Waterside Runaway Bay [2008] QBCCMCmr 179 (26 May 2008)

Last Updated: 4 June 2008

REFERENCE: 0203-2008

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	34678
Name of Scheme:	Waterside Runaway Bay
Address of Scheme:	27 - 29 Madang Crescent RUNAWAY BAY QLD 4216

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

Barrie & Olivia Johnston, the Owners of lot 1

I hereby order that the application for the following orders: A declaration that lot 1 was granted exclusive use of the deck extension pursuant to a resolution without dissent of the body corporate passed on 6 February 2007. An order directing that the body corporate sign and cause to be lodged a new community management statement including a by-law granting to the owner of lot 1 exclusive use of the extension of balcony from lot 1 (which encroaches onto common property) and an exclusive use plan in accordance with the resolution without dissent of the body corporate passed on 6 February 2007. Is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0203-2008

“Waterside Runaway Bay” CTS 34678

THE SCHEME

Waterside Runaway Bay is a 10 lot scheme registered as a building unit plan (now known as a building format plan) and operating under the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Standard Module).

APPLICATION

The applicants are Barrie & Olivia Johnston, the owners of lot 1 who seeks the following final outcomes:

A declaration that lot 1 was granted exclusive use of the deck extension pursuant to a resolution without dissent of the body corporate passed on 6 February 2007.

An order directing that the body corporate sign and cause to be lodged a new community management statement including a by-law granting to the owner of lot 1 exclusive use of the extension of balcony from lot 1 (which encroaches onto common property) and an exclusive use plan in accordance with the resolution without dissent of the body corporate passed on 6 February 2007.

The applicants previously sought the following Interim Order:

That the body corporate be restrained from considering Motion 10 at the upcoming Annual General Meeting to be held on Monday 10 March 2008 or alternatively the body corporate be restrained from acting on the motion pending final determination of this application.

Motion 10 read as follows: “that the area of the deck extension of unit 1 be restored to the common property”

On 7 March 2008 I made the following orders:

• That the AGM scheduled for 10 March 2008 may proceed;
• That owing to the possibility that a resolution based upon motion 10 could be invalid, the Body Corporate is to refrain from acting upon any resolutions based on motion 10 until a final order has been made in respect of this dispute resolution application.
  

However when Motion 10 was voted upon at the meeting, the motion was defeated with 5 votes against the motion and only 3 votes in favour.

BACKGROUND

The applicants purchased lot 1 from Zenrich Pty. Ltd. (“the developer”) by contract dated 6 February 2007 which was conditional upon the purchasers being granted exclusive use of certain common property for the purpose of extending the balcony area of that lot.

The relevant condition read as follows:

This contract is subject to and conditional upon the sellers completing a timber deck extension of the existing ground floor terrace belonging to lot 1 /27-29 Mandang Crescent, Runaway Bay. The dimensions of the terrace will be 1.36 metres x 4.56 metres and the extension will be constructed

of timber decking similar to existing decking on boardwalk and stairs in a proper and workmanlike manner and in accordance with the terms of the necessary Gold Coast City Council. The seller will obtain from the Body Corporate all necessary approvals to the construction of the extension and cause the Body Corporate to grant to the buyer exclusive use of that part of the extension to the balcony that encroaches into the common property.

The applicants state that on 6 February 2007, the developer, who was the owner of all lots in the scheme at the time of the contract, caused the body corporate to hold an extraordinary general meeting to approve the construction of the deck and also granted to lot 1 exclusive use of that part of the extension to the balcony that encroaches upon common property. Attached to the application was a copy of the minutes of the EGM held on 6 February 2007 which include the following information:

Resolved that permission be granted for construction of a timber deck 1.36 metres by 4.56 metres which will extend the existing ground floor terrace in front of lot 1.

Resolved that permission be granted for the above extension of the balcony that encroaches onto the common property to be included in the Exclusive Use areas allowed for by the owners of Lot 1.

However the body corporate failed to register with the Queensland Land Registry a new community management statement (CMS) evidencing the grant of exclusive use. Further, it is claimed that the minutes of the alleged meeting of 6 February were not included in body corporate records and therefore not available to be searched by prospective purchasers.

