Waters Edge the Strand [2008] QBCCMCmr 11 (14 January 2008)

Last Updated: 22 February 2008

REFERENCE: 0383-2007

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	32461
Name of Scheme:	Waters Edge the Strand
Address of Scheme:	63 - 65 The Strand TOWNSVILLE QLD 4804

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Kumar Narayan, the owner of Lot 48

I hereby order that the resolution passed by the Body Corporate for Waters Edge The Strand community titles scheme 32461 (Body Corporate) on Motion 2 at the Extraordinary General Meeting dated 6 December 2006 is void. However, the order voiding the resolution passed on Motion 2 is stayed for three months from the date of this order with the exception of that part of the resolution fixing a special contribution of $5760.00 insofar as it obligates payment of the special contribution by the owner of Lot 48.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0383-2007

"Waters Edge the Strand" CTS 32461

Application
Kumar Narayan of Lot 48 (Applicant) seeks to overturn Motion 2 of the Extraordinary General Meeting dated 6 December 2006 (2006 EGM). The Applicant has named the owners of Lots 1 to 46 as persons who would be affected by the outcome sought. He states that in August to November 2004, the building was renovated and Lots 47 to 49 were created from the restaurant. He says that separate split system air conditioners were installed effectively eliminating these lots from the need to access the main ducted air conditioner unit. The Applicant considers the special levy for the new air conditioner unit should be paid by the 46 lots who will directly benefit. He says Lots 47 to 49 were never included in the quotes and that he did not take an interest in the voting as under the impression Lot 48 was never involved and the cost would not be passed onto me.

Motion 2 proposed the installation of a new VRV air conditioning system. The Motion stated:

That all Owners approve the quotation (copy attached) as submitted by Peak ARE Pty Ltd for the supply and installation of air-conditioning ... to Waters Edge Apartments, The Strand ... To replace an old chilled water system with new energy efficient technology.

The equipment is as follows:-

First Floor Rooms 101-110

•	Supply and installation of 10 corner cassette VRV indoor units
•	45.5kw outdoor VRV inverter units
•	Removal of existing indoor units
•	New drains through ceiling space
•	Master controller at Reception
•	All core hole drilling

Second floor Rooms 201-218

•	Supply and installation of 18 corner cassette VRV indoor units
•	85.6kw outdoor VRV inverter units
•	Removal of existing indoor units
•	New drains through ceiling space
•	Master controller at Reception
•	All core hole drilling

Third floor Rooms 301-318

•	Supply and installation of 18 corner cassette VRV indoor units
•	85.6kw outdoor VRV inverter units
•	Removal of existing indoor units
•	New drains through ceiling space
•	Master controller at Reception
•	All core hole drilling

The installation of the system would consist of running pipe work and cables down each side of the hallway in bulkheads ... The pipe work will enter each room from the hallway and connect to the indoor unit, installed in the position of the existing indoor unit ... The outdoor units will be positioned at the rear of the car park ... We will be able to use the existing power supply that is feeding the chiller unit, to feed the new outdoor units.

The ‘total’ price (including supply of equipment, associated works and removal of existing outside plant) is $282,150.00 ... Payment will be sought by a ‘special levy’ of $5,760.00 per lot; being due as follows:-

31^st December 2006 - $2,500.00

19^th January 2007 - $1,630.00

9^th February 2007 - $1,630.00

RESOLVED that Motion 2 is CARRIED. (28 votes for; 0 against; 0 abstained)

For the purposes of this order: I have referred to the ‘old chilled water system’ as the ‘old system’ and new VRV air conditioning system as the ‘new system’.

Jurisdiction
"Waters Edge The Strand" is a community titles scheme under the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (Accommodation Module).

An adjudicator may make an order that is just and equitable in the circumstances to resolve a dispute, in the context of a community titles scheme, about a claimed or anticipated contravention of the Act; or the exercise of rights or powers under the Act (s276(1), Act). An order may require a person to act, or prohibit a person from acting, in a way stated in the order (s276(2), Act). An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (s284(1), Act).

