Banks & Anor v Body Corporate "Noosa on the Beach" Community Titles Scheme 6417 [2000] QCA 146

Short Punch & Greatorix for the applicant/appellant

[1] THE COURT: This is an application for leave to appeal from a judgment of the District Court on 14 December 1999 that the contribution schedule lot entitlement for Noosa On the Beach Community Titles Scheme Number 6417 be adjusted in accordance with a specified schedule, that that judgment take effect from 7 April 1999 and that, until further adjustment of the contribution schedule lot entitlements pursuant to the provisions of the Body Corporate and Community Management Act 1997, the applicant refrain from levying any lot owner in the scheme other than in accordance with the contribution schedule lot entitlements contained in the order on and from 7 April 1999.

[2] Before this Court the parties joined in asking the Court, in the event that it granted leave, to treat the hearing as the hearing of the appeal and the Court agreed to that course. Accordingly three questions arose for determination by this Court. They were:

1. the competency of the applicant's appeal and its application for leave;

[3] The respondents submitted that the appeal, and consequently the application, were incompetent because the proceedings had not been properly authorized. Section 259 of the Body Corporate and Community Management Act 1997 ("the Act") provides in s 259(1) that a body corporate may start a proceeding only if the proceeding is authorised by special resolution of the body corporate. Some exceptions are provided for in s 259(2) but none of these is relevant to the present case.[1] It is common ground that at the time the present application was filed[2] there was no special resolution of the body corporate authorising it.

[4] However the applicant relies on a special resolution of the body corporate of 24 March 2000, about three months after the present application was filed, by which it was resolved to authorise the commencement and conduct of this appeal and to incur any necessary legal expenses. Mr Carrigan, who appeared for the body corporate in this Court, submitted that that resolution ratified the proceeding already commenced without authority. To that, Mr Atkinson who appeared for the respondents, made two submissions. First he submitted that that was not a valid resolution because the general meeting for it had not been duly convened; and secondly he submitted that, in any event, the resolution did not purport to and did not ratify the proceeding already commenced.

[5] The first of Mr Atkinson's submissions relies on s 43 and s 44 of the Body Corporate and Community Management (Standard Module) Regulation 1997 ("the Regulation"). Those sections are in the following terms:

"43. A general meeting must be held at least 21 days after notice of the meeting is given to lot owners.

44. (1) A general meeting must be held not more than 15 km (measured in a straight line on a horizontal plain) from scheme land.

(2) However, if the committee notifies the owners of its intention to hold the meeting at a stated place more than 15 km from scheme land, and allows them a reasonable opportunity to object in writing to the proposed place, the meeting may be held at the place unless written objections to the proposed place of meeting are given by or for owners of at least 25 % of the lots included in the scheme."

[6] It was common ground between the parties that the general meeting was held more than 15 kilometres from scheme land and the notice calling the meeting was given exactly 21 days before the meeting was held. Mr Atkinson submitted on these facts that, as 21 days is the minimum period required by s 43, a reasonable opportunity under s 44(2) required longer than that. We do not think that necessarily follows. Moreover in the present case the only lot owners who stood to lose in consequence of success of this appeal appear to have been the respondents who were represented in person by the first respondent at the meeting. We would therefore reject the respondents' submission that the meeting at which the resolution was passed was not duly held.

[7] The respondents' other submission on this point also lacks substance. It is correct that, in form, the resolution does not authorise the ratification of the proceeding already commenced, but if it were correct that it did not do so in substance the appropriate course for this Court to take would have been, in our view, to permit the applicant to withdraw its earlier application and permit it to file one on the day of hearing of this application, to extend time accordingly and to treat the material already filed in this application as filed in that. Mr Atkinson does not contend that his clients would suffer any detriment from that course. But we think, in any event, that the resolution in substance ratifies the proceeding already commenced; that plainly must have been its intention. We would therefore reject the submission that the application and appeal are incompetent.

[8] There is no doubt that there is an important question involved in this appeal, namely whether an order made under s 46 of the Act may be made so as to have retrospective effect. The learned primary judge held that it may. However Mr Atkinson, whilst conceding the strength of a contrary view, submitted that the question did not necessarily arise if, as he submitted, in any event, the respondents were entitled to an injunction restraining the applicant from levying the respondents, other than in accordance with the adjusted amount, from 7 April 1999. One difficulty facing Mr Atkinson in making this submission is that that question itself may be an important question of law. But in any event it is important that the question whether a court can make an order under s 46 having retrospective effect should be resolved by this Court. Accordingly, we would grant leave to appeal.

