Heath Court [2009] QBCCMCmr 267 (27 July 2009)

Last Updated: 1 September 2009

REFERENCE: 0434-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	5886
Name of Scheme:	Heath Court
Address of Scheme:	3 Heath Street EAST BRISBANE QLD 4169

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Ross Ashcroft, the owner of Lot 11

I hereby order that the application for an order by Ross Ashcroft, the owner of Lot 11 against the body corporate for Heath Court community titles scheme 5886 seeking to overturn the resolution opposing Motion 15 at the Annual General Meeting dated 14 January 2009 and that the major works be started within not more than 30 days from the date of payment of funds, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0434-2009

“Heath Court” CTS 5886

The scheme
“Heath Court” community titles scheme 5886 is subject to the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (Standard Module).

Application
This application made on 8 May 2009 (amended 12 May 2009) is by Ross Ashcroft, the owner of Lot 11 (Applicant) against the Body Corporate seeking to overturn the resolution opposing Motion 15 at the Annual General Meeting dated 14 January 2009 (2009 AGM): “That a once off $5000 (five thousand) dollar levy apply to each lot, to undertake the substantial works necessary under the previous safety report carried out after the 2008 AGM as well as update common property”. The Applicant also seeks an outcome that the major works be started not more than 30 days from the date of payment of funds.

The Applicant provided a copy of the notice of the 2009 AGM indicating he submitted Motion 15 and an explanatory note: “...The funds, if passed, would raise $90,000 for the sinking fund and would thus enable many of the faults reported in the safety audit, resulting from a motion at the 2008 AGM, to be fixed. This will include, but not limited to, the balustrades around balconies to current legal safety standards; the front fence/s including letter boxes which would make the overall appearance of the property neater from the front and reduce the amount of junk mail which currently litters common property and the footpath; the pool area and back lawn area into an area which could be used for entertainment by tenants; facilitating an area for the bins to be placed in an alternative space for bins (rather than one lot owners car park) which would give the neater impression from the road and footpath. If these are undertaken and the common property made to look ‘cared for’, it would have the added bonus of increasing value of each lot owner’s values, financially as well as from the perspective of ‘first impressions count’. If current safety standards and health standards are not maintained, tenants may be entitled to seek a reduction in rent...”

The Applicant provided:

• Photographs of balustrades, the pool area, pool fencing, power cords hanging out of a ceiling, rubbish bins and the front fence.
• A copy of an ‘Initial Safety Report & Maintenance Report’ prepared by Solutions IE for March 2008 to February 2009. At pages 3 to 5, 18 to 20 and 23 the report identifies work to balustrades, the pool area and the laundry ceiling. A ‘Maintenance Report Management Implementation Plan’ on pages 33 to 37 lists the items recommended as requiring maintenance in the next 12 months, broken into quarters. With respect to balustrades, the report states:
  • − Item 14 of ‘Action Required Within 3 Months’ (quarter 1) of the ‘To Do List’ states: “Please inspect all balustrades and repair/replace all loose and missing balustrade anchors as soon as possible as this represents a moderate falling/personal injury hazard.”: page 4.
  • − At page 17, it is stated: “Typical balustrades: The balcony balustrades of two typical units were visually inspected in terms of the Building Code of Australia height and spacing measurements only, did both balustrades comply? No hazards apparent at the time of inspection. Note: No comment can be made as to the compliance or otherwise of the balcony balustrades we did not inspect.”
  • − At page 18, the report asked: “Did the balcony balustrades and associated anchorages inspected appear to be in good condition?” referring to the abovementioned Item 15(14) on page 4.
  • − Item 14 at page 34 of the ‘Maintenance Report Management Implementation Plan’.
• A copy of an ‘Annual Safety Report One & Maintenance Report’ prepared by Solutions IE for the period January 2009 to December 2009.
• At pages 3 to 5, 15, 16 and 18 to 20, the report identifies work to balustrades, the front fence, the pool area and the laundry ceiling. With respect to balustrades, the report states:
  • − Item 11 of ‘Action Required Within 3 Months’ (quarter 1) of the ‘To Do List’ states: “Please inspect and ensure the missing anchor bolts are replaced on the balustrades and stairway handrails and the loose balustrade are tightened as soon as possible as this represents a moderate falling hazard.”: page 4.
  • − At page 15, it is stated, under ‘Action Required’: “Typical balustrades: The balcony balustrades of two typical units were visually inspected in terms of the Building Code of Australia height and spacing measurements only, both balustrades did comply. No hazards were identified at the time of inspection. Note: No comment can be made as to the compliance or otherwise of the balcony balustrades we did not inspect.” The report also asked: “Did the balcony balustrades and associated anchorages inspected appear to be in good condition?” referring to the abovementioned Item 11 under ‘Action Required’.
  • − A ‘Maintenance Report Management Implementation Plan’ at pages 30 to 33 lists the items recommended as requiring maintenance in the next 12 months, broken into quarters including “Repaint chipped and corroding handrails and balustrades.”
    

