Barakala [2007] QBCCMCmr 498 (23 August 2007)

TAKE NOTICE that pursuant to an application made under the abovementioned Act by
Lyn Niven, the Owner of Lot 3

I hereby order that the Body Corporate for Barakala shall call and hold an extraordinary general meeting (‘EGM’) within three (3) months of the date of this order, for the purpose of considering a motion on whether to approve the change to the colours of the external paintwork of the scheme buildings, along with any other motions submitted.

I further order that the Body Corporate for Barakala must give at least fourteen (14) days written notice inviting motions for inclusion on the agenda of the EMG, and must not given the notice of EGM to owners earlier than twenty-one (21) days from the date of this order.

I further order that the Body Corporate for Barakala provide a copy of this order and the statement of reasons to all lot owners within seven days of the date of this order.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0327-2007

"Barakala" CTS 1865

Barakala community titles scheme (Barakala) consists of seven lots and common property. The community management statement (CMS) for Barakala indicates that the Body Corporate and Community Management (Standard Module) Regulation 1997 (Standard Module) applies to the scheme. Department of Natural Resources and Water records show the scheme is registered as Building Units Plan (BUP) 13820.

APPLICATION

Pursuant to the Body Corporate and Community Management Act 1997 (Act), this application was made by Lyn Niven, Owner of Lot 3 (applicant) on 19 April 2007. The applicant sought an order against the Body Corporate for Barakala (respondent) in the following terms:

After some aspects of the application were clarified, in May 2007 the Commissioner’s Office attempted to organise a conciliation session to assist in the resolution of this dispute. Unfortunately conciliation did not proceed.

MATTERS IN DISPUTE

The application relates to the painting of the scheme. The facts of the dispute, as outlined in the application, submissions and reply to submissions, can be summarised as follows.

Since 2003 owners had discussed the need to undertake certain repairs to the scheme, including painting. At the Annual General Meeting (AGM) of 15 August 2006 the Body Corporate considered three quotes for the work. The minutes record that the issue was to be referred back to the Committee to further investigate and make recommendations as soon as possible.

A revised quote was obtained from Chris Hoole and Staff Master Painters (Hoole) for $12,000. On 21 November 2006 this quote was sent to all owners by the Body Corporate Manager (BCM) indicating that the Committee recommended acceptance of the quote and asking owners whether they agreed or not. On 4 December 2006 the BCM advised Chairperson Craig Dempster in writing that six of the seven owners had agreed to the acceptance of the quote. It appears that the quote was then accepted.

On 23 February 2007 the BCM wrote to all owners advising that the painting was in progress but that further work had been identified. The memo sought owner’s approval for the additional work, quoted by Hoole at $5,980, to paint the roof and two doors. Before responding to this request the applicant inspected the scheme and discovered that it had been painted a different colour.

The trim of the brick building was originally painted in heritage style green and red. The new paint was blue/grey. The applicant says she had no knowledge of any discussion about colours. She says she was never given colour samples or given the opportunity to vote on a colour change. The applicant claims it is obvious the roof and doors did not require painting except that the green colour now clashed with the new colours, and so the only reason for the additional expenditure was the change in colours. On that basis she refused to agree to painting the roof and doors.

The applicant sought clarification from the BCM who said she did not know the colours had been changed and had no input into the colours chosen. The application includes a memo dated 4 December 2006 from the BCM to Dempster in which the BCM confirms a discussion about using a colour consultant and then the proposed colours being provided to her for distribution to all owners.

In March 2007 the Committee sent the BCM an ‘addendum’ to the August AGM minutes. It indicated that following the meeting closure that Committee discussed the painting in the presence of the BCM. They agreed to accept the Hoole quote subject to clarification and to change the colour scheme of the building utilising the services of the colour consultant provided by Hoole.

The applicant wrote to all owners on 7 March 2007 regarding her concerns. The applicant says the Owner of Lot 1 told her that he had no knowledge of the colour change and thought he was voting to repaint the scheme in the same colours. This owner has since said they like the new colours. However, while they felt the roof colour did not match they did not consider it warranted the expense of repainting a colourbond roof. The letter noted that if the owners who chose the new colours wanted to change the colours of the building they should do it at their own expense because others were not given any choice about the colours. She says those who organised the colour change should pay for the scheme to be repainted in the original colours. She has a quote from Hoole to repaint the building for $11,000.

