Boathaven Resort [2010] QBCCMCmr 359 (4 August 2010)

Number of Scheme:	29863
Name of Scheme:	Boathaven Resort
Address of Scheme:	440 Shute Harbour Road AIRLIE BEACH QLD 4802

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

I hereby order that the application for orders seeking

“the revocation of resolutions 11 and 12 and also that the RUM to refund any monies they have received from the body corporate since the resolutions were passed this financial year be refunded to the Body Corporate.”

is dismissed.

This is an application dated 30th April 2010 and amended on 5th May 2010 by John Jackson (the Applicant) owner of Lot 7 in the scheme, against the body corporate for Boathaven Resort CTS 29863 (the body corporate) for orders as follows –

“Boathaven Resort” CTS 29863 is a community title scheme governed by the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module.) There are 18 lots in the scheme created under a Building Format 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)).

That a fee of $1660.00 per annum be given to the caretaker for cleaning, maintenance and insurance of the gym and games room equipment. This amount to be budgeted for each year.”

The motion was proposed by the on-site manager and went on to explain that the room is used by all guests and is a “value added service” and that owners should be responsible for the upkeep. The fee is calculated at $15.96 per hour x 2 hrs a week x 52 weeks a year.

“That the body corporate approves a $1,000 annual expenditure allowance for replacement of gym/games equipment. Each item to be approved by the committee will then be the body corporate property. Further maintenance of this body corporate property will be (sic) the body corporate expense.”

This motion was also proposed by the on-site manager. Motion 11 was passed 7 – 2. Motion 12 was passed 7 – 4.

The Applicant says that the same motion as Motion 11 was passed at the 2009 AGM, and he wrote to the body corporate manager about it at the time. The body corporate manager replied that the body corporate was entitled to agree on the use of any service it wished, and that cleaning services were for the benefit of the body corporate and not an individual owner, since “it keeps what is effectively being used as a common area maintained.”

The Applicant says that the on-site manager owns the gym and the gym equipment. The Applicant advised those present at the meeting that he believed such voting of expenditure was illegal, and that the body corporate was not authorised to allocate public money for the maintenance and upkeep of private property. It is proposed that the $1,600 comes from the administrative fund and the cost of replacement equipment will come from the sinking fund.

The Applicant says that by Motion 12, the body corporate will “pay the same managers who personally own the equipment in the gymnasium the sum of $1,000 per annum for replacement of the gym games room equipment.”

In accordance with section 243(2)(b) Act, submissions were invited from all lot owners.

Marilyn Sabec (Ms Sabec), owner of Lot 14, supports the application. She recalls that at the time of her purchase that the caretaker was to maintain the “extra room” owned by the then managers. Subsequent managers then turned the room into a games room to attract business. However, the games room has not proved an attraction. The manager-owners applied to the committee to “assist in covering the costs of insurance etc.”. Ms Sabec was at the time a member of the committee. The committee agreed to this but said it would be reviewed annually. The then managers sold to Damien and Kelli, and a dispute arose with them regarding “claiming costs on their unit which was used as a games room” and they also wanted costs on the front verge, which had always been part of the manager’s responsibilities and was vigorously opposed by Ms Sabec and some other committee members. She thinks that the committee passed it however, and there has been continued bad feeling on the subject. New on-site managers and new committee members are now in place, and they have “fallen into line.” She has never seen the games room used although she does not live in the scheme. It is usually locked with the lights off. She says that owners should not be paying to maintain a part of another owner’s lot. She also notes that she is not listed in the minutes of the AGM as having cast a vote for Lot 14, which she did.

Kelli Medford, who describes herself as the owner of Lot 1, says that she is the resident manager and owns the gym and laundry rooms. They have asked the body corporate for funds for the upkeep and cleaning of this area as it is used by all guests free of charge. She says that the Applicant was acting treasurer of the committee in 2005/2006 and voted in favour of then managers Gary and Marilyn Anderson receiving $4,500 per year for maintenance and equipment. This was then voted on every year. The Applicant has always voted in favour of the funding. She believes that the Applicant helped the previous managers arrive at the dollar value. However, when they arrived as new managers, the Applicant and Ms Sabec proposed a motion to revoke this payment, as it was personal to the former managers, not because it was illegal. She as on-site manager has paid for maintenance of the gym for 1.5 years. The sum sought to be reimbursed is less than one-half what the actual costs are to keep the gym and billiards room in working order. The gym is used by all guests at the resort.