Submissions to the Commissioner
On 10 September 2007, the Commissioner provided a copy of the application to John Gribbin Realty (Body Corporate Manager) for distribution to the owner of each lot (excluding the Applicant) and the committee, with an invitation to respond to the matters raised in the application (s243, Act). Submissions were made by a number of lot owners. The Applicant inspected the submissions received and made a written reply (ss244 and 246, Act).

Warren and Christine Nolen of Lot 3 made reference to an Extraordinary General Meeting dated 6 September 2007 (2007 EGM) submitting if they had attended this meeting they would have voted in favour of Lots 1 to 46 each paying a special levy of $371.00 as they understand Lots 47 to 49 do not benefit with the recent installation of the new VRV air conditioning system, and that the owners of Lots 47 to 49 each pay a special levy of $73.00 towards the installation of the new split system in the common property reception area.

Eric Bettanin of Lot 5 opposes the application stating when the Body Corporate decides or pays for something it is split between the members equally and not on a pro-rata individual benefit basis. He says the quotes were not misleading and the Motion asked all owners approve the quotation. He poses the question, Why would the body corporate get all owners to approve a resolution if all owners were not going to pay? Mr Bettanin states he pays for costs for which he does not draw a benefit such as the lifts (lived on the first floor) and the pool (never used) and the body corporate paid to replace a hot water unit servicing Lots 47 to 49 (all lots paid for this cost without receiving a direct benefit). He states section 118 of the Accommodation Module does not apply. The section deals with recovering the cost of services from users who are the hotel clients. The costs are recouped through rates charged and passed back onto owners of the lots. Mr Bettanin submits the system does not supply a service solely to a lot. He believes that if the application is successful, it may set a dangerous precedent. For example, the approved quote allowed for a 45.5kw inverter for the first floor rooms and an 85.6kw VRV inverter for the second floor rooms. The levy should be adjusted so a first floor lot owner, does not pay for the larger inverter where there is not direct benefit. He states the applicant receives a benefit from the air conditioning unit servicing the reception area. The quote included removal of the existing outside plant from which the applicant received a benefit.

Carol Moss of Lot 11 submits the quote did not cover Lots 47 to 49 and these Lots do not derive any benefit from the installation of the VRV system. She states Peak ARE Pty Ltd commenced work in January/February 2007 and the first instalment of the special levy was issued on 24 March 2007. She states that an on-site meeting was held on 17 July 2007 attended by Ms Moss, Amanda Field (Body Corporate Manager) and Peter (Peak ARE Pty Ltd). The findings about the new VRV system are (in part) "There is no air-conditioning being generated from the Rooms along the corridors. The vent above each door is commonly mistaken as being a vent for the air-conditioning; however it has been confirmed that the vents are in fact known as ‘fire dampeners’ ... The New VRV System doesn’t extend into the reception area; hence it only extends into Lot’s 1-46 only. The Reception Area is not cooled by a Split System Air-Conditioner only. Prior to the upgrade, the Reception Area was cooled by both a vent in the ceiling (ducted air-conditioning) and a split system".

Carol Macaulay of Lot 14 (the chairperson and secretary) submitted Motion 2 did not exclude Lots 111, 112 and 113 and was voted on in a per lot manner. She said that she and Amanda Field from John Gribbin Realty contacted the Office of Fair Trading which confirmed that all 49 owners were responsible for the cost of the air conditioner replacement although it did not benefit them. She was informed it was the same situation as a lift where the ground floor units did not actually benefit from the lift, but those owners were still responsible for their share of the body corporate lift expenses.

Kerry Mitchell and Denis Gillen of Lot 29 stated the failure of the old ducted air conditioning unit has been a major problem and that owners have had varying opinions how to rectify the problem and who should pay for the repairs. They state owners of the lots not benefiting from the system should not pay the capital contribution.

In his reply to submissions, the Applicant stated the air conditioning system only services 46 of the 49 lots with Lots 47 to 49 not being serviced by the air conditioning mainframe system, and the owners of Lots 47 to 49 have separate air conditioning systems, funded by them and maintained by them. He states the special resolution at the 2007 EGM should not be necessary. He considers that if the owners of Lots 47 to 49 have to pay the special levy, the Body Corporate should reimburse them for the individual air conditioning systems and should pay for any expenses.

