Noosa on the Beach [2006] QBCCMCmr 75 (17 February 2006)

Number of Scheme:	6417
Name of Scheme:	Noosa on the Beach
Address of Scheme:	49 Hastings Street NOOSA HEADS QLD 4567

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Brent Ogilvie and Philip Bacon, the co-owners of Lots 5 and 10

I hereby order that Motion 15 resolved as carried at the Extraordinary General Meeting dated 24 August 2005 is void.

I further order that within 7 days of the date of this order, the body corporate for Noosa on the Beach community titles scheme 6417 must refund to each owner of a lot included in the scheme who has paid the special contribution in connection with the resolution made on Motion 15 at the Extraordinary General Meeting dated 24 August 2005 the amount that has been paid by the said owner.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0719-2005

"Noosa on the Beach" CTS 6417

APPLICATION

This application is by Brent Ogilvie and Philip Bacon, the co-owners of Lots 5 and 10 (applicants) against the body corporate (respondent) seeking the following outcome:

That Motion 15 passed at the Extraordinary General Meeting on 24 August 2005 (EGM) imposing a special levy upon all owners in the scheme be ruled out of order and invalid.

JURISDICTION

"Noosa on the Beach" Community Titles Scheme 6417 is a scheme under the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module).

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:

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)).

INTERIM ORDER

The applicants also sought the following interim order:

That the application of Motion 15 Extraordinary General Meeting on 24 August 2005 imposing a special levy upon which all owners be suspended until such time as this Application has been heard and determined. The motion contemplates imposition of the first contribution of the special levy purportedly approved to be implemented on 1 November 2005.

On 27 October 2005, I made the following interim order, quote:

I hereby order that the application for an interim order by Brent Ogilvie and Philip Bacon, the co-owners of Lots 5 and 10, quote:

That the application of Motion 15 Extraordinary General Meeting on 24 August 2005 imposing a special levy upon which all owners be suspended until such time as this Application has been heard and determined. The motion contemplates imposition of the first contribution of the special levy purportedly approved to be implemented on 1 November 2005.

is dismissed.

I further order that pending a final determination of the application, the Body Corporate for Noosa on the Beach Community Titles Scheme 6417 must not:

This interim order has effect until 12 months have elapsed from the date of this order, a further interim or final order for the application is issued, or until the application is withdrawn, rejected or otherwise ended (whichever is the earlier).

SUBMISSIONS

In the Statement of Adjudicator’s Reasons for Decision for the interim order I stated that "The next instalment of the special contribution arising from the passing of Motion 15 at the EGM is not due and payable until 1 February 2005 (2006). I would expect that a final determination on this matter will be made well before this date." However, as a consequence of an administrative error in the Commissioner’s office, this was not possible and the applicants made a second application (Ref. No. 0912-2005) dated 13 January 2006 again disputing the resolution of the body corporate on Motion 15 at the EGM. In making an interim order dated 17 January 2006 on application 0912-2005, Adjudicator Hanly outlined the circumstances of the administrative error:

However, following Adjudicator Dowling’s interim order, a letter dated 31 October 2005 was sent from the Commissioner’s office inviting the body corporate committee and all owners (excluding the applicants) to respond to the application (for final orders) by 21 November 2005. Due to an administrative error the letter was forwarded to the solicitors for the body corporate to distribute the application to the respective parties, not to the body corporate secretary or to the body corporate manager, as is the usual practice of the Commissioner’s office. As a consequence, the body corporate’s solicitors, although lodging a submission on behalf of the body corporate within the (extended) time allowed for that purpose, did not (nor should they have been required to ) distribute the application to all other owners. Affected persons therefore were not given notice of the application and, accordingly, were not given an opportunity to make a written submission to the application in accordance with section 243 of the Act.

When the error was detected by the Commissioner’s office on 16 December 2005, a further notice pursuant to section 243 was given to the body corporate manager on 19 December 2005 with a new closing date for the lodgement of submissions of 16 January 2006. Given this timeframe and the right of the applicants under section 244 of the Act to make a written reply to submissions (a period of 14 days is customarily allowed for a reply to be lodged) it is clearly evident that application 0719-2005 will not be determined by 1 February 2006.

The applicants submit that the Motion 15 is invalid as it raises a special levy contribution contrary to section 95(2) of the Standard Module as no quotes, plans or details supporting the works had been given to lot owners. The applicants claim that this information must be given to lot owners prior to consideration of the raising of funds.

The body corporate submitted that as the applicants had paid the special contribution without reservation, the applicants waived or lost their right to dispute the Motion and the application should be dismissed. It is also submitted that the Motion "is a fundraising Motion in respect of works to be approved" which was explained in documentation given to lot owners in the Notice of the EGM. The body corporate also submitted that the proposed costs could have alternatively been included in the sinking fund budget.

The applicants’ reply to the initial submissions disputed the body corporate’s argument with respect to the applicants waiving their rights to challenge the Motion given that the applicants had a right to make the application and it was made within the time limit imposed by the Act. Further, it is contended that the body corporate does not have the power to raise a special contribution under section 95(2) of the Standard Module where there is no liability. The applicants also dismiss the body corporate’s argument with respect to the sinking fund for the reason that the contribution was not raised in this manner.

