Margaret Place [2007] QBCCMCmr 163 (19 March 2007)

Last Updated: 2 April 2007

REFERENCE: 0841-2006

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	17818
Name of Scheme:	Margaret Place
Address of Scheme:	QUEENSLAND

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

Catharine Maree Trace, the owner of lot 7

I hereby order that the body corporate is to give effect to resolution 23 carried at the annual general meeting held on 12 July 2006 and, within fourteen days of the date of this order, pay to the owner of lot 7, Catharine Maree Trace, the sum of $2,800.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0841-2006

"Margaret Place" CTS 17818

Scheme

"Margaret Place" was registered as a building units (now known as format) plan of subdivision on 9 November 1994 comprising ten residential lots and common property. It is regulated by the Act’s Accommodation Module.

Application

This application is brought by the owner of lot 7, Catharine Maree Trace (the applicant), against the body corporate, seeking an order that the body corporate pay her $2,800. This amount represents a one fifth share of the $14,000 that has been paid by the Gold Coast City Council (GCCC) to the body corporate for the resumption of an area of common property (approximately 121 square meters – 3m deep x 40.227m wide) at the Southern end of the scheme over which rights of exclusive use had been granted to the owners of lots 5, 6, 7 and 8. The land was resumed in pursuance of the provisions of the Acquisition of Land Act 1967 and the Local Government Act 1993 for drainage purposes, to correct over-floor flooding problems and ultimately cater for the fully developed Q100 stormwater flows. The drainage easement was gazetted on 22 October 2004. Stormwater drainage works within the easement commenced on 3 May 2005. McDonald, Balanda & Associates (MBA) were engaged by the body corporate to negotiate with GCCC for an appropriate amount of compensation.

On 28 February 2006 an EGM was held to consider accepting compensation in the amount of $14,000 plus $2,000 for disruption to the owners. The motion (as worded below) failed as the owners present wanted the compensation to go to the owners of lots 5, 6, 7 and 8.

2. Compensation for Resumption of Land
Resolution without dissent

That the body corporate owners resolve to accept the council’s offer of $16,000 in full and final settlement of any compensation payable, and further that the monies received be banked into the sinking fund.

At the AGM held on 12 July 2006, the following resolution was passed:

23. Compensation
Resolution without dissent

The motion for compensation to go into the sinking fund was lost at the Extraordinary Meeting held on the 28^th February 2006. This was due to some owners of the body corporate losing part of their exclusive use area. The body corporate needs to arrive at an equable solution.

That the body corporate jointly agree to accept the $16,000 compensation and the proceeds to be divided between each owner who lost part of their exclusive use area and the body corporate, and further that a new CMS be drawn up and registered with the Department of Natural Resources.

The motion was carried with three votes for and nil against. The applicant seeks an order to give effect to this resolution.

Submissions

Submissions in response to the application were sought from all owners and the body corporate. Four submissions were received. Of the four, one made no comment; merely completed the submission cover sheet. Two submissions, from the owners of lots 5 and 8, supported the applicant, believing the money should be distributed amongst the four affected owners.

The body corporate manager made a submission (on behalf of the body corporate) opposing the order sought. The body corporate manager states that, upon speaking with an Information Officer from this office, was advised that the compensation money must go into the sinking fund and the funds were not to go to the owners of lots 5, 6, 7 and 8.

Since this meeting, the compensation of $14,000 has been deposited into the sinking fund and a payment of $500 has been paid to the owners of each of lots 5, 6, 7 and 8. The $2,000 already distributed to the owners of lots 5, 6, 7 and 8 is not in dispute.

The body corporate manager goes on to quote section 35 of the Act and conclude that the compensation should be for all members of the body corporate and not just for lots 5, 6, 7 and 8.

Jurisdiction

This is a dispute between an owner and the body corporate and comes within the dispute resolution provisions of the Act.^[1]

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)).

