Festival Towers [2011] QBCCMCmr 42 (8 February 2011)

Last Updated: 18 March 2011

REFERENCE: 1022-2010

ORDER OF AN ADJUDICATOR

MADE UNDER PART 9 OF CHAPTER 6

BODY CORPORATE AND COMMUNITY MANAGEMENT ACT 1997

Number of Scheme:	35634
Name of Scheme:	Festival Towers
Address of Scheme:	108 Alberts Street, Brisbane Qld 4810

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

Doreen Murray, the Owner of lot 2211

I hereby order that Resolution 24 (Utility Special Levy Consideration – Lot 402 – Motion by Ordinary Resolution proposed by L Marshall of Lot No 402), purportedly passed at the re-convened Annual General Meeting of the Body Corporate for Festival Towers on 7 October 2010 is, and was at all times, void.

STATEMENT OF ADJUDICATOR’S REASONS FOR DECISION - REF 1022-2010

“Festival Towers” CTS 35634

APPLICATION

This is an application by the Owner of Lot 2211, Doreen Murray (Applicant), against the Body Corporate for Festival Towers (the Body Corporate), seeking an order that Motion 24 of the 7 October 2010 AGM be declared invalid.

Motion 24 is recorded as follows in the minutes of the re-convened AGM of 7 October 2010:

UTILITY SPECIAL LEVY CONSIDERATION – LOT 402 – Motion by Ordinary Resolution proposed by L Marshall of Lot No 402

RESOLVED that the use of lot entitlements for the purposes of establishing a billing rate for the chilled water/utility special levy billing be altered for the unit 402 to be brought in line with other same sized and positioned units (ie 506). There is currently an imbalance in the formula acknowledged by the Body Corporate.

The motion was declared passed, with 69 votes for, 12 against and 1 abstention from voting. The Applicant states that at the AGM, the issue of the validity of the motion and the requirement for it to be passed by resolution without dissent was questioned. Mr Marshall, the mover of the motion, part owner of lot 402 and chairperson, refused to rule the motion out of order stating that, as he was not requesting that the lot entitlements be altered, his motion was valid.

The grounds to the application are to the following effect:

• Section 79 of the Accommodation Module provides the chairperson with power to rule a motion out of order if the motion, if carried, would conflict with the Act, the regulations, the by-laws, or a motion already voted on at the meeting.
• Section 196 of the Act provides for how utility services that are not separately charged for are to be allocated to owners. Under that section, if there is no practicable way available to a utility service provider to measure the extent to which the utility service is supplied to each lot included in the scheme and the common property, a lot owner is liable to the utility service provider for a share of the total amount payable for the provision of the service in proportion to the contribution schedule lot entitlement for the lot.
• The current billing rate for the chilled water utility levy for Festival Towers is in accordance with the contribution schedule lot entitlements for each lot.
• It is submitted that Motion 24 is inconsistent with section 196 of the Act and should have been ruled out of order by the chairperson, under section 79 of the Accommodation Module.
• It is further submitted that the billing rate for the chilled water utility special levy billing for lot 402 cannot be altered without a new Community Management System incorporating a change to lot entitlements being recorded. This would require the passing of a resolution without dissent.
  

JURISDICTION

“Festival Towers” was registered as a building format plan of subdivision on 11 July 2006 comprising 401 lots 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 (Accommodation Module) Regulation 2008 (the Accommodation Module).

This is a dispute between the owner of lot 2211 and the body corporate and comes within the dispute resolution provisions of the Act (see sections 226, 227 & 228). The application has been made within three months of the passing of the disputed motion, as required by section 242 of the Act.

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)).

SUBMISSIONS

In accordance with section 243 of the Act, a copy of the application was provided to the Body Corporate Manager, Jenny Phillips of Stewart, Silver, King and Burns, for distribution to the owners of all lots (excluding the Applicant) and the Committee, with an invitation to respond to the matters raised in the application. A submission was also separately and specifically sought from the owner of lot 402, the Marshall West End Unit Trust, as the submitter of the motion in question.

A total of three submissions were received.

