Coolangatta Place [2007] QBCCMCmr 599 (22 October 2007)

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

I hereby order that the body corporate for Coolangatta Place must not operate the cooling tower fan between the hours of 8pm to 6am or cooling tower pump between the hours of 10:00pm to 6:00am, unless authorised by further order of an adjudicator.

I further declare that the recent expenditure associated with noise reduction following an Environmental Protection Authority complaint was not properly authorised by the body corporate. I further order that, within three months, the body corporate must consider by ordinary resolution whether this expenditure should be ratified.

I further order that, within three months, the body corporate must stop providing air conditioning services to persons who have not agreed in writing to pay for the services. The body corporate must adopt a formula for payment that will ensure, to the greatest practicable extent, that the total cost to the body corporate (other than body corporate administrative costs) for supplying the service, is recovered from the users of the service. Specifically, all future electrical and maintenance costs must be recovered along with any expenditure ratified by the body corporate as being for noise reduction works following the Environmental Protection Authority complaint. However, it is not necessary that this formula account for recovery of past electricity consumption or past maintenance expenses.

I further order that the committee may arrange for the installation of a separate meter to measure the amount of electricity used by the cooling tower provided that the cost of the installation is within the committee spending limit.

I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0313-2007

"Coolangatta Place" CTS 27255

Coolangatta Place Community Titles Scheme (Coolangatta Place) is a 31 lot scheme under the Body Corporate and Community Management Act 1997 (Act) and the Act’s Commercial Module Regulation (Commercial Module). The scheme is designed primarily for retail and office purposes but lot 401 is a private residence owned by Bradley and Margaret Bishop (applicants).

The application is really three separate applications. Firstly, an allegation of a conflict of interest by committee members in nominating their employer as the Centre Manager. Secondly, a dispute about the costs and use of the cooling tower. Thirdly, a dispute about the body corporate's refusal of the applicants' request to be allowed to extend the height of their apartment by another three levels.

The applicant submits that the majority of lots in the scheme are owned by Piers Property Real Estate Pty Ltd (Piers Property) and associated companies. It is submitted that the committee acted under a conflict of interest and contrary to the legislation in resolving to put forward Piers Property as centre manager. An order is sought that the resolution appointing Piers Property should be declared void.

A submission on behalf of the body corporate committee is to the effect that the claimed conflict of interest should not invalidate the appointment as the committee gave all owners the right to submit their own quotations and vote accordingly. A letter is attached showing that the committee provided owners with details of the duties for the position and invited owners to obtain their own quotations. It is also submitted that the prohibition on voting in a situation of conflict of interest does not apply to voting in general meeting.

In terms of an alleged conflict of interest, the legislation provides that a committee member must disclose potential conflicts of interest and must not vote on those issues (Standard Module, 34).

If any committee member had voted at the committee meeting to appoint an associate, Piers Property, as centre manager then those committee members would be voting under a conflict of interest. However, the resolution at the committee level was simply to put forward persons for the owners in general meeting to consider. There is no conflict of interest in simply voting to put a motion on the agenda for a general meeting.

The appointment itself was pursuant to a resolution passed in general meeting. In general meeting owners are voting in their own right and not as representatives of other owners. There is no legislative requirement for owners to refrain from voting in general meeting because of a conflict of interest.

This does not mean that owners in general meeting can act with impunity to vote themselves financial benefits in general meeting at the expense of the body corporate. Such actions would justify interference by an adjudicator on a "just and equitable" ground to overturn the appointment.^[1] However, the submissions put forward by the applicant do not satisfy me that it would be just and equitable to overturn the particular decision to appoint Piers Property in this instance. Owners had a choice of only two quotations. The quotation from Piers Property was significantly higher than the quotation from QAS International. However, on the material provided, the owners of the majority interests in Coolangatta Place could have had genuine concerns about the qualification and experience if QAS International and the lack of public liability insurance. The quotation from Piers Property states that "Piers Property Real Estate Pty Ltd are specialists in the leasing and sales of Commercial and industrial properties on the southern Gold Coast and Tweed Heads area. We currently manage a portfolio of approximately $100 million. We are registered in both Queensland and New South Wales Real Estate Institutes and abide by their 'Code of Ethics'...The office at Coolangatta Place is open, business hours from 8.30am to 5pm". There is no similar information about the background and experience of QAS International.

