The Strand Apartments [2009] QBCCMCmr 422 (28 October 2009)

Number of Scheme:	7418
Name of Scheme:	The Strand Apartments
Address of Scheme:	9 Eady Avenue BROADBEACH WATERS QLD 4218

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

I hereby order as follows –

that the body corporate pays to Leon and Julie Schutt, the Applicants in this application, as reimbursement for termite treatment and the cost of repairs to Lot 10, the sum of $5,929; and
that such sum be paid within three months of the date of this order.

This is an application dated 20th March 2009 by Leon Schutt and Julie Schutt (the Applicants) co-owners of Lot 10, against the body corporate for The Strand Apartments (the body corporate) for an order that the body corporate reimburse the Applicants the sum of $5,929 for the treatment of the termite infestation and rectification works carried out by the Applicants to their lot, pursuant to section 281(1)(b) Body Corporate and Community Management Act 1997.

“The Strand Apartments” CTS 7418 is a community titles scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (Standard Module). There are ten lots in the scheme created under a Building Unit Plan of subdivision.

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

(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)).

On 14th October 2008, the Applicants engaged Amalgamated Pest Control (Amalgamated) to inspect their lot. Amalgamated reported that there were termite infestations externally and internally on the eastern side of the Applicants’ lot, in the downstairs wall and laundry, and in the roof void. There was an active “mud lead” to the eastern wall visible outside. There was no evidence of damage. The report noted wood decay and damage to barge boards in the car port and the left hand side front of the lot. The report also noted risk areas by the hot water system overflow which drains directly to the base of the building creating a “moisture problem”, and in the bathroom where there were high moisture readings. The report concluded that the lot was at a high risk for termite damage and recommended an inspection every 3 months, and that a subterranean termite management system be installed.

Amalgamated also provided a quotation detailing four treatment options, costing between $605 to $2,558.60.

On 14th October 2008, the Applicants forwarded the report to the body corporate manager partly because the report mentioned eradication options for the entire scheme. The body corporate manager replied the same day that it would get another quotation quickly and seek approval from owners to “have the necessary work carried out to have this matter fully investigated so as to establish the extent of repairs required...”. The body corporate manager asked if the unit was empty so that it could organise a second pest exterminator to inspect. Also on the same day the Applicants advised the body corporate manager that they had engaged Amalgamated to treat the inside of their unit on 16th October 2008. Amalgamated charged the Applicants $605 for remedial treatment to active termites described by Amalgamated as “a partial only treatment to control the current infestation.”

The Applicants then obtained two quotations for repairs of termite damage, one from Termite Repair Specialists for $11,940.50 and one from B & N Middling Builders (Middling) for $5,324. The Middling quote is dated 12th November 2008. It included removing plasterboard wall linings and cornices from the living room east wall; propping and supporting load bearing timber beam; removing and replacing all termite damaged timber wall framing; removing plasterboard wall linings and cornices from laundry/living room wall; propping and supporting upper floor joists at top of stairway; removing and replacing termite damaged laundry wall framing with CCA pine framing; sheeting new framing with plasterboard; fitting new skirting boards, cornices architraves to match existing; and painting on the lower level; and removing wardrobe doors and frame and shelving; removing the shower screen and mirror and the vanity unit; removing shower tiles and splashback and wall linings in the bathroom wast and south, and in bedroom 2 north; demolishing termite damaged wall framing and replace with new CCA treated pine framing; re-lining bathroom and bedroom, fixing matching cornicing; waterproofing the shower with rubberised waterproofing membrane, re-tiling; putting in new shelves in bedroom robe, and replacing fittings and painting on the upper level.

