Body Corporate and Community Management (Accommodation Module) Regulation 2020 (Accommodation Module)

INSURANCE - where the body corporate's insurer made a cash settlement to the body corporate for rectification works to a water damaged lot - where the owners are responsible for undertaking the rectification works - whether the body corporate should transfer the funds to the lot owners or forward invoices to the body corporate for payment.

Act, ss 94(2), 100(5); Accommodation Module, s 198

1. Within 7 days of the date of this order, the Body Corporate for Sandcastles must pay to the owners of Lot 3 the entirety of the monies received by the body corporate from its insurer as settlement of claim CL02104048 with respect to damage to Lot 3, along with any amount deducted from the settlement monies by the insurer for the insurance excess and GST.

• [1] This is a second application relating to an insurance claim for damage to a lot.
• [2] In January 2024 there was water ingress at the scheme and a claim was lodged under the body corporate's insurance policy. The insurer accepted liability for building rectification works to the applicant's Lot 3 and offered a cash settlement in October 2024. The body corporate eventually accepted and received a cash settlement in April 2025. However, there has been ongoing dispute, particularly about the responsibility for the insurance excess. In a previous order, I determined that the owners of Lot 3 were not liable for the excess.[1]
• [3] The applicants asked the body corporate to release the settlement funds so they could commence the rectification works. This was denied. Instead, the body corporate wants the applicants to organise the repairs and then submit invoices to it for payment.
• [4] The applicants say this is not a practical or efficient way to organise repairs and the body corporate is not acting reasonably. They say adjudicators have previously said that where insurance funds are received for internal repairs, it is reasonable to pass the funds onto the owners to be used for the repairs. They note the body corporate is not responsible for the repairs or how they are undertaken. They say the committee has allowed other owners to receive cash payments for insurable events, so the procedure for them is unreasonable. They also say there was no meeting or motion voted on, but rather a single email between with body corporate manager (BCM) that the funds were to be paid to the body corporate.
• [5] The applicants seek an order that the insurance payout be released to them.

• [6] Sandcastles community titles scheme 9740 (Sandcastles) is a 9-lot scheme at Bargara. The community management statement (CMS) shows the Accommodation Module applies. The scheme is registered as building unit plan 5459.
• [7] The application seeks the following:

I want an order that the Body Corporate release the cash insurance payout for claim number CL02104048 in the sum of $61,980.86, currently held in the sinking fund for Sandcastles CTS 9740, to the Lot Owner of 3.

• [8] An adjudicator may make an order that is just and equitable in the circumstances to resolve a dispute about a claimed or anticipated contravention of the Act or the CMS, or the exercise of rights or powers or performance of duties under the Act or the CMS.[2] I am satisfied I have jurisdiction to determine this matter under the dispute resolution provisions.[3]

• [9] The applicant initially applied for conciliation against the body corporate in September 2024.[4] The parties participated in conciliation in October but could not reach an agreement. The previous application was lodged in January 2025 and was determined in July.
• [10] This application was lodged on 27 September 2025. The Commissioner's delegate sought further information,[5] and the application was amended.[6]
• [11] The Commissioner invited submissions from the committee, and all owners.[7] Three submissions were made. The applicant did not obtain or respond to the submissions.[8]
• [12] The application was referred to department adjudication.[9] I have now investigated the dispute, including reviewing the submitted material.[10]

• [13] A submission made on behalf of the committee refers to the history of the dispute and the previous order. It includes:
  1. The BCM advised the usual process with an insurance cash settlement is for the funds to be paid to the credit of the body corporate. Then, the affected owner undertakes the necessary repairs using their preferred contractors and submits the invoices to the BCM for payment, at which point the BCM will contact the contractor to confirm the work has been completed and pay the invoices without committee approval being required. Alternatively, the owner can pay the invoices and then seek reimbursement.
  2. The committee asked the lot owners to attend to the insurance claim themselves through the BCM, but they and involved the committee.
  3. They allege a lack of evidence about the insured event and the damage.
  4. There was another insurance claim involving Lots 3 and 6 in October 2022 which was handled by the owner of Lot 6 and resulted in a cash settlement, but there was no confirmation that the funds were used to repair the water damage at that time.
  5. The applicants have already received a payout from the insurer of $22,229 for accommodation costs while rectification work is undertaken.
  6. The applicants were given the opportunity to provide bank account details to the insurer so the rectification work settlement could be paid to them directly, but they declined.
  7. The committee requests that the funds remain in the body corporate's account under the direction of the BCM, with no input or approval from the committee required. This will remove any conjecture as to whether the insurance proceeds were use for the rectification of the damage to Lot 3 if further claims are made for Lot 3 in future.
• [14] The owners of Lot 4 support the application. They object to the committee's handling of the claim, and its correspondence. They argue the committee has acted unreasonably, outside its powers and the legislation, and has shown bias against the owners of Lots 3 and 4. They say there was no requirement to submit invoices for payment with previous claims. They say that, despite the previous order, the treasurer has said not to pay the monies to the affected owners. They say they have been advised by the insurance assessor that liability was accepted for some damage to their lot, but they have not told whether they were to receive a payout or how to complete the rectification for their lot. They say if the committee requires them to submit invoices after completion as well, they will also apply for adjudication.
• [15] The second applicant made a submission in their capacity as the owner of Lot 7, supporting the application. They say the refusal to release the funds is unjustified and obstructs the owners' ability to carry out the repairs. They say the body corporate has no responsibility for undertaking or managing the repairs, and it is inappropriate for the committee to dictate how the repairs should be managed. They say the approach exceeds the committee's powers and has not been approved by a meeting or resolution. They say the reimbursement model is impractical, with tradespersons unwilling to accept jobs without direct payment assurance, delaying the works and placing an unreasonable burden on the owners. They say the prolonged delay has placed the owners at financial risk, with building costs having significantly increased since the claim was approved.

