Iris Gardens [2007] QBCCMCmr 98 (23 February 2007)

Last Updated: 6 March 2007

REFERENCE: 0918-2006

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	16954
Name of Scheme:	Iris Gardens
Address of Scheme:	9 Dora Street MOOROOKA QLD 4105

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

Mr Maurice & Mrs Wendy Holland, the Owner(s) of lot 9

I hereby order that: 1. The resolution of 30 September 2006 to accept the quote of Boulder Constructions for reconstruction of the retaining wall abutting lots 3, 4 and 5 is invalid. 2. The issue of repairing the retaining wall must be referred to the Body Corporate in general meeting as a motion with alternatives. Relevant quotes and explanatory material must be attached. 3. The motion in relation to repairing the retaining wall is to be made subject to securing appropriate council permits and approvals. 4. If the funds available in the sinking fund to date are already committed to other projects identified under the sinking fund budget (required in accordance with Section 94 of the Standard Module) a second motion in relation to the raising of a special levy must also be considered at that meeting. 5. Contributions to any special levy are to be determined in accordance with the Contribution Entitlements contained in the community management statement. 6. The cost of rebuilding the wall and reinstating the exclusive use areas is to be met by the Body Corporate.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0918-2006

"Iris Gardens" CTS 16954

Application

The applicants, Maurice and Wendy Holland, the owners of Lot 9 (the applicants) have sought the following interim order of an adjudicator:

"To delay commencement of any works to replace or reconstruct a landscaped boulder wall until all aspects of the project have been defined and budget provisions to be agreed to at a general meeting of the Body Corporate".

In addition, the applicants have sought the following final orders:

"To direct the committee to recover all the costs of restoring the boulder wall, fencing and paving as resolved by motion 10A and B at the meeting held on 30/9/06."

The Scheme

Iris Gardens CTS 16954 is a 10 lot scheme registered under the Body Corporate and Community Management Act 1997 and is operating under the Body Corporate and Community Management (Standard Module) Regulation 1997. Typically, this module is intended for residential arrangements.

"Iris Gardens" was registered as a building units plan (now termed a building format plan) on 26 June 1995 and comprises 10 lots. It is regulated by the Body Corporate and Community Management (Standard Module) Regulation 1997.

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

(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.

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

I quote the applications grounds as follows:

The process of carrying out any of the proposed work is deficient in the following areas:

•	The resolution as per motion 10A and 10B from the meeting of 30/10/06 is lacking in detail and does not identify the extent of work;
•	The engineer’s report referred to at the general meeting of 3/9/05 has not been made available to lot holders;
•	There is no evidence of searches or checks being made at BCC for compliance to approved plans or details of "as constructed" amended plans or approved landscape plans having been obtained;
•	The proposal by Boulder Wall Constructions itemises 10 aspects of associated costs which when properly assessed would more than double the expenditure agreed at the annual general meeting 30/10/06. This would require revised budgets to be approved;
•	There is no proposal to re-instate and re-level the portions of the land between the crown of the wall and the northern edge of the building;
•	Town planning requirements applicable in the BCC area require retaining walls over 1 meter in height to have building approvals and certification by authorised building surveyors;
•	The owners of lots 3, 4 and 5 have the additional benefit of being granted exclusive use areas within the property boundaries;
•	By-laws require such areas to be maintained and where such maintenance is undertaken by the committee then costs shall be recovered from the respective lot owners;
•	The ability to grant exclusive use areas is as a result of developing paved and fenced courtyards between the top of the retaining wall and the northern side of the building containing lots 2, 4 and 5;
•	Where lot owners do not carry out maintenance the committee has the responsibility to act. In this issue R Bosley (Lot 3) has taken the need for maintenance to the committee for action.

The applicants enclose an engineer’s report (obtained later) which states that the wall needs correction.

The applicants also provide a hand drawn sketch of the lots, exclusive use areas and retaining wall the subject of the application. On comparing this sketch to the plans registered with the Titles Office, it indicates that the retaining wall is constructed on the common property, rather than within the exclusive use areas.

Interim Order

On 20 December 2006 I made the following interim order:

I hereby order that, pending a final determination, the body corporate for Iris Gardens must not demolish the existing wall abutting the exclusive use areas of lots 3, 4 and 5 or proceed with construction of a new wall.

Submissions

Five submissions were received including 2 from lot owners, 2 from committee members and one from the committee.

The committee and committee members support completion of the wall by the chosen quote and to pay for the work through the Body Corporate. Their combined points are:

•	They do not agree the extent of the work has not been identified;
•	The applicants have viewed the plans at the office of the body corporate manager;
•	While the costs of the 10 associated activities of the winning quote are not known, adoption of this quote is expected to come in at less than the cost of the all up quotes received. It is impossible to identify the all up cost in advance;
•	Reinstatement of the exclusive use areas has not yet been addressed;
•	They intend to secure all necessary approvals;
•	While the by-laws refer to maintenance of fences, they do not refer to the maintenance of retaining walls;
•	The retaining wall is on common property.

