TAKE NOTICE that pursuant to an application made under the abovementioned Act by Bruce Martin, the owner of Lot 20

I hereby order that the application for an order by Bruce Martin, the owner of Lot 20 against the body corporate for Trickett Gardens community titles scheme 11794 (the body corporate) seeking the following outcomes, quote:

1. With respect to the telephone services supplied by the body corporate for the period beginning with the commencement of the Body Corporate and Community Management Act 1997, the body corporate take all necessary steps to recover, to the greatest practicable extent, from each Lot owner who uses the services and each Lot owner who has used the services, the Lot owner's proportionate share of the total cost to the body corporate (other than body corporate administrative costs) of supplying those services.

2. (a) The special sinking fund contribution levied by notice dated 14/3/06 and payable by 15/4/06 be reduced to nil;

(b) In the event of payment of the contribution by any Lot owner/s, the body corporate refund such payment/s to such Lot owner/s.

I further order that the body corporate must ensure that the agreement with a person to supply a telephone service pursuant to section 118 of the Body Corporate and Community Management (Accommodation Module) Regulation 1997 includes a charge to recover, to the greatest practicable extent, the cost to the body corporate to upgrade the PABX system approved by the body corporate by the resolution passed on Motion 2 at the Extraordinary General Meeting dated 9 March 2006.

STATEMENT OF ADJUDICATOR'S REASONS FOR DECISION - REF 0230-2006

This application is by Bruce Martin, the owner of Lot 20 (applicant) against the body corporate. The applicant is seeking the following outcomes, quote:

1. With respect to the telephone services supplied by the body corporate for the period beginning with the commencement of the Body Corporate and Community Management Act 1997, the body corporate take all necessary steps to recover, to the greatest practicable extent, from each Lot owner who uses the services and each Lot owner who has used the services, the Lot owner's proportionate share of the total cost to the body corporate (other than body corporate administrative costs) of supplying those services.

2. (a) The special sinking fund contribution levied by notice dated 14/3/06 and payable by 15/4/06 be reduced to nil;

(b) In the event of payment of the contribution by any Lot owner/s, the body corporate refund such payment/s to such Lot owner/s.

The applicant's main submissions were to the effect that:

• The body corporate has provided telephone services to lot owners wanting such services.

• Since the commencement of section 119(3) of the Standard Module and then section 118(3) of the Accommodation Module, the body corporate has not sought to recover the costs of supplying the telephone services from the users of the service.

• Rather the cost has been borne by all lot owners, including those owners who have not used the service.

• The body corporate has installed a replacement PABX system and levied all lot owners to meet this cost.

• The body corporate only intends to comply with section 118 from 1 May 2006.

• Under section 118, the body corporate must recover the cost of the replacement PABX from the users. Therefore the levy from all owners is unnecessary and unreasonable.

"Trickett Gardens" Community Titles Scheme 11794 is a 33 lot scheme under the Body Corporate and Community Management Act 1997 (the Act) and the Body Corporate and Community Management (Accommodation Module) Regulation 1997 (the Accommodation Module).

An adjudicator may make an order that is just and equitable in the circumstances (including a declaratory order) to resolve a dispute, in the context of a community titles scheme, about a claimed or anticipated contravention of the Act or the community management statement; or the exercise of rights or powers, or the performance of duties, under the Act or the community management statement[1]. An order may require a person to act, or prohibit a person from acting, in a way stated in the order[2]. An adjudicator's order may contain ancillary and consequential provisions the adjudicator considers necessary or appropriate[3].

In accordance with the Act, submissions were called and a copy of the application was provided to the body corporate manager for distribution to the owner of each lot (excluding the applicant) and the committee. A submission was received from the committee and a number of lot owners. The applicant made a written reply to submissions under section 244 of the Act.

Given the investigative powers of an adjudicator in section 271(1) of the Act, by letter dated 27 July 2006, I required the body corporate to provide information concerning the arrangements in place for the operation of telephone services from 1997 to 2006, including:

1. Details concerning the entity or person who managed or had control of the operation of the PABX system from 1997 to 2006.

2. An explanation of the arrangements in place for the use of the PABX system from 1997 to 2006.

3. If the body corporate managed or controlled the PABX system over this period, details of the decisions made by the body corporate about the use and operation of the system.

4. If the body corporate managed or controlled the PABX system over this period, details concerning the owners who used the system from 1997 to 2006 (for example, the number of lot owners who used the system at times during this period).

5. If the body corporate managed or controlled the PABX system over this period, an explanation about the process to enable an owner to use the system.

6. If the body corporate managed or controlled the PABX system over this period, details concerning the costs in relation to the PABX system from 1997 to 2006, including operation and maintenance costs.

7. If the body corporate managed or controlled the PABX system over this period, details concerning how and from whom the associated costs were or have been recouped.

By letter dated 31 August 2006, the body corporate manager provided the requested information.

