Zenith [2007] QBCCMCmr 115 (28 February 2007)

Last Updated: 5 March 2007

REFERENCE: 0003-2007

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	10343
Name of Scheme:	Zenith
Address of Scheme:	20 The Esplanade SURFERS PARADISE QLD 4217

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

Evangelista Pty Ltd, the owner of lots 89 to 93

I hereby order that, provided that Evangelista Pty Ltd, the owner of lot 89 (applicant) enters into a lease within the next year that provides for the occupation of lot 89 by the Queensland Police Service, motion 2 of the extraordinary general meeting of the body corporate for Zenith on 8 December 2006 is deemed to be passed and the body corporate is authorised to record a new community management statement to incorporate the changes proposed by that motion.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0003-2007

"Zenith" CTS 10343

Application

Zenith Community Titles Scheme (Zenith) is a 95 lot scheme under the Body Corporate and Community Management Act 1997 (Act) and the Act’s Standard Module Regulation (Standard Module). The scheme is located in Surfers Paradise and made up of 90 lots in a residential tower fronting onto The Esplanade and 5 commercial lots fronting onto Orchid Avenue.

This application is by Evangelista Pty Ltd, owner of the commercial lots 89 to 93 (applicant) seeking orders against the body corporate for Zenith (respondent). The applicant is seeking an order giving effect to a motion proposing to amend its exclusive use by-laws. This motion was considered at a meeting but not carried due to the dissenting vote of two owners.

Submissions

The applicant’s main submissions were to the effect that:

• There are basically two car parks in the scheme. The commercial car park is underneath the commercial premises and the residential car park is adjacent to it and primarily underneath the residential tower. On the northern end of each car park is a one lane thoroughfare and the two car parks are accessible to each other by an electric roller door;
• Cars parked in the commercial car park my exit through either the Orchid Avenue exit or The Esplanade Exit. The applicant has exclusive use of the commercial car park and is entitled to restrict access from the residential car park through the commercial car park but has never chosen to do so;
• The applicant proposed motion 2 to make changes to the exclusive use by-laws and motion 3 to make various improvements to these exclusive use areas. These proposed changes are associated with a potential tenancy of the commercial premises by the Queensland Police Service;
• Motion 2 failed to pass without dissent because of two no votes. These were from the owner of lot 5 and the owner of lot 28 respectively;
• The chairperson contacted both dissenting owners. The owner of lot 5 said that she voted against the motion because she was unable to get work performed by the body corporate in respect of an area of garden which affected her so why should another owner get what they wanted. The applicant submits this objection is unreasonable; and
• The representative of the owner of lot 28 said the objection is based on a concern the works contemplated would lead to the area being filled with "pimps, prostitutes and pushers", an increase in noise due to police sirens, and lots within the body corporate being devalued. However, the applicant submits that this objection is unreasonable because there is no basis whatsoever for any of these objections. Firstly, there is no access from the commercial lots to the residential lots and the police presence will deter undesirable people from congregating near the commercial lots. Secondly, the police are currently based on The Esplanade so that any north moving cars already pass the body corporate. The police would be using the Orchid Avenue exit whenever possible and this is further away from the residential tower than The Esplanade currently used by police. Finally, there is no basis to suggest the lots will be devalued as a result of a police presence in the commercial lots and, if anything, it is likely to be a positive to many potential purchasers who are looking for safe premises.

Submissions by the body corporate committee and owners in support of the proposal were to the effect that:

• The committee unequivocally supports the application. Negotiations between the applicant, the Queensland Police Service, and the body corporate committee proceeded for most of the 2006 year and all concerns raised by the committee on behalf of the owners were addressed in those negotiations;
• Benefits for owners include 24 hour access through the car park to Orchid Avenue and amendments to the wording of the motions, proposed by-laws and relevant agreements to the satisfaction of the body corporate’s lawyers;
• There are no negative effects on amenity, no reduction in the area of common property currently available to owners, no increase in the area of exclusive use, and no financial downside as the applicant is bearing responsibility for the costs and the body corporate has secured a guarantee from the three directors of the applicant; and
• Owners support the application and it is felt that the presence of the police would tend to reduce the number of undesirable people in Orchid Avenue and increase the general safety of the area.

