19 Paradise Island [2009] QBCCMCmr 49 (12 February 2009)

Last Updated: 9 March 2009

REFERENCE: 1008-2008

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	32749
Name of Scheme:	19 Paradise Island
Address of Scheme:	19 Paradise Island Drive SURFERS PARADISE QLD 4217

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

John and Antoinette Moylan, the owners of lot 2

I hereby order that, within seven days of the date of this order, the owner of lot 1, Arlo Selby, must pay to the owners of lot 2, John and Antoinette Moylan, one half of the cost of effecting the necessary insurance on behalf of the body corporate, being $745.89, under policy number QUS000026 with Calliden Limited, for the community title scheme “19 Paradise Island” Community Titles Scheme 32749. I further order that Arlo Selby, while he remains an owner of lot 1, must contribute in the way stated in the Small Schemes Module to each insurance policy held for 12 months beginning on or about 28 August each year by the body corporate for “19 Paradise Island” Community Titles Scheme 32749 in accordance with the Act and the Small Schemes Module.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 1008-2008

“19 Paradise Island” CTS 32749

The Scheme

“19 Paradise Island” Community Titles Scheme (CTS) 32749 was registered as a building format plan of subdivision on 23 June 2004 comprising two lots and common property and is
subject to the Body Corporate and Community Management Act 1997 (Act) and
the Body Corporate and Community Management (Small Schemes Module) Regulation 2008 (Small Schemes Module).

Application

This application is by John and Antoinette Moylan, the owners of lot 2 (Applicants) against the owner of lot 1, Arlo Selby (Respondent) seeking orders that the Respondent reimburse them half the cost of the insurance premium for the scheme (a sum of $745.89) as well as an order compelling the Respondent to pay his share of the insurance premium for the scheme before 28 August each year.

The grounds to the application are to the following effect:

• The Applicants purchased lot 2 on 14 June 2007 and settlement took place on 10 September 2007.
• The Respondent wouldn’t pay last year’s insurance. Finally, the total insurance premium was paid in full by the previous owner of lot 2, so the sale would go through.
• The Applicants spoke with the tenant of lot 1 expressing their concern as to who would pay the insurance premium in August 2008. The tenant advised that he would probably pay it out of his rent.
• The Applicants went to Sirius Risk Insurance Services to pick up the new policy on 11th August 2008 and handed a copy to the Respondent’s tenant who faxed it to the Respondent that evening. He was sent another bill after that and also an overdue bill after that. The Applicants personally phoned the Respondent twice and he pretended not to know them and hung up.
• Eventually, after no response, on 5 September 2008, the Applicants paid the Respondent’s half of the insurance premium, in the sum of $745.89, in addition to the amount of $745.89 they had already paid by BPay on 28 August 2008. Copies of receipts for both payments were supplied with the application.
  

Determination

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 (s276(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).

Investigation

The investigative powers of an adjudicator are stated in section 271 of the Act. The Applicants detailed the steps they have taken to contact the Respondent. The Applicants have clearly been unsuccessful in eliciting any response from the Respondent in relation to this matter. The Respondent, by letter dated 4 December 2008, was invited to make submission in response to the application. The Respondent did not respond to the invitation. The letter to the Respondent was not returned. I authorised a member of the Commissioner’s office to attempt to contact the Respondent using the mobile phone number provided by the Applicants. Over the course of a week, three separate messages were left for the Respondent, asking him to contact this office as a matter of urgency. The Respondent has not made any contact with this office.

Decision

The scheme

The “19 Paradise Island” Body Corporate was created when the first Community Management Statement (CMS) for the scheme was recorded on 5 July 2004. This was subsequent to the Registrar of Titles registering Survey Plan 164209 (a building format plan of subdivision) on 23 June 2004 under the Act. The plan shows two lots in a building that is surrounded by common property. By-law 13, registered as part of the First CMS for the scheme, allocates a significant part of the common property for the exclusive use of the owner of each lot. The CMS includes information about the scheme including the name of the applicable regulation module, the lot entitlements and the by-laws. The CMS currently applying to the scheme indicates that each lot has a contribution schedule lot entitlement of 1 and an interest schedule lot entitlement of 1.

The Body Corporate

The Body Corporate consists of the two lot owners (s 31, Act). The primary purpose of a body corporate is to administer the common property which is the part of scheme land not within a lot and which is owned by the lot owners as tenants in common (s 35, Act).

