Aimos Court [2008] QBCCMCmr 269 (7 August 2008)

Last Updated: 12 September 2008

REFERENCE: 0322-2008

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	12276
Name of Scheme:	Aimos Court
Address of Scheme:	31 Mountain Street MT GRAVATT QLD 4122

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

Dzung Price, the Owner of lot 5

I hereby declare that, up to and including 2007, body corporate levies for Aimos Court were incorrectly calculated approximately in proportion to the size of each lot rather than according to the contribution schedule lot entitlements for each lot. Further, that it is more likely than not that the various owners of lot 5 during that period paid approximately $30 to $35 more per quarter than they would have needed to if the levies had been properly calculated. I further declare that levies are now being set correctly in accordance with the contribution schedule lot entitlements shown in the community management statement that is currently in effect for Aimos Court. I further order that the application is otherwise dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0322-2008

“Aimos Court” CTS 12276

Aimos Court community titles scheme (Aimos Court) comprises 5 residential lots and common property. The scheme was established upon registration of building units plan 2870 on 9 June 1978 and is regulated by the Body Corporate and Community Management (Small Schemes Module) Regulation 1997 (Small Schemes Module).

Application

Pursuant to the Body Corporate and Community Management Act 1997 (Act), this application was made by Dr Dzung Price, owner of Lot 5 (applicant) on 11 April 2008. The applicant sought an order against the body corporate (respondent) that:

1. That the body corporate levies should be struck in accordance with the contribution schedule in accordance with the Act.
   
2. A declaration which states the correctly calculated levies that should have been raised if they were struck in accordance with the contribution schedule.
   
3. That the body corporate reimburse the owner of lot 5 for the difference in levies which have been paid and that which would have been paid if struck in accordance with the contribution schedule.

Procedural Matters

Under section 243 of the Act, a copy of the application was provided to the body corporate comprising all owners (excluding the applicant) with an invitation to respond to the matters raised in the application. No submissions were received by the due date and the applicant did not by that date exercise her right to advise the Commissioner’s Office of her desire to inspect and respond to submissions.

The owners of lots 1, 2 and 3 subsequently lodged a joint submission. I am prepared to accept this submission despite its late lodgement and note that the applicant had not requested the opportunity to inspect the submissions so was not inconvenienced by the late lodgement.

The Office of the Commissioner for Body Corporate & Community Management (Commissioner’s Office) wrote to the Body Corporate Manager (BCM), Matthews Body Corporate Management, by letter of 22 July 2008 requesting copies of minutes of AGM’s for each year between 1999 and 2008 inclusive. The BCM provided these records by letter dated 24 July 2008.

A dispute resolution recommendation was made referring the dispute to departmental adjudication.

Relevant events

This application arises out of the body corporate levying contributions on the applicant in the past according to the size of the lots instead of the contribution lot entitlement for the respective lots. The background to the applicant’s claim is not contested and the relevant events can be summarised as follows:

• The applicant purchased Lot 5 in December 1999.
  
• According to the community management statement, contribution schedule lot entitlements for each of the five (5) lots are equal. However, prior to the appointment of a professional body corporate manager on 9 August 2007, the body corporate had been levying contributions on the owner of each lot according to the size of their lot instead of the contribution schedule lot entitlements for the respective lots. The applicant was unaware of this until the applicant received notice of the 2008 annual general meeting on 8 January 2008.
  
• The body corporate had levied total contributions of $649 per quarter for the year 2000, divided as follows:
  

Lot	Total Contribution $/quarter
1	121.00
2	117.00
3	117.00
4	130.00
5	164.00

• At the AGM held on 9 November 2000, the body corporate increased contributions levied for 2001 by $10.00 per lot per quarter over and above the year 2000 contributions as follows:
  

Lot	Total Contribution $/quarter
1	131.00
2	127.00
3	127.00
4	140.00
5	174.00

• Contributions for the year 2002 were levied at the same rate as 2001.
  
• At the AGM held on 24 January 2003, the body corporate increased contributions levied for 2003 by $10.00 per lot per quarter over and above the year 2002 contributions as follows:
  

Lot	Total Contribution $/quarter
1	141.00
2	137.00
3	137.00
4	150.00
5	184.00

• For each successive year up to and including 2007, contributions were levied at the 2003 rate.
  
