User pays - Who benefits from the new infrastructure?

1. The owners corporation argued that the differential levy was justified on the basis of the user pays principle, which in this case is perhaps more accurately described as the beneficiary pays principle - that is, that the person who benefits from a resource should pay for it. As a fundamental principle of fairness - it seems uncontroversial and reflects individual unit holders interest in only paying in proportion to the benefit they receive.
2. The parties accepted that electricity consumption costs should be allocated on a user pays basis. Should this principle extend to the cost of establishing electricity infrastructure? Before I turn to this question I will consider which user group gained most from the remediation.

78. The establishment of the new infrastructure gave the 69 residential unit owners immediate and ongoing relief from subsidising the commercial units' electricity consumption. The commercial unit owners benefitted from the improved functioning of their air-conditioning in summer, although if this was sole purpose could have been achieved a lower cost.[24]

1. Although commercial owners would now bear the running costs of their own air conditioning the respondent accepted that this was a fair and preferable state of affairs. In my view, although all unit owners benefited, the residential owners derived most financial benefit from the remediation undertaken.

1. In an extension of the user pays argument the applicant argued that the commercial owners acquired ownership of the new infrastructure, to the extent it exclusively served their unit, and therefore were responsible for the cost of establishing it.
2. Mr Green submitted:

Having now completed the works each commercial owner owns and will be responsible for their own air conditioning and electrical cabling as it is dedicated to their respective units and therefore (is) not common property.[25]

1. Are the premises of Mr Green's argument compatible with the concepts of ownership and responsibility established by the legislative framework?
2. The UTMA establishes a scheme of ownership of property within a unit plan and responsibility for maintaining that property. Property in a unit plan is either owned by individual unit owners or forms part of the common property. The owners corporation holds the common property as agent for the owners as tenants in common in proportion to their unit entitlements.[26] There is no capacity under the current legislation for title in the common area to be split between groups of owners to reflect how those areas are differentially used.
3. The works changed the electricity infrastructure as follows.
4. Originally some commercial owners shared a compressor. All shared electrical cabling and a meter and switch. The new electricity infrastructure serves only one owner; each has a dedicated air conditioning compressor on the roof and is connected to it by a separate electricity cable, which is separately metered. The original separate refrigerant pipe, running from each commercial unit to a compressor on the roof, was unaffected.
5. Common property is defined in the section 13 of the Unit Titles Act 2001:

_Common property is all the parts of a parcel identified as common property - _

(a) before a units plan is registered--in the relevant unit title application; or

(b) after the relevant units plan is registered - in the units plan.

1. Section 17(3)(c) provides that "a unit title application must show as common property all parts of the parcel that are not shown as units or unit subsidiaries".
2. The new system consists of both existing and new components: the existing refrigerant pipe; the new individual electrical cabling and the mainly existing, but newly dedicated air conditioning compressors are located on the common property.[27] Part of the components are presumably located within the units they serve, for example the new switchboard and one end of the electrical cabling and refrigerant pipe.
3. The applicant provided a copy of the floor plan for Unit Plan 3908 and a schedule of unit entitlements. The plan shows the unit entitlement for unit 74, the respondent's unit, as the envelope located on the ground floor at street number 19. It included an entitlement to a yard and two car spaces in the basement - it does not include the roof top or anything between the envelope and the roof top. It is not clear how the cabling and refrigerant piping made the journey from the commercial units to the roof, but I have assumed it was through the common property service ducts shown on the floor plan.

90. The roof top is not shown on the plan but I am satisfied that it is, based on reasoning in Castro v The Owners Unit Plan No 246 (Castro): [28]

...that, in the absence of the units plan identifying common property, it is appropriate to conclude that the common property is that which is not marked as part of a unit, or a subsidiary to the unit.

