Kalimna [2009] QBCCMCmr 136 (26 March 2009)

Number of Scheme:	12015
Name of Scheme:	Kalimna
Address of Scheme:	35 Picture Point Crescent NOOSA HEADS QLD 4567

TAKE NOTICE that pursuant to an application made under the abovementioned Act by John and Marlene Young , the owner of Lot 4

I hereby order that the resolution passed on Motion 15 at the Annual General Meeting of the body corporate for Kalimna community titles scheme 12015 dated 2 September 2008 and adjourned to 9 September 2008, is void.

The scheme
“Kalimna” community titles scheme 12015 is subject to the Body Corporate and Community Management Act 1997 (Act).

Application
This application made on 29 October 2008 by John and Marlene Young , the owner of Lot 4 (Applicants) is against: the Body Corporate; Tuxen Investments, the owner of Lot 1; and Paul and Jennifer Champion, the owner of Lot 2.

The Applicants seek an outcome that the resolution passed on Motion 15 at the Annual General Meeting dated 2 September 2008 and adjourned to 9 September 2008 (AGM) be declared invalid. The minutes of the AGM provided by the Applicants states:

That permission be given for the construction of an extra bathroom in the building void for units 1 and 2.

Referring to section 171 of the Act, the Applicants state the Motion should have required a resolution without dissent and that they voted against the Motion. They say it is not fair to appropriate common property for the use of some owners and the resolution discriminates against the owners of Lots 3 and 4. The Applicants state the lack of a bathroom is a common problem to all lots, especially Lot 4 as it has three bedrooms while the other lots only have two bedrooms. The Applicants submit that no plans, details, development application, costing estimates, environmental impact studies were submitted and no details were given as to the effect on Lots 3 and 4. The Applicants are concerned that the construction of two bathrooms would necessitate altering the plan and would involve an increase in insurance premiums and no arrangements have been made as to how these would be levied.

Interim order
The Applicants also sought an interim order to restrain the Body Corporate and the owners of Lots 1 and 2 from implementing the resolution passed on Motion 15. Before making an interim order, I sought submissions from the committee and the owners of Lots 1 and 2 regarding the interim order application. The owner of Lot 2 made submissions supporting the resolution. Mr Keays, the chairperson and secretary, supported the application. On 18 November 2008, I made an interim order that pending a final determination of this application, neither the body corporate for Kalimna community titles scheme 12015; Tuxen Investments, the owner of Lot 1; or Paul and Jennifer Champion, the owner of Lot 2 shall proceed with, implement, otherwise act upon or allow to be acted upon the resolution passed on Motion 15.

Submissions to the Commissioner
On 14 January 2009, the Commissioner provided a copy of the application to the owners of Lots 1 and 2, and to Whittles Body Corporate Management (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 (s 243, Act).

Paul and Jennifer Champion, the owner of Lot 2 referred to their submission made to me before the interim order was made submitting that they wish to construct an extra bathroom for Lot 2 in the building void area for: increased amenity for owners, visitors and guests; probable increased likelihood of holiday bookings with an extra bathroom; and an increase in capital value of the units in general. They say that they would prefer all units participate in the planning and construction of an extra bathroom for all units.

In their earlier submissions to me, the owner stated they propose construction of an extra bathroom in the building void between two parts of the building. They submitted: the void has no practical use; a conduit for sewage and wastewater is already down one wall; the bottom of the void is a flat sandy area which is not used for any purpose; and access is difficult due to overgrowth of vegetation and the slope of the block. They say the construction of an extra bathroom would vastly improve the amenity of Lot 2; there would be a rental premium if a second bathroom was available; and construction would have little visual or other impact on Lots 3 and 4.

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

Jurisdiction
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, or the performance of duties, under the Act (s 276(1), Act). The application was made within 3 months of the AGM satisfying the time limit for an application of this nature (s 242, Act).

Investigation
The investigative powers of an adjudicator are stated in section 271 of the Act. On 18 March 2008, I requested the Body Corporate Manager provide a copy of the notice of the AGM and the completed voting papers, and to confirm whether there were any explanatory notes provided regarding Motion 15. The Manager provided copy of the requested documents on 20 March 2009 and stated there was no explanation included with Motion 15.