One committee member says the Body Corporate should pay to reinstate the exclusive use areas.

Another owner states that it is clear the work needs to be done.

There is one submission in support of the applicants. Their points are that there is a need to finally clarify who should pay, to meet council regulations and to get an all up quote.

I note that this owner settled on their lot in November 2006, after the Body Corporate meeting where it was resolved to accept Boulder Constructions quote for $11,000 plus variables. The committee provided this office with quotes from Gardenmakers for $21,065 and The Garden King for $21,258.60. These quotes are from 2005. The Boulder Constructions quote proposes recycling existing materials, while the other quotes propose new materials.

Response to Submissions

Additional Matters

Within the response, the applicants seek to raise new issues:

•	They advise that through research they have established that the retaining wall that was originally built for the scheme was not compliant with the approved plans;
•	The issue of pursuing any remedies under common law and whether it is appropriate for the Body Corporate to rebuild the wall or pursue the builder;
•	They state: "We seek confirmation the business plan i.e. the projects planning construction estimations and financial budget will be ratified by agreement at general meeting. Therefore, we ask for conversion of that part of the interim order";
•	the last balance sheet showed $20,000 as total funds available.

They also state they would like all owners input on the finished wall, restoration of exclusive use areas and the amount of money each owner is prepared to commit by way of special levies.

Responses

In relation to the assertion that the retaining wall is on Common Property, the applicants state that "it would be reasonable to accept that the installed fencing established the permitter of the exclusive use areas". Pursuant to that, he observes that the exclusive use areas only became usable by the installation of the retaining wall. He suggests that returning the contour of the land to that of preconstruction would reduce the risks and be consistent with the resolution to commission rebuilding.

The applicants object to the wording of the minutes where it was resolved to commission the work and raises other issues in relation to relay of committee meetings and quotes. They enclose a circular they sent to owners after the dispute resolution application was lodged but before final submissions closed. They suggest that the running of the Body Corporate is in some ways imperfect but there is still room for the Body Corporate to work through all the issues in a united fashion.

Their response to the committee’s submission appears largely directed at procedural imperfections such as failure to attach alternate quotes or engineers report to the minutes, failure to distribute minutes of committee meetings, resolving to investigate the issue of the wall without the motion being on the agenda etc.

Determination

It appears that all those making submissions are in full support of the need to replace the current retaining wall. Therefore, I will restrict my reasons for decision to matters concerned with implementing that intention.

No-one has disputed that the retaining wall is situated on common property and the diagrams provided to me satisfy me that this is so.

Additional Matters

It is not appropriate that I make a determination on those additional matters that the applicants have raised in their response to submissions. However, I will observe that if the applicants wish such matters to be addressed, they must first raise those issues with the Body Corporate, before they can become the subject of a dispute resolution application. If, after raising these issues with the Body Corporate the applicants remain unsatisfied, they can make application to this office and should include evidence that the issue/s have been raised.

All parties should note that any proceedings against the builder cannot be considered by the Office of the Commissioner for Body Corporate and Community Management. Time limitations in relation to commencing an action should be considered.

Liability for Repairs and Reinstatement

The body corporate is required to comply with its obligation under section 109 of the Standard Module and maintain the common property in good condition.

I will firstly observe that the applicants’ argument that the owners of lots 3, 4 and 5 should pay for reconstruction of the wall (as the sole beneficiaries of the exclusive use areas) must fail. On more than one occasion, adjudicators have recognised the responsibility of the Body Corporate for retaining walls on common property. For example, Adjudicator Meek stated in the matter of Cleome:

The respondent also seems to imply that the retaining wall is principally of benefit to the applicant’s lot and not hers, and that therefore the applicant should be responsible. The retaining wall is located on common property, and is therefore the responsibility of the body corporate (i.e. all owners) to maintain^[1].

So in the first instance, I observe that the cost of reinstating the wall rests with the Body Corporate and should not be sheeted home to Lots 3, 4 or 5.

The contributions payable by lot owners are determined by the contribution entitlement contained in the scheme’s community management statement. I note that for this scheme both the lot entitlement and contribution entitlement for all lots are equal. Therefore, each lot owner would be liable for 10% of the cost of reconstructing the wall.

