Admiralty Tower II [2007] QBCCMCmr 506 (10 August 2007)

Last Updated: 5 September 2007

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Adjustment of Lot Entitlements)

Number: 0328-2007

Applicants: AMJO (QLD) PTY LTD and ORS Respondent: BODY CORPORATE FOR ADMIRALTY TOWERS II COMMUNITY TITLES SCHEME 15344

O R D E R
10 August 2007

ORDERS that: (a) the contribution lot entitlements in Community Title Scheme 15344 are to be adjusted so that they are allocated in the manner appearing in the schedule annexed to this order; (b) the Respondent is required within 30 days from the date of this order to lodge a new community management statement giving effect to this order; and (c) the cots of the adjudication are to be paid equally by the Applicants and the Respondent, each share to be paid within 30 days of receipt of an invoice for those costs.

G F Bugden OAM
Specialist Adjudicator

Office of the Commissioner for Body Corporate and
Community Management

SPECIALIST ADJUDICATION
(Adjustment of Lot Entitlements)

Number: 0328-2007

Applicant: AMJO (QLD) PTY LTD and ORS



Respondent: BODY CORPORATE FOR ADMIRALTY TOWERS II

COMMUNITY TITLES SCHEME 15344

DETERMINATION
10 August 2007

Application

1. This application was made under section 48(1)(b) of the Body Corporate and Community Management Act 1997 (‘Act’) before commencement of the Body Corporate and Community Management and Other Legislation Amendment Act 2007 (‘Amending Act’). It is an application for the adjustment of the Contribution Lot Entitlement Schedule applying to Community Titles Scheme 15344 (‘Scheme’).

2. The Amending Act, which commenced on 1 July 2007, amended section 48 of the Act, as well as a substantial number of other sections of the Act. However, section 67 of the Amending Act inserted a number of transitional provisions into the Act, including a new section 358 which reads as follows:

‘(1) This section applies if an application for an order of the District Court or a Specialist Adjudicator for the adjustment of a lot entitlement schedule was made, but not disposed of, before the commencement of this section (the commencement).

(2) The application is to be dealt with under this Act as if the Amending Act had not been enacted and previous section 48(9) applies in relation to an adjustment of a lot entitlement schedule ordered by the Court or Specialist Adjudicator.

(3) In this section –

Previous section 48(9) means section 48(9) as in force immediately before the commencement.’

3. Having regard to the new section 358, I will deal with this application as if the Amending Act had not been enacted.

4. The parties to the dispute are the applicants and the body corporate for the Scheme. There are ten applicants, all being owners or co-owners of lots within the Scheme. Any other owner in the Scheme could have elected to be joined as a respondent to the application, but no such election has been made in the case of this matter.

The Scheme

5. On 21 February 1997, Building Units Plan 105471 was registered under the Building Units and Group Titles Act 1980. That Act was repealed by the Act and the Scheme was established pursuant to transitional provisions in section 330 of the Act. The body corporate constituted upon registration of the Building Units Plan was also continued in operation by those transitional provisions.

6. The Scheme relates to a high rise building at 501 Queen Street Brisbane, known as Admiralty Towers II. The building comprises 41 levels, plus a rooftop area. The levels are designated on the Building Units Plan as ranging from A to OO. The building contains 191 residential lots and two commercial lots. The two commercial lots are jointly used as a restaurant.

7. The first 3 levels (Levels A, B and C) comprise basement areas. A range of common property facilities are situated within these basement areas, as are car parking spaces and storerooms. The car parking spaces are on title; that is to say, they are not allocated to lots by means of exclusive use bylaws but are included within the area of the lots to which they relate. However, the storage rooms are allocated to lots by means of exclusive use bylaws. The ground floor level (Level D) houses a porte cochere, separate low level and high level entry foyers, manger’s office as well as certain common property facilities. The next level up (Level E) houses 2, 2 bedroom units and one 3 bedroom unit. It also houses a community room, pool area (including spa, sauna and changing rooms), gymnasium and a common lift and stair lobby.

8. The levels above Level E comprise various 2 and 3 bedroom units, with essential common property facilities on each level. However, Level OO (the level immediately below the rooftop) contains a swimming pool (including spa, sauna, changing rooms), bar/kitchenette and gymnasium, as well as a common lift and stair lobby. The facilities on Level OO are similar to those common facilities located on Level E.

9. Under the Scheme’s by-laws, all unit owners, including the owners of the restaurant lots, have the right to use the pool and other facilities on Level E. However, the facilities on Level OO can only be used by the owners of units within the ‘high rise’ section of the building (i.e. level Z and above). Owners of units within the ‘low rise’ section of the building (i.e. below level Z), while entitled to use the pool and facilities on Level E, are not entitled to use the pool and facilities on Level OO.

10. External areas of the Scheme include:

a. the driveway and porte cochere set down area;

b. extensively landscaped ‘residents’ plaza’; and

c. extensively landscaped ‘public plaza’ areas that are available for public use under an agreement between the body corporate and the Brisbane City Council, the Council being responsible for maintenance and upkeep costs.