Decision
In the reasons for making the interim order, I stated (at page 2):

The Motion refers to a building void and the owner of Lot 2 has made reference to a plan drawn by Mr Young. The Applicants included in the application a sketch of the ‘Lower Ground’, the ‘Ground Floor’ and the ‘First Floor’. The ‘Lower Ground’ sketch identifies a ‘void’ between Unit 1 and a store room. The ‘Ground Floor’ sketch identifies a ‘void’ between Unit 2 and car spaces. The ‘First Floor’ sketch identifies a ‘void’ between Unit 3 and Unit 4.

A community titles scheme is comprised of lots and common property—other land that is not included in a lot (s 10, Act). The Body Corporate was created by the registration of BUP 3140 which is now known as a building format plan of subdivision. The plan identifies the lots and common property. The boundary of a lot separated from another lot or common property by a floor, wall or ceiling is the centre of the wall, floor or ceiling (s 49C(4), Land Title Act 1994). The plan shows the building on four levels, identified as “A” to “D”. Lot 1 is on level “A”, Lot 2 on Level “B”, and Lots 3 and 4 on level “C”. On the basis of the submissions and the abovementioned sketch, for the purpose of making an interim determination, I am satisfied the ‘void’ mentioned in the Motion is common property and that this part of common property is not subject to an allocation made under an exclusive use by-law.

There is nothing in the subsequent submissions made to the Commissioner which would suggest the ‘void’ is not common property. I am satisfied from BUP 3140 and the material presented that the ‘void’ is common property. As I indicated in the reasons for the interim order: common property is owned by the lot owners as tenants in common (s 35(1), Act); the owners constitute a body corporate (s 31, Act); and the general functions of a body corporate include administering common property for the benefit of lot owners (s 94(1), Act).

In the reasons for the interim order, I stated the work mentioned in the resolution is of the nature of an improvement. Section 159 of the Act provides that the regulation module may provide for making improvements to the common property, including making improvements for the benefit of the owner of a lot. At the time the notice of the AGM was given — 5 August 2008 — the Body Corporate and Community Management (Standard Module) Regulation 1997 (Previous Regulation) applied to the scheme. On 30 August 2008, the Body Corporate and Community Management (Standard Module) Regulation 2008 (Standard Module) commenced and the Previous Regulation was repealed. However, as the AGM was called before 30 August 2008, the Previous Regulation continues to apply to the conduct of the meeting (s 218, Standard Module).

Section 113 of the Previous Regulation makes provision for a body corporate making improvements to common property. Section 114 relates to improvements to common property by a lot owner. Given the submissions, it is apparent the extra bathroom for Lot 2 authorised by the resolution is for the benefit of the owner of this Lot. It would seem the extra bathroom for Lot 1 will similarly be for the benefit of this Lot. In these circumstances, section 114 applies with subsection (1) providing that the “body corporate may, if asked by the owner of a lot, authorise the owner to make an improvement to the common property for the benefit of the owner’s lot”. Given the nature of the improvements stated in the resolution, the “improvement must be authorised by special resolution of the body corporate”: s 114(2).

Motion 15 incorrectly required an ordinary resolution. However, given the minuted votes on the Motion, the Motion was passed by special resolution given that: at least two-thirds of the votes were in favour of the Motion; the number of votes counted against the Motion was not more than 25% of the number of lots in the scheme; and the total of the contribution schedule lot entitlements for the lots for which votes were counted against the Motion was not more than 25% of the total of the contribution schedule lot entitlements for all lots included in the scheme (s 106, Act).

On the basis of the abovementioned legislative requirements, it could be concluded the resolution passed on the Motion was in accordance with the legislation. However, the Applicants are concerned about other aspects of the resolution.

Firstly, the Applicants are concerned about the information (or lack of information) provided to lot owners about the proposed improvements. In submitting the Motion, it would seem the owner of Lot 2 proposed significant building work on common property. The owner did not however provide any explanation which was included in the notice of the meeting given to lot owners. Nothing has been presented demonstrating that either the owner of Lot 1 or the owner of Lot 2 gave any explanatory material to owners in another way. The Applicants have referred to information they consider should have been provided. I agree that an owner voting on a motion of the nature of Motion 2 was entitled to information that explained the proposal. In addition to the material referred to by the Applicants, an owner should have been informed about for example: the exact location of the proposed improvements; the proposed method of construction; the effect the proposed improvements would have on scheme land including the building and existing utility infrastructure; and the effect on the aesthetics of the scheme. The onus rested with the owners of Lots 1 and 2 to fully and fairly explain the proposed work so that owners could consider all relevant details about the proposal before voting on the Motion. The only information given to owners was contained in the Motion itself, and it is brief. The referred to sketch does not provide appropriate detail. The Applicants are entitled to be concerned about the absence of relevant information, which in my view casts doubt on the validity of the resolution.

