River Place Apartments [2009] QBCCMCmr 411 (21 October 2009)

Last Updated: 13 November 2009

REFERENCE: 0312-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	30270
Name of Scheme:	River Place Apartments
Address of Scheme:	82 Boundary Street BRISBANE QLD 4000

TAKE NOTICE that pursuant to an application made under the abovementioned Act by Douglas Rablin, the owner of Lot 324

I hereby order that By-Law 49.1(d) stated in schedule C of the community management statement recorded by the registrar of titles on 22 January 2008 (No.711355025) is invalid. I further order that within two months of the date of this order, the body corporate for River Place Apartments community titles scheme 30270 must lodge a request to record a new community management statement for the scheme to remove By-Law 49.1(d). I further order that the resolution passed on Motion 17 at the Annual General Meeting of the Body Corporate dated 31 July 2008 is void.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0312-2009

“River Place Apartments” CTS 30270

The scheme
“River Place Apartments” community titles scheme 30270 is subject to the Body Corporate and Community Management Act 1997 (Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module).

Application
This application made on 2 April 2009 is by Douglas Rablin, the owner of Lot 324 (Applicant) against the Body Corporate seeking the following outcomes:

1. That an extension of time be granted pursuant to section 242(4) of the Act for the determination of a resolution passed at the Annual General Meeting dated 31 July 2008 (2008 AGM).
2. That the Body Corporate take no further steps to register a community management statement recording the proposed changes to By-Law 49.1(d).
3. That the resolution passed on Motion 17 at the 2008 AGM be ruled void and of no effect.
4. That By-Law 49.1(d), both in its original form and its newly amended form, should be ruled invalid and of no effect.
5. That the Body Corporate should be ordered to seek to amend the registered community management statement in respect to By-Law 49.1(d).
   

Submissions to the Commissioner
On 7 April 2009, the Commissioner provided a copy of the application to CTS Management Pty Ltd (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). Four owners and the committee made submissions. The Body Corporate Manager made late submissions. The Applicant made a written reply to submissions (including the late submissions).

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

Background to making the application
The community management statement recorded by the registrar of titles on 22 January 2008 (No.711355025) includes By-Law 49.1 regulating the renovation of a lot. The By-Law provides that when renovating a lot, the owner must comply with its conditions. Of relevance to this dispute is By-Law 49.1(d) which provides: “An owner must pay a bond of $2,000 to the Body Corporate which will be applied to reimburse the Body Corporate for costs incurred as a result of any damage caused to Common Property or cleaning by the Body Corporate. The Bond or any unused portion thereof will be refunded to the owner following satisfactory inspection of the Common Property by the building manager.”

The Body Corporate passed Motion 17 at the 2008 AGM to consent to recording a new community management statement to include an amended By-Law 49.1(d). The approved difference in the By-Law was limited to replacing the words: “of $2,000”, with: “equivalent to 10% of the total cost or $2,000, whichever is greater, of the renovation works”.

In an email to the Body Corporate Manager on 4 December 2008, the Applicant questioned the method of calculating the renovation deposit suggesting that it should be capped at a reasonable amount. On 23 March 2009, MacGillivrays Solicitors wrote to the Body Corporate on behalf of the Applicant questioning the reasonableness of the proposed amendment to the By-Law and noting that a new community management statement had not been lodged.

Jurisdiction
An adjudicator may make an order to resolve a dispute 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). An order may require a person to act, or prohibit a person from acting, in a way stated in the order (s 276(2), Act). An adjudicator’s order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate (s 284(1), Act).

The Applicant argues that the resolution passed on Motion 17 at the 2008 AGM is void. The resolution was passed some eight months before the application was made. Section 242(1) and (2) of the Act provide that an application for an order declaring void a resolution of the body corporate must be made within three months of the meeting at which the resolution was passed. Section 242(4) provides that if the application is not made in compliance with subsection (2), an adjudicator may, for good reason, waive the non-compliance.

