Katsikalis v Body Corporate for "The Centre"

REAL PROPERTY - STRATA AND RELATED TITLES AND OCCUPANCY - COMMON PROPERTY - whether the grant of an exclusive licence amounts to a disposition of common property

REAL PROPERTY - STRATA AND RELATED TITLES AND OCCUPANCY - MANAGEMENT AND CONTROL - BODY CORPORATE - POWERS DUTIES AND LIABILITIES - DUTY TO REPAIR AND MAINTAIN COMMON PROPERTY - where a body corporate passed a special resolution to allow the extension of a bulkhead over common property - whether the grant of an exclusive licence amounts to a disposition of common property - whether the resolution should have been passed without dissent

Body Corporate and Community Management Act 1997 (Qld), s 154, s 159

Body Corporate and Community Management (Commercial Module) Regulation 1997 (Qld), s 91, s 94

Body Corporate and Community Management (Commercial Module) Regulation 2008 (Qld), s 117(2)(b)

A. Raptis & Sons Holdings Pty Ltd v Commissioner of Stamp Duties (No. 2) [1999] 1 Qd R 462, [1997] QCA 228, applied

Cowell v Rosehill Racecourse Co. Ltd (1937) 56 CLR 605; [1937] HCA 17, applied

H H Halls Ltd v Lepouris (1964) 65 SR (NSW) 181, referred

Henty House Proprietary Limited (in voluntary liquidation) v Federal Commissioner of Taxation (1953) 88 CLR 141; [1953] HCA 54, applied

Lace v Chantler [1944] KB 368, referred

Wilson v Meudon Pty Ltd [2006] ANZ Conv R 93; [2005] NSWCA 448, referred

Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1948] AC 173, applied

[1] McMURDO P: The application for leave to appeal should be granted and the appeal allowed for the reasons given by Douglas J.

[2] I share Chesterman JA's concern about the delay between the filing of the appeal in the District Court at Southport on 17 March 2006 and the hearing of the appeal two years and five months later on 13 August 2008. Neither party in this Court suggested that the delay was caused by the other; nor could the parties provide any explanation for this delay. This suggests that the delay was the fault of the court. Perhaps there is some extraordinary explanation for the delay which is unknown to the parties and not apparent from the appeal record in this Court. If not, such a delay in the disposal of an appeal of this kind is undesirable, unacceptable and of institutional concern.

[3] I agree with the orders proposed by Douglas J.

[4] CHESTERMAN JA: I have read and agree with the reasons for judgment prepared by Douglas J, and with the orders proposed by His Honour.

[6] The application made to the Adjudicator to resolve the applicant's dispute with the respondent body corporate was lodged on 27 July 2005, four months short of four years ago. The Adjudicator gave his decision on 15 February 2006, having received and considered several lengthy submissions from a number of proprietors. The application, for an order that the bulkheads on Lots 4 and 5 of BUP 343 be removed, was dismissed.

[7] The applicant's appeal from that order to the District Court was filed on 17 March 2006, three years ago.

[8] The appeal was argued in the District Court on 13 August 2008. Judgment was given six days later, on 19 August 2008.

[9] The chronology reveals a delay of about two and a half years between the institution of the appeal to the District Court and that Court's disposition of it. The delay was not the subject of particular complaint in this Court and there was no investigation into its causes. We were told that the applicant wanted the matter resolved and made endeavours to have it brought on.

[10] Despite not knowing all the circumstances it is both possible and necessary to condemn the delay in strong terms. It is completely unsatisfactory and, indeed, unacceptable that a litigant be so long denied a hearing.

[11] The case was one in which the applicant complained that his propriety rights had been infringed. The judgment of this Court has vindicated his complaint. It is not an exaggeration to describe the District Court's indifference to his complaint, and the application for its redress, as disgraceful. The appeal was self evidently of a kind that would never impose a strain on the Court's resources. It was limited to questions of law. The hearing occupied only two hours. It is impossible to conceive of any reason why the matter could not have been heard within a few months of the institution of the appeal.

[12] A consequence of the delay is that the parties have acted in ignorance of their legal rights and the infringement of the applicant's rights went uncorrected for years. The primary Court failed quite dismally to deliver justice. Such a failure should not be allowed to happen again.