On 15 February 2008 the body corporate manager issued a notice of AGM and an agenda for the meeting which included the following Motion 10 – “that the area of the deck extension of unit 1 be restored to the common property”. The explanatory material accompanying the motion included the following statement- “ there appears to be a question regarding the legality of the deck extended onto common property by unit no.1. to clarify the situation not only for Unit no.1 but for all other owners an appropriate legal decision should be made to either confirm the legal status of the deck or to have the area returned to common property”;

Requests by the applicants to have the motion withdrawn were rejected by the body corporate manager, and the body corporate has taken the position that it is not now possible to lodge a new CMS evidencing the grant of exclusive use because more than 3 months have elapsed from the date that the resolution was passed on 6 February 2007.

The applicant’s position is that as they have been granted exclusive use of certain common property, a resolution without dissent (i.e. requiring their consent) is required to divest them of their right to exclusive use.

Accordingly, the applicants are seeking an order directing that the body corporate sign and cause to be lodged a new community management statement, including a by-law granting to the owner of lot 1 exclusive use of the extension of balcony from lot 1 (which encroaches onto common property) and an exclusive use plan in accordance with the resolution without dissent of the body corporate passed on 6 February 2007.

Submissions

Pursuant to section 247 of the Act, submissions were sought from all lot owners as well as the body corporate committee.

Submissions made by the owners of 4 lots in the scheme included the following:

• On 29 January 2007 an EGM was held at the offices of Sargeant Strata and according to the minutes, the first community management statement was tabled at that meeting;
• At no time were they notified or made aware of any changes to the CMS concerning the owners of lot 1 being granted exclusive use over the common property where the applicants’ deck now exists;
• In August 2007 the applicants sought the consent of the body corporate to erect an awning over the deck. It then came to the attention of the other lot owners and committee that the deck was constructed over common property, allegedly without the necessary consents or resolutions required under the CMS;
• They question the validity of the alleged EGM held on 6 February 2007, and suggest that apart from the copy of the minutes produced by the applicants, there is no evidence that the meeting occurred;
• They suggest that the minutes of the “alleged meeting” on 6 February 2007 would appear to be an attempt by the vendor/ developer to avoid liability for its failure to comply with the special condition in the contract as detailed in the application;
• The owners of lot 1 should have ensured that the vendor developer, as seller, complied with its obligations under the special condition concerning rights to exclusive use associated with lot 1;
• It was the responsibility of the owners of lot 1 to ensure that the vendor/ developer complied with the obligations under the special conditions concerning rights to exclusive use associated with lot 1. The failure to do so indicates a lack of diligence on their part or on the part of their solicitor;
• The applicants should therefore seek to take action against the vendor/ developer and/ or the solicitors who attended to their conveyancing;
• All lot owners are entitled to rely upon the contents of the current CMS when purchasing their lot. The CMS made available to the owners of lot 9 at the time of making their purchase and the disclosure statement completed by the vendor/ developer did not mention an exclusive use by-law permitting the owners of lot 1 to use common property directly below their lot for the purposes of building a deck.
• They claim that the applicants’ deck substantially affects the peace and enjoyment of those units directly above lot 1 as:

- there is now a living area directly below lot 9 which extends beyond the building line of the complex. The building was not designed to accommodate such an addition and the noise is not stopped from travelling upwards by the original building line as in the other units.

- There was previously a garden in this space which produced no noise but is now a living and entertainment area which generates substantial noise;
- The timber decking causes the noise to reflect and rebound directly up to lot 9 affecting their use and enjoyment by the subsequent increase in noise

• They claim a substantial loss of privacy by the overhead balconies due to the protrusion of the deck extension beyond the building line resulting in people who are using the entertaining area now having a direct line of sight into lot 9;
• By reason of the above, the market value of lot 9 would be adversely affected;
• The deck has a negative impact on the overall design of the building;
• The complaint by the applicants regarding water dripping from above relates to the construction of their deck below lot 9 and impacts on the use and enjoyment of the balconies above lot 1. This is because there was originally garden space below their balconies and they should be entitled to continuing to use their balconies as anticipated at the time of purchase;
• The applicants should be able to pursue remedies against the developer/ vendor as well as the solicitors who attended to the conveyancing on their behalf;
  

The owners of 5 lots supported the applicants and made the following submissions:

• They believe that an EGM has held by the original owner on 6 February 2007 at which lot 1 was granted exclusive use of the subject area by way of a resolution without dissent;
• On 6 February 2007 the applicants entered into a contract to purchase lot 1 and completed the contract on 26 March 2007;
• On 15 February 2008 the body corporate manager issued a notice of AGM and an agenda for the meeting which included the following Motion 10 – “that the area of the deck extension of unit 1 be restored to the common property”;
• The explanatory material accompanying the motion included the following -

