Karana Court [2007] QBCCMCmr 339 (1 June 2007)

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

I hereby order that:

1. Subject to 2 below, the proprietor of lot 7 in the scheme is to carry out the following work at its
expense within a period of twelve (12) months from the date of this order:

(i) to remove the wall which they or their predecessors in title have constructed on the common property adjoining Lot 7;
(ii) to construct a wall on the boundary between Lot 7 and the common property where the original wall was previously removed;
(iii) to restore (including re-painting and re-tiling) and generally make good in a proper and workmanlike manner the common property of the Scheme so affected;
(iv) to provide to the Secretary of the Body Corporate at least one (1) month before any work is undertaken, a list of specifications for the work to be undertaken, particulars of the tradesperson to be engaged and a survey certificate indicating the correct position for the replacement wall;
(v) to observe and comply with any notification from the Body Corporate requiring alterations to the specifications, more information or detail or other requirements which are reasonable in the circumstances;
(vi) to ensure that such work complies with the Building Code and Local Authority by-laws and that the consent of the Local Authority, if required, be obtained by the proprietor of Lot 7.

2. Order 1 will lapse if sale of the area, or allocation of exclusive use of the area, takes place
before 12 calendar months from the date of this order.

I further order that the Body Corporate Committee shall call an Extraordinary General Meeting no later than 3 calendar months from the date of this order and there shall be included on the agenda of the Extraordinary General Meeting a motion seeking the approval of the Body Corporate by way of resolution without dissent for a proposal to sell the area to the respondent. The committee is referred to commentary under my reasons for decision for instructions regarding the drafting of that motion.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0418-2006

"Karana Court" CTS 8617

Application

The Body Corporate for Karana Court CTS 8617 (the applicant) has sought the following interim order of an adjudicator (quote):

The Scheme

"Karana Court" was registered as a building unit plan (now termed a building format plan) on 3 April 1985 and comprises 8 lots. It is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997 ("Standard Module").

Jurisdiction

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

(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)).

Grounds

The applicant’s grounds are quoted as follows:

Evidentiary material is also attached to the application. I note in particular the terms of the Mahon’s undertaking to the Body Corporate:

I note that the Mahon’s signed this acknowledgement in consultation with Murdoch Lawyers.

The body corporate manager served notice to relocate the wall pursuant to the agreement on 13 January 2004.

They provide the minutes of meetings and briefing papers where options such as selling common property, seeking re-instatement or doing nothing were considered. Legal advice was sought in the process along with seeking valuations for the subject areas.

On 4 June 2004 the Mahons attempted to negotiate a payment to the Body Corporate to enable them to keep the area. They say that if this offer is not accepted they would relocate the wall at the end of the current tenancy, but only if other owners also returned their properties to their original status. They attach an offer of $10,000.

At an annual general meeting of 11 October 2004, it was resolved by special resolution to approve the installation of glass sliding doors to lots 2, 3 and 8, but refusing motions put together by the committee on the advice of solicitors, to sell the relevant areas to the owners of lots 3 and 7.

The motion proposed for resolution without dissent was worded as follows:

The motion was lost with 3 votes in favour and 4 votes against.

On the basis of that result, the committee resolved to issue contravention notices on the same date.

The chairperson reported on 18 March 2005 that the notices had not been complied with. At an extraordinary general meeting held 24 May 2005, the Body Corporate resolved to engage solicitors to pursue the matter (3:1).

Submissions

The owner of Lot 7 has responded as follows:

Response to Submissions

The applicant advises they were not aware of any verbal permission being given to the previous owners of lot 7 to enclose the area. The applicant understands that the previous chairperson had been a solicitor and it was the chairperson’s requirement that the clause relating to reinstatement be included in the sale agreement. They say that the granting of exclusive use areas over 20 years ago is not longer relevant. They say that allowing the structure to remain would open the floodgates for other owners to do likewise.

