Amity [2011] QBCCMCmr 359 (23 August 2011)

Last Updated: 15 September 2011

ADJUDICATOR’S ORDER
Office of the Commissioner
for Body Corporate and Community Management

CITATION:	Amity [2011] QBCCMCmr 359
PARTIES:	Daniel and Lizabeth Keating (applicants) The Body Corporate (respondent) All owners (affected persons)
SCHEME:	Amity CTS 17543
JURISDICTION:	Sections 227(1)(b) and 229(3)(a) of the Body Corporate and Community Management Act 1997 (Act), and the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Accommodation Module).
APPLICATION NO:	0722-2011
DECISION DATE:	23rd August 2011
DECISION OF:	J.D.M.Underdown, Adjudicator
CATCHWORDS:	LOT ENTITLEMENTS – whether committee complied with process for reversion of contribution schedule lot entitlements – application for reversion under section 379 Act. Section 379 Act; Section 385 Act.

INTERIM ORDERS MADE:

I hereby order that the body corporate must within 24 hours require the Registrar of Titles not to proceed to record the new community management statement lodged in the Land Titles Registry on 21st July 2011, and that pending a final determination of this dispute, the body corporate must not take any action to register a new community management statement as a result of its committee meeting held on 29th June 2011. This is an interim order and will remain in effect for a period of not longer than six months. It is the responsibility of the applicants to apply to extend this order if no final determination has been made within that period. This order will automatically lapse upon a final order being made or this application being withdrawn.

REASONS FOR DECISION
APPLICATION

[1] This is an application dated 2nd August 2011 by Daniel Keating and Lizabeth Keating (the Applicants), owners of Lot 7, against the body corporate for Amity CTS 17543 (the body corporate) for a declaration that a committee notice is not a valid notice for the purposes of section 385 Act; and an order that a resolution of the committee made on 29th June 2011 is declared invalid.
[2] The Applicants also seek an interim order restraining the body corporate or its committee from lodging a new community management statement pursuant to the committee resolution of 29th June 2011 until further order.

OVERVIEW OF THE APPLICATION

[3] This dispute is about steps taken in the process whereby a body corporate may change its contribution schedule lot entitlements. The Applicants say that the committee did not comply with the legislative process for ‘reverting’ contribution schedule lot entitlements. The body corporate says that the committee acted correctly and as it was required to do by law.
[4] This decision deals with the application for an interim order only. An interim order is in the nature of a “holding order” and is normally only justified when:

• the application raises a serious question of law; and
• at first sight, the applicant for the interim order has a good chance of success at final order; and if so,
• the inconvenience likely to result from the interim order is outweighed by the potential detriment if the order is not granted.
  

JURISDICTION

[5] “Amity” CTS 17543 is a community titles scheme governed by the Body Corporate and Community Management Act 1997 and the Body Corporate and Community Management (Accommodation Module) Regulation 2008. There are 53 lots in the scheme created under a building unit plan of subdivision 101701
[6] I am satisfied that this matter falls within the legislative dispute resolution provisions.[1] This is a dispute between a lot owner and the body corporate. Section 276(1) of the Act provides that 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.
[7] Section 279(1) of the Act allows an adjudicator to make an interim order if satisfied, on reasonable grounds, that an interim order is necessary because of the nature or urgency of the circumstances to which the application relates.
[8] If the Commissioner reasonably considers that an application for an interim order should be referred to an adjudicator because of the nature or urgency of the circumstances, the application may be referred even if notice has not been given to all parties.[2] The application was referred to me on 3rd August 2011. Pursuant to an adjudicator’s investigate powers under the Act[3], I invited the committee to make a submission in response to the interim application. The committee made a submission on 12th August 2011.