The Applicants accepted the quotation from Middling who did the work on Lot 10, as stated, between 14th and 24th November 2008. On 20th November 2008, the Applicants wrote via their lawyers to the body corporate manager detailing the circumstances and claiming reimbursement of their expenditure. The letter says that the Applicants inspected Lot 10 on 12th October 2008 on the vacation of their tenant, and then became aware of “possible termite damage in the wall behind the hot water system in the laundry” and thereafter in the upper level bathroom walls. Owing to the necessity to re-let the property as soon as possible, the Applicants engaged Middling straight away. They claimed the sum of $5,929.00, being the total of the Middling and Amalgamated invoices.

The body corporate manager replied on 26th November 2008 that the amount was in excess of the committee’s spending limit and that the matter must be put to a general meeting. The body corporate manager sent out a “flying minute” to all owners to vote on the issue. On 14th January 2009, the body corporate manager advised that the body corporate had rejected the Applicants’ claim. On 2nd February 2009, the Applicants wrote again to the body corporate manager re-stating their entitlement to reimbursement, and asking the committee to discuss it at the forthcoming meeting on “8th (sic) February” 2009. At that meeting the committee resolved not to consider the Applicants’ claim any further as it had been voted on already.

The Applicants argue that the body corporate must maintain common property in good condition to the extent that that the common property is structural in nature; and quotes section 159 Standard Module. They say that “maintenance” includes the obligation to prevent pest infestation as well as rectification of damage caused by pests. They say that the outer half of the eastern wall where the mud lead was found is a responsibility of the body corporate to maintain in a Building Unit Plan of subdivision. They also say that the body corporate has not used funds in its budget for pest control or prevention in the last three years. The body corporate budgeted $650 in 2007 and $500 in 2008 but spent nothing. The body corporate’s failure to maintain “ is directly causative of the Applicants’ loss”....

On 7th February 2009, at a committee meeting, the body corporate recommended to owners that a termite management programme be implemented at an estimated cost of $7,500, proposing a baiting system. The committee also resolved to inspect units on an annual basis in future.

In accordance with section 243(2)(b) Act, submissions were invited from all lot owners. There were no submissions from lot owners.

The body corporate, through its lawyers, made a submission denying a failure of the body corporate to maintain the common property and exterior wall of Lot 10. It says that termites were attracted to the lot “by the activity on the common property of the owner or occupier of Lot 10”, and says that the “owner or occupier... failed to comply” with the requests of committee members in seeking preventative action in regard to the common property as follows-

The body corporate says that “there has never been difficulty with termites” for 14 years or more. It also says that it had previously budgeted for an annual pest inspection but when Mrs Schutt became treasurer she took this item out of the budget, so after 30th June 2007 she contributed to any failings of the body corporate.

Further the body corporate says that it is not responsible for rectifying the interior of Lot 10. Responsibility for maintenance by the body corporate extends to the mid point in the external wall.

Finally, it says that the body corporate was not afforded any opportunity to conciliate and that the Applicants acted unilaterally. The first the body corporate knew about the damage was on receipt of the Applicants’ lawyers’ letter dated 20th November 2008, after the Applicants had engaged a builder.

The Applicants exercised their right of reply. They deny that the termites were attracted by the activities of their tenant or themselves or that the committee “at any stage requested that preventative measures be taken by the owner of occupier.” They admit that pine, plywood and particle board was kept by the occupier on the common property in the form of a skateboard ramp, but this timber was “not stored up against any external wall of Lot 10.”

Amalgamated concluded that “in all likelihood the termites entered Lot 10 through a mud lead on the eastern side of the lot – an area of common property comprising piles of dirt, overgrown weed and debris” They attached a copy of a site plan from Amalgamated which was not in the application showing the position of the mud lead and termite activity found inside the lot at “A”.

The “skate board type play area” was located at the northern side of the property in an undercover carport area which is tiled, and concreted, shown at “B” on the plan. The skate ramp is at “C”, a “considerable distance” from the mud lead.