They say it is true that an offer was made and rejected by the Body Corporate. They say as part of a democratic process, this was within the owners’ rights.

They point out that the issue of lot entitlements was accepted by owners when they purchased their lot.

Inspection

On 25 May 2007 I attended at the premises in the presence of Mr Grant Field, Chairperson and Ms Linda Kenny, co-owner of Lot 3. The respondent was unable to attend, but gave verbal consent for the inspection to proceed without representation. An external inspection was made of the areas in dispute in relation to both Lots 3 and 7. The area captured by Lot 7 is larger than that captured by Lot 3.

I asked the chairperson what use the Body Corporate foresaw in relation to the areas that had been captured. He stated that he did not know of any identified use.

I wish to thank the parties for their presence, consent and co-operation in communicating only in the presence of all parties as appropriate.

Determination

Based on my inspection of the site I consider that exclusive use of the area abutting Lot 7 will not cause any detriment to any member of the Body Corporate. To my way of thinking, the area is of no use to any other lot owner and does not play a role in the ability of the other relevant lot owner (6) to manoeuvre furniture or other items up and down the stairs. From an aesthetic aspect, the enclosed areas are only visible to those within the stairwell. It is not an area where other owners would go or congregate.

It is therefore difficult to understand the Body Corporate’s reasons for refusing the request to grant exclusive use, other than that "the motion was lost" or the compensation was considered inadequate. I agree with the Body Corporate that the allocation of exclusive use areas, lot entitlements or indiscretions by other lot owners are not relevant reasons as to why the owner of lot 7 should be granted exclusive use. However the question that remains for me is "Why not?".

Under Section 276(1)(b) and adjudicator may resolve a dispute about the exercise of a right (to vote).

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)). Section 276(3) states that the adjudicator may make an order mentioned in schedule 5.

Within Schedule 5, paragraph 10 includes the following example of orders that an adjudicator might make:

Also within Schedule 5, paragraph 17 includes the following example of orders that an adjudicator might make:

One of the interesting aspects I find about the Body Corporate’s application, is the content of legal advice provided to them on 7 May 2004, part of which is quoted as follows:

In the end then, it is unclear to me whether the votes against the sale of the areas were because the dissenting voters found the valuation unacceptable, or whether they were some dissenting voters who retained some desire to punish the respondent for taking the area without authorisation.

Neither the applicant nor the respondent has provided copies of the valuations that were appended to the failed motion. Given the time that has elapsed since that vote, any probative value will have dissipated in any event. It does seem apparent that at some point the respondent was willing to pay something for the area, but that willingness may have been withdrawn since that time.

The approach adopted on 11 October 2004 in the resolution relating to both Lot 3 and Lot 7, identified a specific value rather than following the suggestion offered in legal advice of 6 April 2004 i.e. to allow a valuer to determine appropriate compensation to the Body Corporate for the unimproved space. I believe that was sound advice offered by the solicitor that would have been a constructive means of proposing the motion.

I also note that the legal advice suggests that the areas concerned should be sold under title, rather than allocated as exclusive use. I agree this would be the preferred approach. I further conclude this would be in the respondent’s best interests in terms of dispensing with the need for consent to make alterations to the areas e.g. as exclusive use common property, the respondent would need to seek Body Corporate consent to even repaint the interior of the area.

Whether the area was allocated as exclusive use or alienated in title, it is entirely appropriate that other owners within the Body Corporate are compensated for the areas. To say otherwise is like saying property holders of suburban blocks should have the right to plant a vegetable garden in a disused corner of the next door neighbour’s property without paying compensation.

While it would seem sensible for me to make orders to enable the transfer of title to the areas and set the basis on which the consideration is quantified, Section 285 of the Body Corporate and Community Management Act 1997 specifically states that an adjudicator does not have power to resolve a question about title to land. While this dispute itself might not be characterised as a dispute about title to land, to make an order going to title may prove destabilising when there is no suitable existing motion that falls within Schedule 5, example 10.