Referral to adjudication
A dispute resolution recommendation has been made under section 248 of the Act referring the dispute to departmental adjudication.

Section 269(1) of the Act provides The adjudicator must investigate the application to decide whether it would be appropriate to make an order on the application. In accordance with the investigative powers stated in section 271 of the Act, I invited the Applicants and the Body Corporate to make further submissions. The Applicants were invited to reply to the further submissions made by the Body Corporate.

The Applicant

On 20 November 2007, I invited the Applicant to make submissions in response to the following questions:

1.	Was Lot 49 ever serviced by the old chilled water system?
2.	Was the previous Lot 100 ever serviced by the old chilled water system?
3.	Why was a separate air-conditioner installed to solely service Lot 49?

By letter dated 27 November 2007, the Applicant responded stating:

1.	Lot 48 was part of a restaurant that serviced a motel before the complex was renovated in 2004. Lot 48 was not serviced by the old chilled water system.
2.	Previous Lot 100 (the old restaurant) had its own air-conditioning system and was never connected to the chilled water system that has now been replaced.
3.	The separate air conditioner is for Lots 47 to 48.

The Body Corporate
On 19 November 2007, I invited the committee to make submissions with respect to the following:

1. Motion 2 stated the new technology would replace the old chilled water system.

(i)	When was the old system installed or was it part of the original infrastructure?

(ii) Please provide information (including if necessary a sketch or similar depiction) describing the configuration of the old system.

(iii) What lots were air-conditioned by this system? What infrastructure was within each lot serviced by the system?

(iv)	Were any areas of common property serviced?
(v)	Who paid the maintenance and operating costs of this system?
(vi)	Who paid the costs associated with the use of air-conditioning within each lot?
(vii)	Was Lots 47 to 49 or the previous Lot 100 serviced by this system?
2.	The new system.
(i)	Has it been installed? If so, when?
(ii)	Has each lot paid the special levy?
(iii)	When was the first instalment of the levy required for payment?

(iv) Please provide information (including if necessary a sketch or similar depiction) describing the configuration of the new system. What infrastructure is within the connected lots?

(v)	Are any parts of common property serviced by the new system?

(vi) Is each floor in the building independently air-conditioned or is each floor connected to the one system?

(vii)	Is the system able to be operated/controlled within each connected lot?
(viii)	What is the purpose of the master controller at reception?

(ix) Who will pay for the maintenance and operating costs of this system (including the electricity costs for use within each lot)?

3.	The new system and Lots 47 to 49?
(i)	Why wasn’t Lots 47 to 49 connected to this system?
(ii)	Was any infrastructure installed to connect these lots to the system?
(iii)	Are the lots able to be connected to the system?

(iv) Were the owners of these lots given the opportunity to have their lots air-conditioned by the new system?

Carol Moss made submissions in response to the matters raised in Application 0383-2007 (copy attached). In her submissions, Ms Moss refers to an onsite meeting she attended with Peter (Peak ARE Pty Ltd) and Amanda Field. The committee is invited to respond to the findings stated in Ms Moss’ submissions (including if necessary, to seek confirmation from Peter).

In addition, please provide a copy of:

1.	The notice of the Extraordinary General Meeting dated 6 December 2006.
2.	The notice and minutes of the Annual General Meeting dated 6 September 2007.

By letter dated 3 December 2007, Amanda Field from John Gribbin Realty on behalf of the committee stated:

1.	(i) The old system was part of the original infrastructure. Before the Motel was refurbished in 2004, the air-conditioning system serviced 46 rooms, a restaurant and the reception area (the entire complex). The restaurant was transformed into 3 units creating Lots 47 to 49.

(ii) The configuration of the old system – A central plant chilled water system (including piping, drainage and power supply) was on common property servicing the entire complex. After refurbishment, it serviced Lots 1 to 46 and the reception area.