The representative of the Owner of Lot 2 also expressed concern to the applicant and subsequently made a submission. He says the decision to change the colours was made without consultation with other owners and despite the advice from the BCM. He argues it would be a waste of money to repaint the roof just because of the change of colours and that should have been obvious to anyone who chose the colours. He says they would not have approved the colour change particularly if it meant painting the roof at extra expense. The submission says the building should be repainted in its original colours at the expense of those who made the decision.

In its submission the Committee members say they felt the colours needed to be modernized to improve the value of the units. They describe what they consider to be the benefits of the new colours. They argue they always acted in good faith and considered the interests of all. They also say a colour change was always ‘on the table’, no discussions were held outside of AGMs, the addendum to the AGM was necessary because the discussion was not minuted, no Committee members were individually responsible for the painting, and they were guided by the BCM. They query why they should be responsible just because they were present when a decision was made.

In her reply to submissions the applicant says:

JURISDICTION

I am satisfied that this is a matter which falls within the legislative dispute resolution provisions.^[2]

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:

(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)).

DETERMINATION

The main issue for consideration in this matter is whether the change of colours for the building paintwork was appropriately authorised and, if not, whether it is just and equitable in the circumstances for the building to be repainted in the original colours.

I do not propose to comment on the suitability or preference of the new or old colour scheme, or whether it is necessary to paint the roof and doors to match the new colour scheme if that were to be retained. These are subjective questions that can only be decided by owners themselves. But all owners should respect the fact that their views on aesthetics may well not be shared by others.

Responsibility for painting generally

The Body Corporate’s general functions include administering common property for the benefit of lot owners.^[3] In particular, the Body Corporate has responsibility to maintain common property in good condition.^[4] This scheme is registered as a building format plan of subdivision, formerly known as a BUP. Pursuant to section 49C(4) of the Land Titles Act 1994, the boundaries of a lot in a building format plan with another lot or common property is the centre of the wall, floor or ceiling. The exterior of each lot is part of the common property and as such is the maintenance responsibility of the Body Corporate.

Approval for painting expenditure

Sections 103 and 104 of the Standard Module provide controls on expenditure in the Body Corporate. The provisions regarding spending are designed to give all owners input into decisions about significant expenditure. In this scheme the Committee can approve estimated expenditure of up to $875 (7 lots x $125 per lot). A general meeting can approve expenditure up to $1,750 (7 lots x $250 per lot) with a single quote, or over $1,750 if two or more quotes accompany the notice of meeting.^[5] However, section 103(1)(b) of the Standard Module provides that the Committee may also spend funds over $875 if all owners have given their written consent. However, if owners are being asked to consent to spend over $1,750 multiple quotes are still required.

I am very concerned about the financial decision making in this scheme. While the responsibility rests with the Committee, it seems either the BCM has given the Committee poor advice about the processes required to make spending decisions or the Committee ignored advice received.

It does not appear that the original decision to spend $12,000 to paint the building was validly made. Under the legislative requirements, the three final quotes should have been put to a general meeting as a motion with alternatives^[6] with owners given the opportunity to approve the painting generally and to select their preferred quote. If this had occurred, an ordinary resolution^[7] would have been sufficient. The expenditure could be approved outside a general meeting but only if at least two quotes were given to owners with the request and if all owners consented.

The BCM’s advice of 4 December 2006 was that six of the seven owners had agreed to accept the quote. This is not sufficient for the expenditure to be approved outside a general meeting. While it is reasonable for the Body Corporate to try and save the time and expense of calling a general meeting to see if all owners could agree to the expenditure, when a unanimous result was not achieved the matter should not have proceeded until it was approved at a formal general meeting.

