Galen House [2006] QBCCMCmr 751 (25 September 2006)

Number of Scheme:	11646
Name of Scheme:	Galen House
Address of Scheme:	142 Queen Street SOUTHPORT QLD 4215

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

I hereby order that within four weeks of the date of this order, Amalgamated Megadynamics Pty Ltd, the owner of Lot 2, shall pay to the Body Corporate the amount of $2,435.90, being 50% of the cost of the variation to the building contract with All-Ways Handy Home Maintenance Services.

I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0313-2006

"Galen House" CTS 11646

Galen House community titles scheme (Galen House) consists of two lots and common property. The community management statement for Galen House indicates that the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module) applies to the scheme. Department of Natural Resources Mines and Water records show the scheme is registered as Building Units Plan 3518.

APPLICATION

This application was made by Jeanette Watson, as owner and occupier of Lot 1, and John Watson as occupier of Lot 1 (applicants) on 28 April 2006 under the Body Corporate and Community Management Act 1997 (Act). The applicant sought orders against Rodney Tracey, the director of Amalgamated Megadymanics Pty Ltd, the owner of Lot 2 (respondent) in the following terms:

Payment of outstanding bills for repairs under the direction of Gold Coast City Council to repair multiple defects in building including external staircase and guttering. During reconstruction further defects were found. Dr Tracey was notified and did not object to further repairs. Outstanding accounts amount to $4,871.79. There are outstanding accounts for previous sewerage repairs which amount to $5,914.87

PROCEDURAL MATTERS

In May the Commissioner’s Office contacted the parties in an attempt to arrange conciliation to assist in the resolution of this dispute. Regrettably the parties could not agree to the terms of a conciliation session.

Under section 243 of the Act, a copy of the application was provided to the respondent with an invitation to respond to the matters raised in the application. A submission was made on behalf of the respondent. The applicant did not avail themselves of the opportunity to inspect and respond to the submission received (see sections 246 and 244 of the Act respectively).

A dispute resolution recommendation was made referring the dispute to departmental adjudication.

JURISDICTION

I am satisfied that this is a matter which falls within the dispute resolution provisions of the legislation (see sections 227, 228, 276 and Schedule 5 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:

(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)).
MATTERS IN DISPUTE

This scheme is a duplex. It appears there is a history of communication and personality issues between the owners and occupiers. The application relates to the cost of repairs to the scheme building. The facts of the dispute, as outlined in the application and submission can be summarised as follows.

The applicants assert that the building was in urgent need of repair and that the respondent was uncooperative in progressing the repairs. The applicants obtained a quote from a registered builder (Frank Cowell of All-Ways Handy Home Maintenance Services). The respondent claims the matter was being discussed and that after obtaining a different quote which he felt was inappropriate, he was obtaining other quotes.

The applicants sought advice from the Gold Coast City Council (GCCC) in mid-February. On 28 February 2006 the GCCC notified the Body Corporate that it was required to replace or repair the building’s external balcony and staircase and replace the gutters and downpipes. The notice required this work to be completed by 30 March 2005 (presumably intended to be 30 March 2006).

The quote from Cowell dated 15 February 2006 was for $13,745.60. The respondent obtained a quote from Dean Marshall dated 20 February 2006 which was significantly lower. However the deadline imposed by the GCCC was apparently unable to be met by Dean Marshall and the Body Corporate accepted the quote from Cowell. An initial contract was drawn up by Cowell for the quoted $13,745.60. It seems respondent apparently requested additional works but rejected the cost of the revised contract. The second contract reinstated the original provisions, and was signed by both owners on 13 March 2006.

The respondent argues that Cowell was a friend of the applicants and that a letter from Cowell indicates an agreement between the applicants and Cowell that he would deal only with the applicants and not the respondent. An unsolicited letter from Cowell to this Office suggests that he requested only one point of contact. The applicants claim that the respondent was kept informed throughout the process.

