Eagles Retreat [2007] QBCCMCmr 46 (29 January 2007)

Last Updated: 12 February 2007

REFERENCE: 0728-2006

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	10852
Name of Scheme:	Eagles Retreat
Address of Scheme:	54 Kingfisher Drive PEREGIAN QLD 4573

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

Richard Farndon, a Co-owner(s) of lot 3

I hereby order the body corporate is deemed to have authorised the owners of lot 3 to construct a veranda on lot 3 as per the plan attached to the motion submitted for the extraordinary general meeting on 14 November 2005 on condition that: • written approval from Noosa Shire council is provided; • all construction and maintenance costs be the responsibility of the owners of lot 3; and • the owners of lot 3 give the body corporate details of the nature and value of the improvements so that Richards Body Corporate Management can inform the Body Corporate Insurer.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0728-2006

"Eagles Retreat" CTS 10852

Application

Richard Travers Farndon, a co-owner of Lot 3 (the applicant) has sought the following orders of an adjudicator against the Body Corporate for Eagles Retreat CTS 10852 (the respondent):

To proceed and complete the construction of the third balcony thus making the building uniform as per agreement.

The adjudicator is requested to resolve the dispute by requiring the parties to vote in accordance with that proposed at the extraordinary general meeting 14 November 2005.

Terms of the Motion

The terms of then motion that went before the Body Corporate were:

Application to construct veranda – lot 3

The motion that, by special resolution the Body Corporate approve and register construction of a verandah (sic) on lot 3 (as per attached plan) as required under Section 7592) of the Small Scheme Module Regulation as Improvement to Common Property by Lot Owner under the condition that written approval from Noosa Shire Council is provided and further that all construction and maintenance cost be the Lot Owner’s responsibility and Richards Body Corporate Management advise the Body Corporate Insurance Company of the Improvement.

The Scheme

Eagles Retreat CTS 10852 is a 3 lot scheme registered under the Body Corporate and Community Management Act 1997 and is operating under the Body Corporate and Community Management (Small Schemes Module) Regulation 1997.

Background

The scheme was developed as a partnership between Peter Anderson (unit 1), Peter Hinneberg (unit 2) and Geoff Farndon (unit 3, top floor). The partners originally purchased a block of land as tenants in common (equal shares) with the transfer produced in March 1979. In September 1981 a building units plan was registered in relation to the lot. It details equal lot entitlements for all three lots. This plan includes balconies primarily facing the east for all three lots.

The lot next door is registered as having been purchased by Mr Anderson and Mr Hinneberg on 5 December 1994. On 31 May 2000 this lot was subdivided into 2 lots, with one lot comprising a strip of around 87 square meters abutting the scheme land. On 5 July 2000 the strip lot was cancelled and incorporated into the common property of the scheme. Geoff Farndon’s signature appears on this instrument. On 6 July 2000 the community management statement for Eagles Retreat was amended to capture the additional common property.

Mr Fardon died in 2001 and title to his lot passed to his two sons, one being the applicant.

Grounds

The applicant alleges that north facing balconies were erected to units 1 and 2 in the year 2000. He states that his father was too ill to take part at that time, so no balcony was erected on lot 3. He alleges, that before his father’s death, his father told him and his brother that they should follow through with the partnership plans to add a north facing balcony to lot 3.

The applicant advises that the lot next door had been purchased to allow for a sufficient margin between the structure and the lot boundary, in order to meet council requirements.

He alleges that originally there was no official "Body Corporate" management and so decisions were based on "majority rules". He alleges that lots 1 and 3 were positioned to go ahead with installation of the balcony for lot 3 in April 2003. He says however, that Mr Hinneberg approached the council to have the third balcony permit cancelled and also had the preliminary structural work removed.

In September 2003, the applicant applied^[1] "for an order to complete the balcony redevelopment by erecting a balcony on the north side of lot 3 as per agreement". The applicant alleges this was unsuccessful "due to a lack of an official Body Corporate". He states they now have a body corporate manager.

He states that the original plan was for three balconies to make the building uniform. He says that lot 3 is disadvantaged by the decision not to go ahead with the north balcony because:

•	The balconies for lot 1 and 2 have been built on common land;
•	Noise from the balcony of lot 2 is not buffered and travels into the main bedroom in lot 3;
•	The Building Code of Australia requires sun-protection of openings and walls;
•	The lack of balcony on unit 3 moves against the consensus of energy conservation;
•	The balconies will remain common property until a resolution is approved;
•	The aesthetics of the building are compromised.

The applicant points out that the situation will always be deadlocked due to there being only 3 lots and says this has the potential to be unfair on future buyers. He notes he and his brother will meet the cost of construction.

Submissions

A submission was received from Mr Hinneberg, the owner of lot 2 through his solicitors. He argues that the applicant is asking for "the Commissioner" to review and override his legal and proprietary right to vote in accordance with his ownership of his unit. He argues the dispute does not fall within the purview of Section 228(1) that states:

(1) This chapter establishes arrangements for resolving, in the context of community titles schemes, disputes about--

(a) contraventions of this Act or community management statements; and
(b) the exercise of rights or powers, or the performance of duties, under this Act or community management statements; and
(c) the adjustment of lot entitlement schedules; and
(d) matters arising under the engagements of persons as body corporate managers, the engagements of certain persons as service contractors, and the authorisations of persons as letting agents.