The Owner of Lots 2008 and 2610 and the Owner of Lot 2403 make submission supporting the application to the following effect:

• It is appropriate that the billing for utility services be based on the contribution schedule lot entitlements. This is the fairest way as the current lot entitlements in the scheme, in the main, reflect the level of usage of these services and there is no other practical way to measure the extent to which these utility services are supplied to each lot. Further, the difference in the billing rate for lot 402 and other one bedroom units in the scheme is not onerous.
• If one unit can arbitrarily submit that their utility billing rate be altered then other unit holders could also put forward other equally valid arguments for their utility billing rates to be changed. The motion as passed sets a very difficult precedent for the future.
• Consider that it was inappropriate that the chairperson, who is a part owner of lot 402 and was the mover of Motion 42 did not step down from the chair for the debate of this motion.
  

Leighton Marshall (submitter of Motion 42) made submission to the following effect:

• Does not recall the validity of Motion 42 being questioned either at the initial or adjourned meeting and nothing is recorded in the minutes to this effect.
• There is in fact a practicable way available to the utility service provider to measure the extent to which the utility service is supplied to each lot in the scheme. The building has, since construction, had a metering system in place.
• The building has agreed, in the form of a previous AGM motion, to opt for an alternate method of shared allocation. The basis for working out the allocation was indeed based on the lot entitlements for overall fairness. The method can therefore be altered as it is not required to adhere to the lot entitlements; it was just a convenient method at the time and the lot entitlements for the building do not need to be altered at all to achieve this and is not in contravention of the Act.
  

The Applicant inspected the submissions made and replied to the following effect:

• Mr Marshall stated that the utility billing rates were based on the unit entitlements for overall fairness but then argues that this method was chosen for convenience. The method was chosen not for convenience, as Mr Marshall suggests, but for fairness and because of the requirement to comply with legislation, specifically to comply with section 196(2) and (3) of the Act. Therefore, the levy should not be reduced at whim by a lot owner.
• The legislation clearly states that, if there is no practicable way available to measure the extent to which the utility service is supplied to each lot in the scheme, then levies for utility services must be made equally between the lot owners or proportionally according to the contribution schedule lot entitlement for each lot.
• Mr Marshall wrongfully stated that there is a practical way available to measure the extent to which the utility services in question are supplied by the Body Corporate to each lot in the scheme as the Festival Towers building has a usable metering system. While there was a metering system in place when the building was first occupied, this system was disbanded by the Body Corporate at the 2008 AGM because of its impracticality, errors, and the difficulties in reading accurately three meters (gas, hot water and chiller) for each of 401 lots. The whole system was so cumbersome and impractical that the Body Corporate had to write-off some $160,000 in outstanding metered charges due to challenges to the accuracy of bills. The inadequacies of the system were such that shortfalls in metered charges were unavoidable in the future. Losses equivalent to that which had been incurred already were unsustainable. The cost of ensuring the accuracy of the billing system was beyond the resources of the Body Corporate. Consequently, the meters were shut down and the levy system based on lot entitlements in accordance with section 196 was implemented from July 2008. This was the only fair and equitable avenue for the provision of gas, hot water and air conditioning to all lot owners and the only way to avoid lot owners being incorrectly charged for the use of utilities as was occurring prior to July 2008.
• The billing for utility services should remain as is and continue to be based on lot entitlements and changes to the levies should be dependent on changes being made to lot entitlements. These changes can only occur if they are passed as a motion without dissent. The motion was in contravention of the Act as a change to the utility levy could not be made without changes being made to the lot entitlement for the unit concerned.
• The motion should have been declared invalid by the Chairperson.
• Mr Marshall’s assertion that he does not recall the validity of Motion 42 being questioned is refuted and an affidavit from a lot owner stating that she raised concerns about the motion at the AGM, in particular, its need to be passed by resolution without dissent, was attached.
  

UPDATE

On 7 December 2010, Mr Marshall emailed the Office to advise that the “motion in dispute has been withdrawn and no ruling is required”. On 30 January 2011, the current chairperson of the Body Corporate, Ms Maree Smith, sent an email to this Office advising that “motion 24 (Utility Special Levy Consideration) which was passed by majority vote at the AGM (7th October 2010) is to be rescinded at the next Body Corporate Committee meeting to be held 16th February 2011 as per agreement by committee members. Consequently, it is not necessary to appoint an adjudicator to assess Application 1022-2010)”.