Comparing the two quotations objectively, it is not obviously unreasonable for Piers Property to have been chosen in preference to QAS International and I do not consider it is just and equitable to overturn the decision, particularly at this late stage. Any owners who consider that another party can provide the services at an appropriate level for a better price should obtain a quotation from that party setting forward all relevant information including the qualifications of the nominee. That quotation can then be submitted for consideration at the next general meeting.

The applicants claim that the noise from operating the cooling tower is excessive and orders are sought to stop the body corporate operating the air conditioning cooling tower from 8pm to 6am or to require the body corporate to undertake further noise attenuation measures to meet Environmental Protection Agency requirements.

A submission on behalf of the body corporate committee refers to the Environmental Protection Agency requirements that an occupier of premises must not use air conditioning equipment from 7am to 10pm if it causes noise to be made of more than 50 dB(A) or before 7am or after 10pm if it causes noise more than the higher of 40 dB(A) or 5 dB(a) above the background noise level (Environmental Protection Regulations 1998, 6Z). However, submissions were made to the effect that Coolangatta Place is a commercial scheme and it was submitted that the body corporate cannot refuse to supply air conditioning when requested by tenants.

An acoustical report has been provided from Heggies Pty Ltd, a member firm of the Association of Australian Acoustical Consultants. This report measured noise levels from within the applicant's bedrooms with no cooling plant operating, with the pump only operating, and with both the pump and fan operating. The report indicates that, at least within one of the bedrooms, the use of the pump and fan exceeded these guidelines at all times and the use of the pump only exceeded these guidelines if used before 7am or after 10pm. Measurement at the window indicated use of the pump only may slightly exceed these guidelines even during the day. However, measurements also indicated that closing the bedroom window would significantly reduce noise to well within these limits.

The present application is not an application for enforcement of Environmental Protection Agency requirements and there is no jurisdiction to enforce those specific requirements as part of this application. However, an adjudicator has the power to make an order that is just and equitable in the circumstances to resolve a dispute between an owner and the body corporate (Act, 276). A body corporate is expected to act reasonably in administering the common property and body corporate assets and there is a dispute about the reasonableness of the committee recently allowing operation of the cooling tower at night (Act 94(2), 152(1)).

The applicant has sought orders about the operation of the cooling tower specifically between the hours of 8pm and 6am. Based primarily on the acoustical report provided I am satisfied that it is just and equitable to grant an order that the body corporate must not allow operation of the cooling plant fan between the hours of 8pm and 6am, and must not allow operation of the cooling plant pump between the hours of 10pm and 6am.

If there is a change of circumstances, for example if further noise attenuation measures are taken, then a further order of an adjudicator can be sought to remove this prohibition. Alternatively, it may be unnecessary to use the cooling tower at night if it is possible to install separate air conditioners for any lots that require air conditioning at night.

The applicants claim that the body corporate only began operating the cooling tower twenty four hours a day because one of the tenants of Piers Property started operating during those hours. It is submitted that Piers Property should have provided that tenant with a split system air conditioner rather than causing the whole cooling tower to be operational for only that tenant.

It is also submitted that the continual operation of the cooling tower resulted in noise complaints from residents of a neighbouring scheme and that the owner of lot 108 should pay the entire costs of noise attenuation works that resulted from that complaint. These costs were estimated to be around $42,000.

A submission on behalf of the body corporate committee was to the effect that the body corporate was served with a warning notice from the Environmental Protection Agency and was therefore required to perform the work to reduce the noise to the neighbouring scheme. It is submitted that this work was necessary to reduce day time noise levels as well as night time levels so should not just be the responsibility of the owner of the lot who sought night time use. It was also submitted that the cooling tower is a common property facility that is readily available to all units and the committee feels that it cannot reject a request for 24 hour use regardless of which lot requests the use.