(iii) After the refurbishment, the chilled water system serviced Lots 1 to 46. Each lot and the reception area had a fan coil unit.

(iv) The areas of common property serviced was the reception area.

(v) The maintenance and operating costs of this system have been paid for by Lots 1 to 49.

(vi) Lots 1 to 49 paid the costs associated with the use of air-conditioning within each lot in accordance with lot entitlements.

(vii) Lots 47 to 49 were not serviced by this system.

2.	(i) The new system was installed with work completed in June 2007.

(ii) Lots 48 and 49 have not paid the special levy of $5,760. Lot 47 has paid the special levy.

(iii) The first instalment of $2,500 was required for payment on 10 April 2007.

(iv) The configuration of the new system – There are 3 Daikin VRV Systems in place i.e 1 system per floor. The contractors removed all fan coil units in Lots 1 to 46, water and any accessible chilled piping lines and old existing drains, installed new refrigerant lines in bulk heads along each corridor and into each lot where a corner type cassette was installed, connected pipe work, new drainage and electrical works. The outdoor units are located on common property. A new stand alone split system was installed in the reception area.

(v) There is no part of common property being serviced by the new system.

(vi) The air-conditioning on each floor is connected to the Daikin VRV System.

(vii) The system is able to be operated/controlled within each connected lot.

(viii) The purpose of the master controller at reception is for energy saving costs i.e set the temperature and to turn off air conditioning in a lot.

(ix) Lots 1 to 49 will pay for the maintenance and operating costs of this system.

3.	(i) Lots 47 to 49 were not connected to the new system because they each have a split system. This system was installed when the developer did a refurbishment before the scheme was established.

(ii) No infrastructure was installed to connect these lots to the system.

(iii) Lots 47 to 49 are able to be connected to the system. However, the contractor advised it would be labour intensive and very costly to the Body Corporate.

(iv) The owners of Lots 47 to 49 were not given the opportunity to have their lots air-conditioned by the new system for the following reasons:

(a)	The contractor advised it would be labour intensive and expensive because of the construction conversion; for example, each lot would require 2 cassettes.
(b)	The split systems were only 2 years old.
(c)	At no time did any of the owners of Lots 47 to 49 approach or request that the new air-conditioning system be installed in their Lot.

With regard to the venting in the hallways, some owners were aware these were not air-conditioning vents.

On 17 and 18 December 2007, the Body Corporate Manager provided a copy of the notice of the 2006 EGM and a copy of the notice and minutes of the 2007 EGM (I wrongly referred to this meeting as an annual general meeting).

I sought the 2006 EGM notice for information about the material presented to owners about the proposed work. The notice provided by the Manager included:

• The minutes of a committee meeting dated 23 October 2006 noted as being attended by Brad Swaffer of Peak ARE Pty Ltd. The minutes state:

−	The ‘chiller’ has 2 components, one of which is broken down and a replacement compressor has been obtained.
−	The "’real’ problems are identified as being the design fault of the drip trays in each of the rooms and the deteriorated lagging in the hallways; excess water/condensation has lead to so many leaks, resulting in damaged ceilings etc".
−	The possibility of split systems has been investigated with a report carried out by Ashburner Francis. It revealed wires etc had to be upgraded adding to the expense of the project.
−	Another possibility was the installation of a VRV System.
−	It was decided not to consider the split systems but to pursue the installation of a new VRV System.

• A 3 page report by Ashburner Francis dated 12 October 2006. Page 1 of the report states "It has been proposed that the existing Chiller unit ... be replaced with individual split Air Conditioners in each unit". The report details the work required to provide each lot with a split system.

• An untitled note about the air conditioning stating the cost of power for the VRV System will be approximately half the existing cost and considerably cheaper than split systems to each unit.

• Notes taken from a meeting with the Building Services Authority on 1 November 2006. The notes detail drip tray problems in Room 104 or 105 and in a corridor ceiling.