In response to the second invitation to make a submission given by the Commissioner, Doctor Timothy Forster (the chairperson) for and on behalf of the owner of Lots 13 and 24 submitted that renovations at the scheme have been an ongoing matter since 1999 and that at the Annual General Meeting dated 29 March 1999, the body corporate raised monies in circumstances not dissimilar to the disputed Motion. Dr Forster also states that since 2004, the proposed works have been considered at committee meetings, discussed with lot owners and that material including relevant reports have been given to lot owners. Submissions from other lot owners supported the body corporate.

The applicants’ reply to these submissions substantially related to the submission from Dr Forster. The applicants do not dispute the submission that renovations have been considered since 1999, but state that the body corporate did not have the legislative power to raise funds as no liability has arisen.

DETERMINATION

In its submission, the body corporate contended that the application should be dismissed as the applicants waived their rights to challenge Motion 15 given that they had paid the special contribution fixed by the Motion. It is not disputed that the applicants paid an instalment of the contribution before the application was made in October 2005. The applicants had a right to make the application as a dispute existed under Chapter 6 of the Act and given the outcome sought, the application was made within the time limit imposed by the Act^[1]. In my view, the applicants have simply protected their rights by paying an instalment of the special contribution. Given the circumstances of this dispute, I do not consider that there is any reason to support a view that the applicants are precluded from disputing the Motion.

Motion 15 at the EGM was carried by ordinary resolution and relevantly stated "That the Body Corporate approves the raising of a Special Levy of $1,550,400.00 gross plus GST at the rate of $1,615.00 per lot entitlement, plus GST due and payable by 3 instalments". The explanatory schedule included in the Notice of the EGM listed 11 proposed works that the committee wish to action in May 2006 at an estimated cost of $1,740,900.00.

Section 150(1) of the Act provides that the financial management arrangements applying to a community titles scheme are stated in the regulation module applying to the scheme. As the regulation module applying to the scheme, the Standard Module provides the framework for the body corporate to fix contributions to be paid by its members, the owners of the lots included in the scheme.

Section 94 of the Standard Module establishes the rules for the preparation of the administrative fund and sinking fund budgets for a financial year and requires the adoption of budgets reflecting reasonable and necessary spending to meet current and future body corporate financial obligations. Section 95(1) of the Standard Module provides that the body corporate must fix, on the basis of the administrative fund and sinking fund budgets for a financial year, the contributions to be levied on the owner of each lot for the financial year. The body corporate has a legislative obligation to give consideration to its ongoing financial management by presenting motions with respect to the budgets and associated contributions to owners at each annual general meeting^[2].
The adopted budgets form the basis of the contributions levied and paid by the owner of each lot in a financial year. While a body corporate is not prevented from reviewing its budgets during a particular financial year, the Standard Module also makes provision for otherwise raising monies. Section 95(2)(a) provides that "If a liability arises for which no provision, or inadequate provision, has been made in the budget, the body corporate must, by ordinary resolution fix a special contribution to be levied on the owner of each lot towards the liability". Section 102 provides a power to borrow.

Motion 15 at the EGM approved the raising of a special contribution. The body corporate’s power to fix a contribution in this manner is prescribed in section 95(2) of the Standard Module. Section 95(2) provides a specific power to fix a special contribution where "a liability arises for which no provision, or inadequate provision, has been made in a budget" and obligates the fixing of a special contribution "towards the liability". Liability is defined as "The condition of being liable or answerable by law or equity...A thing for which a person is liable^[3]". In my view, a body corporate may consider fixing a special contribution to be levied on lot owners where the liability has arisen or is identifiable, the inability to meet the liability from a budget is established, and the contribution proposed to be paid by lot owners is limited to meeting the liability. Section 95(2) does not, in my view, provide a power to raise monies to be paid by lot owners towards a potential and unspecified liability which may only arise if owners, at some later time, resolve to authorise work which gives rise to the liability.

Motion 15 has caused the raising of a special contribution. The Motion does not specify the liability to which the special contribution will be applied. The explanatory note to the Motion refers to funding major works the committee wishes to action in May 2006, and includes the estimated costs for 11 items of proposed expenditure. It is apparent that these works have been subject to discussion and consideration by the body corporate committee and it would seem that lot owners are aware of these considerations. However, I do not consider that these factors are relevant in a consideration of the application of section 95(2). The body corporate has not properly considered and approved a quotation to carry out the work or otherwise properly authorised any work. The costs which formed the basis of the fixing of the special contribution are nothing more than an estimate of unapproved works and are not a liability. I conclude that the body corporate did not have the power under section 95(2) of the Standard Module to fix the special contribution to be levied on lot owners. For these reasons, I have ordered that Motion 15 at the EGM is void. I have also ordered that the body corporate must refund any special contribution paid to the body corporate by a lot owner in connection with the resolution on the Motion.

^[1] Sections 227, 238, 242, Act.
^[2] Section 45(3), Schedule Dictionary "statutory motion", Standard Module.
^[3] The New Shorter Oxford English Dictionary, 1993 edition, p 1575.

(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.

1.	Spend any monies the body corporate has received from the owner of a lot included in the scheme as payment of an instalment of the special contribution fixed by the body corporate by the resolution made on Motion 15 at the Extraordinary General Meeting dated 24 August 2005.
2.	Initiate any debt recovery action or other proceeding against the owner of a lot included in the scheme to recover as a debt any amount related to the special contribution fixed by the body corporate by the resolution made on Motion 15 at the Extraordinary General Meeting dated 24 August 2005.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Noosa on the Beach [2006] QBCCMCmr 75 (17 February 2006)