The Applicant has outlined reasons for the delay in making the application stating it would be unjust that a by-law that was inconsistent with the Act continued no matter how much time had lapsed since the resolution. The Applicant relies on Weeks v. Commissioner for Body Corporate, Unreported, Queensland District Court, Appeal No. 13 of 1999. His Honour Judge Dodds stated at page 4: “...the objects of the Act...militate against too strict or legalistic view about good reason for waiving non-compliance with the time limit. What will be required is a balancing of the length of the delay; the reason for non-compliance; the effect of delay on others who are affected by the matter in dispute and importantly, whether apart from the question of non-compliance with the time requirement, an applicant will be entitled to the relief sought.”

It is significant that at the time the application was made the Body Corporate had not lodged a request to record a new community management statement that included the amended by-law 49.1(d). As noted by the Applicant, the request should have been made within three months of the consent (s 65, Act). A by-law does not come into force until the day the registrar records the community management statement or a later date stated in the by-law (s 179, Act). The Applicant questions the power of the Body Corporate to make the amended by-law. If the amended by-law had force, the Applicant could have tested its validity (there is no time limit for making an application about the validity of a by-law). As the amendment did not have effect when the application was made, the Applicant could only challenge the resolution passed by the Body Corporate to consent to the recording of a new statement containing the amendment. I agree with the Applicant that the effect on others is minimal in the circumstance where the amendment had not come into force when the application was made. For these reasons, I consider that there is good reason to waive the non-compliance with section 242(4) of the Act to the extent the outcomes sought relate to the resolution passed on Motion 17 at the 2008 AGM.

Decision
Submissions
The Applicant submits that the resolution makes costs payable on demand prospectively to cover possible costs of any damage or for cleaning rather than recovery as a debt after the fact. He states the terms of the resolution overturn the onus of proving that the costs are reasonable; the Body Corporate can include any costs and expenses it has incurred; and an owner would need to argue that the costs and expenses are not reasonable (Liberty [2004] QBCCMCmr 570 (19 November 2004)). The Applicant is concerned about the role of the building manager. He submits the lost interest and opportunity of using the amount required to be paid to the Body Corporate imposes a penalty which is contrary to section 180(6) of the Act (The Lakes Coolum [2007] QBCCMCmr 218 (19 April 2007)).

While the owners making submissions questioned the reasonableness of an uncapped bond, they generally supported the use of a bond to safeguard the interests of owners. The committee submitted that a new community management statement had not been recorded; it is of the opinion that correspondence from the Applicant suggests he accepted the requirement to pay $2,000; the Applicant has paid the amount; and the matter has been resolved. The committee believes the existing By-Law 49.1(d) does not impose a monetary liability on an owner or occupier. The Body Corporate Manager subsequently submitted that a motion was carried at the 2009 annual general meeting to raise the amount of the deposit; it is proposed to resolve at the committee meeting dated 15 September 2009 not to record a new statement; and it is proposed to withdraw this change at the next general meeting.

In the reply to submissions, the Applicant states an order is still sought with respect to the outcomes sought. The Applicant requests an order about the costs of his legal fees.

Investigation
In accordance with section 271 of the Act, on 29 September 2009 I requested the Body Corporate Manager provide a copy of the minutes of the 2009 annual general meeting and a copy of the minutes of the committee meeting dated 15 September 2009. The Manager provided a copy of the minutes of the Annual General Meeting dated 29 July 2009 and adjourned to 5 August 2009 (2009 AGM) on the same day, and a copy of the minutes of the committee meeting on 9 October 2009.

Applicable law
Section 169(1) of the Act stipulates the things by-laws may only provide for including: the administration, management and control on common property; and the regulation of, including conditions applying to, the use and enjoyment of common property. By-laws are stated in the community management statement for the scheme (s 66(1)(e), Act). The community management statement is binding on the body corporate, each lot owner and each person who is otherwise an occupier of a lot or common property (s 59(2), Act). A by-law comes into force on the day the registrar records the relevant community management statement (s 179, Act). However, “it must not be presumed that a community management statement is valid or enforceable, including, for example, that the by-laws for the scheme included in the statement are valid and enforceable, because the registrar records it” (s 115L(2)(b), Land Title Act 1994). If a by-law is inconsistent with the Act, the by-law is invalid to the extent of the inconsistency (s 180(1), Act). “A by-law (other than an exclusive use by-law) must not impose a monetary liability on the owner or occupier of a lot included in a community titles scheme (s 180(6), Act).