• A letter dated 2 November 2006 from the Building Services Authority stating (in part) "the condensate pipe to unit 104 was higher then the condensate tray, therefore causing a ‘backfall’. The inspection to the ‘drop down’ panel in the hallway outside unit 207 and the inside of the air conditioning unit to unit 207 found that the insulated pipework in these areas was dripping with water".

Documentation about the 2007 EGM was sought to ascertain what transpired at this meeting with respect to the owners of Lots 47 to 49 being exempted from payment of the special levy. The relevant Motion 2 proposing this exemption was minuted as being lost by special resolution.

Applicant’s submissions in reply
On 10 December 2007, I invited the Applicant to reply to Body Corporate’s submissions. By letter dated 17 December 2007, the Applicant stated to the best of his knowledge, Lot 100 was individually air conditioned; the Body Corporate has been paying for the maintenance of the old system; the new system does not service common property; and the opportunity to have Lots 47 to 49 air conditioned by the new system was never discussed.

Determination

Time for making application
Given the outcome sought, the application should have been made within 3 months after the 2006 EGM (s242(2), Act). The application was made some seven weeks outside this time. Section 242(4) provides that if the making of the application does not comply with section 242(2), the adjudicator may, for good reason, waive the non-compliance. The Applicant states the delay in lodging the application is mainly due to discussion with the committee and that he was not aware of the special levy until the notice of payment was received in March 2007. The Body Corporate’s submissions have confirmed the first instalment was due on 10 April 2007, despite the times stated in the Motion.

While it is clear the new system has been installed and it would seem 47 of the 49 owners have paid the special contribution, I consider there are good reasons for waiving non-compliance. The first instalment of the special contribution was not sought until late March 2007 despite the date stated in the Motion, the Applicants have raised a question to be determined, and the delay in making the application does not have a discernible effect on the Body Corporate and owners even though the new system has been installed and most owners have paid the special contribution.

Application 0341-2007
John and Dian Bosca, the owner of Lot 49 made this dispute resolution application against the Body Corporate also seeking to overturn Motion 2 at the 2006 EGM. For this reason, I have dealt with Applications 0341-2007 and 0383-2007 concurrently.

Utility infrastructure and utility service
Air conditioning is a utility service and its components are utility infrastructure (schedule 6 Dictionary, Act). The plant, piping, wiring and fan coil units forming part of the old system was utility infrastructure supplying lots and common property with a utility service. Similarly, the new system’s outdoor units, refrigerant lines, corner type cassettes and associated pipes and wires etc is utility infrastructure. The components of the various split system units are also utility infrastructure.

The legislative treatment of utility infrastructure
Is the infrastructure common property?
Broadly speaking, a community titles scheme is comprised of common property and lots (s10, Act). Common property is that part of the scheme not within a lot. The boundaries of the lots included in a scheme are determined by reference to the plan of subdivision. The plans of subdivision for this scheme (SP166518 and SP172379) are building format plans. A building format plan defines land using the structural elements of a building, including, for example, floors, walls and ceilings and the boundary of a lot separated from another lot or common property by a floor, wall or ceiling, must be located at the centre of the floor, wall or ceiling (ss48C(1) and 49C(4), Land Title Act 1994).

Section 20 of the Act specifies when utility infrastructure is common property. Relevantly, section 20(1) and (3) states:

(1) Common property for a community titles scheme includes all utility infrastructure forming part of scheme land, except utility infrastructure-

(a) solely related to supplying utility services to a lot; and

(b) within the boundaries of the lot (according to the way the boundaries of the lot are defined in the plan of subdivision under which the lot is created); and

(c) located other than within a boundary structure for the lot.

(3) In this section - boundary structure ... means a floor, wall or ceiling ... in which is located the boundary of the lot with another lot or common property.

Generally, unless each of the criteria stated in subsection (1) apply, utility infrastructure is treated as common property.

The infrastructure associated with the old system provided a utility service to Lots 1 to 46 and the common property reception area. The infrastructure not within the boundaries of a lot or within the boundaries of a lot but not solely servicing that lot was common property. Any infrastructure within the boundaries of any of Lots 1 to 46 and solely servicing any of these lots was not common property. The infrastructure associated with the split systems servicing Lots 47 to 49 may or may not be wholly or partially on common property (a finding on the location of this infrastructure is not necessary in the determination of this dispute).