1. The infrastructure was originally, and remains, primarily located on the common property. Many of the components of the original infrastructure were incorporated into the new infrastructure. The original infrastructure served more than one unit and it was, on any reasonable construction, common property.
2. The owners corporation power to authorise the changes to the infrastructure derives from section 23(1)(a) of the UTMA which relevantly provides:

An owners corporation for a units plan may, if authorised by an ordinary resolution - approve the installation of sustainability or utility infrastructure on the common property;

1. The applicant argued that because the new infrastructure establishes separate air conditioning system for each commercial owner they own that part of the new infrastructure, which exclusively serves their unit.
2. Under the scheme of ownership established by the UTMA all owners own the common infrastructure, regardless of whether they can use it or not. The residential owners could not use the compressors on the roof or the refrigerant pipe leading to each commercial unit but that did not mean that it was not common property. It was only because it was common property that the owners corporation was authorised to modify it. By what mechanism does the applicant say the infrastructure was converted to private property?
3. The logical progression of the applicant's argument, as I understood it, was:
   • (a) individual commercial owners are now responsible for the maintenance of that part of the new infrastructure established by the owners corporation, which exclusively serves their unit, regardless of whether it is located on the common property or within their individual lot;
   • (b) because commercial unit owners are now responsible for maintaining that part of the new infrastructure, which serves their unit, they own it; and
   • (c) because they own it they are responsible for the cost of establishing it.
4. I will consider each step in turn.

1. Are the individual commercial owners responsible for maintaining that part of the new infrastructure which serves their unit?
2. Section 24(1) imposes a responsibility on the owners corporation, where the development is not a staged development, to maintain the common property. Because all owners own all of the common property, whether they can use it or not, they, generally, all contribute to maintenance repairs and replacement of the common property, in proportion to their unit entitlements.
3. Under the UTMA maintenance of a building, a facility for a utility service or a utility conduit, means maintenance in good repair and working order, and includes:
   • (a) repair;
   • (b) replacement;
   • (c) renewal; and
   • (d) restoration.
4. The question of who benefits from the property is irrelevant, with one exception. Section 24(1)(e) provides that the owners corporation is only responsible for maintaining a utility service if it is provided for the potential benefit of all units and facilities associated with the provision of the utility services, including utility conduits.
5. 'Utility services' are defined to include; gas, electricity and air services (including air-conditioning and heating). A 'utility conduit' is defined in turn to mean:

a conduit of any kind for the provision of a utility service, and includes, for example, pipes, wires, cables and ducts for a utility service.[29]

1. As a result of the changes the OC was relieved of the responsibility of maintaining the new infrastructure - not because they are the property of individual unit owners - but because they serve each unit exclusively.[30]
2. However section 24(1)(e) does not impose a positive obligation on a unit owner to maintain a utility service, which exclusively serves them. It is also not clear that the definition of a utility services in the Act extends to the air conditioning compressors located on the roof.
3. Section 25 provides that an owners corporation may, by special resolution, and subject to certain other provisos, exempt itself from maintenance obligations for common property imposed by section 24(1). The applicant has sought to avail itself of this process in order to resolve any uncertainty as to who is responsible for maintaining the new infrastructure.
4. At the date of the hearing the EC had given notice of a special resolution (Motion 7) to be put to the AGM to be held in three days' time. It proposed that the house rules be changed pursuant to subsections 25 and 108 of the UTMA to provide that:

Unit owner responsibilities include maintenance, repair or replacement of air conditioning systems and its conduit and cabling, whether inside or outside of a unit, which serves only that unit. To avoid doubt, the rooftop or external to a unit air conditioning compressor may be situated on common property but this does not result in any obligation for the Owners Corporation to maintain, repair to replace the unit and its conduit and cabling.

