Edgecliffe Apartments [2010] QBCCMCmr 99 (2 March 2010)

Last Updated: 14 April 2010

REFERENCE: 0845-2009

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	10509
Name of Scheme:	Edgecliffe Apartments
Address of Scheme:	4 The Esplanade KINGS BEACH QLD 4551

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

C Humphreys, the Owner of lot 7

I hereby order that the application for the following orders A ruling that motions 10 & 11 passed at the 2009 AGM on 27/7/09 do not constitute body corporate approval for the August Painting and Carpeting work undertaken at Edgecliffe between 7.30 Monday 17/8/09 and 5pm Friday 21/8/ 09 (hereafter referred to as the “APC event”). A ruling that the “APC event” is effectively an unauthorised improvement to the common property. An agreement with the body corporate about colour schemes for level 2 common areas which specifies: Whether or not the APC carpet will be accepted; That the painting will be done again; A process for selecting the colour scheme; How costs for repainting will be met; A time frame for completing any corrective work An agreement about a process by which the body corporate will handle complaints by owners on other levels regarding the “APC event”. Is dismissed.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 0845-2009

“Edgecliffe Apartments” CTS 10509

THE SCHEME

The community titles scheme for Edgecliffe Apartments comprises 10 lots on a Building Format Plan (previously known as a building unit plan) and is governed by the Body Corporate and Community Management (Standard Module) Regulation 1997 (the Standard Module).

APPLICATION

The applicant has submitted a dispute resolution application under the Body Corporate and Community Management Act 1997 (the Act) seeking the following outcomes:

A ruling that motions 10 & 11 passed at the 2009 AGM on 27/7/09 do not constitute body corporate approval for the August Painting and Carpeting work undertaken at Edgecliffe between 7.30 Monday 17/8/09 and 5pm Friday 21/8/ 09 (hereafter referred to as the “APC event”).

A ruling that the “APC event” is effectively an unauthorised improvement to the common property.

An agreement with the body corporate about colour schemes for level 2 common areas which specifies:

• Whether or not the APC carpet will be accepted;
• That the painting will be done again;
• A process for selecting the colour scheme;
• How costs for repainting will be met;
• A time frame for completing any corrective work
  

An agreement about a process by which the body corporate will handle complaints by owners on other levels regarding the “APC event”.

BACKGROUND

The applicant has attached a large amount of information to the dispute resolution application including the following submissions:

• The painting and carpeting proposal was presented at short notice without prior consultation and Mrs Morat, a co-owner of lot supervised the work;
• She spoke to Mrs Morat on several occasions regarding the work;
• The applicant believes that within this scheme there is an internal management culture characterised by executive action rather than committee approvals;
• At the last AGM a motion was considered regarding the repainting of the lobby and corridors which are common property. As a result of the motion being carried, the colour scheme for the level 1, 2 & 3 lobby and corridor areas has changed from a “neutral effect” to a “new gaudy effect dominated by a vegemite lid yellow”;
• the motions were classified as “maintenance” in the AGM papers and do not authorise the markedly different colour scheme. The applicant refers to a previous adjudicator’s decision where it was held that maintenance does not involve a dramatic change of colour : Re Wimbledon Villas [2009] QBCCMnfrom;
• the total cost of the painting and carpeting was $4,611.10 comprising carpeting costs of $3,411.10 and $1,200 for painting;
  
• the applicant believes that if considered separately, the $1,200 quote for painting should have been approved by resolution of the committee;
• if considered together, the total expenditure would have required approval by a resolution of an AGM but “motions 10 & 11 seem inadequate for that purpose given that

(i) the work is wrongly described as maintenance instead of “improvements”; (ii) details of colour schemes were not included in the motion; (iii) the carpet is neither Knotty Pine nor Ivy as nominated in the quote.”;

• expenditure approved by motions 10 & 11 were maintenance rather than improvements;
• she asked if the amounts quoted were still current given that the quotes were 9 months old, but was treated dismissively and the question is not recorded in the minutes of the meeting;
• there has been an apparent breach of section 164 of the Standard Module Regulation because Mr & Mrs Morat organised the painting and carpeting. For example she authorised the painter to commence work and Mrs Morat was on site directing the work, presumably acting on the authority of some but not all, committee members.
• She is in favour of leaving the carpet in place as it has been paid for and laid;
• Level 2 owners should be given the opportunity to decide on the colour scheme for their floor & submitted for committee approval;
• A decision also needs to be made as to whether the colour scheme should be changed on levels 1, 2 and 3 or just on level 2;
• Level 2 owners should be given the opportunity to decide on the colour scheme for their floor & be able to submit their proposal to the committee for approval;
• It is unfair that the level 2 unit owners should be out of pocket to fix an unacceptable colour scheme which they have not approved. One possibility is that those who authorised the work should pay for corrective work or alternatively, funds approved by motions 10 & 11 i.e. funds reserved for items 1 & 2 on the painting quote of 12/10/08 should be freed up if this work does not proceed;
• A time frame for the corrective work to be undertaken will prevent unreasonable delay, except that corrective work will not occur during peak holiday booking periods;
  