Responsibility to maintain infrastructure
A body corporate must maintain common property in good condition (section 108(1), Accommodation Module). Despite this general duty about common property, A lot owner is responsible for maintaining utility infrastructure, including utility infrastructure situated on common property, in good order and condition, to the extent that the utility infrastructure relates only to supplying utility services to a particular lot and is 1 of the following types – hot water systems, washing machines, clothes dryers, another device providing a utility service to a lot (s108(3)(b), Accommodation Module). An example for (3)(b) is An airconditioning plant is installed on the common property, but relates only to supplying utility services to a particular lot. The owner of the lot would be responsible for maintaining the airconditioning equipment.

A lot owner has a specific obligation to maintain the person’s lot in good condition (section 119(2), Accommodation Module). Section 119(4) provides The owner of a lot ... must maintain the utility infrastructure within the boundaries of the lot, and not part of common property, in good condition and, if it is in need of replacement, must replace it. A lot owner would also be responsible for the maintenance of infrastructure on common property if the owner obtained body corporate authorisation under section 113 of the Accommodation Module to install infrastructure on common property for the benefit of the owner’s lot (unless otherwise excused by the body corporate).

Given the abovementioned legislative provisions, it can be generally concluded the Body Corporate had a responsibility to maintain (including replace) those parts of the old system’s infrastructure forming part of common property (s108(1), Accommodation Module). The owners of Lots 1 to 46 were individually responsible for any infrastructure to which section 119(4) of the Accommodation Module applied. The individual split systems servicing Lots 47 to 49 are the responsibility of the respective lot owners in accordance with section 108(3)(b) or, if applicable, section 113 of the Accommodation Module.

Order
On the basis of these conclusions, it could be held that unless the infrastructure of the old system was common property, one or more of the owners of Lots 1 to 46 had some responsibility for a part or parts of the infrastructure. The maintenance of any infrastructure within one of these lots which was not common property was the responsibility of the individual owner, not the Body Corporate. In this circumstance, the Body Corporate would not have been responsible for the total replacement of the old system. It is not disputed that the old system required maintenance. However, it is apparent the Body Corporate had obtained a new component of the ‘chiller’ system and that there were widespread problems with other infrastructure associated with the old system. On the basis of the abovementioned provisions of the legislation, it is not certain whether the ‘real’ problems mentioned in the minutes of the October 2006 committee meeting were a Body Corporate or an individual owner/s responsibility, or whether there was a shared responsibility.

If the Body Corporate had sought to maintain parts of the defective infrastructure for which it was responsible and the carrying out of the work was presented for consideration in general meeting, the relevant motion would have required an ordinary resolution regardless of the proposed cost of the work. However, it should be noted that the Body Corporate was not compelled by the legislation to maintain the old system. For example rather than maintain it, the Body Corporate could have voted to remove the common property parts of the old system. If this resolution had been passed, an owner wanting the benefit of an air conditioned lot could have proposed having specific infrastructure installed, possibly in a similar way as Lots 47 to 49. It would seem from the Ashburner Francis report that such work was possible.

In this case, the Body Corporate committee decided not to pursue the split system option and the Body Corporate, by special resolution, decided to accept total responsibility for the removal of the old system and the installation of the new system. This type of resolution would be necessary if for example, the work was considered to be an improvement to common property by the Body Corporate and subject to the requirements of section 112 of the Accommodation Module and/or the purchase of the infrastructure was considered to be the acquisition of personal property constituting a Body Corporate asset (s115, Accommodation Module).

In seeking to overturn the resolution on Motion 2, the Applicants contend the Body Corporate did not have any responsibility for the removal and installation of the air conditioning infrastructure. This argument proposes that the Body Corporate was not responsible for this work raising the question as to whether the Body Corporate could involve itself in this project given its functions and powers.

