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

GENERAL MEETING MOTIONS - The applicant submitted six motions to a general meeting proposing:

• the body corporate reimburses rental income lost due to an air conditioner fault
• the body corporate releases legal advice to owners that it claims is subject to legal professional privilege
• the body corporate reimburses rental income that will be lost due to major works
• the body corporate ceases offering a discount on special levies paid after the due date
• the body corporate puts GST credits towards the special levies used to pay GST, and
• the body corporate committee explains its arrears notice fees.

All motions failed and the applicant argues they should be deemed to have passed.

Act, ss 20, 31, 205; Accommodation Module, ss 44(1), 154(1), 156(1)(c), 170(1), 201(5); Land Title Act 1994, s 48C(1).

1. The body corporate must not offer any further discounts on the special contributions raised pursuant to motion 4.1 of the extraordinary general meeting held on 19 May 2023 unless authorised by ordinary resolution and notified to owners by a further notice of contribution.
2. The application is otherwise dismissed.

• [1] The applicant is the owner of lot 1 and is represented by its director, Mr Turner. Mr Turner seeks to have six motions that he submitted to an annual general meeting held on 25 July 2024 declared passed. The motions were all slated for decision by ordinary resolution, but all failed by significant margins of 3-4 votes in favour to 25-27 against.

That the body corporate committee, on behalf of the body corporate, be required to formally admit liability for the owner's lost rental income, and associated interest charged for non- payment of same, for room closures in the matter of fan unit motor failure repairs carried out at the owner's unit in November and December, 2022, such admission to be effected by means of restoring the owner's financial balance, other than for any levies currently issued but not yet due, to $0.00 ($nil).

• [2] Mr Turner says air conditioning infrastructure failed in November 2022. The body corporate lodged an insurance claim for repairs and lost rent, but it was withdrawn or rejected. The body corporate then paid to have the air conditioner repaired, but refused to reimburse Mr Turner's lost rental income after receiving legal advice that the broken fan motor was Mr Turner's statutory responsibility to repair. Mr Turner argues that the body corporate accepted responsibility for the issue by lodging the insurance claim and carrying out the repairs and therefore must reimburse his lost rental income.
• [3] All utility infrastructure on scheme land is common property that the body corporate must maintain in good condition, except where it is:

(i) solely related to supplying utility services to a lot; and

(ii) within the boundaries of the lot (according to the way the boundaries of the lot are defined in the plan of subdivision under which the lot is created); and

(iii) located other than within a boundary structure for the lot.[1]

• [4] Mr Turner submitted a copy of a letter from a service technician stating that the fan motor within his lot "had most likely burnt out due to the failed capacitor. This is an original fan motor and is approximately 20 years old."[2]
• [5] The body corporate committee submitted a copy of a letter its lawyer wrote to Mr Turner explaining that a fan condenser unit in the false ceiling of his lot was mistakenly repaired by the body corporate before it took legal advice.[3] As The Esplanade Trilogy - One was created under a building format plan of subdivision, the boundaries of lots are structural features of the building.[4] A false ceiling is not a structural feature. It would be below the slab separating lot 1 from lot 9 above.
• [6] Both these documents indicate that the utility infrastructure that was repaired came within the exception quoted above. Namely, it solely related to supplying a utility service to Mr Turner's lot, it was within the boundaries of his lot, and it was not situated within a boundary structure. Mr Turner has not claimed otherwise.
• [7] That means it was not common property that the body corporate was required to restore to good condition. On the contrary, the statutory obligation to maintain it in good condition rested with Mr Turner.[5] There is nothing in the Act or Accommodation Module to indicate that responsibility transfers to the body corporate because it lodged an insurance claim, or because it mistakenly repaired the condenser. Mr Turner is simply fortunate that he was spared an expense that should rightfully have been borne by him. I do not see that the body corporate was under any obligation to agree to cover his lost rental income.

That the body corporate committee, on behalf of the body corporate, be required to disclose to owners its solicitor's advice relating to what the body corporate has termed "recently purchased owners", such advice having been alleged by the body corporate to be privileged.