SUBMISSIONS

In accordance with section 243 of the Body Corporate and Community Management Act 1997 (the Act), a copy of the application was provided to the body corporate and all other owners of lots. Each was invited to make a written submission to the matters raised in the application. Submissions were received from the owners of lots 8, 3 & 1.

The owners of lot 3 made the following submissions:

• The carpeting quote from Tatters giving a choice of 2 carpet colours was accepted at the AGM on 27 July 2009. Neither of the 2 carpet colours were eventually laid and although they would not have chosen the current colour, they agree that the carpet is serviceable and agree that the carpet does not need to be changed;
• The main source of contention is the yellow “vegemite lid paint”. They are not sure who chose the colour but neither they, nor the owners of lots 7 & 8 were consulted.
• the yellow “vegemite lid paint” is not an appropriate colour for the level 1, 2 & 3 foyers and they would support any proposal to change the colour on all three floors;
• alternatively, they would agree to a colour change to level 2 only;
• level 2 owners should be able to decide on their colour scheme and submit this for committee approval;
• they would agree to the use of body corporate funds to repaint the walls on whatever levels are to be repainted;
  
• it is essential that a reasonable time frame is set for any corrective work because last time it took 10 months from receipt of the quote to have the quote approved at an AGM and to then have the work completed.
  

Submissions made by the owner of lot 8, also located on level 2, included the following:

• she wishes to have the level 2 foyer repainted a colour agreed upon by owners;
• even though she was a committee member and was present at the scheme at the relevant time, she was not consulted regarding the paint colour;
• she wants the level 2 foyer to be repainted at the cost of the body corporate.
  

Submissions made by the owner of lot 1 included the following:

• the applicant refers to a number of matters in her submission but the only concrete outcome sought is relates to repainting of the level 2 foyer which would cost approximately $300 to $400 at most;
• the alleged faults in the motions are minor and rather technical;
• details such as the colour and texture of the paint are normally decided at the time of the job rather than being included in a motion;
• the 3 owners of units on level 2 should decide on the colours;
• the minutes of the AGM show that for motion 10 there were 8 votes in favour & nil against, for motion 11 there were 6 votes in favour & 2 against. Therefore both motions would have been carried irrespective of whether an ordinary resolution or a special resolution was required i.e. whether the work was characterised as maintenance or improvements. Therefore the work was properly authorised;
• the body corporate should meet the cost of the level 2 foyer being repainted in a colour agreed by a majority (2 out of 3) owners on that level. The level 2 lot owners should decide what colour they want and advise the committee accordingly;
• this dispute is simply a misunderstanding and subsequent disagreement between the owners of lot 7 and lot 5 and not a dispute involving the committee.
  

The applicant made submissions in reply which included the following:

• three submissions were received in response to the application and these were made by committee members;
• submissions were not made by the committee, the chairman or secretary;
• she does not believe that the committee is functioning well and does not see this event as “simply a misunderstanding and subsequent disagreement” but rather, an indication that body corporate is run by executive rather than committee decision;
• the committee members show “an alarming deficiency in relevant knowledge” and therefore the executive members of the committee should be accountable for the cost of corrective action and her costs involved in preparing the application.
  

JURISDICTION

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)).

DETERMINATION

The outcomes sought by the applicant are expressed in the following terms:

A ruling that motions 10 & 11 passed at the 2009 AGM on 27/7/09 do not constitute body corporate approval for the August Painting and Carpeting work undertaken at Edgecliffe between 7.30 Monday 17/8/09 and 5pm Friday 21/8/ 09 (hereafter referred to as the “APC event”).

A ruling that the “APC event” is effectively an unauthorised improvement to the common property.

An agreement with the body corporate about colour schemes for level 2 common areas which specifies:

• Whether or not the APC carpet will be accepted;
• That the painting will be done again;
• A process for selecting the colour scheme;
• How costs for repainting will be met;
• A time frame for completing any corrective work
  

An agreement about a process by which the body corporate will handle complaints by owners on other levels regarding the “APC event”.