During construction, further defects were identified. This apparently meant that the gutter brackets needed to be repositioned and the barge tiles needed to be refixed and painted. This increased the cost of the work. A Building Services Authority contract variation detailed this change and was signed by the builder but not by anyone representing the Body Corporate. The applicants state that Cowell rang them to discuss the problems and to explain that the work could not proceed without the variation. Janette Watson says she gave Cowell her approval but said she would need to discuss it with the respondent. She says she rang the respondent and he said he would discuss it with the builders. Apparently they explained the problem and took him onto the roof to look at it. As the respondent did not contact the applicants again or make any attempt to contact Cowell or to delay or defer the work Janette Watson says she assumed he was happy for the work to proceed.

The original contract sum was paid by the Body Corporate on 3 and 24 April 2006. The work was completed on 10 April 2006. The variation amount of $4,718.79 was paid by John Watson in early July. The applicants have sought reimbursement from the respondent of 50% of these works.

The application alleges that the respondent has an attitude of ‘if you want it, you pay for it’. They assert that John Watson has previously paid for a number of items which it appears they believe were the responsibility of the Body Corporate but which the respondent had refused to act in respect of. This includes:

The respondent argues that the builder has been paid in full for the contracted price, and that his own financial obligations to the Body Corporate have been paid fully and on time. He also states:

DETERMINATION

This dispute centres on the obligations of the respondent to contribute to the cost of building repairs that were undertaken subject to a variation to the building contract.

Responsibility for and approval for maintenance

It is important that both owners are clearly aware of the maintenance responsibilities of owners and the Body Corporate.

Section 120 provides that the owner of a lot included in the scheme must maintain the lot in good condition. Section 109 of the Standard Module (as follows) requires a body corporate to maintain common property. In the case of a building format plan (which this scheme is), the boundary of a lot with common property or another lot is the centre of the wall, floor or ceiling.

(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--

(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

(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 in good order and condition, to the extent that the utility infrastructure--

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.

(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 is not prevented from recovering an amount of damages 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.

The parties do not appear to dispute that the repairs were to common property. Accordingly, to the extent that the work was necessary, it was a Body Corporate responsibility.

A Body Corporate may have a range of competing demands on its expenditure and owners may have different views on the priority of various maintenance tasks. However the Body Corporate’s legislative responsibility to maintain common property in good condition is a duty that cannot be avoided or deferred. Where maintenance is required the Body Corporate must raise sufficient funds (by contributions from its members) to ensure that all necessary work is undertaken.

Any time that an owner considers an item of maintenance is required, the appropriate course of action is to obtain one or more quotes (depending on the value of the work) and submit them to a committee or general meeting (depending on the type and value of the work) for approval along with a motion for a special levy if the cost of the work has not been budgeted for^[1]. It is not evident that the applicants took this step when they first sought to pursue their concerns.

For the information of the parties I have outlined the relevant provisions regarding the authorisation needed by the Committee or the Body Corporate to spend Body Corporate funds:

(1) The committee may only carry out a proposal involving spending above the relevant limit for committee spending for the scheme if--

(a) the spending is specifically authorised by ordinary resolution of the body corporate; or

(b) the owners of all lots included in the scheme have given written consent; or

(c) an adjudicator is satisfied that the spending is required to meet an emergency and authorises it under an order made under the dispute resolution provisions; or

(2) For this section, if a series of proposals forms a single project, the cost of carrying out any 1 of the proposals is taken to be more than the relevant limit for committee spending if the cost of the project, as a whole, is more than the relevant limit.

(b) the proposal involves spending above the relevant limit for major spending; and

(c) the proposal does not involve spending mentioned in subsection (1)(c) or (d).

(a) a motion to be moved at a general meeting of the body corporate proposes the carrying out of work or the acquisition of personal property or services, including the engagement of a body corporate manager or service contractor, but not including the engagement of a service contractor who also is, or is to be, a letting agent; and

(b) the cost of carrying the proposal into effect is more than the relevant limit for major spending for the scheme.

If goods to be acquired by the body corporate are obtainable from only 1 source, a quotation for supplying the goods must be obtained from the source and circulated with the notice of meeting. The fact that goods with the necessary characteristics are only obtainable from a single source would be an exceptional reason for not obtaining 2 quotations for the supply of the goods.

(a) the cost of engaging a body corporate manager or a service contractor includes any payment for the body corporate manager’s or the service contractor’s services, provided for under the engagement, for the term of any right or option of extension or renewal of the engagement; and

(b) if a series of proposals forms a single project, the cost of carrying out any 1 of the proposals is taken to be more than the relevant limit for major spending for the scheme if the cost of the project, as a whole, is more than the relevant limit.