Submissions to the Commissioner
On 12 May 2009, the Commissioner provided a copy of the application to AD Body Corporate Managers & Consultants (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). On 4 June 2009, the Commissioner re-sought submissions. On 18 June 2009, the Commissioner extended the time for making submissions after advice that an extraordinary general meeting had been called for 19 June 2009 (June EGM).

On 24 June 2009, the Body Corporate Manager provided a copy of the minutes of the June EGM indicating:

• Motion 9: “That quarters 1 to 4 and additional work from the Workplace Health & Safety report “To Do List” be actioned...” was carried, that one of the three quotes presented was accepted and that a special contribution was fixed.
• Motion 10: “That the Body Corporate agree to replace the balustrading...” was not passed.
• Motion 11: “That the Body Corporate agree to replace the front fence...” was carried, that one of the two quotes presented was accepted and that a special contribution was fixed.
• Motion 12 that the Body Corporate refurbish the pool was carried, that one of two quotes was accepted and a special contribution was fixed.
  

Reis Davis and Katrina Ryan of Lot 1 made submissions stating the swimming pool, the balustrades and the fence have been addressed at the June EGM. Adrienne Innes of Lot 3 submitted that all matters raised were addressed at the June EGM with quotes approved to rectify all safety related issues. Lorraine Reed of Lot 7 submitted the proposed levy is excessive and unnecessary given the resolutions at the June EGM. Scott and Deborah Laporte of Lot 12 stated they voted against Motion 15 as it is unreasonable in the economic climate to require such a large one off payment, not all available options have been considered and they could not make an informed decision as they did not have access to the reports.

The Applicant made a written reply to submissions. He states that resolutions at the June EGM resolved sufficiently: the pool; the front fencing; general maintenance identified in safety reports; and the installation of electrical safety switches on the main switchboard. The Applicant does not agree that all matters are resolved. He requests that an order be made to make a once-off contribution for balustrades to be replaced as there is a potential safety risk. The Applicant concedes that the safety report says the balustrade is legal but states the balcony balustrades of only two typical units were inspected and the compliance of other balustrades was not commented on in terms of legality or safety. The Applicant does not agree with fixing the balustrades stating (in part) the balustrades have rust in several parts and does not attach to the balcony path in several places. The Applicant is concerned about the potential liability.
He reiterates the necessity for an order for a special contribution to have the balustrades replaced in the interest of safety and requests an extra amount of $7500. The Applicant also refers to issues relating to exclusive use common property and to the Body Corporate Manager.

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 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).

Investigation
In accordance with the investigative powers of an adjudicator stated in section 271 of the Act, on 14 July 2009 I requested the Body Corporate Manager provide a copy of the notice of the June EGM. The copy of the notice provided by the Manager on the same date included quotations from contractors to do the work stated in Motion 9, 11 and 12.

Decision
Motion 15 at the 2009 AGM
The Motion proposed fixing a contribution payable by each lot owner to the Body Corporate “to undertake the substantial works necessary under the previous safety report carried out after the 2008 AGM as well as update common property”. The explanatory note identified some of the work to be funded by the contribution. While the note does not limit the work to that stated in a safety report, it does not identify the other work anticipated to be funded by the contribution. Given the material presented and the timing of the 2009 AGM, I am satisfied the safety report referred to in the Motion is the ‘Initial Safety Report & Maintenance Report’ prepared by Solutions IE for March 2008 to February 2009. It is clear from the minutes of the 2009 AGM that the Motion was defeated by ordinary resolution.

The financial management arrangements applying to a scheme, including levying lot owners for contributions, are stated in the Standard Module (s 150(1) and (2), Act). The two ways stated in the regulation are: firstly, fixing contributions to be levied on the owner of each lot for the financial year on the basis of the administrative fund and sinking fund budgets (s 139(2) and (3) and s 141(2), Standard Module); and secondly, fixing contributions to be levied on lot owners if a liability arises for which no provision or inadequate provision has been made in a budget (s 141(2), Standard Module). In both cases, the body corporate must decide the number of instalments in which the contributions are to be paid and fix the date on or before which payment of each instalment is required (s 141(1)(b) and (c) and (2)(b) and (c), Standard Module).

Even though Motion 15 is titled ‘Special Levy’, the explanatory note refers to raising funds for the sinking fund.

The body corporate must pay into its sinking fund the amount raised by contribution to cover anticipated spending of a capital or non-recurrent nature, certain amounts received under policies of insurance, and interest from investment of the sinking fund (s 146(3), Standard Module). The sinking fund may be applied towards spending of a capital or non-recurrent nature, the periodic replacement of major items of a capital nature, and other spending that should reasonably be met from capital (s 148(1), Standard Module). All other spending is met from the administrative fund (s 148(2), Standard Module). “The administrative fund budget must contain estimates for the financial year of necessary and reasonable spending from the administrative fund to cover the cost of maintaining common property and body corporate assets; and the cost of insurance; and other expenditure of a recurrent nature” (s 139(2)(a), Standard Module).