The Applicants deny that the chairperson mentioned the danger of storing softwoods against the wall, nor did she mention that it was an unlawful use of common property. On one occasion, the chairperson and the Applicants inspected the skate ramp but no request was made for its removal, and they have never refused to remove it. The Applicants deny that in both in May 2007 and June 2007 they were asked about the unlawful storage or danger of termites, or that the owner of Lot 8 joined in the debate in September 2007.

When the tenant left, no termites were discovered on or near where the ramp had been stored. Amalgamated’s report indicates the area where active termites were detected and they were not proximate to the area where the timber was stored. They query why the body corporate did not write to them asking them to remove the timber if the body corporate’s claim is true. There is nothing about it recorded in the minutes. They say that the body corporate could also have removed it themselves.

Mrs Schutt denies any involvement in preparing the budget, and says that the body corporate had spent nothing on pest control in the years before she was treasurer. The budget was always drawn up by the body corporate manager and her role as treasurer was simply honorary.

On 4th August 2009 I sought further information from the Applicants about the findings in Amalgamated’s report that there was no termite damage .(Section 5.1 (a) refers.) The Applicants replied that Amalgamated did not remove the wall lining. They say that builders inspected the lot before preparing quotations. Both quotes refer to “termite damage.” On 21st September 2009 Middling provided a letter that an inspection of the property revealed the existence of decayed and damaged timber which was the result of extensive termite activity on the property. All work undertaken in relation to the quote was to effect repairs, remedial in nature, and that no improvements were made to the property during completion of the work.

I asked the body corporate if would like to make further submissions on the sketch plan provided in the Applicants’ Reply and sought further information about the alleged storage of timber. The body corporate manager responded on 23rd October 2009. It says that the timber referred to was construction and off-cut material and was piled on common property outside the eastern wall, and highlighted an area on the plan. It was used in the construction of skateboard ramps and the completed articles were stored in the carport area. The body corporate provides a letter from a long-term resident who says that he observed wood of various types piled up against the eastern wall for several months, with rubbish on top of that such as boxes, wire and newspapers so it was about one metre high.

The body corporate says there are no minutes about the concerns of Ms Jansen and chairperson Mr Rukivna. The committee believes, following consultation with an independent pest control expert, that termites entered through weep holes in the area of the “mud lead point” shown on the Applicants’ plan. There is no evidence in the Applicant’s report of breaches to the slab or substructure. The body corporate queries the absence of any photographs of damage and repairs necessary.

I also find that the work done by Middling within Lot 10 related entirely to termite damage.

The body corporate says that when the Applicant Mrs Schutt became treasurer, the budget item for pest control “was deleted from the budget”, and that this shows fault on behalf of the Applicants. I do not find this proved as even if Mrs Schutt prepared the 2007/2008 budget herself, which is unlikely since a body corporate manager was at the time engaged, the body corporate voted to accept that budget. I also note that whilst the item was included in the budget in 2005/2006 and in 2006/2007, a time before Mrs Schutt was treasurer, there were no funds actually expended by the body corporate.

The body corporate says that the Applicants or their tenants caused or contributed to the arrival of the termites in Lot 10 by storing timber on common property against the side of Lot 10 and refusing to remove it. The Applicants admit that their tenant kept pine, plywood and particle board materials “on the common property in the form of a skateboard ramp” but denies that this was stored against the eastern wall. The skateboard ramp was in the undercover car-port area, an area of common property over which the Applicants have exclusive use. They describe the common property outside the eastern wall as an area comprising “piles of dirt, overgrown weeds and debris.” This does not exclude the body corporate’s contention that in the debris were timber off-cuts and particle board left over from the construction of a skate-board ramp or ramps.

However, although committee members say they complained about it, there was no action taken by the body corporate against the tenant or the Applicants for something which appears to have been a breach of several by-laws (eg by-laws 10(b);13(c); 19; and/or 30(a).) Further, there does not appear to be any mention in committee minutes of the concerns of the chairperson or of the meeting of the chairperson, the Applicants and the tenant in March 2007, nor any evidence that the committee raised any concerns about the timber in May and June 2007.