A body corporate’s general functions and powers are stated in sections 94 and 95 of the Act:

94 Body corporate’s general functions

(1) The body corporate for a community titles scheme must--

(a) administer the common property and body corporate assets for the benefit of the owners of the lots included in the scheme; and

(b) enforce the community management statement (including any by-laws for the scheme); and

(c) carry out the other functions given to the body corporate under this Act and the community management statement.

(2) The body corporate must act reasonably in anything it does under subsection (1) including making, or not making, a decision for the subsection.

95 Body corporate’s general powers

(1) The body corporate for a community titles scheme has all the powers necessary for carrying out its functions and may, for example--

(a) enter into contracts; and

(b) acquire, hold, deal with, and dispose of property; and

(c) employ staff.

(2) Without limiting subsection (1), the body corporate has the other powers given to it under this Act or another Act.

The power or duty of the Body Corporate to accept responsibility for the old system and the new system must be construed in the context of the Act. A body corporate cannot decide to do something that is outside its legislated powers or functions, or that is contrary to a provision of the Act. Consequently, it must be clear that the Body Corporate had the legislative power to resolve to accept responsibility for the removal and installation of the air conditioning infrastructure, and for the maintenance and operating costs of the new system. In this regard, it is necessary to consider all the material facts.

These facts are:

1.	Since the establishment of the scheme, the old system serviced Lots 1 to 46 and common property. The Body Corporate accepted responsibility for the maintenance and operation of the old system.
2.	A part or parts of the old system’s infrastructure required maintenance and possibly replacement.
3.	Lot owners were presented with a proposal to replace the old system. The relevant Motion 2 at the 2006 EGM required a special resolution.
4.	The approved new system is comprised of three separate inverter units, each servicing more than one lot. Two of the three units have a larger capacity to air condition lots. Each larger unit services 18 lots on levels C and D of the building. The smaller unit services 10 lots on level B. Each unit seems to operate independently. The supply of the service is able to be controlled within each connected lot. The units do not supply a service to all lots included in the scheme or to common property.
5.	The new system’s infrastructure does not facilitate the provision of, or similarly provide air conditioning to Lots 47 to 49. No infrastructure has been installed to enable these lots to be similarly air conditioned. It would seem the owners of Lots 47 to 49 were not given the opportunity to be connected to the system.
6.	Lots 47 to 49 are air conditioned by individual split system units. The owner of each of these lots is responsible for the costs associated with the operation of these units.
7.	Lots 1 to 46 could have been air conditioned by individual split system units.

The removal of the old system and the purchase and installation of the new system must be work or expenditure within the power of the Body Corporate. It must be for the benefit of owners and the Body Corporate must have acted reasonably in deciding to do this work. While I do not consider the Body Corporate can only act when it is for the benefit of all owners, the power of the Body Corporate to act must be viewed on the basis of the prevailing circumstances.

I do not consider the previous practice of the Body Corporate accepting total responsibility for the old system to be significant. Given it was part of the original infrastructure of the scheme, and in the absence of any contrary agreement, the Body Corporate had a responsibility to maintain common property components of the old system. It would seem there was specific infrastructure within lots related to solely servicing those lots (fan coil units and related piping) indicating that individual owners had some maintenance obligation. The condition of this infrastructure may have been a major reason for considering the new system. If this was the case, the fact it provided the ‘chiller’ infrastructure did not necessarily obligate the Body Corporate to maintain the system completely.

As I stated earlier, a maintenance decision could have been made by ordinary resolution. Even if it was apparent that the work proposed in Motion 2 constituted maintenance, no evidence has been presented demonstrating that the Body Corporate was solely responsible for the maintenance of the old system. In these circumstances, the Body Corporate did not have the power to decide that it would be wholly responsible. To the extent Motion 2 related to obligating the Body Corporate to maintain the old system by completely replacing it, the Motion is void.

In addition, given the abovementioned facts stated at point 4, I am of the view the new system is more in the nature of improvements. While a body corporate may make improvements to common property, the work approved does not benefit users of common property, the only purpose of the infrastructure is to enable most (but not all) lots included in the scheme to be supplied with air conditioning, and a portion of the costs related to work within lots not common property. To the extent Motion 2 related to improvements to common property by the Body Corporate, the Motion is void.