The next question arising is reinstatement of exclusive use areas that suffer any damage caused by contractors in accessing the wall. In my view, it would not be just and equitable to require the owners of lots 3, 4 and 5 to cover the cost of reinstating their exclusive use areas, when the damage that is caused to them is due to the Body Corporate fulfilling its duties. The lot owner’s responsibility is only to maintain the area and not to reinstate the area after the responsible entity interferes with their area. Therefore, the Body Corporate is responsible for the entire cost of the project.

Procedural Irregularities

The applicants have raised concerns in relation to the procedures adopted in authorising the work. I too have some difficulties in the way that the minutes have been presented in relation to this matter, particularly that the resolution to accept Boulder Constructions quote was made in September 2006 with neither of the other quotes appearing in the minutes.

Section 104 of the Standard Module states:

(1) This section applies if--

(a) a motion to be moved at a general meeting of the Body Corporate proposes the carrying out of work or the acquisition of personal property or services, including the engagement of a body corporate manager or service contractor, but not including the engagement of a service contractor who also is, or is to be, a letting agent; and

(b) the cost of carrying the proposal into effect is more than the relevant limit for major spending for the scheme.

(2) The lot owners must be given copies of at least 2 quotations for carrying out the work or supplying the personal property or services.

(3) If the motion is proposed by the committee, the committee must obtain the quotations.

(4) If the motion is not proposed by the committee, the person proposing the motion must obtain the quotations and give them to the secretary.

(5) Copies of the quotations or, if voluminous, summaries of the quotations and advice about where the complete documents may be inspected, must accompany the notice of the meeting at which the motion is to be considered.

(6) If, for exceptional reasons, it is not practicable to obtain 2 quotations, a single quotation must be obtained and must accompany the notice of meeting.

Example--

If goods to be acquired by the body corporate are obtainable from only 1 source, a quotation for supplying the goods must be obtained from the source and circulated with the notice of meeting. The fact that goods with the necessary characteristics are only obtainable from a single source would be an exceptional reason for not obtaining 2 quotations for the supply of the goods.

(7) Unless subsection (6) applies, the motion must be stated as a motion with alternatives in the agenda and on a voting paper for the meeting.

(8) Each quotation obtained under this section must be retained as an attachment to the minutes of the meeting at which the quotation is considered.

(9) For this section--

(a) the cost of engaging a body corporate manager or a service contractor includes any payment for the Body Corporate manager’s or the service contractor’s services, provided for under the engagement, for the term of any right or option of extension or renewal of the engagement; and

(b) if a series of proposals forms a single project, the cost of carrying out any 1 of the proposals is taken to be more than the relevant limit for major spending for the scheme if the cost of the project, as a whole, is more than the relevant limit."

Therefore in accordance with Section 104(7) the motion to approve the reconstruction of the retaining wall should have been presented as one with alternatives. A motion with alternatives involves an initial vote of yes or no to the first question and then the voter selects one of the alternatives. In this case, the first question would be whether or not to reconstruct the wall and the second would be which quote to accept.

Section 42B of the Standard Module became effective on 1 December 2003. It addresses the issue of Motions with Alternatives as follows:

(1) This section applies if 2 or more motions (the original motions) proposing alternative ways of dealing with the same issue are submitted, under section 39, as motions for consideration at a general meeting of the body corporate.

Example for subsection (1)--
The secretary of the body corporate receives motions from 3 lot owners proposing the engagement of a person as a body corporate manager. Each motion proposes a different person.

(2) A voting paper for the general meeting must--

(a) list as alternatives under 1 motion submitted by the committee (a motion with alternatives), the substance of each of the original motions; and

(b) show, after the motion and each alternative listed under it, a blank space for voting purposes.

(3) A person who is a voter for the general meeting may vote either--

(a) for the motion, by voting for the motion and for 1 of the alternatives listed under the motion; or

(b) against the motion.

The Explanatory Notes that accompany the introduction of this section are enlightening:

"Section 40B provides for the grouping of motions dealing with the same subject on the agenda. It is usual for the agenda of a general meeting to include motions relating to the same subject. This occurs, for example, where the committee may submit more than one quotation proposing the carrying out of work.

The existing provisions of the regulation module do not make provision for the grouping of motions about the same subject, and provide that the committee must prepare the agenda for each general meeting. As a consequence, an unfair practice has developed where, to defeat a motion, alternative or competing motions are placed on the agenda with the favoured motion first and the alternative or competing motions placed subsequently or many motions further down the agenda.

An adverse result is that if the favoured motion is passed (eg 10 votes to 9 votes), the second or subsequent motion is ruled out of order as being redundant, even though the votes for that motion may have more "yes" votes (eg 13 votes to 10 votes). The favouritism occurs where the committee or the body corporate manager wants a particular motion to succeed.

This amendment addresses the issue, as it requires motions dealing with the same subject to be included on the agenda of a general meeting in a way that does not advantage or disadvantage any particular motion submitted. As all motions are treated equally, this amendment removes the unfairness associated with the practice of manipulating the outcome by the way the motions are placed on the agenda.