Submissions on behalf of the owner of lot 28 were to the effect that:

• Parliament has plainly intended that no changes to exclusive use by-laws are possible unless every single lot owner who votes is in favour of the motion. As part of the normal checks and balances an adjudicator can overturn the opposition where the adjudicator is of the view the opposition in the circumstances in unreasonable. The applicant therefore needs to find each and every ground of opposition in the circumstances to be unreasonable;
• It is believed to be incorrect that the applicant owns the commercial car park area or is entitled to restrict access from the residential car park into the commercial car park;
• Motion 2 is objected to particularly as it is possible that the amendments would be made but the lease to the Queensland Police Service would never eventuate, the by-law should expressly state that removal and disposal of non approved works should be at the expense of the owner of lot 89, the permit for unrestricted access for pedestrian and vehicular thoroughfare for owners and occupiers of other lots should include an express right to stand vehicles in the thoroughfare in an emergency, in addition to a right to consent to any conditions of development approval the body corporate should have the express right to refuse consent, specific reference needs to be made to the area subject of the proposed lease in by-law 26(3)(iv)(u), and the owner of lot 89 should be required to procure the undertakings, indemnities and guarantees from any proposed purchaser of the lots;
• The resolution is opposed because the body corporate would be giving the applicant additional exclusive use rights without monetary compensation;
• The body corporate is presently the owner of the land the subject of the proposed exclusive use right amendment, subject only to very restrictive car parking and car parking access rights in favour of the owner of lot 89. The new exclusive use by-laws will have a negative financial impact on the body corporate;
• Only 34 votes were recorded in favour of motion 2 out of a total of 95 lots. This does not reflect the claimed enthusiasm by the body corporate for the approval of the proposal;
• Vehicular police use of the basement and immediately outside will add to noise levels which, particularly at night, are already excessive. While the applicant has said the police will use the Orchid Avenue exit wherever possible there are no written restrictions, noise limits or parameters to be met by Police and specific undertakings have not been negotiated with the police. It is irrelevant for the applicant to say that otherwise the premises could be used as a nightclub. However, nightclub noise is contained within walls and subject to noise controls and temporal constraints;
• Approval of motion 2 and the associated motion 3 will facilitate the construction of an unsightly chain wire fence along the perimeter of the thoroughfare below the commercial lots and a block wall on common property;
• If the Queensland Police Service lease proceeds then that will be the only operational police station in Surfers Paradise and will involve processing violent and dangerous persons and have potential or actual offenders reporting for bail, parole or sentencing conditions;
• The area along Orchid Avenue in the immediate vicinity of the Zenith complex has gradually become less attractive to many families and holiday makers as late night clubs and bars have been permitted to operate. The relocation of the police station and additional security around the perimeter of the commercial lots may not in fact encourage holiday makers and tourists but act in reverse;
• The police premises will incorporate a holding area and this falls outside use for office and commercial purposes as required by by-law 15(3);
• Animals are prohibited by by-law 13 and this by-law may also need to be amended if the police bring police dogs onto the scheme; and
• The granting of exclusive use is inappropriate where other alternatives such as a lease or licence may be possible.

The applicant has responded to the effect that:

• It is not necessary for the adjudicator to find each and every ground in the circumstances to be unreasonable. The applicant should succeed if the overall objection is unreasonable rather than a petty but reasonable point being allowed to hinder a clearly desired course of action;
• It is incorrect to say that the body corporate is surrendering the exclusive use areas to the owner of lot 89. The applicant has exclusive use of the areas and there is just a proposed change to the conditions of use of these areas;
• Regarding the wording of the proposed new by-laws, the concern about removal of unauthorised works at the expense of the owner of lot 89 is already taken into account with the proposed indemnity by the owner of lot 89 in favour of the body corporate. Further, there is no need for an express right for persons to stand vehicles in the thoroughfare in an emergency as there is no existing provision of that nature and no suggestion that objection would be taken to such an action in an emergency. In addition, the proposed by-law makes it clear that the body corporate does have a right to refuse consent to improvements, provided that consent is not unreasonably withheld. Finally, the obligations in the by-laws automatically apply to any future purchaser of lot 89;
• The objection based on the owner of lot 89 not providing monetary compensation reflects a misunderstanding as to the effect of a grant of exclusive use. Once an area is the subject of any exclusive use then the other owners no longer have access to it subject to the provisions of the by-law and the exclusive use remains in effect until the recipient agrees to its cancellation. It therefore should be irrelevant to owners as to whether the use of that area is to continue in its present form or that it changes with the consent of the body corporate provided the amenity of the body corporate is not adversely affected. What is being granted to the applicant is quite minor given the existing rights. Part of the existing area is to be changed to provide for some requirements of the Queensland Police Service but much of it will remain for car parking;
• The body corporate benefits from the granting of unrestricted access through the other exclusive use area;
• The designation for commercial use is only to distinguish from residential use and the proposed lease to the Queensland Police Service falls within that designation;
• Regarding appearance, the car park is of little aesthetic value and it is submitted that the additions required by the Queensland Police Service will not have a significant adverse affect on its aesthetics;
• Regarding noise, the applicant notes the complaint that noise levels at Zenith are "already excessive (particularly at night)" and says it is difficult to imagine that the Police will add to that problem.

A letter from the Assistant Commissioner of the Queensland Police Service is provided with comments to the effect that:

• Police vehicle sirens will not be activated in the basement area of the Orchid Avenue tenancy and, as a matter of routine policing will not even be activated immediately on reaching Orchid Avenue;
• In routine day-to-day policing activities, entrance to and exit from the tenancy will be via the Orchid Avenue entrance;
• Access via the Esplanade car park would only occur in the most exigent of circumstances and such access would be governed by standing operating procedures which will include directives that sirens will not be activated until the police vehicle has left the immediate proximity of the Zenith building complex. It is expected that the noise from police sirens affecting Zenith residents may be reduced as a result of moving premises from The Esplanade to Orchid Avenue;
• It is not proposed that offenders reporting for bail, parole or sentencing conditions will occur at the Orchid Avenue tenancy with existing arrangements to be retained at the Ferny Avenue complex; and
• Experience demonstrates that increased policing presence, in the form of both foot patrols and motorised patrols, has a deterrent effect on anti-social behaviour.

Decision

Overturning opposition to a motion

Order of an adjudicator

An adjudicator may make an order that is just and equitable in the circumstances to resolve a dispute (Act, 276). The present dispute has arisen because the owner of the commercial lots has sought a resolution without dissent to support changes to exclusive use by-laws but two owners have exercised their vote to oppose these changes. The applicant claims that the opposition to their proposal by these two owners was unreasonable and has sought an order on a just and equitable basis to overturn this opposition. A specific example of an order an adjudicator may make is an order giving effect to a to a motion requiring a resolution without dissent if the resolution without dissent was not passed because of opposition that in the circumstances is unreasonable (Act - Schedule 5, Item 10).

The appropriate test

The question for me to determine is whether the votes by two owners that prevented the exclusive use amendment motion from passing constituted "opposition that in the circumstances is unreasonable".

The appropriate test is to determine whether it is just and equitable to override the opposition because the opposition was unreasonable when viewed objectively. I do not consider there is any particular formula or test for reasonableness and note that the High Court has supported a view that a paraphrase can place an unwarranted gloss on relatively plain words applying a test of reasonableness.^[1] The preferred approach is to determine objectively whether the votes against the proposed amendment of the exclusive use by-laws constitute opposition in the circumstances is unreasonable.

Submissions on behalf of the owner of lot 28 were to the effect that in evaluating whether opposition to a motion is unreasonable the adjudicator should have regard to whether the decision of the lot owner to oppose the motion was so unreasonable that no reasonable person could ever have reached that decision, whether the opposition has no plausible basis, and whether the opposition was so outrageous that no sensible person could have logically reached it.^[2] I am not persuaded that this is the appropriate test. These submissions are related particularly to the common law grounds of review of administrative decisions formulated in Wednesbury.^[3] However, this test is confined in scope and the courts have held that where a statute expressly provides that a decision is to be made ‘reasonably’ or upon ‘reasonable grounds’, the test is an objective one that requires a balancing of factors in all the circumstances according to the ordinary meaning of the term ‘reasonable’.^[4] A finding that an impugned requirement is logical and understandable does not necessarily mean that the requirement was reasonable in the circumstances.^[5] This is different from the Wednesbury test of unreasonableness.