Section 180(6)
The Applicant has argued that a by-law made as a consequence of the resolution on Motion 17 would be contrary to section 180(6) of the Act. The Applicant referred to two previous adjudications made under chapter 6 of the Act: Liberty and The Lakes Coolum. In its response to the application, the committee believes the existing By-Law does not impose a monetary liability on an owner or occupier. The committee did not make any comment about the relevance of Liberty and The Lakes Coolum to the questions raised by the Applicant.

Liberty concerned the validity of a by-law that: firstly, required a lot owner to pay body corporate costs and expenses incurred to recover levies or monies payable to the body corporate and in proceedings; and secondly, provided where the body corporate expended money to make good damage caused by a breach of the Act or the by-laws, the body corporate could recover the amount as a debt in any action in any court of competent jurisdiction from the lot owner. The adjudicator found the disputed by-law to be invalid stating at page 4 of the reasons for decision:

“Whilst “monetary” might be considered a specific term, the term “liability” is in my view capable of wide interpretation. The New Shorter Oxford English Dictionary, Thumb Index Edition defines “liability” to mean:

1. The condition of being liable or answerable by law or equity;
2. The condition of being liable or subject to something;
3. A thing for which a person is liable;
4. A person who or thing which puts one at a disadvantage, a hindering responsibility, a handicap.
   

The collective term “monetary liability” appears to me to be capable of reasonably wide meaning or scope. I consider that the effect of [the] by-law...is to render owners liable, in the sense of being liable for or subject to the possibility of costs being imposed against them, which “costs” I consider to be within the meaning of the term “monetary”.”

The Lakes Coolum related in part to a provision of a by-law requiring an owner or occupier to lodge a security deposit when applying for committee approval to carry out any construction, improvements, renovations, alterations, additions or landscaping on the person’s lot. The by-law provided that the committee could deduct from the deposit any costs (incurred or anticipated) in rectifying any breach of a by-law relating to the construction of the proposed works. In relying on section 180(6), the adjudicator found that the body corporate was not entitled to forfeit the security deposit. In applying Liberty, the adjudicator stated at page 8 of his reasons for decision: “...section 180(6) prohibits the imposition of a monetary liability by means of a by-law, which I believe is wide enough to preclude the recovery of costs incurred by the body corporate pursuant to the by-laws of the scheme. While there may be other means by which a body corporate may recover costs which it has incurred, it may not do so by means of a by-law and any such by-law is invalid to the extent that it purports to do so. I believe this interpretation is consistent with the intention of that provision of the Act as applied in previous decisions of Adjudicators.” The adjudicator also referred to an earlier decision made under the dispute resolution provisions of the Act in Chiara Sands [2005] QBCCMCmr 683 (5 December 2005).

The adjudicator in Chiara Sands also referred to Liberty when deciding that two by-laws were contrary to the legislation. The first by-law provided: “Where the Body Corporate spends money or incurs any costs as a result of a breach of the Act, the Standard Module or of these by-laws by any Owner, Occupier or Invitee of a Lot then the Body Corporate is entitled to recover the amount spent or cost incurred (including solicitor and own client costs) as a liquidated debt in any court action from the Owner of the lot.” The second by-law contained similar provisions to the first part of the by-law invalidated in Liberty. At page 4 of his statement of reasons and applying section 180(1) and (6) of the Act, the adjudicator stated: “I am concerned that these by-laws purport to make any owner in dispute with the body corporate liable for all the body corporate’s expenses, whatever they may be. This is contrary to the usual position in litigation where a court considers whether costs should be payable and any costs are usually awarded with reference to the court scale of costs”.