The relevant major spending limit for this Body Corporate is $500 (two lots x $250). This means that in most cases if the Body Corporate wishes to spend more than $500 on anything, two or more quotes are required and the spending must normally be approved by a resolution at general meeting, unless both owners have given written consent.

Notwithstanding these usual requirements, the committee may approve spending that is above the major spending limit and without the need for multiple quotes, in certain narrow circumstances. One of these circumstances is if the spending is necessary to comply with a statutory order or notice given to the body corporate.

Need for and approval of the original contract

Given the GCCC notice, there is no doubt that the work which was the subject of the original contract was necessary. Two quotes were obtained but the cheaper quote was not acceptable because of the time constraints. Pursuant to section 103(1)(d)(i) of the Standard Module, as the expenditure was necessary to comply with a statutory enforcement notice from GCCC, it could be carried out by the Committee and so in fact multiple quotes were not required.

The respondent has raised issues about the selection of the builder but the fact remains that both owners agreed to accept the quote and sign the original contract. There is no indication that the respondent sought to contact the GCCC to seek an extension of time to enable alternatives quotes to be sought or that he asked the applicants to consider waiting while alternative quotes were sought. Regardless, he chose to agree to the builder and the quote.
The respondent also complains the builder would only communicate with the applicants. Nothing prevents a body corporate engaging a friend to do work and I consider it reasonable for a contractor to want only one point of contact. It is not the builder’s role to negotiate between the owners. However the onus is on the applicants to communicate fully with the respondents. Even as a committee member, Janette Watson has no independent decision-making authority for the Body Corporate. She can only carry out formal decisions of the Committee or Body Corporate.

Unfortunately it does not appear that the parties have formally minuted their decision to accept this quote. However as both owners have signed the contract I accept it was a clear decision. While the onus is on the secretary, both committee members should ensure that in future all meetings are appropriately minuted. This will assist in avoiding disputes of this type. I bring the parties’ attention to section 36 of the Standard Module^[2] which provides:

(b) a full and accurate record is kept of each motion voted on other than at a meeting.

(2) The secretary must give a copy of the minutes of each meeting and of any resolution voted on other than at a meeting to the following persons--

(a) has given the secretary a written notice instructing the secretary that the lot owner does not wish to be given copies of the minutes of committee meetings and resolutions voted on other than at meetings; and

(ii) for a copy of a resolution voted on other than at a meeting--the passing of the resolution; and

full and accurate minutes, of a meeting, means minutes including each of the following--

(b) the names of persons present and details of the capacity in which they attended the meeting;

full and accurate record, of a motion voted on other than at a meeting, means a record including each of the following--

(e) the number of votes for and against the motion.
Need for and approval of the contract variation

There were two components to the building contract variation – the gutters and the barge tiles. The respondent claims that he agreed that the work on the barge tiles was necessary, but he says this was the only work required beyond the contracted work. He does not comment on why he considers the variation for guttering was not necessary. The original contract clearly intended to replace the guttering and the respondent agreed to that. It may be that the respondent is of the view that if the original contract provided for the replacement of guttering, the contractor should replace the guttering for the original price even if it became apparent after the job commenced that the work involved in replacing the gutters would be significantly greater than first estimated. Unfortunately this is not necessarily the way building quotes and contracts work.

The GCCC clearly required the gutters to be replaced and I have received no evidence to suggest that the reposition of the gutter brackets and strengthening and/or packing out of the gutter fixing points was not necessary to complete the replacement of the gutters. Accordingly, I am satisfied in general terms that the work which was the subject of the contract variation was necessary in respect of the Body Corporate’s maintenance responsibilities.

The contract variation would in itself normally be subject to the major spending provision requirements with a prima facie requirement for two quotes. However, because of the GCCC statutory enforcement notice, the Committee was empowered to approve the variation to the extent that it is for work required by the notice. Even without the statutory notice, it could also be argued that only one quote was required because it would not be reasonable or practical to get another contractor to quote when the job had already been contracted to and started by Cowell.