The proposed expenditure of $5,980 to paint the roof and doors was also problematic. While it appears that all owners did not approve the expenditure, even if there had been unanimous agreement the decision would not have been validly authorised because owners were not supplied with two quotes for the work. Again, the proposal to undertake the work and approve expenditure needed to go a general meeting with at least two quotes. If sinking funds had not been earmarked for this additional work, a special levy would also need to be approved for the expenditure.^[8]

Approval for colour change

In schemes registered as a group titles plan, the maintenance and painting of lot exteriors is often the responsibility of individual owners. The only means of a body corporate ensuring uniformity in the colours used by owners is in the by-laws. A change to a by-laws governing colours requires a new CMS which, if only changing the by-laws only requires a special resolution to approve.

But that situation does not apply to Barakala because the Body Corporate is responsible for external painting in this scheme. Moreover there are no by-laws governing Barakala that are relevant to this situation. The applicant refers to By-law 8, which provides that an occupier must not change the external appearance of a lot unless they have Body Corporate approval or the change is minor and does not detract from the amenity of the lot and surrounds. However this by-law is not applicable to the painting of the scheme because the change was to the exterior of the building which is common property and not part of the lots themselves.

It seems clear that the decision to change the colours was made by the Committee. I do not accept the Committee’s submission that a colour change was ‘always on the cards’. They have provided no evidence that this was discussed at any time other than following the AGM. While the Committee have tried to incorporate the decision into the AGM minutes, the addendum was not part of the AGM and so was at best a Committee decision.

Under section 100 of the Act, a decision of a committee is a decision of the body corporate except where the decision is on a restricted issue for the committee. Section 26 of the Standard Module sets out those decisions that are restricted for a committee. These include an issue that owners have decided by ordinary resolution must be decided at a general meeting, issues that the legislation specifies may only be decided by ordinary, majority or special resolution or a resolution by dissent, or a decision that changes the rights, privileges and obligations of owners.

It is arguable that the decision to change colours changed the right of owners to live in a scheme painted in heritage colours, and as such the change could not be decided by the Committee. But more substantively the change of colours in this circumstance can be seen as an improvement and not just maintenance. While the decision to approve simple maintenance can be made by the Committee decision or an ordinary resolution (depending on the cost), under section 113 of the Standard Module an improvement by the Body Corporate to common property requires a special resolution, unless the cost of the total project is less than $2,100 (7 lots x $300 per lot).

The definition of "improvement"^[9] includes non-structural changes. In regard to the difference between maintenance and improvement an Adjudicator^[10] has made the following comments:

"On a broad view of "maintenance" a body corporate should be allowed a reasonably wide discretion in the means by which it performs its maintenance obligations^[11] and any repair can invoke an element of improvement but still remain within the general concept of repair.^[12] For example, the view has been taken that quite different solutions or methods of repair might be categorised as "maintenance" if the principal intention of the proposal is to return something to a useable condition or state of repair.^[13] ...

The purpose of the relevant provisions in the regulations appears to be only to provide a means by which owners can vote to authorise changes made for the purpose of improving the use of scheme land rather than provide an additional hurdle for authorisation of changes made in order to meet the maintenance obligations imposed by other provisions of the legislation. It would seem absurd if basic maintenance like adding sealant around a window frame, trimming common property trees or repair of an item by replacement with modern substitute would require the proposed work to go though a special authorisation process as an "improvement".

The word "improvements" seems to be used in the regulation modules according to its usual legal meaning of "something to enhance the value of land or make the use of land more efficient"^[14] as opposed to work comprised of a change designed to keep existing improvements in good repair."

I also note the comments by Lord Justice Denning^[15] on repairs and improvements:

If the painting had used the existing colours this would clearly have just been maintenance. But I consider the new colour scheme represented an improvement. It was not a simple replacement of what previously existed. The primary reason for the change of colour was to not just to achieve the repair, for example because the previous colours were no longer available. The Committee’s own submission is that the purpose was to increase the value of the scheme.

The painting of the roof, which clearly does not require painting for maintenance purposes, would obviously be an improvement which would require a special resolution.
Committee member liability for unauthorised decisions

As outlined above, the Committee proceeded with the painting without proper approval for the expenditure. However, that decision has not been disputed by any owner. Moreover, had the proposal to paint alone been returned to a general meeting for a proper vote the likelihood is that it would have passed.