The Body Corporate could have decided to purchase infrastructure which could be an asset (s11, Act and s115, Accommodation Module). However, it is doubtful whether the entire infrastructure could be classified as an asset given the section 11 definition of body corporate assets.

Common property is now air conditioned by a separate split system. Only the owners and occupiers of Lots 1 to 46 derive any benefit from the new system. There is no benefit to the Body Corporate, to common property or to the owners of Lots 47 to 49, who as members of the Body Corporate are being compelled to contribute to the costs associated with air conditioning Lots 1 to 46 while having to individually pay to have their lots air conditioned. In these circumstances, the Body Corporate’s power to be involved in this project was restricted to that provided under section 118 of the Accommodation Module which provides:

118 Supply of services by body corporate--Act, s 158 [SM, s119]

(1) The body corporate may supply, or engage another person to supply, utility services and other services for the benefit of owners and occupiers of lots, if the services consist of 1 or more of the following--

(a) maintenance services, which may include cleaning, repairing, painting, pest prevention or extermination or mowing;

(b) communication services, which may include the installation and supply of telephone, intercom, computer data or television;

(c) domestic services, which may include electricity, gas, water, garbage removal, airconditioning or heating.

Example--

The body corporate might engage a corporation to supply PABX services for the benefit of the owners and occupiers of lots.

(2) The body corporate may, by agreement with a person for whom services are supplied, charge for the services (including for the installation of, and the maintenance and other operating costs associated with, utility infrastructure for the services), but only to the extent necessary for reimbursing the body corporate for supplying the services.

(3) In acting under subsections (1) and (2), 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 a service, including the cost of a commercial service, and the cost of purchasing, operating, maintaining and replacing any equipment, is recovered from the users of the service.
A section 118 arrangement may have been a reasonable option given the extent of the work involved in the installation of the new system. However, the essential difference in applying such an arrangement is that the owners of the unaffected lots would not be liable for all the installation, maintenance and operating costs associated with the new system. The benefiting owners would be principally responsible in a way comparable to the benefit being obtained. Motion 2 was not passed pursuant to section 118.

For the above reasons, I have ordered that the resolution passed on Motion 2 is void.

However, I consider it appropriate to stay the effect of the order given that the new system has been installed and 47 of the 49 owners have paid the special contribution. In addition, the Body Corporate will have some responsibility with respect to the costs of the removal of the old system and could have been involved in the installation of the new system under section 118. The period of the stay allows the Body Corporate to settle the proper allocation of the removal and installation costs and the allocation of ongoing costs internally, including if necessary negotiating and reaching agreement with the owners of Lots 1 to 46. For example, the Body Corporate may need to give consideration: to determining ownership of the infrastructure; to properly apportioning costs; to requiring further payments from some owners and possibly reimbursing some owners; to devising a section 118 agreement/s with the owners of Lots 1 to 46; and to passing appropriate resolutions. There may be a number of complex issues to be determined. If the Body Corporate does not or cannot properly resolve these matters, then it may be necessary that a further application is made under the dispute resolution provisions of the Act.

Given the material presented, it is clear the Applicant is not responsible for the amount of the special contribution fixed by the passing of Motion 2. As the Applicant has not paid the contribution, given the stay on the effect of the order, the Body Corporate may pursue payment (s97, Accommodation Module) and the Applicants would not be entitled to vote in general meeting or be eligible for committee election (ss11 and 47A, Accommodation Module). The issue of the Applicant’s non-payment of the special contribution should not be pursued or taken into account during the three month stay period. In these circumstances, it is just and equitable to include a provision in the order to exclude any obligation for the Applicant to pay the special contribution fixed by the passing of Motion 2 during the stay period. This decision does not prevent the Body Corporate, at a general meeting within this period or at some later time, from deciding the Applicant pay another amount as a special contribution to meet Body Corporate costs associated with the removal and installation of the air conditioning infrastructure.