Locke v The Proprietors of Rosebank & Anor [2015] QMC 3

Magistrates' Court of Queensland|2015-04-30

This is an appeal under section 106 of the Building Units and Group Titles Act 1980 ('the Act') from an order made by a Referee on 15 August 2014 under part 5 of the Act.
Under subsection 107(1)(b) the Act, in the determination of an appeal from an order of the referee, a tribunal may, by order, affirm, vary or revoke the order appealed against or substitute the tribunal's order for the order appealed against. Under subsection 107(1)(c) the tribunal is prohibited from making any order as to costs.
Pursuant to subsection 107(2) the Act, an order made under subsection (1)(b) has effect, and the provisions of the Act other than section 106 apply to it, in all respects as if it were an order made under the provision of the Act under which the order appealed against was made.
Mr Jeremy Locke, the Appellant, is the owner and resident of Lot 54 Rosebank, located in the Rosebank Gardens residential precinct of the Hope Island Resort. The Respondent, Rosebank GTP 3033, is the Appellants residential body corporate. Two other residential body corporates are located in the Rosebank Gardens residential precinct. Entry to the common property of the various body corporates on Hope Island is facilitated by land owned and maintained by the Hope Island Primary Thoroughfare Body Corporate ('the third party BC').
This appeal is about:
- (A) whether the Respondent can authorise the spending of money on land owned and controlled by the third party BC. The land in question is at the entrance to the Rosebank Gardens residential precinct. The Respondent proposes to spend money on a landscaping upgrade to improve the entrance of land which leads to, but is not part of, the Rosebank common plan; and
- (B) whether the Respondent can validly enter into a Deed of Variation to extend the contract for services of their body corporate manager, Cambridge Management Services.

On 13 August 2013 the respondent amended their by-laws to provide authority to make improvements on land adjacent to, but not part of, Rosebank common property. The amended by-law 15 reads in part:

"15 Expenditure on Areas of Adjacent Primary or Secondary Thoroughfares

15.1 Subject to the prior approval of the Primary Thoroughfare Body Corporate or the Secondary Thoroughfare Body Corporate as the case may be, the Body Corporate may expend Body Corporate funds on Primary or Secondary Thoroughfare assets adjacent to lots of common property within the Scheme or immediately outside but adjacent to the Scheme Land to promote the use or enjoyment of the lots and common property provided:..."

Then, on 23 May 2014, further to the authority vested in itself pursuant to by-law 15, the respondent passed Motion 3 at an Extraordinary General Meeting ('EGM') to authorise a landscaping upgrade on property owned by third party BC. Motion 3 reads:

"MOVED that the Respondent GTP 3033 accepts the Rosebank Gardens Entrance Landscape Upgrade proposal attached and marked 'ATTACHMENT B' and approves the expenditure of $18,446.79 being 144/247th of the total cost of the project, with costs to be met from accumulated Sinking Funds, subject to the Rosebank South GTP 102509 and Marina Houses GTP 106928 bodies corporate also approving similar motions."

The Appellant raises a number of issues as to the validity of the decision to spend body corporate money on land not part of the Rosebank body corporate plan. Relevantly, he argues that there is no provision in the Act authorising a Body Corporate to expend sinking fund money on areas that are not part of the plan of Rosebank GTP 3033. Further, funds are already available to the third party BC for the purpose of management, maintenance inter alia of primary and secondary thoroughfares, paid by the Appellant and other residents of the various body corporates on Hope Island. At page 3 of his notice of Appeal, he states:

"Residents pay large annual fees into these budgets. Collecting funds again via the residential body corporate is unreasonable and doubling up."

The Respondent argued in part that "an upgraded entrance to Rosebank, which is located on the primary thoroughfare, will result in an increase in the enjoyment of lots or common property. Accordingly, by-law 15 is within the contemplation of section 30(2)."[1] Thus, the Respondent says, its decision to spend sinking fund money on an area not part of the registered common property of Rosebank was valid.
Section 30(2) the Act authorises a body corporate relevantly as follows:

30(2) A body corporate, pursuant to a special resolution, may, for the purpose of the control, management, administration, use or enjoyment of the lots and common property the subject of the plan, make by-laws amending, adding to or repealing the by-laws set forth in schedule 3 or any by-laws made under this subsection.