1. I am not aware of the fate of Motion 7 at the AGM on 8 April 2019, but it is in any event irrelevant to this dispute because a responsibility to maintain, repair or replace an existing utility service does not either:
   • (a) retrospectively make a unit owner responsible for the cost of establishing the service infrastructure; or
   • (b) establish individual ownership of the service infrastructure.
2. The owners corporation is a creature of statute and thus only has the powers conferred upon it by statute. It is beyond the power of the owners corporation to convert communal infrastructure to the private property of individual unit owners. Section 20(2) of the UTMA states: "an owners corporation may not transfer, sublet or mortgage at law or in equity its interests in the common property".
3. On the basis of logical appeal, the legislation and previous decisions of the tribunal, I prefer the respondent's argument that both the new and original infrastructure, in so far as it is located outside the lot and subsidiary entitlements of an individual unit owner is part of the common property. The logical corollary is that components situated within a unit and its subsidiary is the property of the owner of that unit. The works have effectively converted infrastructure from common property, which served a number of units, to common property, which only serves individual commercial unit owners.

Redress past unfairness caused by the original infrastructure

Motion 8 was the most practical way of redressing the unfairness arising from the Original Electricity Infrastructure such that each commercial owner pays for their own consumption and the Remedial Electrical Infrastructure.[31]

1. It is self-evident that the significant financial benefit accrued to commercial owners for six years under the old system to the detriment of other owners. It should be noted that current owners are not necessarily original owners. The degree of relative benefit or detriment experienced by current owners depends on how long they held their units before separate metering was established.
2. The applicant adduced in evidence a comparative analysis by Mr Green of common electricity costs before and after the separate meters were installed. Mr Green relied on figures, which he said showed a significant reduction in common power costs in December 2018 and January 2019 compared with corresponding months in the previous year. He attributed the whole of that difference to removing the cost of the commercial air conditioning from the common power bill.
3. From the difference Mr Green extrapolated the estimated annual financial benefit derived by the respondent from the old infrastructure. Because SDNM's consumption under the old infrastructure was unmetered and so could not be ascertained Mr Green inferred the benefit attributable to SDNM from its unit entitlements relative to other commercial owners.[32]
4. I found Mr Green's methodology unreliable in several respects - the sample period was too short, the data relied upon was not produced; other variables, which may have affected his conclusions, were not identified or accounted for, and most importantly he demonstrated no relationship between unit entitlement and electricity consumption.
5. To his credit Mr Green frankly acknowledged the difficulties of quantifying the benefit received by SDNM, or indeed any other commercial owner, under the old infrastructure. I concluded that it was simply not possible to do so on the evidence before me.
6. I also found the applicant's funding model logically inconsistent with the stated aim of redressing past unfairness. The proposed allocation of costs between current individual commercial owners is unrelated to the past benefit each received; or the past disadvantage suffered by current residential unit owners; instead it is based on how much of the new infrastructure served each commercial unit.
7. Although the idea of balancing current pain against past gain intuitively appeals to fairness, I am not convinced that the imposition of differential levies on a unit owner without their consent to fund rectification of common infrastructure is an appropriate mechanism to rectify past inequities either in this case or in general.
8. In my view such an approach is inconsistent with the scheme of collective ownership and responsibility for infrastructure established by the legislation and could create a troublesome precedent for the owners corporation. It is particularly inappropriate in these circumstances because the relative benefit or disadvantage experienced by current owners cannot be reliably established on available evidence.

1. The EC's funding solution was overwhelmingly accepted by not just the residential owners who voted at the meeting, which is to be expected in the circumstances, but also by all the other commercial owners, many of whom stood to lose more than the respondent from its implementation.
2. Majority, even overwhelming, support whilst a factor in favour of Motion 8 is not a sufficient reason to uphold it. The UTMA mandates different standards of support depending on the type of decision being made ranging from a bare majority to unanimous support. The requirement of an unopposed resolution is a high bar.
3. Presidential Member (then Member) Daniel provided the following helpful guidance to how the tribunal should determine the question of what is the preferable decision in Brudenell & Ors v Owners Corporation Unit Plan No. 202:

It must be the case that the proper basis of evaluation, of reaching the preferable decision, in these cases, is reference to community standards or community values. It is not the decision-maker's idiosyncratic view of what will adequately protect the public which is relevant, but what the decision- maker determines will achieve that result in accordance with community standards or values.