Edgecliffe Apartments comprises 10 lots on four levels and is located on the Esplanade at Kings Beach. In relative terms this an older building and I note that a significant amount maintenance work has been recently undertaken in common property areas. One area of common property requiring maintenance was the lobby/ corridor areas on levels 1, 2 and 3. I understand that the carpet was worn and the walls were in need of repainting. This dispute largely revolves around the application of bright yellow paintwork to the lower part of the walls in the lobby/ corridor area on level 2. From photographs provided it would appear that the walls are approximately 2.7 metres high with the upper two thirds of the wall painted white and the lower part, approximately 80 centimetres in height, painted bright yellow.

A decision to repaint the walls and recarpet the floors in these areas was made at the last AGM for the scheme where the following motions were considered:

10. Maintenance Replacement of Common Property Carpets Ordinary Resolution

Submitted by committee voting members

That under section 159 of the Body corporate and Community Management (Standard Module) Regulation 2008 , the body corporate resolve to accept the C.Tatters & Son Pty. Ltd. Quote dated 15 October 2008 being for various carpet replacement works in accordance with the content of that quotation and, if this motion is resolved in the affirmative, the quoted price to be debited to the sinking fund. A copy of the quote is attached to this notice of annual general meeting.

It was resolved that the motion be carried with 8 “Yes” votes and 0 “no” votes.

11. Maintenance Repainting of selected Parts of Common Property

Submitted by committee voting members

That under section 159 of the Body corporate and Community Management (Standard Module) Regulation 2008 , the body corporate resolve to accept the Jacky Bourdon Quotation No.35 dated 12 October 2008 being for various maintenance repainting of selected parts of common property in accordance with the content of that quotation and, if this motion is resolved in the affirmative, the quoted price to be debited to the sinking fund. A copy of the quote is attached to this notice of annual general meeting.

It was resolved that the motion be carried with 6 “Yes” votes and 2 “no” votes.

In my opinion, both items of work, that is the replacement of the carpet and the repainting, are items of maintenance as contemplated by section 159 of the Standard Module and approval for maintenance work is dealt with by section 159 of the Standard Module regulation which provides as follows:

159 Duties of body corporate about common property—Act,s 152
(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.
For utility infrastructure included in the common property, see section 20 of the Act (Utility infrastructure as common property).
(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—
(a) maintain in good condition—
(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—
(i) foundation structures;
(ii) roofing structures providing protection;
(iii) essential supporting framework, including load-bearing walls.

The committee can approve maintenance expenditure up to the amount of “the relevant limit for committee spending” which is either:

• the amount set as the relevant limit by ordinary resolution; or
• the lesser of the following amounts - $10,000 or

$1,100 x Number of lots in the scheme.

For reasons which I will set out below, I do not believe that the characterisation of the work as an improvement, would make any difference to the outcome of this decision. Nevertheless, I will deal with the question of whether the work in question involves an “improvement to common property”.

While I have noted the decision of the adjudicator in the decision Re Wimbledon Villas [2009] QBCCM, I am unable to agree with that decision. The question of whether the works involve “maintenance and repairs” or “improvements”. has been dealt with in a number of cases including the adjudicator’s decision in Re Golden Sands Highrise (Ref 927-2008 12 March 2009) where the adjudicator made the following comments:

In regard to the difference between maintenance and improvement, an Adjudicator[1] has made the following observations:

“The word "improvements" seems to be used in the regulation modules according to its usual legal meaning of "something to enhance the value of land or make the use of land more efficient"[2] as opposed to work comprised of a change designed to keep existing improvements in good repair.”

Further authority for this distinction between “maintenance” and “improvements” can be found in the often recited decision of Morcom and Ors v Campbell-Johnson and Ors, in which Lord Justice Denning[3] made the following distinction between repairs and improvements:

“It seems to me that the test, so far as one can give any test in these matters, is this: if the work which is done is the provision of something new for the benefit of the occupier, that is, properly speaking, an improvement; but if it is only the replacement of something already there, which has become dilapidated or worn out, then, albeit that it is a replacement by its modern equivalent, it comes within the category of repairs and not improvements.”

Given its relatively minor nature, this expenditure could have been approved by resolution of the committee, the committee decided to submit the matter for decision by a resolution of a general meeting – as they are entitled to do.

While I am of the view that the repainting and recarpeting is properly characterised as “maintenance” work, I am also of the view that even if the work involved making an improvement to common property, the work could nevertheless be approved by an ordinary resolution. If the work was characterised as involving an improvement to common property, section 163 of the Standard Regulation Module would be applicable and this section provides:
(1) the committee can approve improvements valued at up to $300 x Number of lots in the scheme; or
(2) expenditure of not more than $2,000 x Number of lots in the scheme can he authorised by an ordinary resolution, on one occasion per year; or
(3) the improvements may be authorised by a special resolution.

