Ballah [2008] QBCCMCmr 185 (3 June 2008)

Last Updated: 26 June 2008

REFERENCE: 0921-2007

ORDER OF A REFEREE

MADE UNDER PART V

BUILDING UNITS AND GROUP TITLES ACT 1980

Number of Plan:	Upper Building Units Plan 2
Name of Building:	Ballah
Address of Building:	11 Hanlan Street SURFERS PARADISE QLD 4217

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

Christine Wright, the Owner(s) of lot 35

I hereby order that, unless authorised by a further resolution in general meeting, The Proprietors of Ballah Upper Building Units Plan No. 2 must not incur any further expenditure with DBI, or other consultants, in relation to a proposed upgrade of common property referred to in resolution 15 of the 2006 annual general meeting.

STATEMENT OF REFEREE’S REASONS FOR DECISION - REF 0921-2007

“Ballah”

Application

Christine Wright, the owner of Lot 34 (applicant) lodged an application seeking an interim order that The Proprietors Ballah, Upper Building Units Plan No. 2 (body corporate) not “engage DBI or other architects to do any further work on the proposed upgrade to buildings or scope of project work”. The applicant seeks a final order “preventing the Body Corporate from spending any money with DBI without the approval of the owners”.

Jurisdiction

Upper Building Units Plan No. 2, created from lot 2 on RP 166140, is the upper plan for "parcel 2" under section 4 of the Registration of Plans (H.S.P. (Nominees) Pty. Limited) Enabling Act 1980 (ROPE).

Section 3 of the ROPE Act makes provision for the application of the Building Units and Group Titles Act 1980 (BUGTA) stating:

Save to the extent that this Act is inconsistent with the provisions of the Building Units and Group Titles Act 1980 in which case the provisions of this Act shall apply, the provisions of that Act which relate to the subdivision of land by the registration of building units plans and apply in respect of those plans shall apply in respect of the subdivision of each of parcel 1 and parcel 2 by the registration of upper plans and lower plans pursuant to this Act and in respect of those plans as if those plans were building units plans under that Act and for those purposes references in that Act to building units plans, lots, common property, parcel, subdivision of land and body corporate shall be construed as references to upper plans or lower plans, lots, common property, parcel, subdivision of part of parcel 1 or, as the case may be, of part of parcel 2 and a body corporate of an upper plan or lower plan respectively within the meaning of this Act.

BUGTA continues to apply regarding the operation of the ROPE despite the subsequent commencement of the Body Corporate and Community Management Act 1997 (BUGTA, 5A). A Referee under BUGTA has power to make orders for this type of application (BUGTA, 77).

Submissions

The applicant’s main submissions were to the effect that:

• At the 2006 annual general meeting owners approved spending $30,000 for each building regarding a proposal by SJB Architects;
• The legislation was contravened as only one architect firm was submitted;
• An accurate list of expenditure has not been provided;
• The proposal was subsequently rejected by owners at the 2007 annual general meeting because the costs were prohibitive, with the first proposal $6.9 million and the second $12 million; and
• The chairperson refuses to accept that owners do not want to spend large sums.
  

The body corporate’s main submissions were to the effect that:

• At the annual general meeting on 29 April 2006, approval was given for the spending of $60,000 plus GST for advice on the benefit/value of the scope of works proposed by SJB Architects;
• The committee investigated architects from the Gold Coast and Melbourne but it was not practicable to obtain two tenders for the annual general meeting because of the need for briefing of architects and visiting of the site;
• At the annual general meeting on 11 April 2007 there was considerable discussion about the proposed work as submitted by SJB Architects. However, the motion was withdrawn and not ‘rejected’ as alleged by the applicant. The motion is not relevant in any event as it related to the performance of the work and the applicant has only sought orders in relation to the architectural survey and design as approved at the annual general meeting of 19 April 2006.
  

Other owners have also provided submissions. All submissions are available for the parties to inspect upon request and it is unnecessary for me to summarise these submissions here.

Decision

Applicable law

The legislation includes provisions to the effect that:

• The body corporate may make improvements to the common property with costs that, in any one case, exceed the body corporate’s prescribed amount only when authorised by resolution without dissent or if resolved to be essential for health, safety or security and approved by a referee (BUGTA, 37(2)(g));
• Body corporate expenditure above the body corporate’s prescribed amount must ordinarily be approved by owners in general meeting and, if the expenditure is for the performance of work or the purchase of personal property, must be subject to at least two tenders (BUGTA, 47(2)).
  

Under the Building Units and Group Titles Regulation 1998 (Regulation), the prescribed amount for improvements is $200 per lot (Regulation, 8). The registered plan, UB2, shows 97 lots. The prescribed amount for improvements for the body corporate is therefore $19,400.