In determining whether votes against a motion constitute opposition that in the circumstances is unreasonable it is necessary to consider all the material facts. What is material will vary from case to case but typically the requirement for an adjudicator to make a just and equitable decision involves some balancing of the interests of the majority and minority and raises questions of fairness.^[6] It is therefore relevant to determine if a minority owner will suffer any real loss or detriment if their objection is overruled.

For example, a change of ownership of a shop within a mixed use scheme might result in the new shop owner seeking permission to change the shop’s signage. A residential owner may genuinely hold the view that the new signage should be opposed because it is aesthetically unattractive. However, the opposition by this owner is still likely to be unreasonable in the circumstances unless the owner can show some actual detriment such as the new signage creating excessive illumination that interferes with the owner’s enjoyment of their lot.

Proposed new exclusive use by-law

Exclusive use amendment motion

The core of this dispute is motion 2 at the extraordinary general meeting of 8 December 2006 proposing to amend the exclusive use by-laws (exclusive use amendment motion). By way of background, the plans for the scheme show that Zenith is made up of three buildings. The main building is a 24 level high rise designed for residential purposes with street frontage on The Esplanade. Two smaller buildings contain five lots designed for office and commercial use and have street frontage on Orchid Avenue. At or above ground level there is no physical connection between the main residential building and the commercial buildings. However, the submissions and diagrams show that the basement car parking under the residential and commercial buildings is physically connected. This interconnected car parking area has an eastern ramp leading up to The Esplanade and a western ramp leading up to Orchid Avenue.

Exclusive use under existing by-law

The majority of the area under the commercial lots (area LBA) is subject to by-law 26(1) which grants it to the exclusive use of the owner of lot 89 and states this area may only be used for car parking purposes. The majority of the remaining area under the commercial lots (area OA) is a narrow strip running from the Orchid Avenue ramp to the car parking area under the residential building. By-law 26(2) grants this area also to the exclusive use of the owner of lot 89 but only between the hours of 7pm and 7am and all day on Sundays and public holidays. This by-law says that the owner of lot 89 may lock the grill doors at the eastern and western ends of the area at these times but must permit owners and occupiers of other lots in the scheme access to the area for the purpose of access between the Esplanade and Orchid Avenue at other times. By-law 26(2) also states that this area may only be used for accessing car park areas.

Proposed new by-laws

The changes proposed by the exclusive use amendment motion can be summarised as:

1. Removing the limitation that exclusive use area LBA could only be used for car parking purposes;
2. Removing the temporal restriction regarding grant of the exclusive use area OA to the owner of lot 89, but specifying that owners and occupiers of other lots must be given unrestricted access to this area for use as a pedestrian and vehicular thoroughfare to and from Orchid Avenue; and
3. Specification of numerous conditions that are to apply if the body corporate consents to the owner of lot 89 making improvements to the common property.

Monetary compensation

Submissions on behalf of the owner of lot 28 were to the effect that the body corporate is giving the applicant additional exclusive use rights without monetary compensation and the new exclusive use by-laws will have a negative financial impact on the body corporate. When I attended the scheme to inspect the areas in question there was some further discussion on this issue. The representative of the owner of lot 28 submitted that the applicant was being given additional rights and that discussion with appropriate professionals indicated that it would be possible to obtain a valuation of these rights. I offered the opportunity for the owner of lot 28 to submit such a valuation but it was submitted that this would be an expensive exercise, was one more appropriate for the body corporate to take, and that the owner of lot 28 would rely on the evidence already submitted about the freehold value of the area in question.

I do not accept that the applicant is gaining any additional value from the changes to the by-law affecting the exclusive use area OA. The temporal limitation on this exclusive use area is being removed. However, an additional limitation specifying that owners and occupiers of other lots must be given unrestricted access to this area for use as a pedestrian and vehicular thoroughfare results in an objective detriment to the owner of lot 89 and an overall benefit to the owners of the residential lots.