The courts have recognised that the very detailed provisions of the legislation make it almost inevitable that from time to time there will be non-compliance with the legislation. In particular the courts have commented that non-compliance of an insubstantial nature should not be allowed to imperil the actions of bodies corporate or their committees, particularly in the instance of committees where actions are taken in good faith.^[16] In this case, while all owners should ensure that compliance with correct procedures is followed in future, I do not consider that any owner has suffered a detriment from this particular non-compliance.

However, I consider owners have clearly suffered a detriment from the unauthorised decision of the Committee members to change the colour scheme. The decision cannot be revoked as it has already been carried out, so I have considered whether the Committee or its members are liable for the cost of rectifying the impact of the decision.

In early 2007 the Parliament approved changes to the body corporate legislation regarding committees. These changes have effect from 1 July 2007. Section 101A of the Act now provides that a committee member is not civilly liable for an act done or an omission made in good faith and without negligence in performing the person’s role as a committee member. Section 101B also introduces a Code of conduct for committee voting members (Code), which is set out in Schedule 1A of the Act. The Code requires committee members to have a commitment to understand the Act, to act honestly and fairly, to act in the body corporate’s best interests, to take reasonable steps to ensure they comply with the Act, to not cause a nuisance and to disclose conflicts of interest. The Code applied to all committee voting members who are taken to have agreed to comply with the Code upon becoming a committee voting member. If the Code a body corporate can take steps to have the member removed from office.^[17]

The relevant decisions of this Committee were made before these amendments came into effect and so those decisions are not subject to the new provisions. However it is arguable that the new section 101A of the Act simply entrenched the existing view that committee members would not be liable for actions done in good faith and without negligence. A protection in similar terms exists in the Building Units and Group Titles Act 1980. Moreover, nothing under the current provisions or those in force at the time the relevant decisions were made prevents action being taken in regard to acts done in bad faith or negligently.

While they have clearly acted contrary to the legislation, I am not in a position to determine whether the Committee members have acted negligently or in bad faith. The parties have not addressed this particular issue in their submissions. Moreover, I do not consider that I have the jurisdiction to determine whether the Committee members should be personally liable for the costs associated with their unauthorised decision. The Committee members are not named parties to this particular application and could not be. Under section 227(1) of the Act an owner cannot bring a dispute resolution application against the committee or committee members.

The Body Corporate could decide to take action against the Committee members concerned. The Body Corporate would need to consider the costs of any action. The Committee members concerned should identify if they are subject to office bearer insurance that covers this situation.

Conclusion

The applicant has sought an order that the scheme be repainted in the original colours. It is difficult at this stage to determine whether the Body Corporate would have authorised a change in the colour scheme had they been given the opportunity to vote on the issue. It does seem that at least four owners (including the three Committee members) are happy with the new colours. For this reason I do not consider the order sought would be just and equitable in the circumstances to immediately require the repainting. Rather, I consider that the most appropriate course of action is for owners to consider a motion at a general meeting to change the colours of the external paintwork.

If owners pass a special resolution^[18] to approve the change of colours the matter ends there. However if that motion does not pass owners could then (but is not required to) consider a motion to repaint the scheme in its original colours.

For the reasons outlined above I am unable to determine at this stage that the Committee members should be responsible for the cost of repainting. Therefore, if owners approve in principle that they wish to repaint the scheme in the original colours, it seems to me that they have two alternatives. Firstly, they could consider motions approve the expenditure on the repainting, providing that two quotes for the work accompanied the meeting notice, and, if necessary, to raise a special levy to cover the expenditure. Or they could consider a motion for the Body Corporate to take action, or seek legal advice on the prospects of taking action, against the current Committee members in regard to their potential liability for the costs resulting from the unapproved decision.

The Body Corporate could also consider a motion to repaint the roof and doors. This motion must be determined by a special resolution, as it is an improvement to common property above the improvements limit, and would also need to be accompanied by at least two quotes.