The basis of the amendment is that when more than 1 motion about the same subject is submitted for inclusion on the agenda of a general meeting, the substance of all the submitted motions are included on the agenda as alternatives. The motion under which the alternatives are listed is to be submitted by the committee. This motion identifies the subject and must be passed by the required resolution before the votes on any of the alternatives are considered. If the motion is passed, the alternative with the highest number of votes is the decision of the body corporate.

An attempt to defeat the grouping by putting up a competing motion not in the group will mean that all the motions are lost, resulting in no one being advantaged and all losing. It is incumbent on the committee to ensure that all motions dealing with the same subject are included under the grouped motion."

I have not been supplied with the agenda in relation to this matter however it has become apparent that in the course of addressing this matter, the committee has not been aware of the requirement to present alternatives to members of the Body Corporate. As a common mistake, the committee has done their research with the best of intentions, but has not taken all steps necessary to demonstrate the extent of the research they have undertaken. Unfortunately, this can result in some lot owners feeling that other owners have been led to a forgone conclusion.

Unfortunately at this point, the committee is now in possession of 3 out of date quotes. Therefore time has seen to it that new quotes (minimum 2) will now need to go to the Body Corporate for consideration.

The next time the Body Corporate considers this question, the person performing secretarial duties should also comply with Section 42C(4) of the Standard Module which requires an explanatory schedule to accompany the motion with alternatives. Amongst other things, the explanatory schedule must, for a motion with alternatives, include each of the following--

(a) each motion (original motion), the substance of which is stated as an alternative under the motion with alternatives, in the form in which it was submitted under section 39;

(b) an explanatory note about each original motion, given to the secretary by the submitter of the original motion, if the note is not longer than 300 words;

(c) an explanatory note stating that voters must vote either--

(i)	for the motion, by voting for the motion and for 1 of the alternatives; or

(ii) against the motion.

Example of an explanatory note for subsection (4)(c)--

To vote on this motion, you must either vote against the motion OR vote for the motion and 1 alternative.

To vote against the motion - Mark ‘No’ opposite the motion on the voting paper. If you mark ‘No’, do not place a mark beside any of the alternatives. To vote for the motion and 1 alternative--Mark the voting paper in 2 places. Firstly, mark ‘Yes’, opposite the motion on the voting paper. Secondly, mark ‘Yes’ opposite the alternative you want to vote for. You can vote for only 1 alternative.

The primary objective of the Body Corporate and Community Management Act 1997 is expressed under Section 2 of the Act:

"The primary object of this Act is to provide for flexible and contemporary communally based arrangements for the use of freehold land, having regard to the secondary objects".

The following are some of the Secondary objects expressed in Section 4:

(a) To balance the rights of individuals with the responsibility for self management as an inherent aspect of community titles schemes;

and

(d) To ensure that bodies corporate for community titles schemes have control of the common property and the body corporate assets they are responsible for managing on behalf of owners of lots in the scheme.

While I have some sympathy for the applicants’ concerns in relation to the extent of detail given in the relevant quote, I note that not even a complete lack of detail compels me to require more detailed quotes. It is a decision for the majority of lot owners. If the majority of lot owners are content with the level of detail provided, then they may vote on that basis. It is not appropriate that I substitute my perception of risk management for that of a majority of owners.

Likewise, if the majority of owners find it preferable to speculate that the associated costs of the lower quote will come in lower than an all up quote, it would be inappropriate for me to substitute my views against the objectives of self management.

Both sides of this argument appear willing to ensure that all necessary council permits and approvals are complied with. The requirement for council approval should be included in the motion for approval.

At one point, the applicants suggest that the retaining wall could be dispensed with, thereby putting an end to the exclusive use areas. The applicants’ attention is drawn to Section 171 of the Act which states that exclusive use areas may only be revoked with the consent of the relevant lot owner and a resolution without dissent of the Body Corporate.

Conclusion

Due to:

•	the irregularities in the way the motion was presented the to Body Corporate; and
•	the age of the quotes presently held

I will order that the matter again be taken to the Body Corporate in general meeting as a motion with alternatives. Relevant quotes and explanatory material must be attached.

The motion is to be made subject to securing appropriate council permits and approvals.

If the funds available in the sinking fund to date are already committed to other projects identified under the sinking fund budget (required in accordance with Section 94 of the Standard Module) a second motion in relation to the raising of a special levy should also be considered at that meeting.

The cost of rebuilding the wall and reinstating the exclusive use areas is to be met by the Body Corporate.

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^[1] Cleome CTS 5564 0036-2001 9 May 2001 Adjudicator Meek