[13] DOUGLAS J: This is an application for leave to appeal from a decision of the District Court which was itself an appeal on a point of law from an adjudicator appointed under the Body Corporate and Community Management Act 1997 (Qld) ("the Act").

[14] The dispute relates to a group of shops in an arcade called "The Centre" in Surfers Paradise. The applicant's shop, lot 6 in a building unit plan, was adjacent to lot 5. The owner of lot 5 carried out works to extend the ceiling bulkhead of his shop to align with the frontages of lot 6 and lot 4 which flanked lot 5. The design of these shops was such that the front of each odd-numbered lot was recessed 57 cms from its neighbours.

[15] The extension of the bulkhead over the entrance to the shop by that distance meant that it, the bulkhead, which was used to identify the name of the shop, occupied part of the common property of the respondent body corporate. No previous permission was obtained from the body corporate to do the work but subsequently, on 10 November 2005, at its annual general meeting, it passed a resolution, described as a special resolution, in the following terms:

THAT owners of lots with recessed bulkheads be permitted to extend the bulkhead above the front of their lots to the same alignment as the bulkhead of an adjoining lot provided written application for that modification is first made to and approved by the Committee AND THAT any approval given by the Committee must include such conditions that the Committee considers reasonable and appropriate."

[16] Forty-six votes were cast in favour of the resolution, four against with one abstention. A subsequent committee resolution of 8 March 2006 was made, in respect of lot 5, that the owner be permitted "on the usual conditions to retain the bulkhead extensions already made" but those conditions were not identified. Therefore neither resolution clarifies, for example, whether the approval constituted a licence for the use of that part of the common property and whether or when it might be revoked. Nor did it identify the relevant statutory provision permitting the common property to be appropriated for that purpose.

[17] One of the applicant's main concerns was that the extension of the bulkhead limited his ability to use the return face of his lot for signage.

[18] Section 154 of the Act allows a body corporate to sell or otherwise dispose of common property and also to grant or amend a lease or licence over it in the way, and to the extent, authorised under the regulation module applying to the scheme. Section 159 authorises a regulation module to provide for "making improvements to the common property, including making improvements for the benefit of the owner of a lot...". The term "improvement" is defined in Schedule 6 to the Act as follows:

(c) a non-structural change, including, for example, the

[19] Sections 91 and 94 of the Body Corporate and Community Management (Commercial Module) Regulation 1997 (Qld) identified some possible methods by which this extension of the bulkhead could have been effected. They provided, relevantly, as follows:

"91 Disposal of interest in and leasing of common

(1) This section sets out the way in which, and the extent to which, the body corporate is authorised -

(a) to sell or otherwise dispose of common property; and

(b) to grant or amend a lease over common property.

(i) sell or otherwise dispose of part of the common

(ii) grant or amend a lease for more than 10 years over part of the common property; and

(b) if authorised by special resolution - grant or amend a lease for 10 years or less over part of the common property.

94 Improvements to common property by lot owner - Act, s

(1) The body corporate may, if asked by the owner of a lot, authorise the owner to make an improvement to the common property for the benefit of the owner's lot.

(2) An authorisation may be given under this section on conditions the body corporate considers appropriate.

(3) The owner of a lot who is given an authority under this section -

(a) must comply with conditions of the authority; and

(b) must maintain the improvement made under the authority in good condition, unless excused by the body corporate."

[20] The resolution itself does not make clear what statutory power is being exercised by the body corporate. It is clear from the resolution, however, that there has been no sale or lease of common property. No money was offered for that use of the common property. There is no rental or term of any lease prescribed and the premises the subject of any notional lease, although capable of being made certain, were not defined in the resolution.

[21] The resolution is capable, however, of being construed as the grant of an indefinite licence to the owner of lot 5 to use that part of the common property. If it were such a disposition "otherwise", to use the language of s. 91(1)(a) of the regulation then in force, the resolution said to authorise it retrospectively should have been passed without dissent in order to make it valid. That did not occur as four lot owners voted against it.