• [16] The issue in this dispute is the handling of the cash settlement provided to the insurer for water damage to Lot 3. Questions about the history of the water ingress, including the cause or resulting damage, are immaterial now where the insurer accepted the claim as covered by the insurance policy, and it agreed to and paid a settlement amount for the damage.
• [17] As outlined in my reasons for the previous order, the legislation provides for the use of insurance money received by a body corporate for damage to property.[11] Unless authorised by a resolution without dissent, the body corporate must '...apply the amount as soon as practicable to the repair, reinstatement or replacement of the damaged property." The legislation does not further prescribe how insurance funds are to be managed. But the body corporate must, in accordance with its general statutory obligations,[12] act reasonably in dealing with an insurance payout.
• [18] In that previous decision, I noted the submitted material did not appear to explain why the cash settlement was paid by the insurer to the body corporate rather than to the owners directly, and who made that decision. That remains unclear to me.
• [19] The committee's submission claims the owners of Lot 3 were given the opportunity to give their bank account details to the insurer so the settlement could be paid directly to them, but they declined. However, that assertion conflicts with the submitted evidence. The applicants provided their account details and asked to be paid the funds in February 2025.[13] A email from the treasurer to the BCM on 3 April stated, 'Under no circumstances are the funds to be paid directly to any Lot owner for this claim.'[14] Another email from the BCM (Team Body Corporate) to the insurer on the same date similarly said, 'Team body corporate wish to state that they DO NOT agree with the instructions below as stated by Michael Owens to pay into his own account. The insurance policy belongs to the body corporate and any funds are to be paid into the body corporate account when the committee approve to proceed.'[15]
• [20] I have some concern about these remarks. I have not been given evidence of any committee or body corporate resolution to this effect. And building insurance does not simply belong to the body corporate in my view. It is taken out by the body corporate in the body corporate's name, but it is required by the legislation to protect the interests of owners and occupiers as well as the body corporate. Owner and occupiers have an insurable interest under the insurance policy and so can be a 'third party beneficiary'.[16] Who is involved in making or pursuing a particular claim under the body corporate's insurance policy does not determine the beneficiary of that claim.
• [21] In the previous decision I also said I was unclear why the body corporate was requiring the owners to give it contractor invoices for payment by the body corporate rather than passing the settlement funds directly to the owners so they could organise and pay their contractors directly. Although that is the crux of this application, the body corporate's reasoning remains unclear to me from the committee's submission.
• [22] The committee simply says the BCM said that was the 'usual process'. But no explanation is given (either in the submission or any correspondence) as to why that process is believed to be appropriate or compliant with the legislation generally or in this particular case. And the BCM is not a decision-maker for the body corporate.[17] While a BCM may give information and advice to the committee and the body corporate, the responsibility for making decisions remains with the body corporate or (unless it is for a restricted issue[18]) its committee.
• [23] Although the insurance settlement monies were received by the body corporate on this occasion, they do not 'belong' to the body corporate in my view. Essentially, they belong to the beneficiary of the claim. The body corporate was not responsible for the insured event or the damage, and the repairs are not on common property. There is no suggestion the repairs are to parts of the lot that the body corporate has maintenance responsibility for or that the body corporate's interests could be affected by how the work is undertaken. All parties agree the owners of Lot 3 are to organise the repairs 3 and the committee says it will have no role in the repairs. Accordingly, the body corporate's only responsibility is to ensure the funds it received are applied 'as soon as practicable' to the repair, reinstatement, or replacement of the damaged property. The body corporate does not explain any need for it or the BCM to be involved in paying invoices to meet that obligation.
• [24] The body corporate has apparently not passed a resolution without dissent to use the cash settlement for any other purpose, so the whole of the funds must be applied to the repair of Lot 3. No evidence has been provided that the funds will not be applied by the applicants to the repair of Lot 3. Vague references to a previous insurance claim do not evidence that insurance funds were not appropriately applied in the past or will not be in this case. The body corporate does not establish any general statutory obligation on an owner to provide proof of work they have undertaken within their lot that is wholly their own responsibility.
• [25] However, I note the owners of Lot 3 have a statutory responsibility to maintain their lot in good condition.[19] If the applicants fail to undertake the repairs that are required to Lot 3, and for which the insurance settlement has been made, they may be in breach of that obligation. Also, the insurer could potentially refuse a future claim relating to the lot if previous damage has not been adequately repaired, which could expose the applicants to future liability.
• [26] The committee's submission says it will not be involved in handling the funds or have input or approval of the payment of invoices. It says the BCM will process the payments. But the BCM has no independent decision-making role. The BCM should only act in response to or under the direction of a body corporate or committee resolution. There appears to be no such resolution here. So, I am at a loss to understand what authority the BCM could have to unilaterally determine whether invoices for insurance repairs can or should be paid.
• [27] I also acknowledge the applicants' concerns about the practicality of the body corporate's approach. They say contractors are unwilling to enter a contract based on being paid by a third party. So, the body corporate is expecting the applicants to engage contractors on their own account and commit to over $50,000 of work, without any guarantee (particularly given the body corporate's past handling of this matter) that the contractors will be paid by the body corporate or when. That potentially imposes a significant financial burden on the applicants, and I consider it an unreasonable expectation by the body corporate.