• Prior to 9 August 2007 when Matthews Body Corporate Management was appointed BCM, responsibility for management of Aimos Court was shared amongst the committee comprising owners of Lots 1, 2 and 3.
  
• At the AGM on 23 January 2008, following appointment of the BCM on 9 August 2007, contributions for 2008 were levied equally in respect of each lot.
  
• By letter of 16 January 2008 to the BCM, Brisbane Realty on behalf of the applicant requested advice as to how it was proposed to redress the apparent over-payment of contributions by the applicant in respect of Lot 5. Minutes of the AGM held on 23 January 2008 record that this letter “was discussed in detail but no action was considered necessary”.

Submissions

The applicant seeks to require the body corporate to reimburse her for any overpayments made in the last several years. This would presumably involve all present owners contributing funds to the body corporate in an amount sufficient to cover the reimbursement.

The submission received on behalf of the owners of Lots 1, 2 and 3 conceded that, while collectively acting in the capacity as the body corporate committee, their method of levying annual contributions in respect of each lot was erroneous, being a continuation of a split of levies based upon the respective floor areas of each lot. In doing so, the owners of Lots 1, 2 and 3 claim to have acted in good faith and to the best of their abilities ignorant of the correct basis for levying contributions in proportion to the contribution schedule lot entitlements. Given their motivation at all times endeavouring to “do the right thing” and being “three old ladies who live on the old age pension but .... managed to run things very well”, they submit that they would be unfairly penalised if the body corporate was required to now retrospectively vary the levies. They refer to work and payments from their own pockets used to maintain the building and grounds, including voluntary work and payments from their own pockets for fertilizers, phone calls and photocopies. Reference is also made to the keeping of the insurance up to date even though the applicant had not contributed his payments for the year. It is also submitted that now a professional body corporate manager has been appointed the fees have already increased to cover that cost.

Jurisdiction

This is a dispute between the owner of a lot and the body corporate and therefore comes within the dispute resolution provisions of the Act (Act 226, 227, 228).

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)).

Issues

The issues for consideration in this matter are:

1. Has the body corporate validly levied contributions in the past on the applicant and each other lot owner?
   
2. If not, what, if any, remedial steps should be taken by the body corporate to regularise past contributions levied?
   

Determination

Applicable law

The body corporate must establish and maintain an administrative fund and a sinking fund into which are paid contributions levied by the body corporate on lot owners (Small Schemes Module, 61).

The levying of contributions on lot owners is governed by section 56 of the Small Schemes Module which relevantly provides:

(1) The body corporate must by ordinary resolution –

(a) fix on the basis of its budgets for a financial year, the contributions to be levied on the owner of each lot for the financial year; and

(b) decide the number of instalments in which the contributions are to be paid; and

(c) fix the date on or before which payment of each instalment is required.

...

(3) The contributions levied on the owner of each lot (other than contributions payable for insurance and any other matter for which, under the Act or this regulation, the liability attaching to each lot is calculated other than on the basis of the lot’s contribution schedule entitlement) must be proportionate to the contribution schedule lot entitlement of the lot.[1]

Validity of contributions levied on lot owners

I note the submission received on behalf of the owners of Lots 1, 2 and 3 who concede that, while collectively acting in the capacity as the body corporate committee, their method of levying annual contributions in respect of each lot was erroneous. That is, instead of being levied equally in proportion to the respective contribution schedule lot entitlements as required by section 56(2) of the Small Schemes Module, contributions had always been split up based upon the respective lot floor areas.

Notably, the actions of the body corporate in this regard are not confined to the period of ownership of Lot 5 by the applicant. Rather, according to Frances Kendall (previously known as Frances Hill) and Jean Turner, who have remained in continuous ownership of Lots 1 and 3 since the scheme’s establishment in 1978, contributions have always been differentially levied and paid “based on the size of that portion of the property which was owned by each person”.

It follows, in my view, that all contributions levied by the body corporate have been improperly calculated, at least since the recording of a community management statement on 16 February 1999 that established equal contribution schedule lot entitlements for each lot.