There is an objective benefit to the owner of lot 89 in terms of the removal of the restriction that the area LBA only be used for car parking. I note that the current proposal involves still using the area in question for car parking subject to the installation of lift access and a generator. However, I accept that if amendment of an exclusive use by-law gives a particular advantage to the affected owner then it could well be appropriate that the owner should provide monetary compensation to the body corporate.

The concern I have with the submissions on behalf of the owner of lot 28 is that the evidence suggests that the overall changes to the exclusive use by-laws involve both benefit and detriment to the applicant and indicates that other owners will benefit from the better rights of access to Orchid Avenue. The committee and the applicant have reached a negotiated agreement and put this before owners in general meeting. It will always be arguable by an individual owner that a better deal could have been made or the desired result may have been achieved in a different way. However, the deal that was reached results in a real benefit to owners in the sense of improved rights of access via Orchid Avenue and no significant detriment. There is no independent valuation of the value to the commercial lot owner of the concession that the exclusive use area need not be used solely for car parking as opposed to the value to residential owners that the applicant will allow occupiers access to Orchid Avenue at all times of the day and night. In particular, there is no evidence that the arrangements negotiated between the body corporate committee and the applicant were otherwise than at arms length and after independent legal advice. In these circumstances, it is unreasonable to oppose the proposal on the basis the body corporate is not obtaining fair value for the concession.

Having said this, if at some subsequent time the owner of lot 89 sought body corporate permission for significant improvements that greatly increased the usability and value of the exclusive use area then it may well be reasonable for owners to demand some monetary compensation so that the body corporate permission does not result in a windfall benefit to the owner. That is a matter owners could consider if the situation ever arises.

Specified conditions for any improvements

The proposed amendments to the exclusive use by-laws include twenty-one conditions relating to any improvements made to the exclusive use areas. These conditions include an indemnity in favour of the body corporate from the owner of lot 89, requirements works must be carried out by a licensed and reputable builder, and requirements that the owner of lot 89 pay for the body corporate’s legal costs and costs of an engineer for the purposes of the body corporate approving or disapproving proposed improvements.

Submissions on behalf of the owner of lot 28 express concerns about the content of these conditions and suggest some changes to wording and requirements. These suggestions appear to be genuinely made but appear to reflect an abundance of caution in protecting the interests of the body corporate rather than identifying any glaring defect with the conditions proposed.

I have concluded that the twenty-one conditions proposed were negotiated between the body corporate committee and the applicant at arms length and after independent legal advice. In these circumstances, it is unreasonable to oppose the proposal for the relatively minor or hypothetical concerns about the conditions raised by the owner of lot 28.

Concerns about lease to police

Submissions on behalf of the owner of lot 28 note that the proposal is founded on an assumption that the police would be entering into a lease of the premises and various concerns are raised. These include concerns about amenity, noise from sirens, the possibility of police dogs coming onto the scheme, and concerns about undesirable people being brought to the area.

At the inspection of the scheme the owner of lot 28’s representative indicated that assurances from the Queensland Police Service had satisfied their concerns regarding amenity. However, there are two remaining concerns regarding the occupation by the police that need to be addressed. Firstly, whether the proposed occupation by the police involved use other than for office and commercial purposes as required by by-law 15(3). Secondly, the risk that the changes predicated on the proposed lease to the police occur but the police do not ultimately enter into the lease.

On the issue of whether the proposed occupation by the police would contravene by-law 15(3) the applicant’s representative has made submissions to the effect that the permission to use lots 89 to 93 for "office and commercial purposes" simply distinguishes it from "residential and accommodation purposes" or "residential purposes and management purposes" and does not intend to list all possible purposes. It is also submitted that this question is irrelevant to whether or not the exclusive use by-laws should be amended. Committee representatives also indicated they did not consider a lease of the premises to the Queensland Police Service would contravene by-law 15(3). The question of whether future use of the premises would contravene by-law 15(3) appears hypothetical and irrelevant to the question of whether amendments to by-law 26 should be opposed. In particular, while the amendments to by-law 26 would facilitate occupation of the premises by the Queensland Police Service the issue of whether "office and commercial purposes" should be read broadly to allow leasing by the applicant to any non-residential purpose or would encompass use by the Queensland Police Service is properly determinable as part of any by-law enforcement proceeding rather than the present dispute. In light of the views expressed by committee members such a dispute may never arise. Alternatively, any owner could propose a special resolution to alter this by-law. In all the circumstances this concern does not appear sufficiently relevant or significant to prevent the proposed amendments to by-law 26.