A body corporate must administer common property for the benefit of the owners and must carry out other functions given to it under the Act (s 94(1), Act). A body corporate has all the powers necessary for carrying out its functions (s 95(1), Act).

Insurance

The regulation module may require the body corporate to put in place insurance for the scheme (s189(1), Act).

The body corporate must insure, for full replacement value — the common property and body corporate assets (s112, Small Schemes Module). If one or more lots in the scheme are created under a building format plan of subdivision — the body corporate must insure, for full replacement value, each building in which is located a lot (s113, Small Schemes Module). The body corporate must maintain public risk insurance of the common property and assets for which it is practicable to maintain public risk insurance (s121, Small Schemes Module).

For reinstatement insurance, the owner of each lot is liable to pay a contribution levied by the body corporate that is a proportionate amount of the premium for the insurance that reflects the interest schedule lot entitlement of the lot (s116(1), Small Schemes Module). The premium paid for
insurance may be affected by the standard of fixtures and fittings in a lot, improvements made to common property that benefit a lot, or the use of a lot (s116(2), Small Schemes Module).

Conclusion

Clearly, the “19 Paradise Island” Body Corporate (the two owners) must hold insurance of the nature to which I have referred to above. Based on the information provided and the information stated in the CMS, it would seem the owners should contribute equally to the insurance premium. Taking out and maintaining this insurance is not optional and is not affected by the exclusive use by-law.

It is also not affected by absence of proper administrative processes. It would seem the Body Corporate is not being administered in accordance with the legislation. If it was, an allowance for the cost of insurance would be made in the administrative fund budget for each financial year to be
adopted by the Body Corporate at each annual general meeting (s73, Small Schemes Module). Owners would, at each annual general meeting, vote to fix a contribution paid by them to the Body Corporate on the basis of the adopted budget (s75, Small Schemes Module). A contribution not paid by the due date for payment may be recovered by the Body Corporate as a debt (s79, Small Schemes Module). I do not consider the fact that the insurance for the current 12 month period may not have been or be approved in accordance with the legislation, or that an allowance for the cost of insurance may not have been properly budgeted should influence the ability of the Applicants to have this dispute with the Respondent resolved.

There are two owners in the Body Corporate; one owner has sought to maintain Body Corporate insurance cover; and has demonstrated that repeated and unsuccessful attempts have been made to involve the other owner. The investigations I have initiated have failed to elicit a response from the Respondent. This office unsuccessfully attempted to contact the Respondent, who did not respond to the invitation to make submission regarding the application, or return phone calls made by administrative staff of this office.

I am satisfied from the submissions made by the Applicants and information provided by the Body Corporate’s insurance brokers, Sirius Risk Services Pty Ltd, that the Body Corporate’s insurance policy with Calliden Limited was due for renewal on or about 28 August 2008; that the Applicants were unsuccessful in contacting the Respondent; that the Respondent did not contribute to the continuation of the insurance; that the Applicants paid the insurance premium on behalf of the Body Corporate for twelve months coverage; and that this policy ends on 28 August 2009. I am also satisfied from the Applicants’ submissions and from the information held by the registrar of titles that the Respondent owned lot 1 when the twelve month insurance policy commenced. There is no information provided to suggest that there would be any reason to dispute the
insurance cover instigated by the Applicants. In my view, the Respondent has an obligation to contribute to the cost of insurance for this period. The Applicants have shown that they have acted reasonably in taking out insurance required by the legislation. In my view, the Applicants should be reimbursed by the Respondent proportionate to the interest schedule lot entitlement.

There is no suggestion that the contribution payable by a lot owner should be adjusted due to the factors stated in section 116(2) of the Small Schemes Module. For these reasons, I have ordered hat the Respondent pay the Applicants half of the premium for the twelve month policy.

The Applicants cannot continue to pay for insurance that the Body Corporate is obliged to hold under the legislation. I am satisfied that if the Applicants do not pay the premium as it becomes due that it is likely the Body Corporate insurance policy will not be maintained. Clearly, this outcome is unacceptable. The Applicants have sought orders against the Respondent, who as the owner of a lot in the scheme must contribute to the cost of insurance required by the legislation to be held by the Body Corporate. In these circumstances, I am satisfied it is appropriate to order the Respondent to contribute to the premium for insurance for each 12 month period from September, provided he is still an owner at that time, based on the requirements of the Small Schemes Module.