The reference to 'community standards' in the preceding excerpt is not a reference to the views expressed by the parties in a particular matter, it is a reference to 'more permanent values' such as those encapsulated in legislation.[33]

1. In Clews the Tribunal reviewed a motion proposing a change to the permitted purpose of a Crown lease, which like changes to the method of levying contributions in section 78, requires an unopposed resolution. Senior Member Robinson observed that; "There must have been some legislative intention behind such a high threshold for change."[34] Although she observed that intention could not be discerned from the Explanatory Memorandum.
2. Legislative intent, while not determinative, is a factor in the respondent's favour. I also observe that the bar set by section 78 while high, is achievable - as demonstrated by previous unopposed resolution of the owners corporation in 2016 imposing differential levies based on consumption of utility services. Differential charges based on individual consumption are perhaps less controversial because they relate to services consumed by individuals, not jointly owned infrastructure.

1. There is no perfect solution to the funding dilemma the owners corporation found itself in. The executive committee, with the co-operation of the other nine commercial owners, has made arrangements, which mitigate the financial impact of the remediation on the residential owners. This dispute was about whether SDNM should be compelled to join in.
2. For all the reasons set out above I prefer the option advanced by the respondent, that is, that the unopposed decision of the Owners Corporation in the 2016 resolution prevail. In general I found SDNM's option more logically consistent with both the legislative framework; and the previous decision of the owners corporation made in accordance with that framework.

1. The second step of merit review is to determine whether SDNM'S opposition to the motion was unreasonable.
   1. The test to determine if the opposition to the motion was unreasonable is not a subjective test of the intentions of the unit owners who opposed the motion. Rather, it is an objective test taking into account all relevant circumstances.[35]
2. Mr Green accused Mr Ujdur of acting in his own self-interest to the detriment of other owners. Whether he did or not is irrelevant because, as observed by Senior Member Sutherland:[36]
   • (f) An opponent to the motion is not required to act with altruism or sympathy for the interests of the proponent, at the expense of the opponent's reasonably held view of their own interests.
3. The two limbs of merits review overlap. Having found the option advanced by SDNM is objectively preferable to Motion 8 it follows that opposition to Motion 8 was not objectively unreasonable, and accordingly I dismissed the application.

1. SDNM sought an order under section 129(1)(d) directing the applicant to pay it the sum of $1,000 as, "The Respondent has incurred significant legal expenses in this matter to simply pursue its legal right to reasonably oppose an unopposed motion".
2. Section 129(1) lists the types of orders the ACAT may make, including an order under subsection (d), "requiring a person to pay to the Territory or someone else an amount of not more than $1,000".
3. The respondent is seeking to rely on section 129(1)(g) to recover at least some of its costs in these proceedings. The only power I have to award costs is derived from section 48 of the ACT Civil and Administrative Tribunal Act 2008 which provides at subsection(1)(a), "the parties to an application must bear their own costs unless this Act or another territory law otherwise provides or the tribunal otherwise orders".
4. Although section 129(1)(d) is another territory law it does not confer a costs power on the Tribunal. Section 48(2) sets out other circumstances in which the Tribunal may make a costs order. As none of these exceptions apply in this case I declined to make the order sought by SDNM.

1. Both Mr Green and Ms Proctor referred to the limited capacity of the current legislative framework to recognise and address the unique challenges of mixed use developments. This dispute has come at a significant cost to the owners of UP 3908 both financially and in terms of good will. It may be that much if not all of that cost could have been avoided if the original physical service infrastructure, and/or the scheme of legal title under the Act, was more responsive to the differing needs and interests of the different user groups within the complex. I concur with the observations of Senior Member Robinson at paragraph 50 that:[37]

It is apparent from the circumstances of this case that there is significant potential for disagreement and conflict of interest between the owners of residential and commercial units in a mixed-use facility. No doubt such developments are attractive and vibrant places to live. However, the reality is that the interests of those who are running and business and those who are maintaining a home may not always be harmonious, particularly when it comes to the costs of services, such as utilities and rubbish removal, as well as lifestyle issues such as noise abatement and car parking. The current rules in relation to budget arrangements, in particular, appear to be unhelpful and inflexible and a legislative remedy may be necessary. Models in other jurisdictions, with longer histories of mixed-use developments, may present helpful models for reform.

