Hillhaven [2018] QBCCMCmr 345 (10 July 2018)

Barbara Hart and Ronald Cody, the owners of Lot 15, and all other owners (affected persons)

Sections 227(1)(b) and 229(3)(a) of the Body Corporate and Community Management Act 1997 (Qld) (Act), applying the Act and the Body Corporate and Community Management (Standard Module) Regulation 2008 (Standard Module).

COMMUNITY MANAGEMENT STATEMENT - whether the body corporate may consent to the recording of a new CMS via the committee or at a general meeting by ordinary resolution; whether body corporate consent for a proposed new CMS requires a resolution without dissent.

1. I hereby order that the outcomes sought are dismissed.

[1] The applicant owns Lots 11, 13 and 14. He has reached agreement with Barbara Hart and Ronald Cody, the owners of Lot 15, about selling part of Lot 14. The plan is to subdivide Lot 14, and amalgamate one part with Lot 13 and another part with Lot 15. The dispute relates to the way the body corporate consents to a new community management statement (CMS) for the scheme to give effect to the distribution of the lot entitlements for Lot 14.

• [2] The applicant applied to the Commissioner for Body Corporate and Community Management seeking the following outcomes:

  1. That the body corporate committee be directed to register a new CMS in accordance with the proposed new CMS included in the application as Annexure E (proposed CMS).

  2. Alternatively, that the body corporate be directed to do all things reasonably necessary, including the registration of the proposed CMS, to effect the subdivision of Lot 14 and its amalgamation with Lot 15.

  3. Such further or other order as the adjudicator sees fit.

  4. Alternatively, that the body corporate decision on Motion 20 at the annual general meeting held on 20 August 2016 (2016 AGM) was void because it did not require a resolution without dissent and/or was unreasonable.

[3] With respect to these matters, the Commissioner invited the owners of Lot 15, the other lot owners, the committee and Network Pacific Strata Management (the body corporate manager) to make written submissions. The owners of Lots 15, 21 and 34, the committee and the body corporate manager made submissions. After the applicant replied to submissions, the Commissioner referred the application to departmental adjudication.[1]

[4] Given the submitted material, the following background is relevant to the determination of the outcomes sought.

[5] In or about August 2009, the registrar of titles recorded a new CMS identifying, in the Schedule A Schedule of Lot Entitlements, a contribution schedule of "1" and an interest schedule of "1" for each of the 35 lots included in the scheme (current CMS).

[6] On 27 May 2016, the applicant wrote to the body corporate attaching a letter dated 26 May 2016 signed by him and the owners of Lot 15 requesting that the committee approve particular renovations, and register a new CMS to give effect to the proposed subdivision of Lot 14 and its amalgamation with Lots 13 and 15.

[7] The minutes of the committee meeting held on 21 June 2016 record, "... the new CMS also proposed to change the existing lot entitlements schedule from an aggregate of 35 (being 1 lot entitlement to all lots) to 350. This would give 10 lot entitlements to all lots other than Lots 13 & 15 which would be allocated 15 each ... With regard to registering a new CMS, the committee is not able to give consideration to this matter. The Act prescribes that a body corporate can, by resolution at a general meeting, change the contribution schedule lot entitlements for lots ... In order to assist the owners ... the committee has agreed to place the appropriate motion on the AGM voting paper as a committee motion ..."

[8] The minutes of 2016 AGM record that Motion 20 proposed that the body corporate consent to recording a new CMS relating to the amalgamation of Lots 13, 14 and 15 and "for the purpose of replacing the existing lot entitlement schedule of 1 contribution per lot with the amended lot entitlement schedule of 10 contributions per lot as set out ...." The minutes record that Motion 20 was not passed by resolution without dissent due to 10 dissenting votes.

[9] The applicant and the owners of Lot 15 wrote to the body corporate secretary by letter dated 8 November 2016. Relevantly, they said the committee could lodge a new CMS given sections 51C(4) and 62(4) of the Act, and some owners found Motion 20 confusing.

[10] The then chairperson of the committee circulated an email on 9 November 2016 saying "... the proposed new CMS changes the entitlements of each lot owner (other than Lots 13 & 14 once amalgamated) from an entitlement of 1 to an entitlement of 10. Even though the sum of levies distribution does not change other than by a mathematical process, the entitlement has in fact changed. As such it is a restricted issue for the Committee and can only be changed at a general meeting...."

[11] At the extraordinary general meeting held on 10 December 2016 (2016 EGM), the body corporate approved works in or about Lots 13, 14 and 15.