The prescribed amount for committee expenditure is $40 per lot (Regulation, 11). The prescribed amount for committee expenditure for this particular body corporate is therefore $3,880. Therefore, any expenditure in respect of work to be performed or the purchase of personal property in excess of $3,880 should be undertaken only after the submission of at least two tenders to a general meeting of owners (BUGTA, 47(2)).

Issues

In determining whether to grant the order sought, being that the body corporate be prevented from spending any money on DBI without the approval of owners, it is necessary to determine whether there is evidence that the alleged spending is likely to occur and whether or not the proposed spending is unauthorised.

Findings

I am satisfied from the minutes of the annual general meeting on 19 April 2006 that owners resolved to authorise the committee to spend an amount of up to $33,000 per tower to obtain advice on the benefit/value for the scope of works in the proposal submitted by SJB Architects regarding a common property upgrade.

From details extracted by the parties from the general ledger, I am satisfied that the body corporate spent somewhere around $18,000 to $24,000 per tower, between July 2006 and March 2007, primarily upon services provided by SJB Architects. There is some dispute regarding whether the costs of printing booklets and legal advice should be included in this total. However, it is unnecessary for me to decide this question for the reasons below.

Another question is whether the body corporate has entered into contracts totalling $34,650 with DBI for further advice on the work. By letter dated 9 November 2007 from DBI to the body corporate, DBI listed four phases of a proposed works program, phase 1 relating to the pool area on level 6, phase 2 relating to a facade refurbishment and repainting of the towers, phase 3 relating to an upgrade of elevator lobbies, and phase 4 relating to the podium facade upgrade to Hanlan Street. By letter dated 15 November 2007 from Paul Roberts on behalf of the body corporate to DBI (copied to Lionel Krongold), the body corporate purported to accept DBI’s proposal and authorise Phase Two to proceed at a quoted fee of $5,000. However, the body corporate manager has subsequently advised, by letter dated 16 May 2008, that amounts of $29,150 and $5,500 – DBI Phase 2 have never been paid for or approved by the body corporate.

Based on the above information, there appears to be some uncertainty as to whether the body corporate has, or proposes to, engage DBI or other architects to provide further advice. In particular, I note that the "Phase 2" related to façade refurbishment and repainting rather than an upgrade of common property. However, I note that the minutes of the most recent annual general meeting on 9 April 2008 indicate there was some discussion of a proposal to construct an indoor heated swimming pool where the present putting green is located on level 6 and an indication that the committee indeed to discuss this matter further at future committee meetings.

If the body corporate had engaged DBI to provide approximately $34,650 in services relating to the upgrade of common property as discussed in the 2006 annual general meeting then the authorisation given by owners would have been exceeded. I am not satisfied that this is the case.

However, I have concerns that the authorisation given by owners was insufficient in any event due to requirements for two tenders to be provided for owners to vote upon and because of spending limits for the committee to make improvements to common property.

Limits on spending

The first concern is that owners have simply voted to authorise the committee to spend up to $33,000 on consultants’ fees for a common property upgrade without owners having the opportunity to consider any quotations from those consultants. The legislation requires that any spending above $3,880 should be undertaken only after the submission of at least two tenders to a general meeting of owners (BUGTA, 47(2)). In this instance the committee has raised concerns about the difficulty of obtaining two quotations but has not even submitted one tender or quotation to owners and explained to owners why two tenders were not obtained. Further, the explanation for failing to consider two quotations is inadequate with vague references to concerns of cost and convenience without any specifics provided. The committee has failed to comply with the above provision of the legislation. For this reason alone I am satisfied that the applicant should be entitled to the order that she has sought. In fact, due to the words in section 47(1) restricting committee expenditure "in any one case", the committee should not be incurring any further expenditure for any type of consultants to the extent that the work relates to a single project. I will therefore make an order to this effect.

Another issue is that the work involved appears to be a mix of maintenance and improvements. To the extent that the work involves improvements to the common property I have a concern about the likelihood of these improvements ever being approved by the body corporate given the stated objections of the applicant and some other owners. The proposed improvements to common property are obviously over the prescribed improvements limit for the body corporate of $19,400 (Regulation, 8). The legislation therefore provides that the body corporate may make the improvements only if authorised by resolution without dissent or if resolved to be essential for health, safety or security and approved by a referee (BUGTA, 37(2)(g)). This appears to be an excessively difficult precondition for the body corporate to meet in order to make improvements to the common property, especially when compared with the less restrictive requirements under the subsequent Body Corporate and Community Management Act 1997. It may therefore be questioned whether there is any benefit to the body corporate in paying consultants in respect of proposed improvements that it seems likely the body corporate will be prevented from ever implementing. However, whether improvements to the common property should be authorised by a majority or special majority of owners despite the objections of one or two individuals is a question of policy. If the committee consider the legislative requirements for owner approval of improvements to common property should be made less strict then that is a matter for the committee to raise at a policy level.

Order

For these reasons, I make the order above.