[22] Another possibility is that the body corporate authorised the owner of lot 5 to make an improvement to the common property for the benefit of his lot under s. 94. That would not have needed the authority of a particular form of resolution, such as s. 91 requires for dispositions of interests in common property, unless the grant of permission to make the improvement itself amounted to a disposition of the common property.

[23] The applicant's submission, in support of the argument that the body corporate had purported illegitimately to give the relevant part of the common property to the owner of lot 5, was that the extension of the bulkhead only benefited the owner of lot 5, prevented the common property on which the extension was placed from being used by another person or the body corporate and prevented the applicant from using that part of his lot frontage on the return face of the bulkhead from being used for signage. The argument was that the alteration or improvement made by the owner of lot 5 was indefinite temporally as the resolution did not specify that the permission to extend the bulkhead may be revoked. It was also said to be an improvement only capable of being used by the owner of lot 5 and, so, amounted to the grant of the exclusive use of that part of the common property for an indefinite period and became a disposition of an interest in the common property rather than simply an improvement to the common property for the benefit of lot 5. As the resolution of 10 November 2005 was a special resolution, the applicant also argued that the appropriate inference from that conduct was that the body corporate must have intended to act under s. 91 of the regulation.

[24] It was submitted by the respondent, however, that the legislation permitted structural alternations to be erected on common property to which the body corporate may consent. The definition of improvement, coupled with the power in s. 94 of the regulation, was said to require the conclusion that the erection of a building on the common property, which one would normally regard as being of a semi-permanent nature, was not an alienation or a disposal of an interest in that property. Rather it should be taken to be simply something that was built on the common property which could be removed. In its submission a structural change such as the extension of a bulkhead from a lot was even more clearly a temporary structure able to be removed. The submission was, accordingly, that this was not a disposition of common property as structural alterations can be made on common property without there being a disposition of that property. In that context the submission was that s. 91 and s. 94 of the regulation were mutually exclusive.

[25] Where the improvement permitted under s. 94 of the regulation has the effect of granting the use of part of the common property exclusively to a lot owner for an unlimited period, as has happened here, it seems to me that s. 94 cannot be treated separately in its effect from s. 91. The sections are not necessarily mutually exclusive as there is the real likelihood of the creation of a disposition of the land in those circumstances.

[26] That may not necessarily be the case in some examples that one may think of. For example, a lot owner may ask for permission to fix a bench or place some seats outside his lot on the common property for the benefit of the business's customers. Although it would be an improvement it may not necessarily amount to a disposition of that part of the common property, especially if it remains accessible to others. A different conclusion would be likely to follow if, for example, the permission sought was to make an improvement to enclose indefinitely a car parking space on common property for use as a private parking space exclusively for a lot owner.

[27] The position accepted by both the adjudicator and the learned District Court judge was that the evidence was not sufficient to allow the conclusion that what had occurred was a de facto acquisition of common property by the owner of lot 5. In a sense that is an approach that casts the onus of proof on the applicant to show that the resolution had the effect of otherwise disposing of that part of the common property. It is not necessary in this case to decide whether that is the correct way to approach the issue as it is my view, for reasons I shall explain, that there has been a disposition of the common property on the evidence available. In making a resolution of this type, however, the body corporate is potentially interfering with the rights of unit holders to the common property and should be required to make it clear just how those rights are to be affected.

[28] In this case the approvals given retrospectively show that the extensions to the bulkheads over the common property will be enjoyed exclusively and indefinitely by the lot owner. That, in my view, amounts to a disposition of that property at least by the grant of an exclusive licence to it for some indefinite period. It may also amount to a gift of the property unless it is a mere licence that would normally be revocable.[1]

[29] "A licence is an agreement in which the grantor confers on the licensee permission to enter the land for specific purposes which would otherwise be unlawful or constitute a trespass."[2] Because of the uncertainty attaching to the duration of the licence in this case and the absence of any obligation to pay rent it could not be treated as a lease even though there is a clear case that the owner of lot 5 has been given exclusive possession of it.[3]