[12] By email to the body corporate manager dated 29 May 2017, the applicant said the proposed changes to the current CMS applied section 46(6) of the Act and did not change the rights, privileges, obligations, contributions or interests of the other owners. He said the revised lot entitlement schedule was based on the equality principle; and the owners of Lots 13, 14 and 15 had agreed to the contribution and interest entitlements for Lots 13 and 15. The applicant referred to sections 51C(3), 51C(4) and 62(4) of the Act and said the body corporate should register a new CMS.

[13] Section 66(1)(c) of the Act requires the scheme's CMS to include a contribution and an interest lot entitlement schedule. The legislated lot entitlements system provides a limited ability to adjust lot entitlements. Relevant to the issues raised in this matter:

1. Section 46(6) provides a lot entitlement must be a whole number, but must not be 0.
2. Section 47A enables the body corporate to decide by resolution without dissent to change the contribution schedule lot entitlements for the lots included in the scheme.
3. Section 48 provides an owner may apply for an order of a specialist adjudicator under chapter 6 of the Act or for an order of the Queensland Civil and Administrative Tribunal for the adjustment of an interest schedule.
4. Section 50 applies if the owners of two or more lots agree in writing to change the lot entitlements of the lots. Subsection (1)(b) provides that under the agreed change, the total lot entitlements of the lots subject to the change cannot be affected.
5. Section 51B applies if a lot is subdivided into two or more lots. The owners of the post-subdivision lots must: decide the lot entitlements for the post-subdivision lots by apportioning the lot entitlement for the pre-subdivision lot to the post-subdivision lots in a way mentioned in section 51B(3)(a). After being given written notice of the lot entitlements for the post-subdivision lots, the body corporate must lodge a request to record a new CMS.
6. Section 51C applies if two or more lots are amalgamated into one lot. Subsection (2) provides the lot entitlement for the post-amalgamation lot is the total of the lot entitlements for the pre-amalgamation lots.
7. Section 62(2) provides that the body corporate may, by resolution without dissent, consent to recording a new CMS. A resolution without dissent is not required if the difference in the new CMS relates, for instance, to: compliance with a provision of the Act requiring the body corporate to lodge a request to record a new CMS (subsection (4)(a)); or amalgamating or subdividing lots (subsection (4)(h)). Section 62(5) provides that subsection (4)(h) only applies if the associated plan of subdivision: does not affect the common property; and does not change the contribution or interest schedule lot entitlements for lots (other than the lots being amalgamated or subdivided under the plan); or does not change the total of the contribution or interest schedule lot entitlements for the lots.

1. Where the contribution or interest schedule is adjusted, the CMS must state the information required by section 66(1)(db) and (dc).

[14] The applicant submits:

1. The proposed CMS:

   1. Is necessary to record his agreement with the owners of Lot 15 to: change the lot entitlements of their lots; to subdivide Lot 14 and amalgamate it with Lots 13 and 15; and to redistribute the lot entitlements of Lot 14. It goes no further than is necessary to formalise the subdivision and amalgamation which has been approved by the relevant authorities.

   2. Only differs from the current CMS with the insertion of a new schedule which: amends the contribution and interest entitlements for Lots 1 to 12 and Lots 16 to 35 from "1" to "10" in each case; amends the contribution and interest entitlements for Lots 13 and 15 from "1" to "15" in both cases; deletes the reference to Lot 14; and changes the totals of the contribution entitlements and the interest entitlements from "35" to "350" in both cases. A "0" was added to the end of each existing entitlement to allow for division into a whole number (taking into account section 46(6) of the Act).

   3. Does not change the respective rights, privileges or obligations of the other owners or change their contributions or interests in the scheme. It does not increase in a real sense the number of lot entitlements in the scheme. It only changes the rights, privileges and obligations and the contributions and interests of the owners of Lots 13 to 15 but no further than necessary to reflect the amalgamation of Lot 14 and the agreed distribution of lot entitlements amongst Lots 13 and 15.

   4. Contains a proposed schedule which is based on the equality principle and recognises it is just and equitable that: the obligations and lot entitlements of the other owners should not be affected by the amalgamation of Lot 14; the lot entitlements of the enlarged Lots 13 and 15 should reflect the incorporation of the rights, privileges and obligations that attach to Lot 14; and the proposed lot entitlements for Lots 13 and 15 reflect the market value of those lots.

2. The owners of Lots 13, 14 and 15 have agreed to change their lot entitlements to absorb the lot entitlements of Lot 14 as permitted by section 50 of the Act. They have advised the committee of the agreement. The body corporate must lodge a request to register a new CMS to reflect the change. Given section 62(4)(a) and (7) of the Act: the body corporate is required to lodge a new CMS pursuant to either section 50(2) or section 51C(4); the body corporate does not need to pass a resolution in general meeting; and the committee can resolve to lodge the proposed CMS.