The cooling tower is a service supplied by the body corporate for the benefit to owners and occupiers of lot. The legislation specifically empowers the body corporate to supply air conditioning or heating services to owners and occupiers (Commercial Module, 99(1)(c)). However, the body corporate cannot simply chose to supply a service to one or more owners and then levy all owners for the costs of supplying that service. The legislation specifically provides that when supplying a service of this nature the body corporate must, to the greatest practicable extent, ensure the total cost to the body corporate (other than body corporate administrative costs) for supplying the service, including the cost of purchasing, operating, maintaining and replacing any equipment, is recovered from the users of the service (Commercial Module, 99(3)). Each owner can choose whether or not to accept the services but must pay for the services if they accept them (Commercial Module, 99(2)).

I have concluded that the operation of the cooling tower involves the provision of a service by the body corporate that the body corporate should, by agreement with persons using the service, be required to recover the costs of the service from the users (Commercial Module, 99(3)). However, some further consideration needs to be made of which expenses need to be recovered and what order is just and equitable in the circumstances to resolve the dispute (Act, 276).

The cooling tower has been used for a number of years with maintenance and electricity consumption costs being paid by all owners as part of their levies. No orders have been sought in relation to these historical expenses and it would be difficult at this stage to calculate and fairly allocate those costs. Given that owners could have at any time challenged these arrangements rather than simply paying these costs as part of their levy then, as a matter of discretion, I consider it just and equitable not to interfere with the historical arrangement that involved all owners contributing to these expenses by way of their body corporate levies.

The applicants have expressed the view that around $10,000 additional electricity has been consumed as a result of a single occupier wanting to use the cooling tower at night. In respect of the additional electricity charges it is again difficult to fairly assess any additional cost. There is no separate metering of the electricity used for the cooling tower and no consistent use of the cooling tower at night. Information provided by the parties indicates that sometimes the tower was fully operational and sometimes only the cooling tower pump was being used. The estimate provided by the applicants is based on historical data that may be affected by a number of matters. In particular, the claim covers a period that includes a number of months before the application was lodged and it is not disputed that the cooling tower has been operated without expenses being allocated to individual users for a long period of time.

The cooling tower expenses have been recovered as part of the body corporate's levies for a long period of time. I consider it just and equitable to now give the body corporate a short period of time to put in procedures to arrange for proper cost recovery from users. In all the circumstances, I have concluded that it is not just and equitable to make any order requiring recovery of past electricity expenses even in respect of the recent night time usage.

Recovery of the costs of noise attenuation works of around $42,000 are a different matter. From reviewing minutes of meeting I am satisfied that these works were never properly approved by the body corporate. The works were effectively an improvement to a common property facility to address noise issues and these works should have been approved by ordinary resolution or by the order of an adjudicator (Commercial Module, 93). Having said this, submissions on behalf of the committee indicate that the works were necessary due to the Environmental Protection Agency complaint and that persons with majority voting rights would have voted in favour of the works if the matter had been put to a general meeting. In these circumstances, it seems appropriate to give owners an opportunity to ratify the expenditure in general meeting.^[2] Based on the submissions the expenditure is likely to be ratified. However, if it is not ratified then owners may wish to consider legal options in relation to the matter potentially including the taking of a representative action on behalf of the body corporate to seek to recover the unauthorised expenditure from the persons who spent body corporate funds without authority.

Assuming the body corporate does ratify the expenditure, the question still arises as to whether the body corporate should seek reimbursement of this expenditure from any individual owners. The applicants have sought that the body corporate recover this expenditure from the owner of the lot whose occupier was using the cooling tower at night. This is based upon a claim that the noise attenuation works were only necessary to facilitate use of the cooling tower at night and that this was for the benefit of only that one person.

It may have been the case that a complaint to the Environmental Protection Agency was only made, as a matter of circumstance, because the cooling tower started being used at night. However, once that complaint was made, I accept the evidence in the warning notice from the Environmental Protection Agency that the noise from the cooling tower was 65 decibels from within the neighbouring property. This level is above the Environmental Protection Agency permitted levels for daytime as well as use at night and I accept the submissions on behalf of the committee to the effect that the work needed to be performed to facilitate any future use of the cooling tower, even during the day.

I am therefore satisfied that it is all future users of the service who will receive the primary benefit from the works. Therefore, unlike past electricity charges, I consider it just and equitable to make an order facilitating the payment for the works from the future users of the service if the expenditure is ratified by the body corporate. While it is not clear at this time which current and future owners will use the cooling tower services, it should be possible for the body corporate to adopt a formula that ensures these costs are recovered over a reasonable period of time from persons who do ultimately use the service. I will make an order requiring that this occur.