The manifestation of this, so far as is relevant for purposes of the present application, is apparent in the contributions levied at the AGM held on 30 November 1999 for payment commencing 1 February 2000 as follows:

Lot	Combined admin/sinking fund contribution $/quarter
1	121.00
2	117.00
3	117.00
4	130.00
5	164.00

This means that the combined quarterly levy was $649. Had contributions been levied equally in proportion to the respective contribution schedule lot entitlements as required by section 56(2) of the Small Schemes Module, the amount levied for each lot should have been $129.80 per quarter. This effectively means that the contributions levied on and paid by the owners of Lots 1, 2 and 3 were deficient and those levied on and paid by the owners of Lots 4 and 5 were excessive. The amount by which the applicant overpaid at this time was $34.20 per quarter, being the $164 actually paid by lot 5 less the $129.80 that lot 5 should have paid.

The applicant overpaid by the same amount each subsequent year until the problem was rectified, with the extent of this overpayment not being affected by contribution increases of $10.00 per lot per quarter at the AGM’s on 9 November 2000 and 24 January 2003.

Records have not been provided that would show contributions since the date of establishment of the scheme in 1978. However, it would seem likely that the various owners of lot 5 during that period paid approximately $30 to $35 more per quarter than they would have needed to if the levies had been properly calculated. Further, the owners of lots 1, 2, and 3 would have been underpaying by approximately $10 per quarter each and the owner of lot 4 would have been paying approximately the correct amount despite the wrong method of calculation being used.

Should past contributions levied be regularised?

It is indisputable that by levying contributions in the manner in which it did, the body corporate has been in contravention of section 56(3) of the Small Schemes Module since 1999. The applicant is seeking an order that she be reimbursed all overpayments made since she purchasing Lot 5 in 2001. Attachment A to the application indicates that the applicant at one stage believed the amount to be reimbursed should be more than $6,000 but, from the calculations above and from subsequent calculations, the overpayments by lot 5 were only $34.20 per quarter (or $136.80 per year).

Despite the relatively small size of the overpayment, there may be significant difficulties in determining an appropriate way to reimburse those funds to the applicant. One practical difficulty with seeking to contributions that were paid over a number of years is that any order the body corporate reimburse overpaid contributions would normally require all owners to provide that contribution according to present contribution schedule lot entitlements and it is difficult to make specific orders on individual owners given the potential for ownership changes or lot entitlement adjustments over the period in question. As a matter of fairness, it would seem that contributions would need to be recalculated over the life of the scheme and that all persons who were owners at various times would need to be involved in making or receiving the adjustment payments.

There are also numerous variables that impact upon determining whether the applicant has actually suffered material disadvantage due to the incorrect calculations. It does appear that the applicant did pay around $35 per quarter more than she should have. But I also accept that other owners volunteered their time to manage the scheme without the assistance of a professional body corporate manager. I note and accept statements by the owners of lots 1, 2 and 3 that they live on the old age pension, that they have performed voluntary work and voluntary expenditure that helped keep the body corporate levies lower than they would otherwise have been, and that they tried to do the right thing throughout. In these circumstances, it is entirely possible that the applicant would have had to pay higher contributions if the body corporate had been administered with the assistance of a professional body corporate manager and levies had been properly calculated in accordance with the lot entitlements.

It should have been obvious to the applicant well before the present application was made, or even upon the initial purchase, that the body corporate for Aimos Court was not being administered in accordance with the legislation. No application was made near the time of purchase to require the body corporate to have formal notices and minutes of meeting specifying the amount levied per contribution lot entitlement or requiring the body corporate to adopt financial accounts that formally set out levies and contributions. By failing to take any such action the applicant allowed a situation to continue where levies were improperly calculated. This situation has then been complicated by subsequent changes in ownership of lots 2 and 4. There is even the possibility that other owners would have sought a lot entitlement adjustment if the applicant had insisted on equal contributions at the time.

In all the above circumstances, I am prepared to grant a declaration confirming that levies were improperly calculated and confirming the extent of the likely overpayment by owners of lot 5 over time. However, I will also confirm that levies are now being properly calculated and I do not consider it just and equitable to make any order providing for a readjustment covering the last several years.

Conclusion

For these reasons, I make the above order.

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[1] Emphasis added.