate from at least 6 June 1999, meaning a period of over 7 years has passed and the Respondent has still not repaired the podium level of the scheme in accordance with its statutory obligations under the Act;
• The Applicant suffers and continues to suffer from loss of rental income from its tenant while the water ingress problems are not resolved by the Respondent;
• The applicant is concerned that the Respondent’s request for leave to file further submissions to seek an order that works be performed according to the estimate from Buildcheck is unnecessary and will only serve to further delay the prompt final determination of the application;
• The Applicant is concerned that the Respondent’s request for leave to file further submissions to seek an order that works be performed according to the estimate from Buildcheck is unnecessary and will only serve to further delay the prompt final determination of the application;
• The Applicant notes that the levies for owner contributions toward the rectification works (passed in the motion dated 11 April 2006) were issued to owners on about 16 June 2005 payable on 1 august 2006, meaning that the respondent should have received some, if not all funds necessary to commence works at the end of August as per the Respondent’s submissions dated 26 April 2006;
• The Applicant is concerned that the process required to call another general meeting to rescind the motion of 11 April 2006 and pass another motion authorising Buildcheck to undertake works as per their estimate of 18 July 2006 is unnecessary and only serves to frustrate the prompt commencement of rectification works by Building rectification Works Pty. Ltd. (which should have commenced by no later than the end of August 2006).

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

(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)).

DETERMINATION

From correspondence between various parties including tenants, the Managing Agent for the building, lot owners and the body corporate, I note that since mid 1999 there has been a significant leakage of rainwater from the common property area through the concrete slab forming the roof of the commercial lots at street level.

On 28 June 1999 the applicant’s agent sent a letter to the body corporate manager requesting that the body corporate attend to water leakage which had been identified in a building inspection report. Reports were obtained from two firms of Engineers, both of whom concluded that the leaks were attributable to failure of the waterproofing membrane under the gardens.

At an EGM convened on 27 August 2002 it was resolved that repairs would be effected at a cost of $12,544 plus supervisory costs of $2,637. However, this attempt to stop the leakage by adopting an inexpensive option, other than replacement of the waterproofing membrane, proved to be ineffective. Soon after these repairs were undertaken, the applicant again experienced water penetration and water damage in December 2002, and subsequently in November 2004 and December 2004.

Correspondence between the parties dated December 2004 indicates that further attempts were made to prevent rainwater leakage from the podium area without replacing the waterproofing membrane. However, following a period of rain during June 2005, water continued to penetrate through the concrete podium area and as a result the shop has experienced damage to fixtures, fittings and stock. I also note that GK Consulting Engineers Pty. Ltd. raised concerns that water was leaking into the ceiling area containing a mass of electrical cabling and light fittings giving rise to a possibility of short-circuiting between live electrical connections.

Following the lodgement of the dispute resolution application with this Office, an EGM of the body corporate was convened at which it was resolved that a contractor be engaged to effect repair works to the podium level to enable the body corporate to fulfil its obligations under section 109 of the Body Corporate and Community Management (Standard Module) Regulation and after consideration of two quotations, the EGM approved the appointment of Building Rectification services Pty. Ltd. (BRS) to perform all necessary rectification works. However as the body corporate then had insufficient funds, it was decided to impose a special levy, payable in August and it was anticipated that by the end of August the body corporate will have sufficient funds to enable BRS to complete the works.

As the parties are aware Section 109 of the Standard Module sets out the body corporate’s responsibilities in respect of common property, and also those areas of lots which are not common property but which are specifically stated to be the responsibility of the body corporate.

Section 109 provides:
Duties of body corporate about common property Act (s 152 Act)
(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.

It is reprehensible that the water leakage into the applicant’s shop premises is continuing more than 7 years after the applicant first informed the body corporate of the need to undertake repairs to the waterproofing membrane on the podium level.

As the body corporate is very aware, the constant inundation of the shop premises has caused continuing disruption to the business operations of the occupier as well as loss of rental income to the lot owner. Prior to the EGM on 11 April, at which it was resolved to replace the entire waterproofing membrane covering an area of approximately 1,000 square metres, the body corporate was only willing to undertake cheap piecemeal repairs which have proved unsuccessful.
It seems probable that sinking fund contributions for this scheme have been inadequate and until the above resolution was carried, the body corporate has, for several years, managed to avoid meeting its statutory obligations.

However, I note the applicant’s advice that as the levies for owner contributions toward the rectification works were issued to owners on about 16 June 2006, payable on 1 august 2006, the respondent body corporate should have received some, if not all funds necessary to commence works at the end of August as per the Respondent’s submissions dated 26 April 2006.

As mentioned above, pursuant to my powers of investigation under section 271 of the Act, in August of this year I noted subsequent correspondence from the respondent referring to "an alternative, more cost effective means of repairing the leakage". However, in my view what is being proposed is another attempt to waterproof the concrete podium area on a piecemeal basis. It is proposed that initially a 200 square metre area would be waterproofed by replacement of the waterproofing membrane at a cost of between $50,000 and $70,000, and if this is not successful, the next adjoining area would be excavated and the waterproofing membrane replaced.
In his report dated July 10 2006 Mr. Graeme Moulston states "I recommend that the soil and vegetation be removed one grid at a time, to check and replace/ repair all drainage and the sealing of the slab as this is the only guaranteed way of determining where the leaks originate and repairing them satisfactorily". Accordingly, it cannot be said with any certainty that the cost of rectifying the defective waterproofing would be at most $120,000. It could well be the case that as each area is excavated, it may become evident that the whole 1,000 square metres of waterproofing membrane requires replacement.

As stated above, the leakage through the water proofing membrane covering the concrete slab has been continuing for more than 7 years and two previous attempts at repairs have proven unsuccessful. The Body Corporate has resolved in general meeting that to meet its obligations under section 109 of the Act it is necessary to completely replace the waterproofing membrane along with the usual associated work such as attending to flashing and expansion joint fillers.
While this does of course involve a cost to each of the 59 lot owners, it is inevitable that ownership of a lot in a building such as the Moroccan will involve certain maintenance costs such as the cost of replacing the waterproofing membrane. Such expenditure is met from the sinking fund and bodies corporate should ensure that realistic body corporate levies are struck so that provision can be made for such an expense over a number of years.

I propose to order that the Body Corporate implement the resolutions carried at the EGM on 11 April 2006 whereby it was resolved that Building Rectification services Pty. Ltd. be engaged to effect repair works to the podium level to enable the body corporate to fulfil its obligations under section 109 of the Body Corporate and Community Management (Standard Module) Regulation.

I also propose to order that the body corporate is to implement the above resolutions within two months of the date of this order but will also make provision for this period to be extended by way of a supplementary order in the event that Building Rectification services Pty. Ltd. or GK Consulting Engineers Pty. Ltd. are not able to commence the works within that time period.