The body corporate's general functions include administering the common property and body corporate assets for the benefit of lot owners and carrying out other functions given to the body corporate under the Act or the community management statement[4]. The body corporate must act reasonably in anything it does under section 94(1)[5]. The body corporate must administer, manage and control body corporate assets reasonably and for the benefit of lot owners and comply with the obligations imposed under the regulation module applying to the scheme[6].

The body corporate may supply or engage another person to supply services for the benefit of owners and occupiers in the way and to the extent authorised under the regulation module applying to the scheme[7]. Section 118(1) of the Accommodation Module provides that the body corporate may supply or engage another person to supply communication services for the benefit of owners and occupiers of lots. Section 118(2) provides that the "body corporate may, by agreement with a person for whom services are supplied, charge for the services (including for the installation of, and the maintenance and other operating costs associated with, utility infrastructure for the services), but only to the extent necessary for reimbursing the body corporate for supplying the services". Section 118(3) provides that "the body corporate must, to the greatest practicable extent, ensure that the total cost to the body corporate (other than body corporate administrative costs) for supplying a service, including the cost of a commercial service, and the cost of purchasing, operating, maintaining and replacing any equipment, is recovered from the users of the service".

Body corporate assets are items of real or personal property acquired by the body corporate[8]. The body corporate may acquire and enter into agreements about the use of real and personal property in the way and to the extent authorised under the regulation module applying to the scheme[9]. The body corporate may acquire personal property for the general use and enjoyment of the owners and occupiers of lots included in the scheme[10].

The body corporate has submitted that it purchased the original PABX in 1981. In the reply to the section 271(1) requirement, the body corporate manager stated that the PABX has been controlled and operated by the building manager who on charged the cost of the calls to the users of the system. The body corporate did not keep records of the lot owners who had use of the system as it did not manage or control the PABX system. During the period 1997 to 2006, the body corporate made decisions about the Night Answering Company and renewing the PABX Maintenance Agreement as these charges which were paid by the body corporate. Additionally, the body corporate paid the monthly line rental cost. The body corporate also purchased new handsets in 1992. The body corporate manager provided details about costs incurred by the body corporate for the period 1997 to 2006 for monthly line rental, and for the annual night answering and PABX maintenance costs.

As the original PABX was 'on the brink of collapse', an urgent dispute resolution application was made on 14 February 2006 (Application 0102-2006). By order dated 16 February 2006, RA Meek ordered "that the body corporate committee of Trickett Gardens is hereby authorised to proceed immediately with the purchase and installation of a PABX system from the Communication Company, and to use existing sinking funds for this purpose, provided however that such funds are to be reimbursed as soon as possible upon the approval of a ratifying resolution to be considered on 9 March 2006, and implemented thereafter". In the statement of reasons for decision, the adjudicator relevantly stated; "I do have some concerns that the cost of the proposal is to be met initially with sinking fund moneys (that is, monies belonging to all owners) but that this money will subsequently be recovered in full from those owners who receive the benefit of the new system on the basis of section 118 agreements to be entered into. It goes without saying that should any owner subsequently refuse to enter into a section 118 agreement with the body corporate, then the body corporate will need to ensure that the PABX system or service is not provided to that lot. It will also mean that the cost of the system will be proportionally more to those owners who choose to enter into 118 agreements".

The body corporate at the Extraordinary General Meeting dated 9 March 2006 resolved by special resolution to accept the quotation of $13,600 (excluding GST) from The Communications Company to upgrade the PABX system and to fix a special contribution to be levied on each lot owner towards the liability. By letter dated 14 March 2006, the body corporate gave to the owner of each lot, notice of the special contribution payable and a PABX Service Agreement to be executed by those owners wishing to avail the services of the PABX system. The letter indicated that the PABX service will not be supplied to lots whose owners do not return an executed agreement by 1 May 2006.

The body corporate take all necessary steps to recover from each lot owner who uses the telephone services and each lot owner who has used the services since 13 July 1997, the lot owner's proportionate share of the total cost to the body corporate (other than body corporate administrative costs) of supplying those services.

Given the arrangement in place for the supply of telephone services, the applicant correctly refers to section 118 of the Accommodation Module[11] and also to the previously applicable section 119 of the Standard Module[12].

The information provided by the body corporate in response to the requirement made under section 271 of the Act indicates that management and letting agreements since the purchase of the original PABX system contained a clause stating that "Should the Manager operate or cause to be operated the telephone switchboard...then additional charges...shall be charged by the Manager and paid by occupiers of the units concerned, the amount of which will be agreed upon between the parties involved". The body corporate has stated that the users of the PABX service paid for the cost of calls, with the body corporate paying night answering costs, PABX maintenance costs and monthly line rental costs.

It is clear that prior to the recent actions of the body corporate with regard to the management and administration of the new PABX system, the body corporate did not supply telephone services in accordance with the legislation. For instance, it is apparent that the body corporate did not "ensure the total cost to the body corporate is recovered from the users of the service"[13].