Decision

The issue of how monetary compensation, received by a body corporate for a resumption of an area of common property, is to be allocated is not specifically addressed by the legislation.

The body corporate manager quotes section 35 of the Act and concludes that, on this basis, the compensation should be for all members of the body corporate and not just for lots 5, 6, 7 and 8. She further states that the body corporate engaged the solicitor to act on behalf of the body corporate and not just a select few owners. Section 35 provides as follows (bolding my emphasis):

35 Ownership of common property

(1) Common property for a community titles scheme is owned by

the owners of the lots included in the scheme, as tenants in

common, in shares proportionate to the interest schedule lot

entitlements of their respective lots.

(2) Subsection (1) applies even though, under the Land Title Act,

the registrar creates an indefeasible title for the common

property for a community titles scheme.

(3) An owner’s interest in a lot is inseparable from the owner’s

interest in the common property.

Examples--

1. A dealing affecting the lot affects, without express mention, the

interest in the common property.

2. An owner can not separately deal with or dispose of the owner’s

interest in the common property.

(4) If the occupier of a lot is not the lot’s owner, a right the owner

has under this Act to the occupation or use of common

property is enjoyed by the occupier.

(5) The way the body corporate for a community titles scheme

(scheme A) may enjoy the occupation and use of the common

property for a community titles scheme for which scheme A is

a subsidiary scheme is subject to the community management

statement for each scheme for which scheme A is a subsidiary

scheme.

(6) If a body corporate is authorised under this Act to enter into a

transaction affecting common property, it may enter into the

transaction, and execute documents related to the transaction,

in its own name, as if it were the owner of an estate of fee

simple in the common property.

I believe this argument is further supported by the following:

Firstly, the settlement agreement in relation to the amount of compensation to be paid is between the GCCC and the body corporate for Margaret Place, not the owners of lots 5, 6, 7 and 8.

Secondly, clause 4 of the settlement agreement seems to suggest that no other party was entitled to compensation, other than the body corporate. Clause 4 of the settlement agreement provides as follows:

The Owner (referring to the body corporate) states that its interest is the only interest in the resumed Easement and is the only person or corporation entitled to compensation and that it is not aware of any trust, obligation, mortgage, lease, agreement to lease, charge, rate, contract, claim or other estate or interest in which the resumed Easement taken is subject, or any other person or corporation who may be entitled to compensation.

Thirdly, the resumption did not actually result in any loss of land, at least at ground level. At the outset, in order to clarify the exact nature of the resumption of land described above, I telephoned Property Officer Mr Peter Brown of the GCCC on 15 March 2007. Mr Brown was involved with this particular resumption of land from Margaret Place. Mr Brown commented that, despite the terminology, no land was in fact "resumed", rather, an easement for drainage purposes was registered over the land described. He further stated that all of the drainage works are underground and that the Southern boundary of the property was not altered in any way. The owners whose areas of exclusive use were affected had their courtyards restored to their pre-existing condition and did not suffer any loss of land.

Notwithstanding this, I note that clause 7 of the "Notice of Intention to Resume" dated 21 April 2004 contains a number of restrictions in relation to the area of common property covered by the easement. Clause 7 provides as follows:

No Structures etc. on Easement

7. The Owner shall not at any time without the express written permission of the Council:

7.1 erect any buildings or structures (other than fences) upon the easement or any part thereof or otherwise permit the Easement or any part thereof to be used in such a way as to obstruct or interfere with the relevant works and/or the proper and effective use thereof by the Council;

7.2 install concrete, bitumen, or other pavement or driveways on the easement or gardens or landscaping involving concrete, brick or other permanent materials;

7.3 remove or stockpile or permit the removal or stockpiling of any soil, sand, gravel, or other substance or material on the easement or construct any roads, dam walls or other earthworks on the Easement which would in any way obstruct or interfere with the relevant works and/or proper and effective use thereof by Council.