[1] 2018 General Meeting of the Owners Corporation of Units Plan 3908 Aurora dated 29 November 2018, Motion 8

[3] SDNM Pty Limited v The Owners Unit Plan 3908 [2018] ACAT 102

[4] Pursuant to an unopposed resolution of the owners corporation at the 2016 AGM made in accordance with section 78(2)(b). I am unsure what the arrangement was prior to 2016 but the default position under the legislation is that all owners contribute according to their unit entitlements not their consumption.

[5] Pursuant to an unopposed resolution of the owners corporation at the 2016 AGM made pursuant to section 78(4) UTMA; and before that the default provisions in section 78(2)(a)

[6] Report from ESBC dated 17 September 2018, attachment B witness statement of Amnon Holland page 4

[7] Ibid see at 4.3, "Option 2- install sub meters"

[8] Minutes of the General Meeting of the owners corporation held 13 June 2018 at 2(b), attachment C witness statement of Luka Ujdur dated 25 February 2019

[9] SDNM v the Owners of Unit Plan 3908 [2018] ACAT 102 at [16]

[10] Email from Gary Green to Luka Ujdur dated 25 May, attachment B witness statement of Luka Ujdur dated 25 February 2019

[11] Minutes of the General Meeting of the owners corporation held 29 November 2018

[12] Detailed reply to respondent's undated submissions filed by the applicant 12 March 2019 page 4 at paragraph 18

[13] [2017] ACAT 51 at [17] - statement not disturbed on appeal before Presidential Member McCarthy in The Owners - Unit Plan No 396 v Uren & Blundell [2017] ACAT 100 and has been adopted in other cases

[14] [2018] ACAT 82, upheld on appeal [2019] ACAT 63

[15] Minutes of Annual General Meeting 2016 of Owners of Unit Plan 3908 held 4 April 2016 at motion 10, attachment E witness statement of Gary Green dated 14 September 2018

[16] SDNM v the Owners of Unit Plan 3908 [2018] ACAT 102 at [36]- [37]

[17] SDNM v the Owners of Unit Plan 3908 [2018] ACAT 102 at [19]

[18] SDNM v the Owners of Unit Plan 3908 [2018] ACAT 102 at [21]

[19] Transcript of proceedings 5 April 2019 page 17 at lines 6-11

[20] Nash v The Owners - Units Plan 2413 & Ors [2018] ACAT 54 at [59]

[21] Transcript of proceedings 5 April 2019 page 24 at lines 34-44; Report from ESBC dated 17 September 2018

[22] Applicant's undated submissions at paragraph 43

[24] Report from ESBC dated 17 September 2018

[25] Report from ESBC dated 17 September 2018

[27] Except one which one owner established in basement

[28] [2016] ACAT 111 at [21]

[29] See analysis of the legislation in Castro in which the Tribunal found the OC not responsible for maintain electricity cables which were for the sole benefit of the applicant.

[31] Applicant's submissions undated at [41]

[32] UP 3908 Outcomes of Electrical Remediation works - Electricity Supply Costs

[33] [2016] ACAT 101 at [45]

[35] Uren & Anor v The Owners Unit Plan No.396 [2017] ACAT 51 at [17]

[36] Uren & Anor v The Owners Unit Plan No.396 [2017] ACAT 51 at [17]

[37] SDNM Pty Limited v The Owners- Units Plan 3908 [2018] ACAT 102 at [50]