In his decision, the Referee refers to this subsection and unaccountably in his reasoning omits the words 'the subject of the plan'[2].
The chief duties of a Body Corporate are set out in section 37 of the Act. Which states relevantly as follows[3]:

37 Duties and powers of body corporate regarding property etc.

(a) control, manage and administer the common property for the benefit of the proprietors; and

(f) accept and deal with a lease, licence or permit that may be issued or granted under the Land Act 1994 to any person in respect of any unallocated State land, road or reserve which abuts on the parcel; and

(g) make or cause to be made improvements to the common property where -

(i) in any one case, the cost of the improvements does not exceed the prescribed amount; or

(ii) the body corporate by resolution without dissent so resolves; or

(iii) the body corporate resolves in general meeting that the improvements are considered to be essential for the health, safety or security of users of the common property and the referee makes an order approving the making of the improvements.

(4) Any unallocated State land, road or reserve referred to in subsection (2)(f) is additional common property.

Sub-section 38(6) the Act restricts the use of sinking fund money. It states as follows:

38(6) A body corporate shall not disburse any moneys from its sinking fund otherwise than for the purpose of -

(a) meeting its liabilities referred to in section 38A(2); or

(b) carrying out its powers, authorities, duties or functions under this Act.

Subsection 38A(2) specifies the liabilities for which the body corporate shall determine the amounts are reasonable and necessary to be raised by contributions and states as follows[4]:

38A(2) Within 12 months after registration of the plan and from time to time thereafter, the body corporate shall determine the amounts which are reasonable and necessary to be raised by contributions for the purposes of meeting its actual or expected liabilities in respect of -

(a) painting or treating of any part of the common property which is a structure or other improvement for the preservation and appearance of the common property; and

(d) the renewal or replacement pursuant to section 37 of parts of the parcel being the common property, fixtures and fittings which the body corporate is required by this Act to maintain and keep in good and reasonable repair and other property (including personal property) held by or on behalf of the body corporate; and

(e) such other liabilities expected to be incurred at a future time where the body corporate considers that the whole or part thereof should be met from its sinking fund.

The respondent argued that subsection 38A(2)(e) the Act extends the authority of a body corporate under the Act to authorise expenditure to: "such other liabilities expected to be incurred at a future time" and thus it contemplates a situation such as here, where improvements are sought to be made to an area outside the common plan. However, the Tribunal notes that subsections 37(2)(g) and 38A(2)(c) both expressly limit the making of improvements "to the common property".
There are no express exceptions to these provisions except with regard to unallocated State land that directly abuts the common plan in accordance with subsections 37(2)(f) and 37(4). The Tribunal notes that were the land 'unallocated State land' the respondent may be in a different position in regard to improvements. However, this does not apply given the land belongs to the third party BC.
Section 14A(1) of the Acts Interpretation Act 1954 ('the AIA') provides that in the interpretation of a provision of an Act, the interpretation that will best achieve the purpose of the Act is to be preferred to any other interpretation. Given the express limitation of subsections 37(2)(g) and 38A(2)(c) to improvements to the common property, without express exception applicable in this case, and given that the words 'common property' are clearly a major thread through the legislation, it does appear clear that the Act operates to limit expenditure on improvements to areas of common property.
In the case of Humphries v Proprietors "Surfers Palms North" Group Titles Plan 1955[5] the majority decision of the High Court observed[6]:

"The chief duties of a body corporate are set out in s.37(1) of the Act; s.37(2) sets out powers which, in the discretion of a body corporate, it may exercise. Apart from specific paragraphs relating to the care of the personal property of the body corporate and the provision of a mail box, the duties of a body corporate imposed by s.37(1) relate either to what is or is part of the common property or to fixtures or fittings in one lot intended to be used for the servicing or enjoyment of any other lot or of the common property."

Similarly, in this case it is clear that none of the duties encompassed by the Act extends to the provision by the body corporate of improvements relating to an area outside the common property. In general, the Third Schedule does not authorise a body corporate to provide improvements to property not on the common property_._
In follows that the power to make by-laws pursuant to section 30(2) of the Act does not avail the respondent. The respondent did not have power under the Act to authorise improvements to the land of the Third Party BC and there was no valid by-law made which might have authorised the body corporate to improve property not the common property in the circumstances as here.
Thus, the Tribunal finds that there was no statutory power authorising, and there was no valid by-law which might have authorised, the respondent to use funds of the residential body corporate to be used to fund works on property that is not part of the residential body corporate and is owned by the third party BC. As a result, the Tribunal finds that by-law 15 is invalid. It follows that Motion 3 is invalid, as the Respondent did not have power to authorise funds of the residential body corporate be used to fund works on property that was not part of the residential body corporate.

