Brookwater Home Owners Club [2010] QBCCMCmr 25 (19 January 2010)

Last Updated: 19 March 2010

REFERENCE: 0489-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	29222
Name of Scheme:	Brookwater Home Owners Club
Address of Scheme:	Augusta Parkway BROOKWATER QLD 4300

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

the bodies corporate for Brookwater Bougainvillea Gardens Home Owners Club, Brookwater Panorama Home Owners Club and Brookwater Vista Home Owners Club

I hereby order that the application for an order that the decision made by the Body Corporate for the Brookwater Home Owners Club at an Extraordinary General Meeting held on 23 February 2009 when Motion 3 (Consent to Leisure Centre Lease) failed should be set aside and that the Body Corporate for the Brookwater Home Owners Club be permitted to enter into the Lease the subject of Motion 3 and proceed in accordance with Motion 3 as if a resolution had been passed at the EGM in the terms of Motion 3, is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0489-2009

“Brookwater Home Owners Club” CTS 29222

APPLICATION

This is an application by the bodies corporate for Brookwater Bougainvillea Gardens Home Owners Club, Brookwater Panorama Home Owners Club and Brookwater Vista Home Owners Club (the Applicant subsidiary bodies corporate) against Brookwater Home Owners Club, the principal body corporate and Respondent.

The Applicants seek an order that the decision made by the Respondent at an EGM held on 23 February 2009 when Motion 3 failed should be set aside and that the Body Corporate be permitted to enter into the Lease the subject of Motion 3 and proceed in accordance with Motion 3 as if a resolution had been passed at the EGM in the terms of Motion 3.

Motion 3 was as follows:

3. CONSENT TO LEISURE CENTRE LEASE:

MOVED THAT in accordance with section 166(3) of the Body Corporate and Community Management (Standard Module) Regulation, the Body Corporate resolves by resolution without dissent to:

(a) Acquire a leasehold interest in freehold land and enter into the Lease (a copy of which is circulated with this notice) for the use and enjoyment of the owners and occupiers of lots included in the Scheme as well as by residents (or the class or classes of residents determined from time to time by the Body Corporate) of lots included in any subsidiary scheme to the Scheme; and
(b) Affix the common seal of the Body Corporate to the lease.

AND THAT to this end the Body Corporate shall:

(a) enter into and execute the Lease;
(b) affix the common seal of the Body Corporate to the Lease, in the presence of the Chairman and the Secretary or one other member of the Committee; and
(c) execute any other documentation required by the Queensland Land Titles Office to register the Lease.

(RESOLUTION WITHOUT DISSENT)

Motion failed 25 YES 6 NO 1 ABSTAIN

The grounds to the application were to the following effect:

• Brookwater Home Owners Club (“the Principal Scheme”) is the Principal Scheme for a community known as Brookwater. Brookwater is a layered scheme. There are 33 lots in the Principal Scheme, including 14 subsidiary schemes that are currently registered. Of the other 19 lots included in the Principal Scheme, 13 are owned by Springfield Land Corporation (No.2) Pty Ltd (“S.L.C”) the original developer of Brookwater. The remaining 6 lots in the Principal Scheme are owned by Mirvac Qld Pty Ltd (“Mirvac”) which is intending to develop those lots for the purpose of creating further subsidiary schemes.
• The proposal for the Leisure Centre had been discussed and negotiated for more than 3 years between S.L.C and the Principal Scheme committee and lawyers for both parties had been involved in the negotiation of the Lease for many months before arriving at the final form of the Lease that was placed before the EGM on 23 February 2009 for consideration.
• On 23 July 2007 at a presentation for all lot owners throughout the subsidiary schemes, 80% of registered owners voted in favour of the proposed Leisure Centre.
• The proposal for the Leisure Centre had been common knowledge among residents for some considerable time. The Original Masterplan refers to the proposed Leisure Centre and marketing of land at Brookwater included reference to a Leisure Centre from the beginning. Some owners may have purchased lots within Brookwater in anticipation that the Leisure Centre would one day become a reality and that any delays were due to delays in the planning. Some owners may have decided not to build swimming pools on their own lots in anticipation that the Leisure Centre, which is intended to include a swimming pool for use of residents, would one day become a reality and that again, any delays were due to delays in the planning process.
• The motion for consent to the lease required a resolution without dissent at the EGM because the lease was intended to be for an initial term of 10 years.
• At the EGM all 33 lots, apart from one subsidiary scheme were represented either in person or by voting paper so accordingly there were 32 voters.
• Motion 3 failed with there being 25 “YES” votes, 6 “NO” votes and 1 abstention. All 6 “NO” votes were from just one voter, namely Mirvac. In effect, the resolution without dissent was not passed as a result of the vote of one single voter.
• The Applicants believe Mirvac acted unreasonably in voting “NO” to Motion 3. That has resulted in the Respondent not acting reasonably in making the decision at the EGM regarding the Leisure Centre Lease.
• The Applicants and the Principal scheme are not aware of any reasons why Mirvac has voted against the Leisure Centre Lease. In a letter dated 16 February 2009 from Mirvac to S.L.C., the reason given by Mirvac refers to the change in Queensland Transport laws not allowing buggie access on public roads.
• Brookwater is a residential estate built around Brookwater Golf Course and golf buggies are a common form of transport used by residents to travel to and from the golf course. The location of the proposed Leisure Centre is next to the clubhouse and will form part of the golf course. The Applicants consider that restrictions on the use of golf buggies to move to and from the Leisure Centre is not a reasonable basis for Mirvac to have voted against the motion for the Lease.
• The Applicants consider a decision to vote in favour of the Leisure Centre Lease would have been a reasonable decision because:
  • The Leisure Centre would provide a top class facility, including a swimming pool for the use of the hundreds of families that will ultimately reside in Brookwater once the total development is completed;
  • The facilities provided by the Leisure Centre would add value to the overall Brookwater suburb and in turn add value to the dwellings in Brookwater.
  • S.L.C. was to build the Leisure Centre and then lease the Leisure Centre to the Principal Scheme for rental of $1.00 per annum. The Applicants understand that the cost of construction of the Leisure Centre will exceed $1,500,000. Although the rent is negligible, the Principal Scheme does have obligations under the Lease to contribute to the on-going repair and maintenance of the Leisure Centre and is to pay an annual refurbishment contribution to SLC.
  • The Principal Scheme administrative budget for the year ended 31 March 2009 had items pertaining to the Leisure Centre lease totalling $43,500. Those items have been repeated in the administrative fund budget for the year ended 31 March 2010 pending the outcome of action to enable the Principal Scheme to proceed with the Leisure Centre Lease. Notwithstanding this fact, the administrative fund levies for the Principal Scheme will be less this year than they were last year.
  • When the $43,500 is divided amongst the 608 lots currently in all of Brookwater, that equates to $71.55 per lot.
  • The financial impost on owners as a result of the Leisure Centre Lease is not considered to be significant.
    

JURISDICTION

“Brookwater Homeowners Club” is registered as a standard format plan of subdivision comprising numerous individual lots, subsidiary community titles schemes and common property. The scheme is regulated by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Standard Module) Regulation 2008 (the Standard Module).

This is a dispute between the body corporate and three of its subsidiary schemes and comes within the dispute resolution provisions of the Act (see sections 226, 227 & 228).

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

(c) a claimed or anticipated contractual matter about-

(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)).

Without limiting the above, an adjudicator may make an order in schedule 5. Order 10 of Schedule 5 provides that an adjudicator may, if satisfied that a motion considered by a general meeting of the body corporate and requiring a resolution without dissent was not passed because of opposition that in the circumstances is unreasonable, make an order giving effect to the motion as proposed, or a variation of the motion as proposed.

SUBMISSIONS

In accordance with section 243 of the Act, a copy of the application was provided to the body corporate manager, Capitol Body Corporate Administration, for distribution to the owners of all lots in the Principal scheme (excluding the Applicants), the committee, and specifically to Mirvac Queensland Pty Ltd, as the party identified by the Applicants as having voted against Motion 3 at the EGM of 23 February 2009, with an invitation to respond to the matters raised in the application.

Two submissions were received, one from S.L.C. to the following effect:

• Concurs generally with the submissions made by the Applicants;
• Has undertaken design work and preliminary work related to construction;
• Has called for tenders for the construction contract and has selected a preferred builder;
• Is prepared to construct the Leisure Centre provided that the lease is signed by the Brookwater Home Owners Club, under which the Brookwater Home Owners Club will agree to contribute to refurbishment etc of the Leisure Centre.
• Strongly supports the Brookwater Leisure Centre concept and wishes to expedite the construction of the Leisure Centre, as soon as the Brookwater Home Owners Club enters into the lease.
  