11. The current contribution lot entitlement schedule is identical to the lot entitlement schedule that appeared on the original Building Units Plan. That original schedule, upon commencement of the Act, was transposed into two identical new schedules:

d. an interest lot entitlement schedule; and

e. the contribution lot entitlement schedule.

12. The interest lot entitlement schedule is relevant when determining a unit owner’s share in the common property, as well as liability to contribute to the costs of building insurances. The contribution lot entitlement schedule is relevant when determining a unit owner’s liability for other contributions to the body corporate, as well as the unit owner’s voting entitlements upon a poll at a general meeting. It follows that any change to the contribution lot entitlement schedule will impact on the level of levies paid by the various lots. In the case of the Scheme that impact will be substantial for a number of lots.

Relevant Law

13. As I have already indicated, this is an application under section 48 of the Act for the adjustment of the contribution lot entitlement schedule. Section 48(4) of the Act requires any order that I make adjusting those lot entitlements to be consistent with the principles stated in subsection (5) of section 48. That subsection reads as follows:

"(5) For the contribution schedule, the respective lot entitlements should be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal."

14. Section 49 of the Act sets out the criteria for deciding just and equitable circumstances. Section 49 is in the following terms:

"(1) This section applies if an application is made for an order of the District Court or a specialist adjudicator for the adjustment of a lot entitlement schedule.

(2) This section sets out matters to which the court or specialist adjudicator may, and may not, have regard for deciding--

(a) for a contribution schedule--if it is just and equitable in the circumstances for the respective lot entitlements not to be equal; and

(b) for an interest schedule--if it is just and equitable in the circumstances for the individual lot entitlements to reflect other than the respective market values of the lots.

(3) However, the matters the court or specialist adjudicator may have regard to for deciding a matter mentioned in subsection (2) are not limited to the matters stated in this section.

(4) The court or specialist adjudicator may have regard to--

(a) how the community titles scheme is structured; and

(b) the nature, features and characteristics of the lots included in the scheme; and

(c) the purposes for which the lots are used.

(5) The court or specialist adjudicator may not have regard to any knowledge or understanding the applicant had, or any lack of knowledge or misunderstanding on the part of the applicant, at the relevant time, about--

(a) the lot entitlement for the subject lot or other lots included in the community titles scheme; or

(b) the purpose for which a lot entitlement is used.

(6) In this section--

"relevant time" means the time the applicant entered into a contract to buy the subject lot.

"subject lot" means the lot owned by the applicant."

15. Upon first reading, those provisions appear to give me a fairly wide discretion. This is particularly so having regard to the provisions of section 49(3). However, the Court of Appeal in Fisher & Ors v Body Corporate for Centrepoint Community Title Scheme 7779 [2004] QCA 214, set out clear guiding principles for the interpretation of those provisions.

16. In essence, the question whether a contribution lot entitlement schedule should be adjusted is to be answered with regard to the demand made on the services and amenities provided by a body corporate to the respective units, or the contribution to the costs incurred by the body corporate. The Court has made it clear that more general considerations of amenity, value or history are to be disregarded and what is at issue is the ‘equitable’ distribution of the costs.

17. To satisfy this test it is necessary to examine the various expenses of the body corporate and to assess each expense item to determine the extent to which the individual units contribute to that expense. This exercise is usually undertaken by appropriately qualified experts.

The Evidence

18. In support of the application, the applicants provided a report from Leary & Partners Pty Ltd dated 24 October 2006 (‘Leary Report’). That report undertakes the analysis I have referred to and concludes that one of two possible alternate contribution lot entitlement schedules could be adopted. In the report the schedules are referred to as ‘Schedule A’ and ‘Schedule B’. The application asks me to adopt Schedule A as the new schedule for the Scheme.

19. Schedule A was also proposed to a general meeting of the body corporate held on 1 March 2007 for adoption, as an alternative to this application being made. At that meeting the body corporate failed to pass a resolution without dissent approving the proposed Schedule A reallocation. The vote against the motion for the resolution was substantial. This refusal or failure constituted the dispute upon which the current application is based.

20. In response to the application, the body corporate has provided a report by Messrs Del Linkhorn and Scott Simpson (‘Linkhorn Report’). The Linkhorn Report undertakes the same type of analysis as was undertaken by the Leary Report, although a different recommended new schedule of contribution lot entitlements appears in that report.

21. It is fair to say that the differences between Schedule A and Schedule B in the Leary Report and the schedule recommended in the Linkhorn Report are not substantial. In an effort to test the merits of the various schedules, I convened a meeting of the experts on 1 August 2007. Ms Kaylene Arkcoll attended as author of the Leary Report and both Messrs Linkhorn and Simpson attended as the authors of the Linkhorn Report.