In any event, there is no evidence that the stored timber or debris, caused or contributed to the termite infestation.

The body corporate also argues that it is not responsible for damage within Lot 10. This may be true to a certain extent, although it is well established that where the cause of the damage enters from the exterior of a lot, for example rainwater, and permeates into the interior of a lot, then the person responsible for the maintenance of the exterior coating will be responsible for the interior damage if caused by a failure to maintain that exterior coating.[1]

The obligation of the body corporate to maintain load-bearing walls in a building format plan (previously called a “building unit plan”) of subdivision comes from Section 159(1) and section 159(2) Standard Module which state as follows –

(1) The body corporate must maintain common property in good condition, including, to the extent that common property is structural in nature, in a structurally sound condition.

(2) To the extent that lots included in the community titles scheme are created under a building format plan of subdivision, the body corporate must—

(i) railings, parapets and balustrades on (whether precisely, or for all practical purposes) the boundary of a lot and common property; and

(ii) doors, windows and associated fittings situated in a boundary wall separating a lot from common property; and

(iii) roofing membranes that are not common property but that provide protection for lots or common property; and

(b) maintain the following elements of scheme land that are not common property in a structurally sound condition—

“To avoid any doubt, it is declared that, despite an obligation the body corporate may have under subsection (2) to maintain a part of a lot in good condition or in a structurally sound condition, the body corporate may recover the prescribed costs, as a debt, from a person (whether or not the owner of the lot) whose actions cause or contribute to damage or deterioration of the part of the lot.”

The Amalgamated report notes that in order to comply with Australian Standard AS349.3-1998 “Inspection of Buildings”, buildings should be inspected for termites at least annually.[2] Between 1st July 2004 and 30th June 2005, the body corporate spent $594.60 on pest control, although there is no detail of the way in which this sum was spent. Between 1st July 2005 and 30th June 2006, the body corporate spent no money on pest control although there was a sum of $650 in the budget. Again between 1st July 2006 and 30th June 2007, there was nothing spent on pest control, although the budget was $500. Between 1st July 2007 and 30th June 2008, there is no heading for pest control at all in the administration fund.

As has been said before,[3] the issue of the prevention and treatment of termite infestations is one of maintenance by the body corporate. Section 170 Standard Module also provides that the owner of a lot must maintain the lot in good condition. In the case of a building units plan, the boundary of a lot with common property or another lot is the centre of the wall, floor or ceiling.

“Maintenance extends beyond the rectification of damage of a defect, to include work that may be reasonably expected to minimise the need for future maintenance of the lot. Therefore, maintenance responsibilities would include a responsibility for reasonable pest prevention as well as rectification of damage by pests.”

Despite the relevant Australian Standard, it is prudent for any body corporate, as part of its duty to maintain common property, to engage a professional person to make an annual inspection for termite activity. It therefore appears to me that the body corporate failed in its duty to inspect the common property and exterior walls for which it is responsible by virtue of section 159(2) Standard Module; or take any action about their concerns of what was known to be on the common property.

The report from Amalgamated says that a termite “mud lead” was found on the exterior of the eastern wall. Active termites were found in the eastern internal wall on the first and second floors of Lot 10 and in the roof void on the eastern side. Active termites were also found in the laundry wall behind the hot water system. The laundry is not on the eastern side of the lot but termites are attracted to moist areas, and can move quickly.[5] It seems to me highly likely that the termites entered Lot 10 from the common property via the mud lead against the eastern wall. It also seems reasonable to suggest that they would not have entered had there been in place a well-maintained termite barrier or termite protection along the eastern wall.

However, what is the responsibility of the lot owner in this matter? Lot owners must also maintain their own lots. It appears that the Applicants did not engage a professional pest controller to inspect their lot for termites on an annual basis.