The other submission, by Mirvac, was to the following effect:

• Discussions have occurred between the parties, however, no resolution could be reached.
• Mirvac entered into an agreement with S.L.C. in July 2006 to purchase land currently described as Lots 1- 13 on SP195370, which are included within the Principal Scheme. Lots 1 – 7 will form the Fairways West Subsidiary Scheme and lots 8 – 13 will form the Fairways East Subsidiary Scheme.
• The Mirvac development proposal has always included the construction of a significant recreational facility consisting of a pool, barbeque area, seating and green space. This facility was completed in March 2009 for the sole benefit of, and use by, future residents within the Fairways East and Fairways West Subsidiary Schemes. The cost to residents for the enjoyment of this facility is included within the weekly Body Corporate Levy of approximately $55/week.
• At a regular monthly meeting on 10 November 2006 between Mirvac and S.L.C, S.L.C’s representative advised that Mirvac’s development lots would not be included in calculations for the proposed Brookwater Leisure Centre, due to the fact that Mirvac would be providing its own facility. Mirvac agreed to this at this meeting, and was advised that it would not be an issue for the Principal Body Corporate if Mirvac was not included. At this meeting Mirvac was also verbally advised that the body corporate levy impact for all Brookwater residents (excluding those in Mirvac’s development) of the Leisure Centre would be approximately $11/week.
• In June 2008, S.L.C. raised the issue of the Leisure Centre with Mirvac, and asked if Mirvac would like to be included in the usage of the Centre. Based on the verbal levy impact (advised at $4/week) Mirvac still rejected the invitation due to the extreme sensitivity of body corporate levies on potential buyers, and that Mirvac had its own facility. At no time was Mirvac advised that there would be an issue for the Principal Body Corporate with respect to implementing the Leisure Centre based on Mirvac’s exclusion from the scheme.
• In Decmember 2008, when the recreational facility within Mirvac’s development was almost complete, S.L.C. advised Mirvac that there may be problems for the Principal Scheme getting the Leisure Centre approved due to the nature of the lease with S.L.C. At this time, in an email dated 2 December 2008, S.L.C. advised in writing that the Body Corporate Levy impact to residents would be $5.36/week, or $278.72/year. Mirvac notes that the dispute resolution application advises the levy impact to be $71.55/year. Given that the Principal Scheme’s main assertion for Mirvac acting “unreasonably” is based on this figure, Mirvac requested that the Applicants contact the Commissioner and confirm the correct figure. The Principal Scheme verbally advised Mirvac that the figure in the dispute resolution application is incorrect.
• Mirvac considered the further request from S.L.C. and decided not to join the Leisure Centre for the following reasons:
  • Mirvac had already provided its own comprehensive facilities;
  • The additional levies would increase Fairways levies to over $60/week, which is considered too high for the target market of the project;
  • The Leisure Centre location would require Fairways residents to drive to the Leisure Centre, via Augusta Parkway, due to the Fairways project not being connected to the existing “Greater Brookwater” by road, golf cart, or pedestrian path.
  • Being part of the Leisure Centre would be considered to add no value to Fairways – on the contrary, the additional levies would detract from buying into the development.
    

Mirvac also provided the following information with respect to further developments which have occurred since this application was lodged.

• Since its receipt of this application, Mirvac made contact with the chairperson of the Principal Body Corporate to hopefully reach a compromise on the dispute.
• The basis of the discussion was for Mirvac to assist the Principal Body Corporate in reaching resolution to allow the Leisure Centre to occur for the benefit of the other Brookwater residents. Mirvac suggested that an automatic rebate mechanism would be possible to enable the 2 Fairways subsidiary schemes to simply “opt out” of the Leisure Centre membership. Failing that, Mirvac suggested that it would consider a payment from the Principal Body Corporate to offset future levies.
• Following this discussion, the chairperson advised that a committee meeting would take place to allow a proposal to be put to Mirvac.
• On 19 June 2009, however, Mirvac received an email from the chairperson advising that the Committee had met, but that they would not entertain either the rebate mechanism or a payment to offset the future levies.
  