The Appellant also seeks an order that that "no funds of the residential body corporate be used to fund words on property that is not part of the residential body corporate." The Tribunal is of the view that an order in the terms specified (above) would be unsustainable as it would require the Tribunal to make a decision as to the power of the Body Corporate in relation to future decisions in circumstances as yet unknown. Such decision would appear vague and unspecific and not a final, or operative decision on a specified set of circumstances, and may be contrary to subsequent legislation as it may be enacted. In the future circumstances may change.
The Tribunal is further of the view that a decision of a referee that can be reviewed by a Tribunal must be a final or operative decision rather than a decision made to cover future circumstances where varying factors may come into play, rendering the final circumstances of the decision at variance. In any case, the Tribunal is of the view that a decision to prevent the body corporate to do or not to do an act in the future, based on as a yet unknown set of circumstances, is not a reviewable decision.
As a consequence the Tribunal finds that the Referee was correct in refusing to make the order.

The Respondent and Co-respondent are parties to a residential body corporate agreement that commenced on 1 June 2009 ('the contract'). The contract provided for an initial term of 5 years to 31 May 2014, with an option for a further 5 years.
Pursuant to the contract, on 21 November 2013, the Co-respondent notified the respondent of its intention to exercise the option and the parties entered into negotiation. Parties were then required to obtain an expert assessment on the remuneration, but an expert could not be found given that very few schemes are now regulated by the Act.
The Co-respondent agreed to a clause varying the contract to dispense with the requirement of expert assessment and reaching an agreement on remuneration. As a result, the Respondent proposed Motion 2 for the EGM to he held on 29 April 2014 to the effect that the respondent enter into a Deed of Variation with the Co-respondent. The Appellant lodged an application for review with the Referee and the Respondent withdrew the motion following the decision of the Referee requiring the respondent to suspend finalisation of the issue pending his decision.
The Motion was then relisted at a further EGM and passed on 29 April 2014. In essence, it is to the effect that Respondent enter into a Deed of Variation with Cambridge Management Services ('CBS'), to extend the date whereby pre-conditions must be met in order to exercise the option to extend the management rights agreement. The Tribunal notes that this Motion was entered into prior to expiry of the Contract. The offer was accepted and parties entered into a formal contract after the final decision of the Referee on 15 August 2014.
The Appellant initially sought review of the decision in April 2014 on a number of grounds, none of which is compelling. Clearly the respondent has power to enter into a management agreement with the co-respondent under the Act and that does not appear to be the subject of dispute.
The Appellant now says that due to the delay caused by the Referee's order (brought about solely by his objection), the time for finalising the extension of the option lapsed and the new agreement invalid and the respondent had no power to finalise the agreement.
However, it appears clear that the intention of the parties at all times, as evidenced by the Motion referred to above, was to continue with the agreement for management services.
There appears to be no dispute that the co-respondent has done all that was required of it to properly exercise the option. Further, there is no dispute that the Respondent and Co-respondent, were in agreement prior to execution of the Deed of Variation, that management rights should continue. The Co-respondent argues that the executed Deed is simply in effect ratification of the agreement already entered into by parties in May 2014.
The Deed of Variation ultimately entered into by parties pursuant to a Motion at the Respondent general meeting of August 2014 records the agreement:

2.1 The Body Corporate and the Manager ratify and affirm the Agreement as varied and acknowledge and agree that the Manager has validly exercised the option.

The Tribunal is satisfied that the co-respondent has done all that was required to properly exercise the option and is satisfied that ultimately, the execution of the Deed of Variation simply records the agreement to vary the contract.
For all these reasons the Tribunal holds that the appeal must fail on this ground.
The Tribunal adds, by way of note, that in any case, it would appear that if the agreement were not to continue, the co-respondent having done all that was required of it by way of the agreement would have a substantial damages action against the respondent (and by association the Appellant) were the agreement not to continue in the circumstances.

In relation to the application for orders (1) (a) and (1) (c):

The decision of the Referee is set aside and decisions are substituted that:
- (a) By-law 15 is invalid; and
- (b) Motion 3, Rosebank Gardens Entrance Landscape Upgrade, is invalid.

In relation to the application for an order re: Motion 2 (2):

Appeal dismissed.
Order of the Referee affirmed.

[1] Submissions of Respondent 17 December 2014, para 4.2.

[2] Decision of the Referee, Rosebank [2014] QBCCMCmr 301 at paragraph 25.

[3] Tribunal emphasis on the words 'common property'

[4] Tribunal emphasis on the words 'common property.'

Units and Group Titles Act 1980

Interpretation Act 1954

At a glance

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Judgment (45 paragraphs)

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Legislation Cited (2)

Cases Cited (3)