DETERMINATION

Applicable Law

Section 196 of the Act provides for utility services which are not separately charged for, as follows:

196 Utility services not separately charged for

(1) This section applies to a community titles scheme if—

(a) there is no practicable way available to a utility service

provider to measure the extent to which the utility

service is supplied to—

(i) each lot included in the scheme; and

(ii) if the utility service is also supplied to the common

property—the common property; and

(b) the supply of the utility service to scheme land is

charged according to usage, and is not charged for on

the basis of the value of land.

(2) A lot owner is liable to the utility service provider for a share

of the total amount payable for the provision of the utility

service to scheme land.

(3) The share is proportionate to the contribution schedule lot

entitlement for the lot.

(4) However, the body corporate may, by arrangement with the

utility service provider, take on liability for owners or

occupiers of the lots for the utility service supplied for the

benefit of owners or occupiers.

(5) If an arrangement is in force under subsection (4), the utility

service provider can not separately charge the owners or

occupiers for the utility service to which the arrangement

relates, and the body corporate must satisfy the liability to the

utility service provider out of—

(a) the contributions paid by lot owners to the body

corporate under the regulation module applying to the scheme; or

(b) a levy imposed on the individual lot owners in the way

stated in subsection (6).

(6) The levy must be made—

(a) for lots for which the body corporate has a way of

measuring the extent to which the utility service is

supplied to each lot—according to the extent of supply; and

(b) for lots for which the body corporate does not have a

way of measuring the extent to which the utility service

is supplied to each lot—

(i) equally between the lot owners; or

(ii) proportionately among the lot owners according to

the contribution schedule lot entitlement for each lot.

(7) Subsections (8), (9) and (10) apply if—

(a) an arrangement is in force under subsection (4); and

(b) the body corporate fails to satisfy the liability to the

utility service provider under the arrangement by the

day the liability becomes payable.

(8) If the utility service provider is a local government, the unpaid

amount of the liability becomes an overdue rate under the

Local Government Act 2009 that is payable proportionately by

each lot owner according to the contribution schedule lot

entitlement for the lot.

(9) If the utility service provider is the urban land development

authority, the unpaid amount becomes a special rate or charge

under the Urban Land Development Authority Act 2007 that is

payable proportionately by each lot owner according to the

contribution schedule lot entitlement for the lot.

(10) If the utility service provider is not a local government or the

urban land development authority—

(a) the unpaid amount is payable proportionately by each

lot owner, according to the contribution schedule lot

entitlement for the lot; and

(b) the amount payable by a lot owner is a charge on the lot.

(11) For applying the Urban Land Development Authority Act

2007, section 127 for the purposes of subsection (9), the

reference in the section to the land is taken to be a reference to each lot.

(12) Subsection (10) is in addition to any other remedy the utility

service provider has for recovery of the unpaid amount.

(13) This section does not apply to a community titles scheme

established after 1 January 2008 in relation to a utility service

that is water reticulation or supply if devices for separately

measuring the supply of water to each lot and the common

property are installed on the scheme land—

(a) after 1 January 2008; and

(b) in relation to a compliance request made under the

Plumbing and Drainage Act 2002 after 31 December 2007.

(14) In this section—

liability, for an owner or occupier of a lot for which a utility

service is supplied for the benefit of the owner or occupier,

does not include the owner’s or occupier’s liability for a fee

charged by the utility service provider for providing the utility

infrastructure for the service.

utility service provider includes a local government in whose

local government area scheme land is located but does not

include—

(a) a body corporate manager, service contractor or letting agent; or

(b) an associate of a person mentioned in paragraph (a).

Section 79 of the Accommodation Module details the power of a person chairing a general meeting to rule motions out of order, as follows:

79 Power of person chairing meeting to rule motion out of

order [SM, s 81]

(1) The person chairing a general meeting of the body corporate

must rule a motion out of order if—

(a) the motion, if carried, would—

(i) conflict with the Act, this regulation or the

by-laws, or a motion already voted on at the meeting; or

(ii) be unlawful or unenforceable for another reason; or

(b) except for a procedural motion for the conduct of the

meeting, or a motion to correct minutes—the substance

of the motion was not included in the agenda for the

meeting.

(2) The person chairing the meeting must, when ruling a motion

out of order—

(a) give reasons for the ruling; and

(b) for a ruling given under subsection (1)(a)—state how the

ruling may be reversed by the persons present and

entitled to vote on the issue.