More recently, in Liberty [2007] QBCCMCmr 333 (1 June 2007), the adjudicator ordered that a resolution of that body corporate to consent to recording a new community management statement that included a by-law amendment was void “to the extent that it purports to require payment of a $2,000 bond”. At pages 4 and 5 of the reasons for decision, the adjudicator stated: “As previously, the by-law provides that when removing or installing any hard floor surfaces a lot owner is required to pay a $2,000 bond to the body corporate. I believe that to the extent that it seeks to require payment of a $2000 bond, by-law 21 offends section 180(6) of the Act”. In O’Quinn Street Apartments [2008] QBCCMCmr 427 (17 November 2008) the adjudicator stated (at pages 6 and 7 of the statement of reasons): “The only objection I have to proposed by-law 2 is its attempt to make an occupier liable for any damage caused to common property by tradesman or removalist vehicles. Any assertion of liability pursuant to the by-law would be wrong at law as a by-law of this nature is invalid as seeking to impose a monetary liability”.

Conclusion
The Applicant has sought an outcome that By-Law 49.1(d), both in its original form and its newly amended form, should be ruled invalid and of no effect. As the Body Corporate has not lodged a request to record a new statement as a consequence of the resolution passed on Motion 17 at the 2008 AGM, By-Law 49.1(d) has not been amended or, as stated by the Applicant, it is still in its original form. It is apparent that by-laws almost identical to By-Law 49.1(d) in this form have been previously invalidated. I agree with the reasoning of the adjudicators in the abovementioned decisions. It is settled that a body corporate cannot make a by-law of the nature of By-Law 49.1(d). Its purpose is to impose a monetary obligation which is inconsistent with the legislation. In my view, By-Law 49.1(d) is invalid.

The Applicant has sought an outcome that the community management statement in respect to By-Law 49.1(d) be amended. An adjudicator may make an order mentioned in schedule 5 (s 276(3), Act). If satisfied a by-law is invalid, an adjudicator may require “the body corporate to lodge a request to record a new community management statement to remove the by-law” (s 21, schedule 5). In the circumstances, I consider it is appropriate to make an order that the Body Corporate lodge a request to record a new statement to remove By-Law 49.1(d).

The Applicant has also sought an outcome to invalidate the resolution passed on Motion 17 at the 2008 AGM to incorporate an amendment to By-Law 49.1(d). At the time the application was made, the resolution had not been implemented; a request to record a new statement has not been lodged with the registrar of titles. It is apparent that the effect of the resolution is that the Body Corporate has decided to amend that part of By-Law 49.1(d) that imposes a monetary liability. The amendment did not remove the monetary liability provision; rather it prescribed another way to calculate the liability. For this reason, the resolution is void.

It is apparent that the Body Corporate passed Motion 16 at the 2009 AGM to amend By-Law 49. The approved difference in the By-Law is limited to replacing the words: “of $2,000” with: “equivalent to 10% of the total cost or $2,000, whichever is greater, of the renovation works”. The effect of this resolution is that the Body Corporate has decided to amend that part of By-Law 49.1(d) that imposes a monetary liability in the same way as the earlier resolution at the 2008 AGM. The Body Corporate Manager has suggested that the committee will not lodge a new community management statement as resolved by the Body Corporate. The Applicant has questioned this course of action in the reply to submissions. The minutes of the committee meeting dated 15 September 2009 state (at page 13): “Noted that the committee discussed not registering the CMS with the change to by-law 49. Further noted that the committee recommend that Motion 16 from the 2009 AGM voting paper be re-submitted in the 2010 AGM voting paper for consideration by all owners. However the Committee will recommend that this motion be withdrawn.” As I have determined that the By-Law the subject of the resolution is invalid and the earlier resolution at the 2008 AGM to amend the By-Law is invalid, there obviously is a question about the Body Corporate implementing the resolution. The committee’s obligation is to put into effect the lawful decisions of the Body Corporate (s 101(2), Act).

Given the above orders, there is no need to make an order directing that the Body Corporate take no further steps to register a community management statement recording the proposed changes to By-Law 49.1(d). In the reply to submissions, the Applicant requests an order about the costs incurred in legal fees. There is no power under chapter 6 for an adjudicator to award costs of this nature in the circumstances.