RELEVANT LAW

[9] A change to the contribution schedule lot entitlements only takes effect on the recording of a new community management statement (Section 46(10) Act).
[10] The amendments to the Act which came into force on 14th April 2011 concern “pre-commencement adjustment actions”. These are certain specified actions taken before 14th April 2011 which proposed an adjustment to the contribution schedule lot entitlements for a scheme. Every “pre-commencement adjustment action” ceases to have effect at 14th April 2011 as if it has never been made (Section 377 Act), and “no further action may be taken in relation” to it. (Section 377(2) Act).
[11] Section 379 Act enables a motion proposing a re-adjustment back to the earlier contribution schedule to be submitted by an owner to the committee, if a previously made adjustment order increased the proportion of the total contribution schedule lot entitlements for “all the lots ....that are attributable to a lot included in the scheme”.
[12] A motion proposed further to section 379 Act is subject to consideration of sections 381 to 384. Section 381 concerns adjustment where the lot has since been subdivided; section 382 concerns adjustment if two or more lots in the scheme have since been amalgamated; section 383 concerns adjustment if the boundary for a lot has since changed; and section 384 concerns adjustment if there has been a “material change” since the contribution schedule lot entitlements were last decided.
[13] Section 385 Act requires the committee in its dealing with such a motion proposed by an owner to “identify the pre-adjustment order entitlements for the existing scheme” and give written notice to each owner stating that a motion has been submitted and is subject to sections 381 to 384, stating the committee’s proposed adjustment, and inviting owners to make submissions “in relation to what (if any) changes to the pre-adjustment order entitlements.... should be made under section 381 to 384, within a stated period of at least 28 days after receiving the notice.” Thereafter the committee must decide if any changes are to be made and then give each owner written notice of its decision within 7 days.

SUBMISSIONS

[14] The Applicants say that on 18th August 2006, the District Court by order and pursuant to the then section 48 Act adjusted the contribution schedule lot entitlements for the scheme. A new community management statement was duly recorded in the Land Titles Registry.
[15] On 19th May 2011, Sandy Allan, owner of Lot 41, proposed to the committee that the contribution schedule lot entitlements be returned to their original allocation and that the committee be authorised to execute a new community management statement.
[16] By circular letter dated 25th May 2011, the committee, gave owners 28 days to lodge any grounds of objection to Ms Allan’s proposal. The committee was of the view that it could not object to Ms Allan’s proposal pursuant to the amended legislation.
[17] On 29th June 2011 at a committee meeting, the committee voted 4 – 0 that Ms Allan’s motion “had to be approved” and noted that there had been no submissions made in response to its circular letter. Solicitors were asked to draft and lodge a new community management statement.
[18] Applicant Mr Keating received notice of the committee decision on 6th July 2011. He says that if an owner proposes such a motion as Ms Allan’s to a committee, to revert the contribution schedule lot entitlements, the committee must give each owner written notice pursuant to section 385 Act. Specifically, the Applicants say that the committee’s notice to owners did not state the committee’s proposed adjustment of the contribution schedule; and that it did not invite owners to make their submissions “within a stated period of at least 28 days after receiving the notice”.
[19] The body corporate says that the amendments entitle an owner to compel the body corporate to “revert the contribution schedule lot entitlements to the pre-adjustment order entitlements” subject to certain changes which have since taken place. The committee is required to record the new community management statement under penalty.
[20] The new community management statement was lodged on 21st July 2011, and the Applicants should apply to the Queensland Civil and Administrative Tribunal or a specialist adjudicator if they disagree with the entitlements now recorded.
[21] The body corporate says that no serious legal question is raised by the application so that an interim order is not warranted, nor have the Applicants demonstrated that the committee’s notice was invalid or that the committee is in breach of its statutory duty.
[22] Further, the body corporate is incapable of complying with the interim order sought since the new community management statement was lodged 12 days prior to the application being made.