“ there appears to be a question regarding the legality of the deck extended onto common property by unit no.1. to clarify the situation not only for Unit no.1 but for all other owners an appropriate legal decision should be made to either confirm the legal status of the deck or to have the area returned to common property”;

• Solicitors acting for the owners of lot 1 requested the body corporate to withdraw the motion but were advised as follows- “Motion 10 was submitted by the committee and cannot be withdrawn by any other party. Committee have agreed that it is not now the body corporate’s responsibility to have plans of exclusive use prepared or a new community management statement, which cannot be lodged within the legal time frame prepared.”
• Motion 10 was voted upon at the meeting but was defeated with 5 votes against the motion and only 3 votes in favour;
• They believe that the lot 1 deck is in keeping with the visual aspect and amenity of the rest of the building as the balcony does not protrude any further than the boundaries of the existing building and is constructed with materials that conform to those used throughout and is therefore virtually unnoticeable and in fact, conceals the vent to the basement carpark;
• They do not want the body corporate exposed to any legal fees or expense that may result from any action that the applicant may take in the event that certain members of the body corporate persist in attempting to deny the applicants exclusive use of the balcony.
  

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)).

DETERMINATION

The applicants are Barrie & Olivia Johnston, the owners of lot 1 who are seeking the following final outcomes:

A declaration that lot 1 was granted exclusive use of the deck extension pursuant to a resolution without dissent of the body corporate passed on 6 February 2007.

An order directing that the body corporate sign and cause to be lodged a new community management statement including a by-law granting to the owner of lot 1 exclusive use of the extension of balcony from lot 1 (which encroaches onto common property) and an exclusive use plan in accordance with the resolution without dissent of the body corporate passed on 6 February 2007.

On 6 February 2007 the applicants entered into a contract to purchase a lot and included in that contract was the following clause: This contract is subject to and conditional upon the sellers completing a timber deck extension of the existing ground floor terrace belonging to lot 1 /27-29 Mandang Crescent, Runaway Bay.

The applicants also state that on 6 February 2007, the developer, who was the owner of all lots in the scheme at the time of the contract, caused the body corporate to hold an extraordinary general meeting to approve the construction of the deck and also granted to lot 1 exclusive use of that part of the extension to the balcony that encroaches upon common property.

However lot owners who oppose the application question the validity of the alleged EGM held on 6 February 2007, and suggest that apart from a copy of the minutes produced by the applicants, there is no evidence that the meeting occurred. For example, they claim that no notice was given to lot owners or the body corporate manager of a meeting to consider the grant of exclusive use. Further, they claim that the minutes of the alleged meeting on 6 February 2007 appear to be an attempt by the vendor /developer to avoid liability for its failure to comply with the special condition in the contract as detailed in the application.

A further matter that arises for consideration in this case is that (assuming the EGM was held on 6 February 2007) a new CMS recording the grant of exclusive use was not submitted with the Queensland Land Registry within the 3 month period prescribed by sub-section 65(1) of the Act which provides as follows:

65 Time for lodging request to record new statement
(1) If the body corporate consents to a new community management statement being recorded for a community titles scheme, the body corporate must, within 3 months after the relevant event happens, lodge a request to record the new statement.

A body corporate is created under the terms of the BCCM Act[1], and its functions and powers are defined by the BCCM Act[2]. The BCCM Act specifies the type of body corporate resolution required to consent to the recording of a new Community Management Statement[3] and the responsibility for preparing a new Community Management Statement for lodgement after the consent has been given[4]. Section 65 of the Act prescribes that the body corporate must lodge the request to record the new statement within 3 months of the date it consents to the recording of the new statement. The applicant states that the resolution with dissent, approving the grant of exclusive use was made on 6 February 2007, and therefore a new CMS should have been lodged with the Queensland Land Registry by 6 May 2007.
In my view section 65 imposes a duty upon the body corporate to lodge a request to record a new community management statement within a specified time limit and the lodgement of a request outside this period should only be allowed by an adjudicator where, in the circumstances, it would be just and equitable to do so.

On one hand, I note that the applicants acted in good faith and made what they considered to be a reasonable request for permission to increase the width of their front terrace by 1.36 metres along a length of 4.56 metres (i.e. approximately 6 square metres) so that the outside area is able to accommodate a table and chairs.