Secondly, the Applicants state the Motion should have required a resolution without dissent. Section 170 of the Act provides that a body corporate may make an exclusive use by-law “that attaches to a lot...and gives the occupier of the lot for the time being exclusive use to the rights and enjoyment of...common property”. Section 171(1) and (2) provides that an exclusive use by-law that specifically identifies the common property to which it applies “may attach to a lot only if the lot owner agrees in writing before the passing of the resolution without dissent consenting to the recording of the new community management statement to incorporate the exclusive use by-law, or the lot owner votes personally in the resolution”. As the Motion did not deal with making such a by-law, it did not require a resolution without dissent. However, there is a basis for arguing that if the resolution was implemented, the owners of Lots 1 and 2 would have use and enjoyment of common property to the exclusion of other owners and occupiers without proper authority, such as for example a grant of exclusive use. It is apparent the Body Corporate has not given any consideration to the matter of giving a right to either owner over the parts of common property to be built on. In my view, this issue is directly related to Motion 15 and the absence of any contemplation of it is significant.

Lastly, the Applicants believe the resolution is not fair and discriminates against the owners of Lots 3 and 4. A body corporate must administer the common property for the benefit of lot owners (s 94(1), Act). A body corporate must act reasonably in anything it does under section 94(1); including in making or not making a decision for the subsection (s 94(2), Act). In determining whether the Body Corporate acted reasonably in making the decision on Motion 15 it is appropriate to consider if the decision is objectively reasonable: Greiner v Independent Commission Against Corruption (1992) 28 NSWLR 125. The objective test requires a balancing of factors in all the circumstances according to the ordinary meaning of the term ‘reasonable’: Secretary, Department of Foreign Affairs and Trade v Styles [1989] FCA 342; (1989) 88 ALR 621 (see also McKinnon v Treasury [2006] HCA 45 per Hayne J at p61).

The Applicants would seem to be basing their argument on a claim that the lack of a bathroom is a common problem to all lots. This may be an issue. However, it does not prevent the owner of Lot 2 proposing a motion of the nature of Motion 15. As a lot owner, the Applicants are similarly entitled to submit an appropriate motion for the consideration of the Body Corporate. It has not been demonstrated that the Body Corporate made the resolution on Motion 15 knowing that another owner could not similarly seek authority. There may be a question if the owners of Lots 1 and 2 were authorised to make an improvement to common property and the effect of this authorisation was that another owner could not similarly obtain authorisation, even though for example, the Body Corporate knew that that owner also wanted to make a similar improvement to common property. There is nothing to suggest this circumstance is evident in this dispute. I do not necessarily agree that the Applicants have demonstrated that the resolution was unfair or discriminated against particular owners.

In my view, the absence of any proper explanation to owners about the improvements or about the consequential right for the owners of Lots 1 and 2 to enjoy the affected common property to the exclusion of other owners are significant deficiencies. The owner of Lot 2 proposed a motion seeking authorisation to build bathrooms for Lots 1 and 2 on common property. The Body Corporate was entitled to full disclosure about the proposal before deciding whether to authorise the owners to use common property for the benefit of their lots and it is clear this information was not given to owners. Further, while not raised by the Applicants, there is also the question about the voting on the Motion. The voting papers provided by the Body Corporate Manager indicate that the owners of Lots 1, 2 and 3 voted for the Motion. Mr Keays, the owner of Lot 3 has submitted support for the application, which suggests he opposes the proposal. It is noted that in voting for the Motion, the words “and unit 3” were added to the Motion on the voting paper for Lot 3 which suggests consent was given on the condition that Lot 3 was included in the proposal. The minutes do not suggest that the Motion was amended at the meeting to include the additional words. It could be argued the owner of Lot 3 would not otherwise support the Motion. The opposition from the owner of Lot 3 would defeat the proposal.

The owner of Lot 2 has suggested that each owner should consider building a bathroom on common property. This is a matter for owners, may involve approaching relevant authorities and persons with appropriate skills or qualifications such as engineers, architects or solicitors before a proper proposal is put to the Body Corporate for its consideration in accordance with the legislation.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Kalimna [2009] QBCCMCmr 136 (26 March 2009)