• [8] Mr Turner wrote to the committee in October 2022 and asked to be excused from paying special levies raised to fund major projects, as he had only recently purchased lot 1 and had been unaware of these significant costs. The committee resolved to obtain legal advice on the question for $1500. The committee says it has not disclosed the advice to anyone outside the committee because its lawyer advised that it was privileged and should not be shared with any third party. Mr Turner argues "the advice is the property of all owners and there is no such concept as privilege in relation to the advice as amongst the committee and the owners."
• [9] It is not obvious why all owners in general meeting were obliged to compel the committee to share its legal advice. Mr Turner contests the committee's claim of legal professional privilege, but it is not evident that owners refused to pass his motion because they felt the advice was privileged. Their reasons for opposing his motion are unknown, yet Mr Turner bears the burden of demonstrating that there was some irregularity in their refusal to pass the motion.
• [10] Owners are entitled to copies of body corporate records if they submit a written request and pay the prescribed fee.[6] Mr Turner has submitted no evidence that he attempted to do so in relation to the legal advice. In the absence of those steps, I do not see how the body corporate was subject to any obligation to provide it.
• [11] Had Mr Turner sought a copy of the advice in accordance with the Act, it seems clear that the committee would have claimed legal professional privilege and refused his request. Legal professional privilege protects from disclosure documents created for the dominant purpose of giving legal advice or conducting litigation.[7] The document Mr Turner seeks to gain access to was obviously created for the purpose of giving legal advice.
• [12] Mr Turner argues that the body corporate cannot claim privilege against a lot owner, as lot owners make up the body corporate.[8] Advice obtained by the body corporate is advice obtained by the lot owners.
• [13] But I do not accept that claim. The body corporate has its own legal personality, as do individual lot owners. That is evident throughout the Act, which sets out distinct powers, functions and responsibilities for each. For instance, the body corporate must administer and maintain the common property, while lot owners must maintain their lots in good condition. Neither entity can step into the shoes of the other and exercise those functions. The body corporate requires formal decisions to be made by various collectives of owners before it can act. It can never act on the discretion of a single lot owner. Owners and the body corporate can find themselves opposed when it comes to the payment of contributions or compliance with the by-laws. They are clearly not equivalent, notwithstanding that the former are members of the latter.
• [14] In the words of Dr Forbes of the Queensland Civil and Administrative Tribunal:

[11] However, assuming a commonality of interest between the body corporate and the committee, it does not necessarily follow that individual unit owners share that interest. If the body corporate and the unit owners shared the same legal interests and personality (as the Residents suggest) these proceedings would be impossible, because a person cannot sue himself, or appear on both sides of the record.

[12] On a more pragmatic level, it is quite conceivable that the interests of the body corporate and a unit owner may sharply diverge - for example, when the body corporate seeks to curb unauthorised use of common property, to enforce the payment of corporate levies, or to restrain the unauthorised keeping of animals on the premises. If the committee (or the body corporate) obtained legal advice in such circumstances - as a body corporate no doubt often does - it would be absurd to suggest that it could not claim privilege against the alleged debtor or offender.[9]

• [15] The situation described by Dr Forbes is analogous to the present case. Mr Turner would rather not pay his special levies. The committee would presumably prefer that he did. Their interests diverge, and the committee is not obliged to share legal advice obtained in support of its position with its adversary.

That the body corporate committee, on behalf of the body corporate, be required to admit liability to all owners, and account to all owners in due course, for their loss of rent occasioned by predicted HVAC project room closures.

• [16] An EGM held on 12 December 2022 resolved by special resolution to carry out heating, ventilation, air conditioning and roof waterproofing (HVAC) projects (motion 2), and overwhelmingly accepted by ordinary resolution (61 yes, 12 no) that this would involve disruptions on levels 3-13 that could include lots needing to be temporarily vacated or kept vacant (motion 7).
• [17] Mr Turner articulates no clear legal basis for why, having resolved to carry out the work in the knowledge that this would mean rooms temporarily becoming unavailable for use, the body corporate is now obliged to have the committee "admit liability" and "account to all owners" for their lost rent.

That the body corporate committee, on behalf of the body corporate, ceases and desists forthwith from continued and ongoing breaches of its formally-stated deadline of 1.7.23 for payment by owners in full of their HVAC project special levies with the benefit of a material discount. AND that the aforementioned ceases and desists forthwith from making similar offers in future by means of offers expressed in monthly owners' updates and/or by any other means.