On the second issue, the representative of the owner of lot 28 indicated that his concerns are addressed if the registration of the changes to the by-laws is conditional upon a lease allowing occupation by the Queensland Police Service being entered into. The applicant had no objection to this proposal.

Order

While emphasising that the owner of lot 28 appears to have acted properly and sincerely in the exercise of her dissenting vote it is possible that this dissenting vote was exercised out of an abundance of caution to protect the interests of the body corporate rather than for reasons that were objectively significant in all the circumstances. Perhaps if the applicant or committee had involved individual owners more in the negotiation process or obtained feedback from individual owners prior to the proposed amendments to the exclusive use by-laws being formulated then the present dispute could have been avoided. However, I also acknowledge that it can be difficult to allow a significant or continuing level of feedback from individual owners in negotiations affecting a 95 lot scheme.

In fact, the representative of the owner of lot 28 has now written and confirmed that there are only four outstanding issues of concern to this owner. The first of these is a technical issue about the application in the sense of doubt about whether the applicant is applying as an owner or as a caretaking service contractor. In this respect I am satisfied that the applicant is an owner and the dispute is properly of the character of a dispute between an owner and the body corporate. Secondly, the concern about whether by-law 15(3) also needs to be amended was reiterated. As indicated above, I do not consider it reasonable in all the circumstances to oppose the proposal on this basis. The remaining two concerns related more to the form of the order sought rather than specific grounds of opposition to the original resolution. These are concerns that the orders not allow for reconfiguration of the common property and that the changes to the by-laws be subject to the entry into a lease by the Queensland Police Service. I consider these concerns to be legitimate and will take them into account in formulating an order that is just and equitable in the circumstances.

In summary, I have considered the submissions in their entirety. Particularly persuasive is a submission on behalf of the committee indicating that independent legal and other advice has been obtained and that the view of the committee is that there are no negative effects on amenity, no reduction in the area of common property available for the use of owners, no financial downside for the body corporate, and the protection of guarantees and indemnities in relation to any costs, damage or loss from the proposed improvements. I also note written assurances from the Queensland Police Service about the proposed use of the premises and accept submissions from the applicant and committee to the effect that the proposal provides a benefit to owners and occupiers of the residential tower in the form of removal of a possible restriction on full access to and from Orchid Avenue.

Having considered the submissions and circumstances in their entirety I have formed the view that, objectively speaking, the opposition to motion 2 by two lot owners was opposition that in the circumstances was unreasonable. I am therefore satisfied that it is just and equitable to make an order giving effect to the motion as proposed. I note that an adjudicator can make ancillary and consequential orders and an order overturning opposition to a motion can give effect to a variation of the motion as proposed (Act 276, 284, Schedule 5). I accept submissions from all parties to the effect that the proposed amendment to the exclusive use by-laws is predicated on a proposal that the Queensland Police Service will enter into occupation of the premises. I consider it just and equitable to order that motion 2 is deemed to be passed and a new community management statement be recorded subject to the applicant entering into a lease that provides for the occupation of the premises by the Queensland Police Service. I will allow a period of one year for this condition to be satisfied.

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^[1] McKinnon v Treasury [2006] HCA 45 per Hayne J at paragraph 61. Waters v Public Transport Corporation [1991] HCA 49; (1991) 173 CLR 349.
^[2] Reference is made to Boston on Belgrave, Order 0391-2005, R Miskinis, 7 October 2005.
^[3] Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] KB 223.
^[4] Secretary, Department of Foreign Affairs and Trade v Styles [1989] FCA 342; (1989) 88 ALR 621.
^[5] Commonwealth Bank of Australia v Human Rights and Equal Opportunity Commission (1997) 75 FCR 551.
^[6] Points North, Order 0261-2004, CJ Carrigan, 2 September 2004 at paragraph 44. Ocean Plaza Apartments, Order 0262-2004, CJ Carrigan, 23 September 2004 at paragraph 26.