I do not regard making an order allocating the areas as exclusive use and approving the alterations as being in the best interests of either the Body Corporate or the lot owner. Rather than making an inappropriate order, I therefore propose to make orders to give the parties one last chance to resolve the situation on an informed basis.

I will make an order requiring the respondent to re-instate the common property, however I will order that reinstatement need not occur until 12 months from the date of the order and subject to a condition that the order will lapse if sale of the area or allocation of exclusive use of the area takes place in the meantime.

The Body Corporate and the respondent would serve themselves well to agree a method by which the value is determined. I note the Body Corporate’s lawyer suggests the engagement of an independent valuer whose decision as to value will be final. Another method may be for the Body Corporate and the respondent to source separate valuations (from independent registered valuers) with the sale price to be determined by the average valuation. The valuation instructions could note that the improvements made by the respondent are not to be taken into consideration, are not based on a replacement value and should not consider the value the area may add to the respondent’s lot.

I will order that the Body Corporate again consider the proposal to sell the area as a resolution without dissent, within 3 months of the date of this order. I recommend the motion put to the Body Corporate proposes that:

I further suggest that the Body Corporate seek legal advice on the form such a motion might take and consider the other pertinent advice contained in the letters of 7 May 2004 and 31 March 2004. However the cost of this legal advice (which is before the motion might come into effect) should be borne by the Body Corporate.

It is also open for an alternate motion to be put up, that the area be allocated as exclusive use and that the improvements be approved. The payment of compensation to the Body Corporate remains appropriate, though one would anticipate the amount of compensation might take the form of either an annual fee or some lesser one off payment.

If the motion should fail to be passed and the respondent feels that this refusal has not been reasonable, an application may be made to this office to have any dissenting votes overturned.

Members of the Body Corporate should be made aware of an adjudicator’s power to give effect to a motion without dissent as proposed, where opposition to the motion was in the circumstances unreasonable. The Body Corporate should consider the advice given by their solicitor in relation to the reasonableness of the proposal. The respondents should be aware that it is considered just and equitable that some compensation be paid to the Body Corporate for the area.

I urge the applicant and the respondent to take the opportunity over the next 12 months to implement a sensible and fair settlement of the dispute in the interim. The parties might be well served to engage the services of a professional mediator to facilitate this process.

Number of Scheme:	8617
Name of Scheme:	Karana Court
Address of Scheme:	Cahill Street Bilinga QLD 4225

i)	to remove the wall which they or their predecessors in title have constructed on the common property adjoining Lot 7;
ii)	to construct a wall on the boundary between Lot 7 and the common property where the original wall was previously removed;
iii)	to restore (including re-painting and re-tiling) and generally make good in a proper and workmanlike manner the common property of the Scheme so affected;
iv)	to provide to the Secretary of the Body Corporate at least one (1) month before any work is undertaken, a list of specifications for the work to be undertaken, particulars of the tradesperson to be engaged and a survey certificate indicating the correct position for the replacement wall;
v)	to observe and comply with any notification from the Body Corporate requiring alterations to the specifications, more information or detail or other requirements which are reasonable in the circumstances;
vi)	to ensure that such work complies with the Building Code and Local Authority by-laws and that the consent of the Local Authority, if required, be obtained by the proprietor of Lot 7.