• [28] In the current circumstances, I consider that by failing to transfer the settlement funds for insurance claim CL02104048 directly to applicants to enable them to pursue the necessary repairs to Lot 3, the body corporate has failed to apply the funds as soon as practicably to the repairs. I consider it is appropriate to require those funds to be transferred promptly.
• [29] I have not been given clear evidence in this application as to the exact amount received by the body corporate for claim CL02104048, whether it all related to Lot 3 or also other lots, or any deductions from the settlement amount. The applicants refer to the amount of $61,980.86 in their order but do not explain that figure. The committee's submission to the previous application included documentation from the insurer dated 16 April 2025. [20] That detailed a building settlement amount of $56,908.86 for Lot 3 with a cash payment of $46,735.33 following deductions of the $5,000 excess and $5,173.53 for GST. It may be the applicants incorrectly added the $5,000 excess to the total settlement amount.
• [30] I do not wish to delay the determination of this long-running matter further by seeking clarification from the parties of the relevant amounts. I will simply explain the basis for what must be paid to the applicants.
• [31] The body corporate must transfer to the applicants all monies it received from the insurer for rectification works on Lot 3 (apparently $46,735.33). It must also transfer any excess deducted by the insurer (apparently $5,000) as the applicants are not liable for that. If the amount paid to the body corporate was GST exclusive, the body corporate should also pay that deducted amount (apparently $5,173.53) to the applicants. It seems surprising that a scheme as small as Sandcastles would be registered for GST such that the insurer would make a GST exclusive payment. But if that is the case, I understand the body corporate can claim a GST input tax credit from the Australian Taxation Office for the excluded GST component. If the body corporate accepted a GST exclusive amount but cannot claim GST input tax credits, it should pursue the shortfall from the insurer. If the amount in the insurer's documentation from April 2025 reflect the finalised settlement amount, the body corporate should transfer a total of $56,908.86 to the applicants.
• [32] It appears a similar issue may have arisen regarding Lot 4. That matter is beyond the scope of this application to consider or determine. But if the body corporate has received a cash settlement for repairs to damage to Lot 4 that are the responsibility of the owners of Lot 4 to undertake, prima facie the body corporate should similarly transfer the settlement amount to the owners as soon as practicable so they can proceed with the required repairs.
• [33] From the material submitted in relation to both adjudication applications, I am concerned that the approach of the body corporate to this matter has unnecessarily complicated and delayed the progress of both the insurance claim and the repairs to Lot 3. I am also concerned the committee did not pay due regard to the information outlined in the reasons for the previous decision. I encourage the committee to better inform itself as to its statutory responsibilities and the limits on its statutory role. It should also remember that body corporate decisions can only be made in a general meeting or by the entire committee, and not by any individual committee member or the BCM.

[1] Sandcastles [2025] QBCCMCmr 258

[3] Sections 227, 228, 276 and schedule 5 of the Act

[11] Section 198 of the Accommodation Module

[12] Sections 94(2) and 100(5) of the Act

[16] See section 48 of the Insurance Contracts Act 1984 (Cwth)

[18] Section 44 of the Accommodation Module

[19] Section 201 of the Accommodation Module

[20] This was in the committee submission made on 16 April 2025 in response to application 0015-2025.