It is arguable, however, that these restrictions are no more onerous than the conditions already imposed on owners with a grant of exclusive use, by virtue of by-law 20, which provides as follows:

20.	Exclusive Use of Courtyards

The Body Corporate hereby grants for the time being to the Owner and the Occupier of each Lot the exclusive use of that area of the Common Property (called "the exclusive area") as is marked with a corresponding number to that of each Lot and being the areas shown on the attached Survey Plan and market "MP1" for identification purposes and contained in Schedule E, upon the following conditions:

(a)	The Owner or Occupier must not store or bring upon nor permit to be stored nor brought upon the exclusive area any refuse, rubbish or trash of any description whatsoever.
(b)	The Owner or Occupier is responsible for the care and maintenance of any lawn, garden, pergola or paving installed or contained upon the exclusive area.
(c)	The Owner or Occupier must not alter or establish any gardens, plantings, pergola, plumbing (or other services) or landscaping of on or installed in the exclusive area without the prior written approval of the Body Corporate.
(d)	The Owner or Occupier must observe and perform such reasonable written directions as may from time to time be given by the Body Corporate in respect of the Owner’s continued use of the exclusive area.

To conclude, I agree, at least initially, that the appropriate recipient of the compensation is the body corporate. However, I disagree with the body corporate manager as to where those funds should be deposited. The body corporate manager states that the compensation has been paid into the sinking fund. I believe the funds should have been paid into the administrative fund, by virtue of section 98 of the Accommodation Module. Section 98 relevantly provides as follows:

98 Administrative and sinking funds [SM, s 100]

(2) The body corporate must pay into its administrative fund any

amount received by the body corporate that is not required

under subsection (3) to be paid into its sinking fund.

(3) The body corporate must pay into its sinking fund--

(a) the amount raised by way of contribution to cover

anticipated spending of a capital or non-recurrent nature

(including the periodic renewal or replacement of major

items of a capital nature and other spending that should

be reasonably met from capital); and

(b) amounts received under policies of insurance for

destruction of items of a major capital nature; and

(c) interest from investment of the sinking fund.

There is no requirement under subsection (3) for compensation proceeds to be paid into the sinking fund, therefore, subsection (2) requires that they be paid into the administrative fund.

There is only one issue that remains to be considered, and that is the effect of the resolution without dissent passed at the AGM on 12 July 2006, quoted above. In short, I cannot find anything in the legislation to prevent the body corporate from deciding themselves how to distribute the compensation proceeds, although I do concede that any such decision would have to be made by resolution without dissent, as has occurred here. I find the following legislative support for this proposition.

One of the secondary objects of the Act is to ensure that bodies corporate for community titles schemes have control of the common property and body corporate assets they are responsible for managing on behalf of owners of lots included in schemes.^[2] Further, the body corporate must administer, manage and control the common property and body corporate assets reasonably and for the benefit of lot owners.^[3] There has not been any suggestion that the allocation of the compensation proceeds amongst the four lot owners whose areas of exclusive use were affected and the body corporate in equal shares is unreasonable. In particular, no-one has sought to challenge resolution 23 passed at the AGM on 12 July 2006, nor has the body corporate revoked or rescinded it since. Further, the only submissions from owners received in response to this application were in favour of the order sought being granted. No opposing submissions, other than that of the body corporate manager, were received.

To conclude, as a general principle, I believe that any compensation a body corporate receives for a resumption of common property land, should be paid into the administrative fund and used to offset future contributions of owners in accordance with their contribution schedule lot entitlements. However, the body corporate is not prevented from allocating the compensation in a different way, provided a resolution without dissent is passed to approve the allocation and that the body corporate acts reasonably and for the benefit of owners, in doing this.

In the circumstances of this case, I consider it just and equitable to make an order giving effect to the resolution without dissent passed at the AGM held on 12 July 2006.

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^[1] See ss.226, 227 and 228
^[2] See section 4(d)
^[3] See section 152(1)(a) Act