On the other hand however, certain lot owners claim that apart from the copy of the minutes produced by the applicants, there is no evidence that the EGM occurred on 6 February 2007 and that minutes of that meeting were not included in the body corporate records available for search by subsequent purchasers. They claim that the vendor/ developer, and the purchasers’ solicitors, were remiss in not ensuring that the new CMS was registered within the prescribed timeframe. Further, they claim that the aesthetic outlook from the balcony of lot 9 is significantly affected by the existence of the deck and a garden area has been replaced with a living and entertainment area which generates substantial noise.

I have perused photographs of the balcony taken from various angles and find it difficult to come to the conclusion that the balcony extension (1.36 metres by 4.56 metres i.e. approximately 6 square metres) has had a significant impact on the visual amenity of the building or that it would have an adverse impact on the resale value of units. It is also difficult to come to the conclusion that the 6 square metre extension is “a living and entertainment area which generates substantial noise”.

The principal matter of concern to me is that a valuable area of common property has effectively been appropriated to a particular lot without payment of compensation to the body corporate and without being properly recorded in body corporate records. The existence of the exclusive use grant has not been recorded as required by the Act, and therefore, would not have been discoverable by undertaking pre-settlement searches at the Queensland Land Registry. Further, it is claimed that the resolution dated 6 February 2007 was not included in the body corporate records that were available to be searched by prospective purchasers.

For these reasons I do not believe it would be just and equitable for me to make the requested orders.

However, in addition to whatever rights of action the applicants may have against the developer/ vendor, I believe that there may be other options available to the applicants. For example the applicants could arrange to have a motion put to a future general meeting that they be granted exclusive use of the subject area of common property. They may also wish to consider whether such a motion should provide for compensation to the body corporate for the grant of exclusive use. An appropriate motion could be put to a general meeting and if the applicants believe that opposition to the motion is unreasonable, a further dispute resolution application could be submitted with this Office.[5]

Alternatively, the applicants may wish to consider the possibility of seeking relief under the statutory framework established by the Property Law Act 1974 to deal with encroachments.

In this regard, section 184(1) of the Property Law Act 1974 provides:

Either an adjacent owner or an encroaching owner may apply to the court for relief under this division in respect of any encroachment.

Other relevant “Encroachment Provisions” of the Property Law Act 1974 include sections 185 and 186 which provide as follows

185 Powers of court on application for relief in respect of encroachment
(1) On an application under section 184 the court may make such order as it may deem just with respect to—
(a) the payment of compensation to the adjacent owner; and
(b) the conveyance, transfer, or lease of the subject land to
the encroaching owner, or the grant to the encroaching owner of any estate or interest in the land or of any easement, right, or privilege in relation to the land; and
(c) the removal of the encroachment.
(2) The court may grant or refuse the relief or any part of the relief as it deems proper in the circumstances of the case, and in the exercise of this discretion may consider, amongst other
matters—
(a) the fact that the application is made by the adjacent owner or by the encroaching owner, as the case may be; and
(b) the situation and value of the subject land, and the nature and extent of the encroachment; and
(c) the character of the encroaching building, and the purposes for which it may be used; and
(d) the loss and damage which has been or will be incurred by the adjacent owner; and
(e) the loss and damage which would be incurred by the encroaching owner if the encroaching owner were required to remove the encroachment; and
(f) the circumstances in which the encroachment was made.

186 Compensation
(1) The minimum compensation to be paid to the adjacent owner in respect of any conveyance, transfer, lease, or grant under section 185 to the encroaching owner shall, if the encroaching
owner satisfies the court that the encroachment was not intentional and did not arise from negligence, be the unimproved capital value of the subject land, and in any other case 3 times such unimproved capital value.
(2) In determining whether the compensation shall exceed the minimum and if so by what amount, the court shall have regard to—
(a) the value, whether improved or unimproved, of the subject land to the adjacent owner; and
(b) the loss and damage which has been or will be incurred by the adjacent owner through the encroachment and through the orders proposed to be made in favour of the encroaching owner;
(c) the circumstances in which the encroachment was made.

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[1] Sections 24 and 30, Act.
[2] Sections 94 and 95, Act.
[3] Section 62, Act.
[4] See sections 63 and 64, Act.
[5] See item 10 in Schedule 5 to the Act