The respondent body corporate says that the former owners of the management rights, Garry (sic) and Marilyn Anderson received $4500 per year for this purpose, voted on by the body corporate on an annual basis. The Applicant was at that time a member of the committee and voted in favour. It is unusual that the gym and games room are not part of the common property. The body corporate has considered purchasing the area and the games equipment, but each time the matter is raised the body corporate feels that such purchase would not be viable. The option of paying for cleaning and upkeep was another option on the basis that the area is integral to the resort’s attractions which benefit everyone. Without it, potential guests would be turned off the resort. The bottom line, is that whilst the managers own the area and the facility, it is an essential part of the resort, and therefore immaterial to owners who the area actually belongs to. The majority realises that if the managers decided to close it down, owners and guests would be extremely disappointed.

I sought further information from the body corporate by 30th July 2010. The body corporate confirmed that the gym and games room is an area of 79 sq.m on Level B, being part of Lot 1.

It also confirmed that the caretaking service contractor was Medorth Pty Ltd (Medorth), the active participants in which are Kelli Medford and Damien Orth, the guarantors of the caretaking company. Medorth owns Lot 1.

The body corporate explained that it was proposed that the $1,600 was paid to Medorth against an invoice. The sum of $15.96 per hour was worked out as being the wage for a “level one” housekeeper, and insurance was not particularly evaluated in that sum. Medorth submitted a figure which “covered ½ the expenses of the cleaners specifically cleaning that portion of the resort for the year.”

In respect of insurance, Medorth says that the insurance premium for the business has increased “over $600 per annum” when the insurers found out that Medorth was liable for guests using the gym. There is no provision for body corporate insurance to cover guests using the gym. There is no specific part of Medorth’s insurance for “gym use”, but the insurance agent explained the increase was in respect of the gym use.

The committee does not advise its spending limit, but refers to Motion 12 in respect of purchasing gym equipment in the sum of $1000 per year. The body corporate has no record of gym and games equipment owned by Medorth. At present the body corporate has no gym or games equipment of its own, and has no register of such assets

Medorth makes no income from the gym. All equipment is free except for the pool table, the charge for which goes to the company which supplies the pool table and equipment in respect of it, and also maintains it.

In this matter, the Applicant seeks to have Motions 11 and 12 of the annual general meeting (the AGM) held on 8th March 2010, revoked. At that time and in this application, he says that it is unlawful for the body corporate to vote to apply body corporate funds to the cleaning of an owner’s unit, and to the purchase of equipment for use within a private lot.

At first sight, this argument is attractive. However, part of Lot 1, 76 sq m. owned by the caretaker Medorth, is used as a gym and games room for the benefit of the body corporate.

By-law 14 of the scheme by-laws, allows the owner of Lot 1, to use the Lot 1 both for residential use, and for the purpose of managing and caretaking, letting and sales, and "for the provision of such other goods or services to owners or occupiers of lots.....” Medorth says that it makes no income from the gym and games room.

The body corporate look on the gym and games room as “essentially common property.” There is some dispute about the use of the gym. Ms Sabec says it is rarely used, but Ms Medford says that it is used by all the guests. The body corporate says that without it, guests would be “turned off” the resort. I note that it is mentioned on the website as a resort facility, and that this is a scheme governed by the Accommodation Module, that is, the predominance of lots are available for letting out.[1]

The games room and gym are not common property, and there appears to be no reason why Medorth should allow any other owner or occupier into its lot. There does not appear to be any agreement between Medorth and the body corporate for the use of that part of Lot 1. However, Medorth is of the view that the offer of gym facilities and games room enhances the resort, which attracts lettings, and since Medorth is also the letting agent for the scheme, the use of its lot as a “body corporate” facility is beneficial to Medorth.