1.	At some point prior to 2003 the proprietor of Lot 7 removed the wall constructed on the boundary between Lot 7 and the "rear verandah" adjoining the stairwell and constructed a replacement wall approximately 2 meters into the common property. This was done without the consent of the Body Corporate.
2.	On 6 January 2003 the then proprietor of Lot 7, Julian Ward wrote a letter to the Body Corporate advising he was intending to sell Lot 7 and that under the conditions of sale the purchaser acknowledged that they may be required to remove a wall which had annexed a certain part of the common area to the advantage of Lot 7;
3.	the current proprietors, Mr and Mrs Mahon subsequently purchased Lot 7 and an extract from the contract of sale incorporating an acknowledgement regarding the wall is contained in the annexed document. The proprietors of Lot 7 subsequently executed an acknowledgement dated 13 February 2003 to the Body Corporate undertaking to reinstate the external wall to its correct boundary but this has not eventuated;
4.	the Body Corporate believes that the proprietor of Lot 7 is using the alienated part of the common property to give it a second bedroom thereby significantly increasing the value of the lot;
5.	the unauthorised erection of a wall on the common property has alienated from use by other proprietors in the scheme an area of approximately 4 sq meters. This seizure of common property is not supported by any consent, implied or expressed, from the Body Corporate and is no supported by an exclusive use by-law;
6.	This action therefore breaches Section 167 of the Act and reference is made to the decision of Platt v Ciriello (1997) Queensland Court of Appeal 33 in return referred to in the statement of Adjudicator’s Reasons for Decision reference 0667-2004 "Onslow grove" CTS 5748;
7.	The erection of the wall s also in breach of section 114 of the Standard Module prohibiting the erection of improvement on common property without the consent of the Body Corporate;
8.	the action is a contravention of by-law 3 of schedule 3 by-laws under the Building Units and Group Titles Act 1980 under which a proprietor shall not obstruct lawful use of common property by any person and the proprietor has failed to act upon the Contravention Notice served under the Act;
9.	The action is also a fundamental denial of the underlying proprietorship of all owners in the scheme in the common property – section 35 of the Act;
10.	The action of the proprietor of Lot 7 was a unilateral undertaking with no regard for the rights of other proprietors. The consent of the Body Corporate was not sought before the work was undertaken;
11.	It is likely that the erection of the wall does not have building approval of the Local Authority, may be in breach of the Building Code and of fire safety regulations. The erection of the wall reduces the area of common property.
12.	The proprietor has previously acknowledged and undertaken to restore the common property and remove the wall (document attached) and has failed to act accordingly;
13.	The Body Corporate has unsuccessfully explored alternate ways of dealing with this issue but negotiations have failed and any further negotiations are unlikely to be fruitful;
14.	a similar application in respect to the proprietor of Lot 3 is intended to be lodged at the same time;
15.	It is just and equitable in all the circumstance that the order sought in the application be granted.

(a)	I find it difficult, applying logic and reason, to think of a reason why the Body Corporate would not be prepared to sell the relevant areas to the lot owners concerned;
(b)	There are reasons why the lot owners concerned, though presumably they would want to buy the areas concerned, might not be able to, and the principal one of course is that one or both of them might not be able to afford the purchase price and all the other costs of the exercise that they would have to bear....;
(c)	If the owners of lots 3 and 7 on the one hand and the owners of the other lots on the other are both acting reasonably, presumably they ought to be able to agree, so far as price is concerned, that if the Body Corporate and the buyers cannot agree with some particular period on what the price is to be (and, for that purpose, the decision of the Body Corporate could be the decision of the committee minus the owner of the lot concerned, if that owner happens to be on the committee), then the price is to be the amount determined as being the market value of the area concerned by an independent valuer (whose decision as to the value will be final) appointed by the committee, the valuer’s costs to be paid by the buyer.

2.	We are aware that an exterior wall has been erected on common property without approval of the Owner’s Corporation as disclosed in special condition 3 of the contract.
3.	At the time of commencement of external painting of the building "Karana Court" we will on not less than 30 days written notice so requesting, reinstate the external wall of the unit to its correct boundary in conformity with other rear patio verandahs.
4.	this acknowledgement is given in consideration of the Owner’s Corporation BUP6611 permitting such structure to remain in place until notice is given to us in accordance with paragraph 3 hereof...........

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Karana Court [2007] QBCCMCmr 339 (1 June 2007)