I have made an order requiring the Body Corporate convene an extraordinary general meeting (EGM) to consider a motion to approve the change to the colours of the external paintwork on the scheme buildings. While I understand the Body Corporate is having its 2007 AGM on 28 August 2007, the notice of that meeting should have been issued at least 21 days prior to the meeting and so it is too late for this issue to be considered on the AGM agenda. Moreover, this decision may give rise to other motions that owners or the Committee might like to put on the agenda. It is the responsibility of the Committee to submit the motion required by this order. The Committee, the applicant, or any other owner may submit any other consequential motions that they would like considered. While this order will mean owners will be required to hold a second general meeting within a short time, I do not consider that it is appropriate to delay the consideration of this issue and owners will also be able to submit motions on any unrelated issues if desired.

The material before me suggests that Committee members and owners alike are quite unclear as to their rights and responsibilities under the body corporate legislation. This is understandable to a certain extent as the legislation is complex. However I would encourage all owners to make the effort to inform themselves about body corporate processes. The Information Service of the Commissioner’s Office, provides a variety of education services including the freecall 1800 060 119 information line and a range of fact sheets and on-line training available at www.bccm.qld.gov.au . The Committee in particular should take heed of its responsibility to inform itself about their legislative obligations. They should also bear in mind that they may not take action that has not been authorised by a minuted decision at formal Committee or general meeting.^[19]

^[2] See sections 227, 228, 276 and Schedule 5 of the Act
^[3] Section 94 of the Act
^[4] Section 109 of the Standard Module

^[5] Under section 104(6) of the Standard Module, in exceptional circumstances a single quote may be sufficient if it is not practicable to obtain two quotes, for example if there is only one supplier of a product.
^[6] See section 42C of the Standard Module

^[7] Pursuant to section 108 of the Act, if the votes counted for the motion are more than the votes counted against the motion. But, note the discussion below on the resolution type required for an improvement.
^[8] See section 95(2) of the Standard Module

^[9] See Dictionary in Schedule 6 of the Act
^[10] D Toohey in No. 9 Port Douglas Road [2006] QBCCMCmr 674 (18 December 2006)

^[11] Body Corporate for Golden Sands Highrise v Galtos & Anor, Appeal 33 of 1999, District Court (Southport), Robin DCJ, 10 March 2000. See also Surfers Aquarius [2005] QBCCMCmr 625 (11 November 2005)

^[12] Proprietors "The Rocks Resort" v Costi, Building Units Appeal Tribunal No 227 of 1997, O’Driscoll SM (24 September 1997)

^[16] Wei-Xin Chen v Body Corporate for Wishart Village CTS 19482, Appeal 4080 of 2000, District Court Brisbane, 29 May 2001 (Unreported).

^[17] The procedure for removing a committee member for a breach of the Code is provided in sections 25AA and 25AB of the Standard Module.

^[18] Under section 106 of the Act, this requires two-thirds of the votes cast to be in favour of the motion, along with not more than two votes (25% of the number of lots and 25% of the total contribution lot entitlements) counted again the motion.

^[19] Sections 27 to 37 of the Standard Module provide specific requirements for the conduct of Committee meetings, the production of minutes and the carrying out of Committee decisions.

Number of Scheme:	1865
Name of Scheme:	Barakala
Address of Scheme:	87 Swan Street GORDON PARK QLD 4031

-	The Committee members were acting independently outside their role as the Committee;
-	They didn’t bother to find out whether other owners felt the colours needed modernising;
-	Given their years of participation in the scheme, the Committee members should have known correct meeting procedures;
-	If a colour change was on the table why was it not listed at any AGM since 2003-2006;
-	The Committee clearly discussed this issue outside the AGM, both after the AGM and with the colour consultant;
-	If the AGM addendum was necessary why did it occur in March 2007 and not August 2006;
-	The material provided contradicts the claim that the Committee followed the BCM’s advice;
-	The Committee is not being held responsible for decisions at the AGM but for decisions they made outside the AGM without notification to other owners; and
-	She disputes that the Committee were acting in the interests of all owners.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Barakala [2007] QBCCMCmr 498 (23 August 2007)