In Peninsular Court, the adjudicator said that owners were not “necessarily obligated” to inspect their own lots for termites because –

“[U]nless termites are directly introduced to a lot in a building format plan (for example, brought onto the lot on a piece of wood), they can only enter the inside of the lot from an adjoining lot or through common property that is the responsibility of the body corporate.”

This will make the presence of termites in a lot always “someone elses’ fault”, and poses a liability on the body corporate akin to strict liability, so that the body corporate must provide a barrier for the prevention of entry of termites into lots, and if it does not, it will be liable, whatever the actions of the lot owner. However, the adjudicator then went on to analyse the contribution (if any) of the lot owner to the damage, and to say that if termites had entered from the common property, the body corporate would be liable. It seems to me that an analysis both of the point of entry of the termites, and the behaviour of the lot owner are relevant considerations, and that liability for termite damage is not “strict.”

“In order to recover the cost of repairing termite damage to her lot and the cost of termite eradication, the applicant would need to establish on the balance of probabilities that termites emanated from common property that [sic] the body corporate had failed to take measures to control known termite activity on common property.”

There is no evidence of a history of termite activity on scheme land, the scheme having been established in 1987. However, nor is there any evidence that the body corporate has previously installed a termite barrier, and there is evidence that there was no active termite management plan.

Termites establish new colonies by sending out flying alates (reproductive termites) which then drop their wings. It is quite possible for alates to enter a lot by flying into it without “being brought in on a piece of wood” or coming from another lot or common property. If conditions are right, eg. moisture and a source of food, then termites need no other encouragement. Soil contact is usually maintained but is not essential provided a source of moisture is available, and termite nests have even been found on top of multi storey buildings[7].
It remains that such subterranean species may be very difficult to detect, that they can move fast, and that they can enter properties where conditions are right for them. It follows that in my view, lot owners should make regular inspections of their lots, at least annual inspections, for pests, particularly where the property is rented out and the owners are not owner/occupiers. Such is sound maintenance practice.

“...[A]n owner does have certain responsibilities in regard to termite infestations. ......In the case of a non-resident owner, this requires that owner to ensure that internal inspections of the lot are undertaken on a regular basis, if only to check for evidence of termite damage. If there was evidence of termite damage to a lot over a sustained period of time which was not reported to the body corporate, I would have no hesitation in finding a form of contributory negligence on the part of the owner of a lot, and determining compensation accordingly....”

There is no evidence that the termite damage had been sustained over a long period of time in this case.

“The applicant did not provide any notification to the body corporate of his intention to undertake the termite eradication and protection work. This work is the responsibility of the body corporate to undertake, at its cost. The fact that the applicant failed to notify the body corporate, and to have the body corporate undertake the work is relevant in my view to the amount of compensation the applicant is now entitled to.

He then referred to an appeal case where the judge approved the right of the person who “pays the piper to call the tune.”

“In my opinion, the body corporate ought to have a reasonably wide discretion in determining how it carries out its obligation. It may well be objectionable that the lot owners as a body corporate should have to pay beyond the minimum necessary to provide a building that does not leak. ...”[9]

“What the Judge is stating, unequivocally, is that the body corporate should have the discretion, and a wide one at that, in undertaking work for which it is responsible. The fact that the applicant simply proceeded with the work denied the body corporate this opportunity, and means that the body corporate had no input into who to engage and at what cost. .....”

The adjudicator awarded only 50% of the repair costs sought because of this, and in order to “send a clear message” to owners that they should not undertake work for which the body corporate is responsible, and then expect to be fully compensated.

The body corporate says that the Applicants afforded it no time for conciliation. I agree, although I am not sure that any conciliation would have been effective by 14th October 2008 when the termites were discovered by the Applicants. However, the Applicants gave the body corporate no opportunity to inspect the damage; nor to consult its own building firm or remedial expert; nor to seek other quotations. The body corporate was presented with a fait accompli and a bill.