The Applicants exercised their right to inspect the submissions made and responded to Mirvac’s to the following effect:

• They continue to rely on the grounds set out in their original application, subject to them clarifying the impact on levies for owners in the Fairways subsidiaries, concluding that the difference between the current levies and future levies, is only $3.35 per week and that the per lot amount will reduce as and when future subsidiary schemes are registered and more lots are contributing to the overall expenses for Brookwater.
• The facilities intended to be offered by the Leisure Centre are considerably more than the facilities offered by the Mirvac subsidiary schemes. The Leisure Centre will add value to all of the Brookwater subsidiary schemes, including those subsidiary schemes established by Mirvac.
• The facilities and the services attaching thereto that will be offered by the Leisure Centre will be such that it is possible, indeed likely, that the residents of Fairways will wish to use those facilities. If Fairways does not contribute to the costs then those residents will need to be excluded. This departs from the sense of community within Brookwater and it would also lead to security and management issues if it was necessary to have to try to exclude a class of residents from the facility.
• Residents of Fairways will be able to drive or walk to the Leisure Centre, although this will not be achievable totally on roads within Brookwater. This is the same situation for residents of other schemes within Brookwater, some of whom are located further away from the Leisure Centre site than the Fairways schemes.
• Residents of Fairways will be able to access the Leisure Centre by vehicle by driving and parking in the golf club car park or by golf buggy along the fairway and direct into the Leisure Centre.
• The Principal scheme could not meet the capital costs of constructing the Leisure Centre.
• The Applicants believe that it might be possible to resolve the matter between the parties now that the views of the parties are known to the others. The Applicants state that it may be in the interests of all owners in the Brookwater community to endeavour to have the parties reach their own negotiated arrangement before the dispute is formally adjudicated upon.
  

A submission from the committee of the Principal Scheme was also received. It broadly supported the reply of the Applicants but made additional comment to the following effect:

• The factors that led to the “no vote” by Mirvac are quite insignificant when considered in the context of the number of owners who are adversely affected by the decision. All of those owners are also required to contribute the same small additional weekly amount to the Principal Scheme to cover the cost of the Leisure Centre.
• The Principal Scheme committee would support moves to attempt to resolve this matter by formal conciliation.
• To prevent the investment from taking place would be to deprive the entire community of a much needed social and sports facility.
  

DETERMINATION

Offer to Conciliate Refused

In a telephone conversation with the Conciliation Manager of this office, on 15 January 2009, Ian Darcy of Capital Body Corporate Management advised that the Applicants were no longer willing to attempt to conciliate the matter. He advised that that was proposed back in October but that that was no longer the case.

Applicable Law

The body corporate may acquire a leasehold interest in freehold land for the use and enjoyment of the owners or occupiers of lots included in the scheme only if the proposal is authorised by a resolution without dissent if the proposal is to enter into a lease of more than 3 years (section 166, Standard Module).

The body corporate must administer, manage and control the common property reasonably and for the benefit of lot owners (section 152, Act). The body corporate must also administer body corporate assets for the benefit of the owners of the lots included in the scheme and must act reasonably in anything it does in this regard (section 94, Act).

Order 10 of Schedule 5 provides that an adjudicator may, if satisfied that a motion considered by a general meeting of the body corporate and requiring a resolution without dissent was not passed because of opposition that in the circumstances is unreasonable, make an order giving effect to the motion as proposed, or a variation of the motion as proposed. There have been a number of adjudications dealing with schedule 5(10) of the Act and the issue of “reasonableness”.

In Points North (paras 42 and 44) and Ocean Plaza Apartments[1] (paras 23 and 26), the specialist adjudicator stated:

In determining whether such opposition was in the circumstances unreasonable, I do not consider that the “subjective intention” of each of the lot owners who voted in opposition is the appropriate test for the above criteria in Schedule 5 Order 10. Whether the opposition is in the circumstances unreasonable has to be considered “objectively” taking into account all relevant circumstances ... the appropriate test ... is whether opposition to a motion is unreasonable/reasonable when considered in an objective and fair manner in all of the circumstances. A test relying on a subjective intention to oppose a motion would make Schedule 5 Order 10 meaningless and inoperative.