Medorth might propose to the body corporate that it takes a lease or licence of the area. It seems that the purchase of the area has been considered by the body corporate but that the body corporate does not think the purchase would be a viable option. It would of course require the agreement of a price at a commercial rate, and a resolution without dissent from the body corporate.

If the body corporate is desirous of maintaining the gym and games room facility, then it seems to me that Medorth is offering a service to the body corporate, for which it would be reasonable for the body corporate to pay. The price proposed is said simply to cover cleaning costs, and at $1,600 per year likely to be much cheaper than a commercial rent - approximately $30.76 per week. If the body corporate was the sole tenant, as lessee, it would then also have to keep the area clean.

If Medorth offered no service in that area, or the body corporate did not want a games room and gym, then the Applicant is correct that body corporate funds should not be used to pay for the cleaning a lot owner’s unit.

From the result of the voting on Motion 11, it seems that the majority of lot owners do wish to keep the use of the gym and games room, and are willing to pay for having this facility open to them, albeit that the fee is espoused as a “cleaning fee”, to be given to the “caretakers” when it is the owners of the lot, who happen to be the caretakers, to whom the fee should be paid. This seems to me a reasonable use of body corporate funds. Further, the body corporate can vote each year as to whether or not they wish to pay for cleaning, that is, have use the gym facility. If the body corporate does not want to pay a reasonable fee for the use of the area as a facility for the body corporate, then the owners have no obligation to provide a service within it. The owners/caretakers are in a somewhat vulnerable position, having no more formal arrangement, if they wish to keep the gym/games room running, but that is a matter between them and the body corporate.

The owners of Lot 1 have also taken on the insurance of operating a gym on their property, for the benefit, even if only the joint or partial benefit, of the body corporate, and could be sued for any personal injury to another in the use of the gym equipment, or in the use of the premises of Lot 1, which is a liability not undertaken by any other owner.

In respect of Motion 12, this again is a vote by the majority that the gym facility should continue. The body corporate proposes simply to buy some equipment, to be selected by the committee up to the value of $1,000 this financial year. It does not need to be $1,000 of equipment, every year, if the body corporate votes against it the next time the budget, or this motion, is proposed. I do not concur with the Applicant that this motion is in itself in any way unlawful.

The maintenance of the new equipment shall be paid for by the body corporate. That would also seem to be reasonable where the body corporate owns the asset.

The Applicant does not have any dispute about the body corporate owning gym equipment, only that the body corporate should not be paying to maintain equipment belonging to someone else, and not paying to replace equipment now owned by someone else.

As noted by some owners at the AGM, there is the potential for confusion if some of the equipment is owned by the body corporate and some owned by Medorth or others eg the pool table. I asked the body corporate whether it currently had a register of assets but it replied that it did not yet own any equipment. In accordance with section 195 Accommodation Module, the body corporate must keep a register of assets valued at more than $1,000. I would suggest however, that in future the body corporate committee minutes carefully record the gym/games equipment purchased by the committee for the body corporate even if its value does not require it to be kept on the assets register.

The Applicant has not demonstrated that the $1,000 is to be paid to “the managers”. The sum of up to $1,000 is to be used for purchasing gym/games equipment for the body corporate, perhaps at the recommendation of Medorth, but the committee must approve each item, and can refuse any recommendation if it wishes. The committee might also refuse to buy equipment if, for example, body corporate faith in the attractions of the gym falter. Again, it seems to me that it is the caretakers who are in a somewhat vulnerable position. The body corporate will own the equipment, and may of course withdraw any equipment from use if it wishes to do so.

The present arrangement works because the majority of owners and Medorth feel there is some mutual benefit in running the gym/games room. If Medorth closed Lot 1 to the body corporate, or the body corporate removed its equipment, then neither party would benefit. This is a matter for the body corporate to decide at future general meetings, and I see nothing intrinsically unlawful about such an arrangement.

The body corporate might however satisfy itself on the question of insurance if the gym is to operate on private property but using equipment owned and maintained by the body corporate.

Queensland Body Corporate and Community Management Commissioner - Adjudicators Orders

Boathaven Resort [2010] QBCCMCmr 359 (4 August 2010)