The respondent disputes the validity of the variation because it was not signed by the Body Corporate. That issue is beyond the jurisdiction of this Office, although I note that section 82 of the Domestic Building Contracts Act 2000 provides that as soon as practicable after a variation document is made, the building contractor must sign the document and "take all reasonable steps to try to ensure the document is signed by the building owner." Accordingly it may not automatically be the case that a variation that is not signed by the owners is not valid.

The fundamental issue here is whether Janette Watson had the authority to verbally authorise Cowell to proceed with the variation work. Clearly Janette Watson has no legislative authority in her own right or as a committee member to authorise expenditure of Body Corporate funds to the tune of almost $4,900 (or even $1 for that matter). The minimum requirement for the expenditure of Body Corporate funds is a committee decision. I accept that Janette Watson may have believed that the respondent did not object to the variation and that the respondent may not have contacted her to say he objected to part of the variation works. However that is entirely insufficient for the additional expenditure to have been approved by the Body Corporate. A decision must be a positive decision rather than an absence of objection and, moreover, it should be minuted. There was no committee meeting, no apparent attempt to call a committee meeting, no attempt to decide the issue by flying minute or to confirm the purported decision at the next face-to-face meeting. It is clear there was no valid decision by the Body Corporate agreeing to the contract variation.

Building contract dispute

The respondent argues that this is really a dispute between the Body Corporate and the builder, and to a large extent I agree. However, I do not consider it is appropriate for the respondent to simply refuse to contribute to the cost of the contract variation and at the same time to take no specific action to pursue his concerns about the contract.

It is not the role of this Office to determine disputes under the Domestic Building Contracts Act 2000. The Body Corporate must pursue a dispute with the Building Services Authority or the Commercial and Consumer Tribunal (depending on the specific nature of the complaint) if they consider that there are defects in the work, that the variation was not properly signed, that the variation guttering work was covered by the original contract price, or any other area of concern.
Pursuant to section 312 of the Act a special resolution is required for a Body Corporate to commence legal proceedings. The proper course of action for the respondent, if he has concerns about the building contract, is to put a motion to a general meeting seeking authority for legal proceedings to be commenced in the appropriate forum, accompanied by quotes for the cost of the action. The respondent would be prudent to seek further information and legal advice on the basis of any claim and the likelihood of success before proceeding with this course of action.

If the motion is not passed and the proponent considers this to be unreasonable, he may lodge a dispute resolution application in this Office seeking to overturn the decision. The applicants should bear in mind that they have a responsibility to vote on any such motion with the interests of the Body Corporate, rather than their builder friend, in mind. If the respondent is able to present cogent evidence of some irregularity in Cowell’s contract or workmanship it may well be determined that the Body Corporate is acting unreasonably if it does not agree to pursue legal action, unless the cost of the action would outweigh any benefit the Body Corporate could win.

Other claims

In addition to the sums sought for the contract variation, the application appears to seek nearly $6,000 for sewerage work and claims other unspecified amounts have not been paid for. I invited the applicants to provide full details of their claim if they were seeking to recover for previous works, noting that I am not able to reconsider issues previously determined by an adjudicator.

Aside from an assortment of unexplained and unreferenced documentation, including letters and invoices, scant information has been provided by the applicants to substantiate any other claims. They have not outlined even basic grounds to justify these claims.

Moreover, it is apparent that an adjudicator has previously made a determination on issues relating to a security light and sewerage work^[3]. The applicants have provided no information to indicate they are making a claim beyond that which has already been determined. As the applicants have been advised, there is no jurisdiction for an adjudicator to revisit issues that have been finally determined in a previous adjudication. If the applicants dispute the earlier decision, the next step is for them to appeal that previous decision to the District Court on a question of law.

Accordingly, I find that there is no basis to consider any further claims by the applicants and it is not apparent that I have any jurisdiction to consider claims relating to security lightening and sewerage work.

Day-to-day financial management

The respondent claims Janette Watson has removed the cheque book from the Body Corporate and refused to sign cheques necessary for the day to day management of the scheme. He claims he has had to personally pay for the handyman-gardener. As these issues were not the subject of the original application and the applicants have not responded to them, it is not appropriate for me to make any orders on these issues. However I will make the following comments.