Further, even if approval by way of a special resolution was required, I note that the minutes of the AGM show that for motion 10, there were 8 votes in favour & nil against, for motion 11 there were 6 votes in favour & 2 against. Therefore both motions would have been carried irrespective of whether they referred to “maintenance” or “improvements”.[4] This view is supported by numerous cases including the District Court appeal decision in Stainlay and Tecelec (QLD) Pty Ltd v Body Corporate for No. 9 Port Douglas Road 177/2006 where his honour White DCJ made the following observations which are applicable to the circumstances of this case:

I accept that the voting paper in respect of motion 7, was defective in that it specified that the motion was to be decided by ordinary resolution when it is clear , that it should have been specified as having to be decided by special resolution because improvements were involved in at least some of the alternatives offered. In my view this was an irregularity of the most technical nature in the context of this particular case. The fact is that all eligible votes were cast in respect of the primary motion and in choosing one alternative. The primary motion was passed unanimously. There was, in my view, and could not have been any disadvantage to any lot owner by the failure of the voting paper to specify that the primary motion needed to be passed by special resolution.

Section 276 of the Act provides as follows:-
"(1) An adjudicator to whom the application is referred may make an order that is just equitable in the circumstances (including a declaratory order) to resolve a dispute in the context of a community title scheme, about -
(a) A claimed or anticipated contravention of this Act...
(2) Without limiting subsections (1) and (2), the adjudicator may make an order mentioned in Schedule 5." Schedule 5 contains the following:- An order declaring that a resolution purportedly passed at a meeting of the' committee for the Body Corporate, or a general meeting of the Body Corporate, is a valid resolution of the meeting."I have no doubt at all that had the point been raised before the adjudicator he would have been satisfied that it was just and equitable to make an order and for declaration confirming the validity of the resolution by which motion 7 was passed. In my view this Court has the same power. The fact that an appeal is limited to an error of law does not
deprive this Court of all of the powers of an adjudicator provided the basis for the exercise of the power is confined to the correction of an error of law.”

To sum up:

• I believe that the recarpeting and repainting is properly characterised as maintenance rather than improvements to common property;
• Having regard to section 163 of the Standard Module Regulation, even if the work did involve improvements to common property, this work could be approved by an ordinary resolution of the body corporate in general meeting;
• Even if a special resolution had been required, the conditions required for a special resolution have been satisfied.
  

Accordingly, I believe that this expenditure was properly authorised and therefore move on to the choice of colours for the carpet and wall paint.

It would appear that the actual colour of the carpet that was laid does not correspond to the description in the quotation, although the applicant, and other persons making submissions are in favour of leaving the carpet in place as it has been paid for and laid.

The applicant objects to the painting of the lower section of the walls (approximately 80 centimetres) a bright yellow colour. I am advised that the cost of repainting would be at most $300 to $400 per floor. When the motion was voted upon, the colour was not specified in the motion. It would therefore appear that a few members, or perhaps one member, of the committee took responsibility for choosing the paint colour which is not to the liking of the applicant . However I note that although all lot owners were invited to make submissions, only two other lot owners objected to this choice of colour.

Given that there was no mention of paint colour in the relevant motion I believe that the painting work was properly authorised. While it is not uncommon for matters such as colour to be discussed and decided upon on an informal basis, there has been an obvious lack of communication between the parties in this case, most probably attributable to the fact that almost all of the lot owners live elsewhere. As an adjudicator I am not sure that there is any particular order that I can make in the circumstances although I do propose to make certain recommendations.

I believe that the most sensible solution to this dispute has been suggested by the owner of lot 1. The 3 owners of units on level 2 could meet and decide, by majority decision, what colour scheme they would prefer for the common property on their floor. They could then request the committee to attend to the repainting of the common property area at the cost of the body corporate.

While I understand that committee members act in a voluntary capacity and communication can be difficult when 9 out of 10 owners live off site, clear communication and consultation with all lot owners results in good governance and obviates disputes such as this.

Finally, I would point out that , an adjudicator has no general power to order costs[5] but only a limited power to award costs of up to $2,000 against the applicant if an application is dismissed on the basis it is frivolous, vexatious, misconceived or without substance (Act, 270). Therefore, no costs can be awarded.

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[1] D Toohey in No. 9 Port Douglas Road [2006] QBCCMCmr 674 (18 December 2006)

[2] See Butterworths Australian Legal Dictionary

[3] Morcom and Ors v Campbell-Johnson and Ors [1955] 3 All ER 264
[4] See District Court judgement of White J in Stainlay and Tecelec (QLD) Pty Ltd v Body Corporate for No. 9 Port Douglas Road 177/2006
[5] Woodrange Pty Ltd v Le Grande Broadwater Body Corporate [2004] QDC 215.