DETERMINATION OF THE APPLICATION FOR AN INTERIM ORDER

[23] On 10th May 2011, Ms Allan submitted a motion to the committee requesting that “the contribution lot entitlements that were adjusted in 2006 be returned to the original allocation as per the community management statements”. On 25th May 2011, the committee wrote to all owners advising receipt of the motion and giving owners 28 days to lodge any grounds of objection. On 29th June 2011, the committee noted that no objections were received and resolved that the motion be approved and that a new community management statement be lodged.
[24] I have reviewed the committee’s notice to lot owners dated 25th May 2011. The notice does not appear to contain the committee’s proposed adjustment of the contribution schedule as a separate item, although it may be understood from the text that the committee is proposing that the original schedule “prior to alteration”, as was attached, be adopted. The Applicants claim that such an omission would invalidate the notice.
[25] The effect of a failure to comply with a mandatory legislative requirement is a matter which can be more properly explored at the final order stage.
[26] The committee notice said that any objections must be forwarded prior to close of business on 27th June 2011. I note that this is more than 28 days after the date of the committee’s notice and the Applicants have not indicated that they did not have at least 28 days to make any submission they wished to do.
[27] The Applicants also say that the committee failed to consider the impacts of sections 381 to 384 Act as it was required to do. The committee did not undertake these steps but rather proceeded on the basis that in the absence of a submission by a lot owner, it was obliged by the Act to approve the motion. The Applicants say that had the committee considered sections 381 to 384 as it was bound to do, then it would, or should, have concluded that the existing scheme had been affected by a “material change that happened after the pre-adjustment order entitlements for the Scheme were decided”. However, the Applicants do not say what the “material change” was.
[28] “Material change” is defined in the Act as a “change that has, or may have a significant effect on the contribution schedule lot entitlements for the lots included in the scheme, including, for example – the addition of 1 or more lots other than by a subdivision....; or the removal or one or more lots other than by amalgamation.”
[29] Prima facie, there is no evidence of such a material change.
[30] In the mean time, however, I am concerned with Ms Allan’s ability to apply to the committee for a reversion pursuant to section 379 Act.
[31] There is some reason to consider the wording of section 379(1)(a) Act, the meaning of which is not immediately apparent. It is unlikely that the proportion contribution schedule lot entitlements for “all the lots” would have been increased by an adjustment. The aim of the application for an adjustment would surely be that some lots have their entitlements reduced whilst others take up the difference. In this scheme, the total contribution schedule lot entitlements was increased by the adjustment from 5000 to 9991, but the proportion payable attributable to a lot in the scheme was not increased for “all lots”. For example, Lot 7, the Applicants’ lot had its entitlements reduced from 440/5000 (8.8%) to 143/9991 (1.43%), whilst Ms Allan’s lot, Lot 41, had its entitlements increased from 68/5000 (1.36%) to 195/9991 (1.95%).
[32] If the wording of section 379 Act is followed, then no owner has a right to propose a motion for reversion unless the contribution schedule lot entitlements for each of the lots was increased. This was not the case in this scheme.
[33] Section 379 Act in my view does not make sense, and cannot be applied literally. Section 379 makes no reference to the owner who proposes the reversion having had his or her entitlements increased. The reference to an increase is attached to “all the lots” and the meaning of this section raises a serious question of law. How is this section to be applied?
[34] In Paloma [2011] QBCCMCmr 355, the adjudicator, when considering an interim application said –

“There is a serious question as to whether the relevant re-adjustment provisions can apply as a literal reading of the legislation indicates the earlier adjustment order would have needed to proportionally increase the contribution lot entitlements for every lot – a mathematical impossibility (BCCMA, 379(1)(a)).”

[35] The new community management statement containing the pre-adjustment schedule has been lodged but is not yet apparently recorded by the Registrar. As at 23rd August 2011, the community management statement for the scheme is the one recorded on 7th May 2009.
[36] The interim order requested by the Applicants cannot be achieved since the body corporate has lodged the new community management statement. However, the Registrar can be requested not to proceed with the recording of the new community management statement, and I so order.
[37] I am of the view that the balance of convenience in maintaining the status quo is better served if the new community management statement is not recorded until the questions raised in this application are finally determined.
[38] This application will now be referred to the Commissioner pursuant to section 279(4) Act and administered in accordance with the normal processes of this Office for the final outcomes sought to be resolved.

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[1] Sections 227,228, 276 and Schedule 5 of the Act
[2] Section 247 of the Act
[3] Section 271 of the Act