He says the application does not involve any issues of contravention, that he has no duty to vote in the manner the applicant requires and there is nothing in the Act that empowers "the Commissioner" to require him to vote in a certain manner. He says it is not a dispute relating to performance of duties and is not about lot entitlements. He therefore says the Commissioner has no power to entertain the application. He says that if the applicant wishes to pursue arguments in relation to any alleged agreement, then it requires specific action in the District or Supreme Court.

He says that the agreement with Mr Farndon was not to build a balcony for lot 3. He says that Mr Farndon said he would therefore not contribute to the cost. He says that council requirements uncovered the need to buy the lot next door and that this cost and all other costs associated with the project were met by him and Mr Anderson alone.

He encloses plans dated July 1999, showing only 2 balconies, however making allowance for a "sun hood" to be affixed to exterior of lot 3. During construction of the balconies, he says that the architect arranged for the support posts for this sun hood/sail to be erected on the corner of his balcony. He says that Mr Farndon declined its installation, as it would interfere with his view.

He says that Mr Farndon lived in his unit during construction and knew what was going on at all times. He says there was never an agreement to install a balcony on lot 3.

He disputes a number of the factual allegations in the application, but for the reasons below I will not summarise these issues.

He says he has never accepted a balcony over his unit and he will never do so. He says that among other things, it will severely limit sunlight in his unit and "substantially" reduce its value. He says he does not believe the foundations and supports were ever designed to support a third balcony.

Another submission was received from the owner of lot 1, Mr Anderson. He says that Mr Hinneberg has simply had a change in heart and encloses his submission in relation to the previous application. He says he hopes "the Commissioner" rules in favour of the third balcony.

His letter relating to the previous application says that only 2 balconies is not aesthetically pleasing. He says it is his understanding that agreement existed for 3 balconies. He says that previously disputes had been resolved on a majority basis and he cannot understand why Mr Hinneberg has broken this pattern on this issue. He says that he and Mr Farndon only agreed to the balconies in the first place, on the understanding that the building was structurally capable.

Reply to Submissions

The applicant again emphasises the aesthetic aspect of only 2 buildings and says that the current appearance has devalued all the lots. He reiterates the noise concerns relating to Unit 2’s balcony.

Jurisdiction

Section 105 of the Small Schemes Module states:

(1) The body corporate may, if asked by the owner of a lot, authorise the owner to make an improvement to the common property for the benefit of the owner’s lot.

(2) The improvement must be authorised by special resolution of the body corporate unless--

(a) the improvement is a minor improvement; and
(b) the improvement does not detract from the appearance of any lot included in, or common property for, the scheme; and
(c) the body corporate is satisfied that use and enjoyment of the authorised improvement is not likely to promote a breach of the owner’s duties as an occupier.

Given that the value of erecting the balcony will exceed the amount of $200 (see the Schedule to the Module) a special resolution of the Body Corporate is necessary for the improvement to be approved.

Section 106 of the Act described the counting of votes for a special resolution:

(1) This section applies if a motion is to be decided by special resolution at a general meeting of the body corporate for a community titles scheme.

(2) One vote only may be exercised for each lot included in the scheme, whether personally, by proxy or in writing.

(3) The motion is passed by special resolution only if--

(a) for a meeting notice of which is given--

(i) before the commencement of subparagraph
(ii)--the votes counted for the motion are more than the votes counted against the motion; or
(ii) after the commencement of this subparagraph--at least two-thirds of the votes cast are in favour of the motion; and

(b) the number of votes counted against the motion are not more than 25% of the number of lots included in the scheme; and

(c) the total of the contribution schedule lot entitlements for the lots for which votes are counted against the motion is not more than 25% of the total of the contribution schedule lot entitlements for all lots included in the scheme.

Given the equal lot entitlements in this scheme, a dissenting vote by Mr Hinneberg is enough to defeat the provisions of Section 106(3)(b) and (c) meaning that the motion to install the balcony cannot be carried.

Section 30 of the Module states that a voter for a general meeting of the body corporate is an individual:

(a) whose name is entered on the body corporate’s roll as--

(i) the owner of a lot;or
(ii) the representative of the owner of a lot; or

(b) who is the nominee of a corporation the name of which is entered on the body corporate’s roll as the representative of the owner of a lot; or
(c) who is a corporate owner nominee.

Repeatedly throughout the Module, the ability of someone who qualifies as "a voter" is described as a "right to vote". Some references include Sections 27, 30(11) and 34(1). I am of the view that Mr Hinneberg’s has exercised his right to vote as part of the Body Corporate.

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.

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 17 includes the following example of orders that an adjudicator might make:

If satisfied the body corporate’s decision about a proposal by the owner of a lot to make improvements on or changes to common property is an unreasonable decision--an order requiring the body corporate--

(a) to reject the proposal; or

(b) to agree to the proposal; or

(c) to ratify the proposal on stated terms.