[9] The substantive points in the appeal then are whether the learned primary judge had power to make an order under s 46 having retrospective effect; and, if he did not, whether the respondents were nevertheless entitled to an injunction restraining the recovery of any contribution levied as from a date earlier than the date on which the adjustment would take effect.

[10] Section 46 of the Act, pursuant to which the owner of a lot may apply to a District Court for an order for the adjustment of a lot entitlement schedule, provides in s 46(8) that, if a court orders an adjustment of a lot entitlement schedule, the body corporate must, as quickly as practicable, lodge with the registrar a request to record a new community management statement reflecting the adjustment ordered.[3] Sections 48, 49 and 50 then provide for the recording of a community management statement and s 53 provides that a community management statement takes effect only when it is recorded by the registrar as the community management statement for a community titles scheme. It can be seen from these provisions that it is the recording by the registrar of the community management statement, rather than the order of the judge, which causes it to take effect. If there remained any doubt that, consequently, the adjustment of lot entitlement took place only on the recording of the new community management statement, that is removed by s 44(7) which so provides specifically.

[11] If by the orders already referred to the learned primary judge was purporting to change the lot entitlement retrospectively, his Honour was, in our opinion, wrong in thinking that any such order could have that effect for it could take effect only pursuant to the terms of the Act, that is, upon the recording by the registrar of the new community management statement.

[12] Mr Atkinson, for the respondents, did not argue strongly to the contrary. His principal argument was that, assuming that an order under s 46 could not be given retrospective effect, the learned primary judge was nevertheless correct in enjoining the applicant from levying lot owners, after 7 April 1999, otherwise than in accordance with the contribution schedule lot entitlements contained in his order. This was, he submitted, because the applicant was estopped, on and from 7 April 1999, from asserting a right to recover from the respondents lot entitlement contributions greater than those which would be in accordance with the lot entitlement contribution schedule contained in the order. Such an estoppel, it was conceded, must be based on unconscionability of the applicant causing delay, from that date, in the adjustment of the lot entitlement which in turn caused detriment to the respondents, that detriment being liability for contributions to the extent that that liability would not have existed under the adjusted schedule.

[13] The application for adjustment was filed in the District Court on 19 March 1999 with a return date of 7 April. On that date neither party was ready to proceed.[4] The present respondents did not then have evidence to support the adjustment for which they later contended and which the court made. Directions were sought and given as to amendment of the application, the filing and serving of documents including affidavits and the listing of the matter "for final determination or further directions if necessary on May 17 1999". The amendment sought and made was as to the form of relief, adding a plea for such further or other order as the court deemed fit, the application, as initially framed, having sought only adjustment to an equal contribution. This amendment was sought, presumably, because the respondents recognized by that date the possibility that the contributions ought not to be equal.

[14] This is of some importance because of the submission made by Mr Atkinson that, on that date, the court could have and perhaps should have made an order for equality of contribution in reliance on the presumption contained in s 46(4) which provides that, for the contribution schedule, the respective lot entitlements should be equal except to the extent to which it is just or equitable in the circumstances for them not to be. It was submitted for the respondents in this Court, as it had been below, that such an order would have left it open to other lot owners to make a further application for adjustment. Given the fact that the respondents' application for adjustment was already before the court in circumstances in which the likelihood of an adjustment otherwise than on the basis of equality must have been foreseeable,[5] it was appropriate for the court to consider what that adjustment should be rather than to take the course urged by Mr Atkinson. Mr Atkinson was unable to point to any act or omission of the present applicant, at that time, which could be relied on to found an estoppel.

[15] In the meantime on 29 March 1999 the applicant had resolved upon a number of special levies on lot owners in proportion to their existing contribution schedule lot entitlement.[6] Some of these were made payable in full by 31 May 1999, others by instalments the first of which was due on 31 August 1999.

[16] When the matter came before the court again on 17 May 1999 the applicant sought an adjournment on the basis that it had been unable to convene a meeting of the body corporate to determine the attitude of the proprietors other than the respondents. The learned primary judge whilst noting that the time frame which he had imposed was quite tight, noted also the urgency from the respondents' perspective because payment under some of the levies was due at the end of that month. It was at this hearing that counsel for the respondents raised, for the first time, the possibility of any adjusting order ultimately made being antedated to the date on which the application was made. Mr Carrigan for the present applicant informed his Honour that he had no instructions to consent to such an order. His Honour nevertheless concluded that there were special circumstances which would justify an order, if favourable to the respondents' application, being antedated to the time when the application by them was made. His Honour did not identify those special circumstances. At that stage no evidence had been produced by either party as to what would be a just and equitable adjustment. The learned primary judge accordingly adjourned the application, gave further directions as to the conduct of the matter and restrained the applicant, until further order, from levying the respondents to any greater extent than if their lot entitlement were equal to that of the other lot owners.