• [18] Motion 6 of an EGM held on 19 May 2023 proposed offering owners a discount of 5% on their special levies for the HVAC project if they paid the entire amount by 1 July 2023. The motion passed by ordinary resolution.
• [19] Mr Turner alleges, and the committee admits, that it has continued to offer that discount to owners who have opted to pay the entire outstanding amount beyond that date. The committee says this policy protects against possible future arrears, allows the funds to be placed in high interest deposits, and reduces the amount the body corporate needs to borrow to fund the works.
• [20] However, the body corporate's power to allow a discount is expressed in the following terms:

The body corporate may, by ordinary resolution, fix a discount to be given to owners of lots if a contribution, or an instalment of a contribution, is received by the body corporate by the date for payment fixed in notices of contribution given to the owners.[10]

• [21] The only discount that has been fixed by ordinary resolution was a 5% reduction if the special contribution was paid by 1 July 2023. The committee lacks the power to vary that, as it may not make a decision:

(a) fixing or changing a contribution to be levied by the body corporate; or

(b) changing rights, privileges or obligations of the owners of lots included in the community titles scheme; or

(d) that may only be made by resolution without dissent, special resolution, majority resolution or ordinary resolution of the body corporate...[11]

• [22] However, I will not deem motion 17 passed as sought by Mr Turner. The body corporate might yet pass a further ordinary resolution to authorise a discount if the remainder of the outstanding contribution is paid in a lump sum, and issue a further notice of contribution to give it effect. To allow for that possibility, I will order the body corporate to cease offering the discount unless authorised by ordinary resolution and notified to owners in a notice of contribution.

That the body corporate committee, on behalf of the body corporate, be required to remit any and all HVAC project goods and services tax input tax credits, as progressively received, to owners in relief of their HVAC project special levies rather than such credits being sent to and retained in the body corporate sinking fund.

Owners are suffering the financial burden of HVAC infrastructure project goods and services tax not once, but twice, by virtue of

(a) incurrence of goods and services tax on project expenditure, AND

(b) incurrence of goods and services tax, again, in their special levies.

• [24] He says it is inequitable for any input credits to be absorbed into the sinking fund rather than credited against owner's contributions to the HVAC project.
• [25] I take this to be an argument that the body corporate acted unreasonably when refusing to pass motion 18, in contravention of section 94(2) of the Act. If satisfied of that, I could deem the motion to have passed.[12]
• [26] But I am not satisfied. Mr Turner argues that it is inequitable for the body corporate to return any input tax credits to the sinking fund. But by increasing the balance of the sinking fund, any credits will offset owners' future contributions. Less money will be required in future if more money is already available. I do not see that the body corporate could not reasonably choose to continue to manage the issue that way, rather than by directly reducing the contributions that gave rise to the credit. That is particularly so where the quantum of those contributions has already been resolved and notices of contribution issued to owners.

That the body corporate committee, on behalf of the body corporate, be required to explain its regime of charging as much as $59.51 to owners for issue of simple arrears notices. Similarly, $17.84, both amounts subsequent to only $6.86 prior thereto.

• [27] The committee points out that these fees are charged by the scheme's body corporate manager, who owners chose to engage for three years in 2023. Owners also resolved in 2023 to issue various notices for outstanding contributions, though the motion did not specify their cost.
• [28] Mr Turner counters that the body corporate manager was not validly engaged, as the contract was not properly signed, sealed, or witnessed.
• [29] Where contributions are not paid on time, the body corporate may recover as a debt the contributions, any penalty interest, and "any costs (recovery costs) reasonably incurred by the body corporate in recovering the amount".[13] Irrespective of whether the body corporate manager has been validly engaged, which is not directly at issue in the present application (no orders are sought on that point), Mr Turner has not disputed that the body corporate is paying the amounts described in his motion to the body corporate manager to send arrears notices to owners. At face value then, they are costs reasonably incurred by the body corporate in recovering the overdue contributions.
• [30] In any event, motion 19 did not propose any substantive action in relation to these fees. Only that the committee "explains" them. Mr Turner has not established why the body corporate could not reasonably have elected not to require an explanation from the committee. Other owners may have felt they understood the fees, or they may have considered their amount appropriate and been disinterested in precisely how they were calculated, or, even if they agreed that the fees were excessive, they may have seen little concrete advantage in an explanation only.

• [31] For these reasons, I will order the body corporate to stop offering the 5% discount on special contributions to the HVAC fund in the absence of an ordinary resolution to authorise it and a further notice of contribution to owners.
• [32] The application will otherwise be dismissed.

[1] Act, s 20; Accommodation Module, s 170(1).

[2] Bob Halter, Trane, 14 February 2023.

[3] Shane Devenish, Devenish Law, 13 June 2023.

[4] Registered plan SP143145; Land Title Act 1994, s 48C(1).

[5] Accommodation Module, s 201(5).

[6] Act, s 205.

[7] Esso Australia Resources Ltd v Federal Commissioner of Taxation [1999] HCA 67.

[8] Act, s 31.

[9] Carroll and Ors v Body Corporate for Palm Springs Residences CTS 29467 [2013] QCATA 21.

[13] Accommodation Module, s 156(1)(c).