In considering the original application in relation to this matter, Adjudicator Meek made the following statements:

I outlined a number of matters to the parties including that in many respects, the terms of the application in touching on issues of joint venture, estoppel and unconscionability, were outside the jurisdiction of an adjudicator under the Act, and that potentially the matter should be referred to a court of competent jurisdiction.

I concluded the teleconference by outlining to the parties and in particular the applicant three options –

1. To proceed with the application, and if so, to evidence the rights under the legislation which the applicant was asserting;
2. To go to court alleging issues of joint venture, estoppel and unconscionability; or
3. To submit to a meeting of the body corporate fresh motions containing the proposal and if such motion or motions were not carried, to make fresh application to this office on the basis that the body corporate was (allegedly) not acting reasonably.

I agree I do not have jurisdiction to determine a contractual dispute between the owners. However, the owners of lot 3 have now submitted a motion containing the proposal to the body corporate and I have jurisdiction to consider whether the body corporate’s decision in this respect is an unreasonable decision.

Reasonableness of Decision
The arguments in relation to the reasonableness of the decision of the Body Corporate to reject the proposal to install the balcony on lot 3 are summarised below.

The applicant’s arguments in favour of the new balcony are:

•	Uncertainty of new buyers in relation to title
•	Noise reduction;
•	Sun protection of openings and walls as required by the Building Code of Australia;
•	Energy conservation;
•	Improved aesthetics through consistency;
•	An increase in resale value of lot 3;
•	Mitigation of the disadvantage compared to other lot owners.

Mr Hinneberg’s arguments are:

•	Loss of sunlight;
•	Suitability of foundations;
•	Reduction of resale value of lot 2;

Mr Hinneberg would also argue that the lack of contribution to cost of the additional common property by lot 3 is a valid reason to reject the proposal. However in my mind, this issue is tied more to the alleged agreement between the joint developers. If the current parties in this application were replaced by new lot owners, the circumstances relating to the acquisition of common property would be irrelevant to any application made by Lot 3 to erect a balcony. Therefore, I regard it as inappropriate to consider that aspect within the bounds of my jurisdiction.

Both the applicant and Mr Hinneberg argue that the other’s position necessitates a reduction in the value of their lot, either due to sunlight or aesthetics. Neither offers any professional opinions in support of their argument. Without such support it is simply a matter of personal preference.

The applicant has also argued confusion (in relation to title for the balconies) for intending purchasers I find these arguments less than compelling in terms of considering the reasonableness of the decision by the Body Corporate to reject the proposal. Admittedly, sale of any lots in the scheme could be complicated by the current irregularities in approvals for all balconies. However, I do not regard this situation as being unique to the applicant. The rejection of the balcony for Lot 3 is not the sole potential cause of this confusion and its correction cannot be given sole responsibility for all the other defeated motions within the scheme. Those defeated motions were separate decisions, which I suspect were muddied by the circumstances surrounding lot 3.

I find Mr Hinneberg’s concerns in relation to the suitability of foundations material. However, the requirement in the motion that "written approval from Noosa Shire Council is provided" appears to
adequately address these concerns.

Given that approval of from Noosa Shire Council is already in place in relation to the existing structure, that approval operates to negate the applicant’s concerns in relation to the Building Code and energy conservation.

The issue of noise penetration from the downstairs balcony is a legitimate consideration that mitigates in favour of allowing the balcony. Similarly, sun protection and energy conservation may be relevant to the issues. However, the applicant has provided little evidence to show these are significant issues and these issues would be offset by Mr Hinneberg’s concerns about loss of sunlight. Similarly, there is little evidence of the likely effect of building the balcony on the resale value of the lots in the scheme.

The most persuasive submission is by the applicant to the effect that he suffers disadvantage or discrimination in that the body corporate has allowed the owners of other lots to build balconies on the common property but the body corporate is refusing the applicant similar permission. Mr Hinneberg has not offered me any argument as to why he is entitled to a northern balcony floor space while the applicant is not, or why he is entitled to sunlight and the occupant of lot 1 is not. His evidence does not satisfy me that the reduction in sunlight from the northern balcony (particularly when there is also an eastern balcony) interferes with the enjoyment of the lot to an unreasonable extent.

In all those circumstances I conclude that Mr Hinneberg has not advanced a good reason as to why the Body Corporate has refused the applicant’s request to build a north facing balcony on the lot. Particularly as the body corporate has allowed the owners of lots 1 and 2 to build similar balconies, I conclude that the opposition to the proposal by the owners of lot 3 is unreasonable in all the circumstances. I consider it just and equitable to order that the body corporate is deemed to have authorised the owners of lot 3 to construct a verandah on lot 3 as per the plan attached to the motion submitted for the extraordinary general meeting on 14 November 2005 on condition that written approval from Noosa Shire council is provided, that all construction and maintenance costs be the responsibility of the owners of lot 3, and that the owners of lot 3 give the body corporate details of the nature and value of the improvements so that Richards Body Corporate Management can inform the Body Corporate Insurer.

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^[1] 0612-2003