It should now be clear to the committee that the body corporate is required to put into place arrangements by which the body corporate recovers the costs of future electricity consumptions and maintenance costs from the users of the cooling tower service (Commercial Module, 99).

It is not generally possible for exact amounts to be determined in advance as different matters may arise or different numbers of owners would use the cooling tower over time. However, I will make an order requiring the body corporate adopt a formula for charging users of the service so that the body corporate recovers future maintenance costs and electricity consumption along with any expenditure ratified by the body corporate as being for noise reduction works. There may be more than one way for the body corporate to do this and the body corporate may wish to obtain its own advice in this respect. However, it would not seem unreasonable for the body corporate to initially estimate all costs over a ten year period and then average those costs between the expected numbers of owners using the service. For example, costs over the next ten years might be estimated as $200,000 covering the noise attenuation works, future maintenance, and expected electricity consumption. It might also be estimated that an average of ten lots would use the service for each of the next ten years and use the service roughly to the same extent. If so, an initial payment of $2,000 per lot per year would be likely to cover the estimated costs. At the end of each year the actual cost recovery verses expenditure could be compared and any necessary adjustments could be made to the amount each lot is required to contribute.

I also understand that the body corporate has made enquiries about the installation of a separate meter to measure electricity consumption for the cooling tower. This is likely to be a relatively minor expense that will greatly facilitate effective cost recovery of the provision of the cooling tower service. However, an additional meter may also be an improvement to the common property requiring authorisation by ordinary resolution (Commercial Module, 93). In the circumstances of this application, and to facilitate compliance with other aspects of the orders made, I consider it just and equitable to make an order authorising the committee to arrange for the installation of a separate meter to measure the amount of electricity used by the cooling tower. This is provided that the cost of the installation is within the committee spending limit.

The applicants' apartment is a two level stand alone structure situated on part of the rooftop of the scheme. The applicants say that there is no height limit on their apartment and they wish to extend the height of their apartment by an additional three levels. It is submitted that no other property owner will be disadvantaged by the proposal.

A submission on behalf of the body corporate committee is to the effect that the proposal does in fact extend beyond the bounds of lot 401 as shown on the registered plan and requires a resolution without dissent to be approved. It is submitted that this was appropriately voted on by owners and that the resolution failed.

I have reviewed the registered plan. It is a building format plan under which the general rule is that the boundary of a lot created under a plan and separated from common property by a floor, wall, or ceiling must be located at the centre of the floor, wall or ceiling (Land Title Act, 49C). The plan and photographs show that the airspace above the applicants' apartment is common property and the building of any additional floors on top of the existing apartment would encroach on common property.

An adjudicator may overturn opposition to a resolution without dissent if that opposition in the circumstances is unreasonable (Act 276, Schedule 5 Item 10). However, the applicants have not satisfied me that the opposition is unreasonable. While the applicants may have a view that no other owner will be directly adversely affected by the proposal, the proposal would amount to a significant change to the scheme and require a new plan to be registered. In particular, it may affect potential future redevelopment of the scheme, the potential for the body corporate to make improvements itself to the area in question, or may result in changes needing to be made to the interest schedule lot entitlements affecting rights and liabilities on any future termination of the scheme. This is not a matter where I consider it is just and equitable to overturn the opposition to the proposal.

^[1] Dindas & Anor v Body Corporate for One Park Road [2006] QDC 302, Wilson SC DCJ, 25 August 2006 at paragraph 46. See also Hablethwaite & Anor v Andrijevic & Ors [2005] QCA 336, Jerrard JJA, Keane JJA, Cullinane J, 9 September 2006 at paragraph 33.
^[2] For ratification generally see Warren v Body Corporate for Buon Vista [2007] QCA 160, de Jersey CJ, Keane JA and Holmes JA at paragraph 12.

Number of Scheme:	27255
Name of Scheme:	Coolangatta Place
Address of Scheme:	87 Griffith Street COOLANGATTA QLD 4225

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Coolangatta Place [2007] QBCCMCmr 599 (22 October 2007)