I have some concerns that the body corporate was denied natural justice in a situation where it was likely to be liable to pick up the repair bill, or at least some part of it. It should have been advised of the works to be done, enabled to inspect, given a timeframe in which to discuss the issue, and the opportunity to make reparation. It might have been provided with photographs.

The Applicants say that they pressed on in haste because they did not want to lose rental income, which makes the engagement of Middling, and the decision to get the repairs done without further reference to the body corporate, a commercial decision taken by them. The body corporate would be bound to act swiftly, but in relation to a sum over $2,000 was obliged to put the matter before a general meeting in accordance with the legislation, or to seek the unanimous approval of all lot owners. (section 151 Standard Module.)

There is no evidence of the body corporate failing to consider the Applicants’ plight. There was no delay on the part of the body corporate, and the circumstances of Jade Place[10], quoted by the Applicants, where owners took on the repairs because of the failure of the body corporate to act, are not relevant to this matter. Nor is there any no evidence that once the pests had been eradicated that there was any emergency for building work to commence, such as that the lot was unstable.

However, in considering all these points, I am satisfied that on the balance of probabilities, the termites entered from the common property, whether or not attracted by the off-cuts of softwood, which, if present, should have been removed at the instigation of the body corporate. The power both to protect the buildings from termite infestation, and to keep common property clear is given to the body corporate in the legislation but it was not exercised.

The Applicants may have lacked courtesy, and just taken the risk that the body corporate would be liable for repairs, but their behaviour does not change the legal situation. Nor has the body corporate claimed either that the Applicants undertook work which was in excess of remedial treatment, or that it could have got the work done more cheaply by using its own, or other, contractors. I have considered reducing the amount sought but find there is no evidence on which a deduction of any specific amount or percentage can be justified. There is no evidence of the part played by the softwood debris in the arrival of the termites, such that section 159(4) Standard Module (quoted above) can be activated. Unlike the Regency Place Lakeside application, the Applicants did advise the body corporate of the work to be done. In the circumstances, although I find the decision somewhat hard on the body corporate, I order that the Applicants should be paid both the cost of the Amalgamated treatment, and the repairs by Middling.

“If the adjudicator is satisfied that the applicant has suffered damage to property because of a contravention of this Act or the Community Management Statement, the adjudicator may order the person who the adjudicator believes, on reasonable grounds, to be responsible for the contravention –

(a) to carry out stated repairs, or have stated repairs carried out, to the damaged property; or

(b) to pay the applicant an amount fixed by the adjudicator as reimbursement for repairs carried out to the property by the applicant.”

Subsection (2) makes it clear that there is a limitation on an order under paragraph (a) of a cost of $75,000, and a limitation under paragraph (b) of an amount of $10,000. The amount sought is a total of $5,929.00 as a reimbursement of a sum paid by the Applicants. The body corporate shall pay that sum to the Applicants within three months of the date of this order.

I mention that the Applicants are not excluded from any contribution required by the body corporate in order to meet its liability to the Applicants.

[1] Section 281 Act: “Order to repair damage or reimburse amount paid for carrying out repairs”; example at 281(1)(b) Act.
[2] Report of Amalgamated Pest Control dated 14th October 2008 to Applicant at p.7 section 8 “additional comments”
[3] Peninsular Court 2004 QBCCMCmr 122 (3rd March 2004)
[4] Peninsular Court 2004 ibid
[5] Note (D) Section 6 p. Amalgamated’s report.
[6] 2005 QBCCMCmr 20
[7] Wild Places of Greater Brisbane – pubd Queensland Museum

[9] Per Judge Robin QC DCJ in Golden Sands Highrise –v- Galtos & Anor District Court (Southport) 33/1999, Robin DCJ, 10 March 2000
[10] Jade Place 2008 QBCCMCmr 202

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

The Strand Apartments [2009] QBCCMCmr 422 (28 October 2009)