In Zenith[2] (where the above test was applied), the adjudicator stated the courts have held that where a statute expressly provides that a decision is to be made ‘reasonably’ or upon ‘reasonable grounds’, the test is an objective one that requires a balancing of factors in all the circumstances according to the ordinary meaning of the term ‘reasonable’.[3] In this decision and in the decisions made to resolve disputes in Q1[4] and Allen Court[5], adjudicators also stated:

In determining whether votes against a motion constitute opposition that in the circumstances is unreasonable it is necessary to consider all the material facts. What is material will vary from case to case but typically the requirement for an adjudicator to make a just and equitable decision involves some balancing of the interests of the majority and minority and raises questions of fairness.

In Sirocco Resort[6], reasonableness in the context of withholding approval was considered by the specialist adjudicator who stated:

• In general terms ... provided there are objectively established circumstances showing potential reasons, there could be “sufficient reasons for withholding consent” (para 56).
• My own conclusion, reached from a consideration of relevant authority and principle, is that where there has been a constructive, implied, or deemed, decision of a withholding of consent/approval, it is open to a body corporate ... to still rely upon the objectively established circumstances at the time to glean the existence of reasons, although a Court, or Specialist Adjudicator, might be able, in particular circumstances, to more readily imply that the deemed withholding was unreasonable. But each case would depend on its own set of circumstances (para 59).
• The question of whether the body corporate’s conduct was reasonable or unreasonable is one of fact to be decided by the adjudicator (para 64).
• In determining whether the conduct was reasonable, it is not necessary to determine that it was either right or justifiable, if the conclusions which led to refusal of consent might have been reached by a reasonable person in the circumstances (para 66).
• The essence of a reasonable decision is that there are reasons for it which can be justified at some level (even if only by showing the reasons are genuine and not wholly fanciful), what is not required is for those reasons to be justified by reference to some objective standard of correctness (para 67).
• The Applicant has not discharged its onus of establishing that the deemed withholding of the Respondent’s approval ... was unreasonable, given the actual circumstances that existed ... and given the advice on which it could rely which had been placed before it (para 108).
  

Was Opposition to Motion 3 Unreasonable?

In its submission, Mirvac provided the following reasons for voting “no” to Motion 3:

• Mirvac had already provided its own comprehensive facilities;
• The additional levies would increase Fairways levies to over $60/week, which is considered too high for the target market of the project;
• The Leisure Centre location would require Fairways residents to drive to the Leisure Centre, via Augusta Parkway, due to the Fairways project not being connected to the existing “Greater Brookwater” by road, golf cart, or pedestrian path.
• Being part of the Leisure Centre would be considered to add no value to Fairways – on the contrary, the additional levies would detract from buying into the development.
  

The Applicants responded as follows:

• The difference between the current levies and future levies, is only $3.35 per week and that the per lot amount will reduce as and when future subsidiary schemes are registered and more lots are contributing to the overall expenses for Brookwater.
• The facilities intended to be offered by the Leisure Centre are considerably more than the facilities offered by the Mirvac subsidiary schemes.
• Residents of Fairways will be able to drive or walk to the Leisure Centre, although this will not be achievable totally on roads within Brookwater.

Given the circumstances that existed at the February 2009 EGM, I consider that it was objectively reasonable for Mirvac to vote against the Motion as proposed. Its reasons for voting against Motion 3 appear to me to be objectively reasonable, even considering the Applicants’ response to them. Mirvac could not see any benefit in contributing financially to a project that would provide use of facilities which Mirvac had already provided, even if to a lesser extent than those proposed, and, in its view, would be difficult for Mirvac residents to access. The increase in levies, however small, that would result from its support of the project could detract from buying into the Mirvac development. In my view, the Applicants have not established that the opposition to Motion 3 was unreasonable and that the resultant decision of the body corporate not to pass Motion 3 was unreasonable.

ORDER

For these reasons I have made the order above.

---

[1] Points North [2004] QBCCMCmr 423 (2 September 2004); Ocean Plaza Apartments [2004] QBCCMCmr 452 (23 September 2004).
[2] Zenith [2007] QBCCMCmr 115 (28 February 2007).
[3] Secretary, Department of Foreign Affairs and Trade v Styles (1989) 88 ALR 621.
[4] Q1 [2007] QBCCMCmr 131 (8 March 2007).
[5] Allen Court [2007] QBCCMCmr 297 (21 May 2007).

[6] Sirocco Resort [2006] QBCCMCmr 426 (2 August 2006). This dispute did not give consideration to schedule 5(10). The decision related to the transfer of rights provisions in the Body Corporate and Community Management (Accommodation Module) Regulation 1997.