22. A number of unit owners attended that meeting. At the meeting the methodology used by the experts was discussed with a view to determining which methodology might be the most reliable. While the general methodology used by both experts was the same, the different recommendations came about mainly as a result of two things:

f. the way in which they each assessed the usage of common property facilities within the 2 sections of the building (i.e. the low rise and the high rise); and

g. the use of a measurement approach for the allocation of some items as opposed to those items being allocated on a lot area basis.

23. As a result of that meeting, I am satisfied that, while both area and measurement are arguably a proper basis for arriving at the relevant allocations, area is more accurate and is therefore to be preferred when it is available. I am also satisfied that Schedule B in the Leary report is the most appropriate of the three schedules under consideration at that meeting. It is significant to note that at the meeting none of the experts were in substantial disagreement as to the appropriateness of using Schedule B of the Leary Report.

24. It was put to me at the meeting that I may wish to use the benefit of the discussion at the meeting to come up with my own schedule, which may be different to the three schedules then under discussion. While that may be an option available to me, I do not think it is appropriate for me to do that when I have such reliable expert evidence available to assist me.

25. A substantial number of unit owners made submissions to the Commissioner in relation to the application. They were all opposed to the application. A variety of points were raised in the submissions, including points dealing with the following:

h. the impact on the amount of levies payable as a result of the proposed changes in lot entitlements;

i. the divided nature of the building into low rise and high rise and the way this should be dealt with;

j. the liability for payment of building insurance premiums;

k. the amount of insurance payout various unit owners will receive if there is a total destruction of the building;

l. disagreement with various approaches to cost allocation by the experts;

m. the knowledge of purchasers at the time of their purchase;

n. the fact that some units have better views than others;

o. the affect levy increase or decreases will have on the value of units; and

p. that it is not just and equitable to disregard the views of the majority of owners who do not support a change.

26. I have carefully considered all of those submissions and while time does not permit a detailed response to them all, I can indicate the following:

q. as a matter of law I cannot take into account the submissions in paragraphs (a), (f), (g), (h) and (i);

r. there is no substance to the submissions in paragraphs (c) and (d) because both of those issues are determined with reference to the interest schedule lot entitlements and that schedule will remain unchanged; and

s. after considering the opinions arising from the points referred to in paragraphs (b) and (e) and reading and hearing the opinions of the experts on most of those matters, I decided to defer to the opinions of the experts.

Findings

27. In relation to this application, my findings are as follows:

t. the applicants, being registered proprietors of lots in the Scheme, are entitled to bring this application;

u. the current contribution schedule lot entitlements are not equal;

v. the current contribution schedule lot entitlements are not just and equitable;

w. there is nothing about how the Scheme is structured, the nature, features and characteristics of the lots in the Scheme, or the purposes for which those lots are used, apart from those taken into account in the 2 experts’ reports, that is relevant to this application;

x. there are no special matters that need to be taken into account in respect of voting rights attaching to lots in the Scheme; and

y. in all the circumstances of this matter, the proposed contribution schedule lot entitlement comprising Schedule B in the Leary Report, is just and equitable.

28. I therefore propose to make an order adjusting the contribution schedule lot entitlements for the Scheme in accordance with Schedule B of the Leary Report.

Taking Effect of the Order

29. Counsel for the applicants has requested me to make any adjustment of the contribution schedule lot entitlements effective from an earlier date than the date on which the order is made (such as the date on which the application was made). On the other hand, the body corporate has requested that the terms of my order should delay the new schedule taking effect until a period of say twelve months, so as to give unit owners the opportunity to plan for the increases in their levies.

30. Leaving aside the question of whether or not orders of this nature can be made retrospective or prospective, I am not inclined to do either in the case of this application. I do not think the application is different to any other application and it is normal practice that the order takes effect in the normal course and the change to the contribution schedule lot entitlements take effect when the new community management statement is recorded by the Registrar of Titles.

31. I therefore propose to decline both requests.

Costs

32. Counsel for the applicant has also asked me to make an order in favour of the applicants in relation to the costs of the adjudication. Counsel has requested that my order require those costs to be paid by the respondent body corporate.

33. I have on a number of occasions set out my views in relation to costs of the adjudication in these types of applications. See for example Martin & Anor v Body Corporate for Cartwright Community Title Scheme 10181 & Ors [791-2005] 11 April 2006 and Long & Anor v Body Corporate for Park Rise Community Title Scheme 14028 [0638A-2006] 19 September 2006. Nothing has occurred since dealing with those matters that has changed my views in relation to costs.

34. As regards this application, the body corporate has gone to the expense of providing its own expert’s report and it is fair to say that the way in which both parties have conducted themselves in relation to this application has facilitated the determination of the application. In turn, this has contained the costs of determining the application. On the other hand, the body corporate had the opportunity to voluntarily change its contribution schedule lot entitlements and, for whatever reason, declined to do so. From a public policy perspective, that warrants some type of costs penalty.

35. I therefore propose to give the applicants the benefit of some of the costs, but not all of them. I will do this by providing for the costs of the adjudication to be shared equally between the two parties to the dispute.

G F Bugden OAM
Specialist Adjudicator