(3) The persons present and entitled to vote may reverse a ruling

given under subsection (1)(a) by passing an ordinary

resolution disagreeing with the ruling.

(4) The reasons given by the person chairing the meeting for

ruling a motion out of order must be recorded in the minutes of the meeting.

Section 93 of the Accommodation Module provides for the amendment or revocation of resolutions passed at general meetings, as follows:

93 Amendment or revocation of resolutions passed at

general meeting [SM, s 95]

(1) This section applies if a resolution of 1 of the following types

is required to decide a matter—

(a) a resolution without dissent;

(b) a special resolution;

(c) a majority resolution;

(d) an ordinary resolution.

(2) Once it has been passed, the resolution may be amended or

revoked only by a resolution of the same type.

Questions for Determination

Whether Motion 24 is valid?

Section 196 of the Act provides three methods for charging individual lot owners for the supply of utility services. If the body corporate has a way of measuring the extent of supply to each lot, then owners are to be charged according to the extent of supply. If the body corporate does not have a way of measuring the extent of supply to each lot, owners must be levied either equally, or proportionally, according to the contribution schedule lot entitlement for each lot.

Motion 24 purported to adopt a different methodology than any of the three permitted by section 196 of the Act for a single lot to be charged for one particular utility service. Further, the Applicant is correct in her assertion that if a change to lot entitlements is requested, a resolution without dissent would be required, by virtue of sections 46(9) and 62(2) of the Act . It should be noted that a change to the lot entitlement schedule for a particular purpose only (to calculate a lot owner’s share of charges for one specific utility service) is not provided for in the Act. A change to the lot entitlement schedule would affect the calculation of all levies, not just those for one or more utility services.

In my view, Motion 24 is clearly inconsistent with the Act. The chairperson should have ruled the motion out of order, using his powers under section 79 of the Accommodation Module.

Not having done that, however, the question arises as to whether the Motion can subsequently be “withdrawn” as contemplated by Mr Marshall, or “rescinded” as the Committee is now proposing to do at a Committee meeting scheduled for 16 February 2011.

Whether Motion 24 can be withdrawn / rescinded?

The Accommodation Module is silent on the question of the withdrawal of a motion placed on the agenda of a general meeting. It has previously been decided that it would be illogical and impractical to refuse to allow the submitter of a motion to withdraw that motion prior to
the vote being cast. Once a motion is in the arena of the body corporate, however, and has been voted on by lot owners, it is arguable that it may only be withdrawn with the consent of those present at the meeting. That is, there is no “ownership” in a motion put to a general meeting for the proponent to amend or withdraw at will. In this case, where the motion has been voted upon and decided and the minutes of the meeting issued to all owners, I do not consider that it is possible to “withdraw” the motion as Mr Marshall purported to do after this application was lodged. Motion 24 has already been decided. The owners of some 401 lots have perused and considered the material, and possibly cast their votes or chosen to abstain. It is insulting to their intelligence and diligence for a motion to be removed without more.

Section 93 of the Accommodation Module makes specific provision for resolutions passed at general meetings to be amended or revoked. The purpose of the provision is to ensure that
the same type of resolution is required to amend or revoke an earlier resolution. Applying section 93 to the circumstances of this case, because Motion 24 was purportedly passed by ordinary resolution in general meeting, it would take the passing of an ordinary resolution in general meeting to revoke it. The Committee is not able to revoke an ordinary resolution of the body corporate in general meeting.

It has long been held by adjudicators that the body corporate in general meeting is the paramount decision making body for the body corporate and that if a decision of the body corporate and a decision of the committee conflict, the decision of the body corporate made in general meeting will prevail, subject to the requirement that the body corporate’s decision must be reasonable, and for the benefit of owners (see sections 94 & 152, Act).

Conclusion

Motion 24 is not able to be withdrawn, and in order to be revoked, the revocation must be voted upon at a general meeting of the body corporate, and be passed by ordinary resolution. The Committee cannot revoke a motion passed by the body corporate in general meeting. In any event, Motion 24 is clearly inconsistent with the legislation and void. Therefore, it is not necessary for the body corporate to revoke it.

ORDER

For these reasons I have made the order above.