Despite the time which has passed since the legislation commenced, the applicant seeks a determination compelling the body corporate to now properly recover costs from the persons who use or have used the service since 13 July 1997. The applicant has taken this action even though he has been the owner of a lot included in the scheme (and a member of the body corporate) during this period, and it is not evident that he has previously unsuccessfully attempted to pursue this matter formally within the body corporate.

The applicant has sought this determination, yet has not provided any material indicating the extent of the "agreement with a person for whom services"[14] were supplied. Neither has the applicant indicated that there is a reasonable and equitable basis on which the body corporate can now proceed against each person who has used the service. For instance, it may be that the body corporate has lost the right to pursue the matter given the time which has passed while the previous arrangement for the provision of telephone services has been in place. The applicant acknowledges that there may be problems recovering costs against previous lot owners, but states that the body corporate should proceed against persons who happen to still be lot owners. The applicant does not explain the equitable basis for such limited action. Additionally, it would seem that a large number of lots in the scheme have been serviced by the PABX system. The applicant has not provided any material suggesting that the body corporate has a reasonable opportunity to ultimately derive a benefit from a limited recovery action.

It is apparent that on or after 2 June 2005, the body corporate received legal advice from McDonald, Balanda & Associates about the PABX service. Further, it is clear that the body corporate has upgraded the PABX system and that it has sought to enter into agreements with persons wanting to be supplied with the telephone service. I am satisfied that the body corporate is now aware of the requirements of section 118 of the Accommodation Module. The applicant has not provided any material (other than the purchase of the upgrade of the PABX system) to suggest that the current arrangements are contrary to these requirements.

For these reasons, I do not consider that it is appropriate or just and equitable that a determination be made under the dispute resolution provisions of the Act in the terms being sought that the body corporate now seek to recover from each person who has used the PABX telephone service since 1997, that person's proportionate share of the body corporate's costs of supplying that service.

The special sinking fund contribution levied by notice dated 14 March 2006 and payable by 15 April 2006 be reduced to nil; and in the event of payment of the contribution by any lot owner/s, the body corporate refund such payment/s to such lot owner/s.

It is not contended that the cost of the upgraded PABX system was met by the owner of each lot by special contribution. The applicant states that the body corporate does not intend to recover the cost from the users of the PABX system contrary to section 118(3) of the Accommodation Module. The applicant submits that the special contribution is unnecessary and unreasonable. The body corporate submitted that under the current arrangement, users of the PABX system will be charged for the costs of supplying the service (line rental, maintenance and answering service costs), but not for the purchase cost of the upgrade. It is submitted that it would be unfair for some owners to pay the cost of the upgrade if others could delay entering into a section 118 agreement to avoid paying for the purchase.

It is clear that the body corporate has decided to purchase an upgrade of the PABX system. This is an asset for the use and enjoyment of all owners and occupiers as all owners have a right to agree to be supplied with the service provided by the asset (for instance, it is not submitted that only a limited number of owners or occupiers are capable of accessing the service). A body corporate asset must obviously be acquired by the body corporate. The members of the body corporate are the owners of the lots included in the scheme[15], and it is the lot owners who contribute to the spending approved by the body corporate. Therefore, the body corporate had the power to fix a special contribution to be paid by lot owners to purchase the upgrade of the PABX system

However, the telephone service can only be supplied to lots in accordance with section 118 of the Accommodation Module. Therefore, the body corporate must seek to recover from the users of the service "the total cost to the body corporate (other than body corporate administrative costs)"[16]. In this way, the costs of the supply of the service to owners who choose not to avail the service is minimised and the service is supplied on the basis of user pays cost recovery.

In my view, the cost recovery contemplated by section 118 includes the purchase or initial capital costs. This cost must be met by the users of the service and any agreement must make provision for cost recovery in accordance with section 118(2) and (3). For instance, the body corporate may implement a system based on amortising the cost of the asset over its useful life with appropriate payments being made by the users of the system. The capital cost of the system is not meant to be solely at the cost of those owners who choose initially to agree to be supplied with the service, but equitably by all persons being supplied with the service over for example, the life of the asset. Consequently, ownership of the asset is retained by the body corporate while the total cost to the body corporate is properly recovered from the users.

For these reasons, I have ordered that the body corporate must ensure that the agreement to supply a telephone service pursuant to section 118 of the Accommodation Module includes a charge to the extent necessary to recover the body corporate costs to upgrade the PABX system approved by the body corporate in the resolution passed on Motion 2 at the Extraordinary General Meeting dated 9 March 2006.

[10] Section 115(2), Accommodation Module.

[11] The Accommodation Module applied to the scheme from 3 November 1997 with the recording of a new community management statement by the Registrar of Titles.

[12] The Standard Module applied to the scheme from the commencement of the Act on 13 July 1997 until the recording of the new CMS mentioned at footnote 14.

[13] Section 118(3), Accommodation Module.

[14] Section 118(2), Accommodation Module.

[16] Section 118(3), Accommodation Module.