3. The committee has declined requests to lodge the proposed CMS and appears to rely on section 62(4)(h) and subsection (5)(b) because it considered the change in the number of lot entitlements in the proposed CMS requires approval in general meeting. This position is incorrect because:

   1. The committee is obliged to lodge the proposed CMS pursuant to section 50(2) or section 51C(4), and if a separate obligation to register the proposed CMS exists, section 62(4)(h) does not need to be considered.
   2. The committee's interpretation of section 62(4)(h) is incorrect. The proposed schedule: may contain different numbers, but that is only necessary to give effect to the requirements of section 46(6); and does not change the total lot entitlements of the amalgamated lots either in real terms or relative to the lot entitlements of the other lots. This literal interpretation of section 62(4) would deprive section 51C of its utility.

1. The body corporate has approved the physical works that are necessary to effect the subdivision and amalgamation of Lot 14. It would not be just and equitable to require the applicant to resubmit the proposal to register the proposed CMS to a further general meeting, and risk having to challenge the outcome again if the motion fails to pass.

[15] Ms Garton of Lot 21 submits:

1. Given section 62(2), subsection (4)(h) and subsection (5)(b) the committee could not consent to recording the proposed CMS which changed the entitlements of all lots.
2. While it appears there is minimal impact on lot owners, the change to the contribution entitlements will impact voting, specifically poll voting.

1. The only reasonable order would be for the body corporate to put the appropriate motion to a general meeting to approve registering a new CMS that changes the contribution entitlements of all lots.

[16] Mr Preston of Lot 34 submits:

1. The committee has not obtained independent professional advice to determine whether the interests of owners would be adversely affected by the proposed subdivision and amalgamation. This advice is essential to ensure: the correct procedures were being adhered to; the proposed subdivision and amalgamation would not adversely affect owners' rights and uses; and the proposal put to a general meeting was explained to owners so they could make informed votes in their best interests.
2. A resolution without dissent is required because of section 263(1)(a) of the Sustainable Planning Act 2009, and sections 47A(1) and 62(5)(a) of the Act.

1. The proposed CMS incorrectly includes Lot 14 as part of scheme land and omits Lots 33, 34 and 35.

[17] The owners of Lot 15 support the application submitting:

1. Given section 50 of the Act and their agreement with the applicant, the body corporate should lodge a request to record a new CMS reflecting the agreed adjustment to lots.
2. Regarding Ms Garton's submissions, the amalgamated lots will have the right to request that an ordinary resolution be called by poll vote consistent with the Act, and the contributions other than the amalgamated lots do not change.

1. Regarding Mr Preston's submissions, independent professional advice is not required to submit a new CMS.

[18] In reply, the applicant submits:

1. The proposed CMS does not affect a person's right to call a poll vote pursuant to section 109 of the Act.
2. A revised proposed new CMS correcting the error identified by Mr Preston. The applicant says, importantly, both versions of the proposed CMS are the same in each other material respect, and in particular, show the distribution of Lot 14's lot entitlements between Lots 13 and 15.
3. Mr Preston's planning and engineering concerns involve matters which have been considered by the body corporate and are not the subject of this adjudication application. Nor are Mr Preston's concern that the committee did not obtain independent advice about the broader amalgamation and subdivision.

1. He does not accept Mr Preston's: interpretation of the provisions of the Sustainable Planning Act 2009; or his submissions about the impact of the subdivision and amalgamation on the existing development approval or planning principles more generally. The tone of Mr Preston's submission makes it clear he would be highly unlikely to vote in favour of a motion to register the proposed CMS that required a resolution without dissent.

[19] The applicant says the proposed CMS goes no further than is necessary to formalise the subdivision and amalgamation arrangement, and consequently the committee has power to consent to the lodging of that document with the registrar of titles. It is evident from the minutes of the 21 June 2016 meeting and the chairperson's email dated 9 November 2016 that the committee disagrees. Given submissions, this dispute centres on the way the body corporate may approve the proposed CMS. The abovementioned statutory lot entitlement system is fundamental to determining this dispute.

[20] It is noted that the current CMS shows that Lot 14 has a contribution lot entitlement of "1" and an interest lot entitlement of "1". Given section 46(6), an entitlement of "1" cannot be divided between Lots 13 and 15. The legislation does not contain a provision that specifically caters for dealing with this predicament.