[17] It could not seriously be contended that there was, on or before this date, any act or omission of the applicant which would found an estoppel. The suggestion for backdating was plainly not accepted by the applicant as a condition of the adjournment. In any event, even the respondents were not then ready to proceed except on the basis that, in accordance with the presumption in s 46(4), the lot entitlements should be equal.

[18] By the time the matter came before another judge on 26 July 1999 the applicant had filed an affidavit of Bryce Hansen on 14 July. That affidavit is not before this Court but we were told that it stated that the contribution lot entitlement should be other than equal but did not say how it should be adjusted. It is unclear whether, by 26 July, Mr Hansen had told the applicant how he thought it should be adjusted. However on 26 July the respondents filed an affidavit by Howard William Alfred Stewart deposing to what was, in his opinion a just and equitable adjustment. This showed an adjustment requiring a contribution from the respondents of approximately twice that which would have been an equal contribution but less than half that for which they were liable under the existing scheme. This was the adjustment ultimately made by the court. On 26 July the matter was further adjourned to October, the applicant being given liberty to produce and serve an expert report, within one month, in reply to Mr Stewart's report. There was no further act or omission by the applicant on or prior to 26 July which would found an estoppel. By now, of course, the levies due on 31 May would have been payable but for the injunction referred to earlier which, though not referred to in the orders of 26 July, appears to have continued by force of the order of 17 May.

[19] The time limit imposed on the applicant for producing and serving its expert's report was not complied with. It was not until 11 November 1999 that it disclosed to the respondents a further report of Mr Hansen which was, in effect, identical to that of Mr Stewart. Nevertheless it appears that it had in its possession a copy of that report in draft form in September 1999. It is also possible that the applicant knew of Mr Hansen's view at a date earlier than this but that is not clear. What is clear is that, at no time after it received Mr Hansen's further report did the applicant challenge Mr Stewart's report. On the ultimate hearing of the matter on 9 and 10 December 1999 the applicant did not contest Mr Stewart's report or itself file any valuation evidence and accordingly, on 14 December, the order under appeal was made adjusting the lot entitlement schedule in accordance with Mr Stewart's report.

[20] The first date upon which there was any arguable unconscionability on the part of the applicant is some time in September 1999 when it received Mr Hansen's draft report presumably agreeing, in effect, with that of Mr Stewart. It is arguable that it ought then to have conceded the correctness of Mr Stewart's adjustment and agreed to an order in terms of it or called a meeting of the body corporate for the purpose of consenting to a new community management statement.[7]

[21] But it is not at all clear that the taking of either of these courses would have, in any way, hastened the making of an adjustment. The adjustment order was made retrospective upon the submission of the respondents and there is no suggestion that, if either of those courses had been taken, the respondents would have resiled from that submission. The applicant was plainly entitled, as it did, to contend that no such retrospective order should be made; indeed, as already indicated, such a contention would have been correct.[8] So it seems likely that a contested hearing, presumably at about the time it ultimately occurred, was likely.

[22] Consequently we cannot be satisfied that, even assuming unconscionability on the part of the applicant from, say, the end of September 1999, in failing to disclose and act on Mr Hansen's draft report, that unconscionability caused the respondents any detriment. They do not assert any detriment other than that which occurred by reason of their liability to pay the levies for which they became liable before the adjustment took effect. There was, therefore, no basis for an injunction from 7 April 1999 or from any later date.

[23] We would accordingly grant the application, allow the appeal, set aside the judgment below and order that the contribution schedule lot entitlement for Noosa on the Beach Community Titles Scheme Number 6417 be adjusted in accordance with the Schedule contained in [1] of the judgment of 14 December 1999 and that the respondents pay the applicant's costs of and incidental to the hearing set down for two days commencing on 9 December 1999 and of this appeal.

[24] In view of the fact that this appeal has succeeded on an error of law by the learned primary judge we would also order the respondents be granted an indemnity certificate in respect of this appeal.

[1] See also Body Corporate and Community Management Act 1997 s 92(1) and s 92(2); Body Corporate and Community Management (Standard Module) Regulation 1997 s 26(e).

[2] The application for leave to appeal and notice of appeal were filed on 24 December 1999.

[3] The community management statement must include a contribution schedule: s 57(1)(c) of the Act.

[4] That is, except on the basis contended for by Mr Atkinson, referred to in [14].

[5] The facts in the report of Mr Stewart which was before this Court shows that it must have seemed an obvious possibility.

[6] The Act s 113(2)(b); the Regulation s 95 and s 96.

[7] Pursuant to s 55 of the Act.

[8] And the same is true of a contention with respect to an injunction from 7 April 1999.