[30] The words, "dispose", "disposition" and "disposal" are very wide in their effect and, depending on the context, are not restricted to arrangements involving the transfer or creation of proprietary rights.[4] The terms of s. 154 suggest that the grant of a licence is one of the means of disposing of common property envisaged by the legislation. Even if one assumes that the transaction here was simply the creation of a mere licence that gave no interest, legal or equitable, in the common property and was revocable,[5] the fact that exclusive possession of that part of the common property had passed to the owner of lot 5 would, in my view, allow the conclusion that there had been a disposition of the relevant part of the common property. The right to possession of that part of the common property had been made over or parted with for the period of the licence.[6] If the licence remained unrevoked, no action of trespass could have been maintained by the respondent against the owner of lot 5.[7]

[31] It would have been simple for the body corporate to clarify in its resolution whether the permission to extend the bulkhead was for a particular period or was revocable and whether it was subject to other conditions. It would then have been possible to ascertain clearly what type of resolution was required, whether one without dissent or a special resolution. That task may have been more difficult under s. 91 as it stood in 2006 as it, unlike s. 154 of the Act, did not then refer to the grant of licences but spoke only of sales, other dispositions and leases for more than or less than 10 years. Section 117(2)(b) of the current regulation, Body Corporate and Community Management (Commercial Module) Regulation 2008, makes it clear, however, that a licence for less than 10 years may be granted by a special resolution.

[32] It is important that the rights to common property of bodies corporate are not removed unheedingly or inadvertently and to the detriment of their members. That is why the rules require such resolutions to be passed without dissent. That the infringement on those rights is relatively trivial in this case does not excuse what occurred. The principle is significant.

[33] In my view, therefore, the resolution purporting to authorise the extension of bulkheads was a disposition "otherwise" for the purposes of s. 91(2)(a)(i) of the regulation and was not passed without dissent. It was therefore invalid.

[34] The application for leave to appeal was argued as if it were also a hearing in respect of an appeal. Consequently, as it seems to me that the matter is one where an appeal is necessary to correct a substantial injustice to the applicant, there is a reasonable argument that there is an error to be corrected and the issue is one of some general importance to bodies corporate and their members, the application for leave to appeal should be granted.

1. The application for leave to appeal is granted;

3. The order of the District Court of 19 August 2008 is set aside and instead it is ordered that the appeal is allowed and the order of the adjudicator made under Part 9 of Ch 6 Body Corporate & Community Management Act 1997 (Qld) on 15 February 2006 is set aside;

4. The matter is remitted to the adjudicator for determination in accordance with these reasons;

5. The respondent is to pay the applicant's costs of and incidental to this application and appeal and of the proceedings before the District Court.

[36] An injunction was also sought requiring the respondent to remove the bulkhead structure from lot 5 but that relief was not pressed at the hearing. It seems to me that relief of that nature should not be granted at this stage because it is open to the respondent to approve another resolution to authorise the use of the extension to the bulkhead that does conform to the powers available under the legislation. I would remit that part of the application to the adjudicator for determination in accordance with these reasons.

[1] Halsbury's Laws of Australia at [140-125].

[2] Halsbury's Laws of Australia at [245-235]; Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1948] AC 173 at 188, 193.

[3] Lace v Chantler [1944] KB 368; H H Halls Ltd v Lepouris (1964) 65 SR (NSW) 181, affirmed on appeal (1965) 39 ALJR 259 and discussed in Wilson v Meudon Pty Ltd [2005] NSWCA 448 at [61]- [65]; [2005] NSWCA 448; [2006] ANZ Conv R 93.

[4] Henty House Proprietary Limited (in voluntary liquidation) v Federal Commissioner of Taxation [1953] HCA 54; (1953) 88 CLR 141 at 153 and other authorities discussed in A. Raptis & Sons Holdings Pty Ltd v Commissioner of Stamp Duties (No. 2) [ 1999] 1 Qd R 462 at 467-468.

[5] Halsbury's Laws of Australia at [140-125]; Cowell v Rosehill Racecourse Co. Ltd (1937) 56 CLR 605.

[6] A. Raptis & Sons Holdings Pty Ltd v Commissioner of Stamp Duties (No. 2) [1999] 1 Qd R 462 at 467-468.

[7] Cowell v Rosehill Racecourse Co. Ltd (1937) 56 CLR 605 at 629.