Surfers Palms North [2006] QBCCMCmr 779 (20 September 2006)

Last Updated: 13 July 2007

REFERENCE: 0691-2006A

INTERIM ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	20846
Name of Scheme:	Surfers Palms North
Address of Scheme:	2 St Kevins Court BENOWA QLD 4217

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

Mr David Baty, the Committee Member of lot 43

I hereby order that any agreement purporting to be pursuant to Section 118 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 between the Body Corporate and the lot owner, for that lot owner’s unit to be painted, is of no effect unless the agreement includes the identification of the costs attributable to the lot for the preparation, repairs and painting service. I further order that the Body Corporate must, as soon as practicable, distribute a copy of this order to all owners. I further order that any agreement signed before the issue of my final order, must attach a copy of this order, with the extract of Adjudicator Toohey’s reasons for decision in 0610-2005 initialled by the lot owner. This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0691-2006A

"Surfers Palms North" CTS 20846

Interim Application

Surfers Palms North CTS 20846 is a 61 lot scheme registered under the Body Corporate and Community Management Act 1997 and is operating under the Body Corporate and Community Management (Accommodation Module) Regulation 1997. Typically, this module is intended for residential arrangements.

Lot boundaries are designated under a group titles plan (now known as a group titles plan of resubdivision).

On 6 September 2006 I issued the following interim order:

"That the body corporate for Surfers Palms North must not continue with repainting owners’ lots until a written agreement is made between the lot owner and the Body Corporate pursuant to section 118 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997.
This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn."

Section 279(2)(b) of the Act provides that an adjudicator may extend, vary, renew or cancel an interim order until a final order is made.

The original application had sought the following interim orders that the painting of the complex Surfers Palms North be suspended until the Extraordinary General Meeting on 13 September 2006 determine the membership of the committee.

The final orders sought were that painting of the complex does not proceed until the following are addressed:

•	An agreement is entered into with each owner to paint their unit;
•	Approval is reached with owners for the reimbursement of repairs required to the exterior of units prior to painting;
•	Damaged and rusted guttering and downpipes are repaired prior to painting;
•	A colour consultant is engaged for colour recommendations;
•	These recommendations are presented to owner/residents for comment.

New Developments

I have received advice that the extraordinary general meeting that was scheduled for 13 September 2006 has run into some difficulties.

I am advised that partly as a result of the making of the interim order, with agreement of the Secretary, it was resolved early last week to withdraw the Notice of Extraordinary General Meeting scheduled to take place on the following day (13 September). That meeting did not include any item on its agenda relating to the painting of units.

On the day of the meeting, a cancellation notice was placed in the Surfers Palms North complex, and at the body corporate manager’s where the meeting was scheduled to take place. As well, the Applicant (Mr David Baty), his representative (Mr Graeme Beattie) and the Treasurer (Ms Michele BurIey-Jones) were notified verbally of the cancellation. As all motions on the agenda were to be decided by secret vote, the Returning Officer was also notified of the cancellation and did not attend at the originally scheduled meeting time.

It appears that a group of 11 owners (who also held 8 proxies out of a total of 62 lots), including the Applicant and Mr Beattie, proceeded to hold the EGM on 13 September 2006. The validity of this meeting will need to be referred to this office by way of a separate application.

On 15 September 2006, a circular was distributed to owners under the hand of Michele Burley-Jones, purporting to be Chairperson. It attached a new form of agreement in relation to the painting.

There is concern about the impact of this distributed material with regard to the painting of units because:

1. The agreement distributed with the circular of 15/09/06 states in Item 4 on the front page "The Body Corporate has raised sufficient funds for this work as per motion carried at the Annual General Meeting 2006."; and

2. There is a direction on the circular of 15/09/06 in bold which tells owners to disregard any prior agreement issued and "please do not pay the amount requested"

There is concern that this approach is in contravention of the interim order which requires any agreement for the painting of units with owners to be pursuant to Section 118 of the Accommodation Regulations, sub-section (2). The specific concern is that this means that unless any such agreement includes an agreement for a charge, then there is no agreement to pay for the service and a lot owner would be entitled to refuse to pay for the service. This, combined with the representation in the Burley-Jones circular that the painting will be paid from the body corporate’s funds would appear to be misleading and in contravention of the order made.