It is not apparent from submissions that the purpose/s for which the contribution was sought to be applied would ordinarily be met from the sinking fund. It would seem that some elements of the expenditure stated in the safety report is more of the nature budgeted for in the administrative fund. While it is also not clear in the Motion whether the amount raised would be expended in the current financial year or over a longer period of time, the second outcome sought suggests there is some urgency (something not evident in the Motion or the explanatory note). It is not apparent that the intent of the Motion was to increase contributions to the sinking fund for a particular purpose/s, which were identified in the budget for the financial year or that it proposed adjusting the sinking fund budget for the financial year. In my view, the Motion does not provide any explanation to suggest its purpose was to increase the contributions payable into the sinking fund in a way contemplated by section 139(3) of the Standard Module.

Further, there is nothing in the Motion demonstrating that a liability had arisen necessitating fixing a special contribution to be levied on the owner of each lot pursuant to section 141(2). The Motion does not identify the specific work proposed to be carried out and does not include a quotation/s about the work. There is no indication of the costs to be incurred which would justify fixing a contribution of $5000 to be levied on each lot owner.

The Applicant seeks to have the resolution defeating Motion 15 overturned. In this circumstance, it is appropriate to determine whether the resolution, if it had effect, would conflict with the legislation, or would be otherwise unlawful or unenforceable. While the Body Corporate can fix a contribution to be levied on lot owners, the contribution must be fixed in a way, and on a basis, stated in the regulation. For the reasons I have stated, I do not consider the Motion proposed fixing a contribution in accordance with the legislation. In my view, the Motion as presented conflicted with the regulation and was otherwise unenforceable. For these reasons, there is no reason to overturn the result of voting on the Motion. The first outcome sought is dismissed.

The second outcome is consequential to the first outcome. In the circumstances, there is no basis for giving any consideration to the second outcome sought.

Maintenance
A number of the issues mentioned by the Applicant in the application relate to the maintenance of common property. A body corporate must administer, manage and control the common property reasonably and for the benefit of lot owners (s 152(1)(a), Act). A body corporate must maintain common property in good condition (s 159(1), Standard Module).

It would seem from the material that the Body Corporate had not complied with its legislative maintenance duty for a period of time. The copy of the reports provided by the Applicant indicates that work identified in the first report was again recognised in the later report. The photographs suggest a lack of maintenance. This may have been the motivation for the submission of the Motion to the 2009 AGM and for the application. However, it is apparent that the Body Corporate, at the June EGM, resolved to do work of the nature stated in the later safety report. In his reply to submissions under section 244 of the Act, the Applicant acknowledged the Body Corporate has made decisions about work recommended in the report.

Other matters
Section 244(2) of the Act provides that the Commissioner must give notice to the applicant advising that if the applicant wishes to reply to submissions, the applicant must, within the period stated in the notice, apply to the Commissioner to inspect the submissions and make a written reply. The notice must state that the reply may only relate to issues raised by the submissions (s 244(3)). By notice dated 30 June 2009, the Applicant was informed: “...your reply to submissions must be limited strictly to matters canvassed or issues raised in the submissions. In particular, you should not raise new material or issues in your reply. If in the opinion of the Adjudicator determining the application, your reply does raise new issues then, at the discretion of the Adjudicator, the new material may be disregarded on the basis of the obligation to observe natural justice to all parties (see section 269(2) of the Act).”

The concept of natural justice includes the requirement for affected parties to be given the opportunity to be heard before action is taken against them. Fairness would not be exercised if an order was made against a person without that person being made aware of the specific claim being made against him or her and having the opportunity to respond to that claim.

In the reply to submissions, the Applicant raised new material proposing an order: to replace the balustrades; to increase the amount of the contribution sought to $7500; relating to exclusive use; and about the removal of the Body Corporate Manager.

While the maintenance of the balustrades was an issue mentioned in the explanatory note to Motion 15, the replacement of balustrades was not something sought or mentioned in the Motion or the explanatory note, or when the application was made. There is nothing in the submitted material to suggest this work was recommended in the safety reports provided by the Applicant or that the recommended work will not maintain the balustrades in good condition. The Applicant has not provided any substantiation from a person with appropriate qualifications or expertise to cast doubt on the recommended work. It is apparent the Body Corporate opposed replacing the balustrades at the June EGM. If the Applicant considers the Body Corporate did not comply with its legislative duties or functions in making this decision, this would be a matter for the Applicant to consider pursuing further, initially internally within the Body Corporate and if not satisfied by any outcome from this process, by making another dispute resolution application. In the context of the outcomes sought, I do not consider there is a basis to warrant consideration of this issue in the determination of this application. Similarly, I do not consider there is any reason to give regard to the claim to increase the amount stated in Motion 15 to $7500.

The matter relating to exclusive use is a new issue and is disregarded. In addition to the fact that the matter relating to the Body Corporate Manager is a new issue, the Applicant, as the owner of a lot in the scheme, cannot seek an order against the Body Corporate Manager under the dispute resolution provisions of the Act (s 227, Act).