Committee members must act reasonably, responsibly and in accordance with the legislation at all times. It is entirely inappropriate for a committee member to refuse to counter-sign payments for Body Corporate obligations because of a dispute over an allegedly unpaid bill. That sort of ‘tit-for-tat’ activity (if this is in fact what is occurring) would be childish and unprofessional.

However it does not particularly assist the situation for the respondent to pay outstanding bills himself and just assume they will be repaid. If the gardener is not paid they will cease working which will provide a much greater incentive for cheques to be counter-signed.

A more appropriate course of action would be for the respondent to put forward motions to a body corporate meeting that (a) the gardener be paid and (b) that he be reimbursed for any amounts paid in the interim. If the motions are not passed or acted on, and the respondent considers that the Body Corporate has been unreasonable in failing to do so, the respondent can lodge an application in this Office.

Conclusion

I am satisfied on the evidence before me that the work that was the subject of the original contract with Cowell, and the contract variation, was necessary and the responsibility of the Body Corporate. However, it is clear that Janette Watson failed to obtain proper Body Corporate approval before authorising Cowell to proceed with the contract variation work.

Notwithstanding that, I am required by section 276 to make a decision that is just and equitable in the circumstances. The primary concern of the Body Corporate in this matter was to ensure that necessary repairs were undertaken in accordance with the Body Corporate’s legislative responsibilities and the directive of the GCCC. The work that was the subject of the contract variation has been completed and I have not received any convincing evidence that the work were not necessary, or was faulty or unprofessional. Moreover, I have not received any evidence that the cost of the variation work (comprising both the barge tile and guttering component of the work) was manifestly excessive.

While inappropriate and incorrect, the actions of the applicants have nonetheless resulted in the fulfilment of the Body Corporate’s maintenance obligations. Moreover, I am not satisfied that the Body Corporate has suffered any particular detriment as a result of these actions. Accordingly, I do not believe that it would be just and equitable for the Body Corporate to avoid paying the cost of work which is its responsibility because of irregularities in the process for approving the work.

As John Watson has paid the variation amount, I have ordered the respondent pay 50% of the cost to the Body Corporate. The Body Corporate can then reimburse the applicants in this amount.

Both parties are now clearly on notice as to their legislative responsibilities regarding maintenance and spending. They should ensure that in future no money is spent by the Body Corporate without a clear and minuted decision agreeing to the expenditure. This will assist in minimising future disputes.

I would also encourage both owners to make every effort to inform themselves about their rights and responsibilities under the body corporate legislation. As the parties have been previously informed, the Information Service of the Commissioners’ Office can be contacted on 1800 060 119 with a range of information online. A new fact sheet targeted at owners in a duplex is available at: www.dtftwid.qld.gov.au/Dispute+Resolution/BCCM/Fact+Sheets. I would also encourage the parties to utilise mediation and conciliation services to assist in any future disagreements over the operation of their scheme. If the owners find the administrative responsibilities of the scheme they may wish to consider engaging a body corporate manager to assist with tasks such as meetings, minutes taking and financial management.

^[2] Section 59 of the Standard Module similarly requires that ‘full and accurate minutes’ be recorded for each general meeting.
^[3] Galen House [2005] QBCCMCmr 535 (29 September 2005)

-	The dispute is between the Body Corporate and the builder.
-	He agreed that the barge tiles needed to be repointed and rescrewed but that was the only work beyond the contracted work that he agreed to. He has apparently obtained estimates for this work from other builders which are in the region of $600-700.
-	He asked Cowell for a detailed invoice for the additional work but it has not been received.
-	A council inspector looked at the work and told him the rear downpipe does not meet council requirements.
-	He was informed by the Building Services Authority that the written variation only applied if it was accepted by the Body Corporate and signed by all parties. Because the variation was not seen by the Committee the original contract stands.
-	The purported variation was signed by Cowell on 11 April 2006 but no mentioned was made of it at the Body Corporate meeting on 24 April 2006.
-	Janette Watson has refused to countersign any Body Corporate cheques necessary for the day to day running of the Body Corporate and as a result the respondent has had to pay the handyman gardener from his own funds at a cost of $50 per week.
-	The sewerage and security lighting issues were resolved in a previous adjudication and this is the first time he has seen mention of the figure of $5,914.87.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Galen House [2006] QBCCMCmr 751 (25 September 2006)