[21] The proposed CMS contains the approach taken by the applicant (with the agreement of the owners of Lot 15) to accommodate section 46(6). That is the addition of a "0" to the lot entitlements of all lots included in the scheme. It is clear that the proposed CMS not only contains changes to the total lot entitlements of Lots 13 and 15, it also changes the lot entitlements of all other lots and the total of lot entitlements. The applicant argues body corporate consent by resolution without dissent is not required given the reason for, and the negligible impact of, his methodology (as noted above at paragraphs 14.1 and 14.3.b).

[22] In my view, the strict statutory lot entitlement system does not provide the scope argued by the applicant and the owners of Lot 15. In the context of the legislative framework, it is irrelevant that the method used to give effect to a division of lot entitlements does not, in a real sense, change the rights, privileges, obligations, contributions or interests of other owners. Unless an exception of the nature mentioned in sections 50, 51B or 51C applies, the lot entitlements for lots can only be changed by resolution without dissent as required by sections 47A and 62(2).

[23] At present, the respective lot entitlements of Lots 13 and 15 are "1". The owners of Lots 13 and 15 have agreed to change the lot entitlements of each lot to "15". Clearly, the total lot entitlements of Lots 13 and 15 are affected. Therefore, section 50 of the Act cannot apply. Further, I do not consider section 51C applies when two lots have not been amalgamated into one lot.

[24] I am satisfied that section 51B applies when Lot 14 is proposed to be subdivided into Lots 13 and 15. The owners of Lots 13 and 15 have to do the things mentioned in section 51B(3) including apportioning the lot entitlement for Lot 14 to Lots 13 and 15 consistently with the deciding principle for the lot entitlement. If there is no apparent deciding principle, then they would need to apportion according to the respective market values of the lots except to the extent to which it is just and equitable in the circumstances for the individual lot entitlements not to reflect the respective market values of the lots. If the body corporate had notification pursuant to section 51B(3), given section 62(4)(h) the body corporate consent may be by the committee or by ordinary resolution in general meeting.[2]

[25] The applicant's submissions noted above at paragraph 14.1.d refers to the equality principle and to the market value of lots. However, there is nothing in the proposed CMS of the nature mentioned in section 66(1)(db) or subsection (1)(dc). In my view, the body corporate was not obliged to lodge a request to record a new CMS in the absence of that information. More significantly, given section 62(5), section 62(4)(h) cannot apply when changes are proposed: to the contribution and interest schedule lot entitlements for lots included in the scheme (other than Lots 13, 14 and 15); and to the total of the contribution and interest schedule lot entitlements for the lots included in the scheme.

[26] In the circumstances, I consider sections 47A and 62(2) apply. The committee could not authorise the proposed CMS.[3] It could only be approved by the body corporate by resolution without dissent.

[27] With respect to other matters raised in submissions, I have not considered it necessary to have regard to the Sustainable Planning Act 2009. Furthermore, related construction work has body corporate approval as evidenced by the minutes of the 2016 EGM. There is nothing to suggest a dispute has been raised under chapter 6 of the Act about a specific body corporate decision about construction work. This application is not the forum to examine an issue about that approval or work.

[28] For the above reasons I have dismissed the first outcome sought.

[29] Further and for the same reasons, I do not consider it is appropriate or necessary to make an order in the terms of the second outcome sought. In this regard, I am not satisfied the applicant has established that, in the circumstances, the body corporate has acted unreasonably or in a way warranting an adjudicator's order.[4] Neither do I consider it is appropriate or necessary to make an order with respect to the body corporate consenting to the proposed CMS. The possibility Mr Preston may oppose a relevant motion at a future general meeting is not a basis for making an order.

[30] The fourth outcome sought is that the body corporate decision on Motion 20 at the 2016 AGM was void because it did not require a resolution without dissent and/or was unreasonable.

[31] The applicant firstly refers to section 242 of the Act. That provision does not apply when Motion 20 was not passed at the 2016 AGM.[5]

[32] Secondly, for the reasons discussed above, I consider the motion had to be decided by resolution without dissent.

[33] Thirdly, for the reasons discussed above, I consider section 47A applied to the proposed change to the contribution schedule lot entitlements that formed part of the proposed CMS. Given section 47AA(5) of the Act, a department adjudicator does not have jurisdiction to determine a dispute about whether or not a body corporate acted reasonably under section 94(2) in deciding to pass, or not to pass, a resolution under section 47A. Furthermore, given section 276(3) and item 10 of schedule 5, a department adjudicator cannot decide a dispute relating to whether the opposition to a motion under section 47A was unreasonable.

[34] For these reasons, I have dismissed the fourth outcome sought.

[2] In my view, the specific section 62(4)(h) applies in the circumstances as an exception to the general section 62(4)(a).

[3] Act, s 100(2) and Standard Module, s 42(1)(d).

[5] Act, s 242(1)(b) and subsection (2)(b).