Determination

Even before the introduction of Section 118, this scheme has previously been party to an appeal to the High Court of Australia where it was held that:^[1]

"...... ... where a body corporate wishes to affect the rights and obligations of an individual proprietor in respect of his or her lot, a by-law is required. Furthermore, if a service directly affects an individual lot, then ........., the fact that it is for the benefit of all the proprietors does not entitle the body corporate to act without the authority of a by-law."

To enable bodies corporate to enjoy the economies of scale offered by bulk services where no by-law exists, the 1997 Act and Regulations introduced Section 118 which states:

Supply of services by body corporate--Act, s 158 [SM, s119]

(1) The body corporate may supply, or engage another person to supply, utility services and other services for the benefit of owners and occupiers of lots, if the services consist of 1 or more of the following--

(a) maintenance services, which may include cleaning, repairing, painting, pest prevention or extermination or mowing;

(b) communication services, which may include the installation and supply of telephone, intercom, computer data or television;

(c) domestic services, which may include electricity, gas, water, garbage removal, airconditioning or heating.

Example--
The body corporate might engage a corporation to supply PABX services for the benefit of the owners and occupiers of lots.

(2) The body corporate may, by agreement with a person for whom services are supplied, charge for the services (including for the installation of, and the maintenance and other operating costs associated with, utility infrastructure for the services), but only to the extent necessary for reimbursing the body corporate for supplying the services.

(3) In acting under subsections (1) and (2), the body corporate must, to the greatest practicable extent, ensure the total cost to the body corporate (other than body corporate administrative costs) for supplying a service, including the cost of a commercial service, and the cost of purchasing, operating, maintaining and replacing any equipment, is recovered from the users of the service.

Both sub-sections (2) and (3) make clear reference to the passing of cost to the owner of the lot who has agreed to the service. It follows then, that those who do not agree, need not pay.

In order to give effect to this provision, the cost to each lot owner must be quantified and contained in an agreement.

Adjudicators have previously held that maintenance services for the benefit of lots under a standard format plan must be met by the lot owner and cannot be paid for by the body corporate. Further this is not the first scheme that has attempted to pay for such services out of a sinking fund and in that regard I refer owners to the remarks of Adjudicator Toohey in Case 0610-2005:

"Finally, the question arises as to how the body corporate should deal with moneys paid over the years into the sinking fund for the purposes of funding future painting. It is clear that the sinking fund forecast should not have included a component for the cost of painting individual lots and if it has not already done so, the body corporate should ensure that any such cost component is removed from future forecasts.

While the Act and regulation modules do not specifically deal with repayment of monies erroneously levied against owners, the legislation gives an adjudicator a wide jurisdiction to make orders that are "just and equitable in the circumstances to resolve a dispute", including the making of such ancillary and consequential provisions an adjudicator considers necessary. I believe that it is just and equitable for me to order that the monies in the sinking fund which have been allocated for the painting of individual lot buildings should be refunded to the lot owners in the same proportion in which they were collected. As all owners will receive a refund, I consider that no owner will be disadvantaged. Even if an owner has only recently purchased a lot, that owner should receive a refund since the contributions of a previous owner are effectively a portion of the equity of the body corporate funds acquired by the new owner as part of the purchase."

However, I do not intend to issue my final orders without the benefit of inviting submissions from all owners.

These considerations lead me to conclude that the current agreement being distributed by the committee (purported to be appointed on 13 September 2006) is inadequate and should not be acted upon. I will make orders to this effect.

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^[1] Humphries and Another v The Proprietors "Surfers Palms North" Group Titles Plan 1955 [1994] HCA 21; (1994) 179 CLR 597 (1994) 68 ALJR 479, (1994) 121 ALR 1 F.C. 94/022 (4 May 1994)