ARTICO HOLDINGS PTY LIMITED & THE OWNERS UNITS PLAN NO. 3461 (Civil Dispute)

[2012] ACAT 31

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

ARTICO HOLDINGS PTY LIMITED & THE OWNERS UNITS PLAN

NO. 3461 (Civil Dispute) [2012] ACAT 31

XD 12/78

Catchwords:             CIVIL DISPUTE – Unit Titles Act 2001 – Variation to Crown Lease Purpose Clause – whether opposition to motion in general meeting of Owners Corporation was unreasonable – meaning of ‘unreasonably’ – concerns of the Applicant relating to his opposition to motion - merits review by ACAT

List of Legislation:   Unit Title Act 2001 (Republication No 22, effective 7 July 2011 – 29 March 2012), ss 51A, 125 and 166

List of Regulations:  Territory Plan 2008

CZ5 Mixed Zone Development Code

Structure Plan – Kingston Foreshore

List of cases:             Curragh Coal Sales Company Pty Limited v Wilcox, Bowen and Walsh [1984] FCA 168

Lanfranchi & Owners of Unit Plan 809 (Civil Dispute)

[2011] ACAT 73

Tribunal:                  Ms J. David, Senior Member

Date of Orders:  31 May 2012

Date of Reasons for Decision:       31 May 2012

AUSTRALIAN CAPITAL TERRITORY  )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          XD 12/78

BETWEEN:

ARTICO HOLDINGS PTY LIMITED

Applicant

AND:

THE OWNERS UNITS PLAN NO. 3461

Respondent

PETER LEWIS

Party Joined

TRIBUNAL:Ms J. David, Senior Member

DATE:  31 May 2012

ORDER

On being satisfied that opposition to the motion set out in order 1 of the orders is unreasonable, the Tribunal orders that:

1.The motion:

‘That the existing Lease Purpose Clause for Unit s Plan 3461 be amended to allow for “Indoor recreation facility LIMITED to a gym/fitness centre”, with all costs associated with the amenities being the responsibility of the owner of Units 67 and 71.’ be given effect to

2.         The motion is taken to have been passed as an unopposed resolution of a general meeting of the respondent owners corporation of Units Plan No.3461.

………………………………..

Ms L. Crebbin, General President

For and on behalf of

Ms J. David Senior Member

REASONS FOR DECISION

1.The Applicant, Artico Holdings Pty Limited (“Artico”) is the owner of 25 units in Units Plan No. 3461 which relates to a block of units, called ‘Aspire’, located at the corner of Giles Street and Printers Way in the Kingston foreshore development. 
Mr Anthony Tokich is a Director of Artico.  Artico is seeking to amend the Crown Lease Purpose Clause for the property to allow for an “Indoor recreation facility LIMITED to a gym/fitness centre” to be established and operated in units 67 and 71, both owned by the Applicant.  Artico is to be responsible for all costs associated with the amendments.  The indoor recreation facility proposed by Artico is a commercial gym/fitness centre, one not limited to the use of residents and/or owners of the units in Units Plan No 3461.

2.The Respondent is the Owners Corporation of Units Plan No 3461.  At the hearing on 19 April 2012, Ms Renee Drover of Independent Body Corporate Services Pty Limited, represented the Owners Corporation and indicated that all unit owners other than Mr Lewis did not oppose the variation to the Crown Lease Purpose Clause. 

3.Mr Lewis, the owner of unit 58, who was joined in these proceedings, appeared at the hearing to oppose the proposed variation to the Crown Lease Purpose Clause.  His submissions and arguments are set out below.

4.The current Crown Lease Purpose Clause for the property is set out in Clause 3(c) of Form 4, Units Plan No 3461 entitled ‘Schedule of Provisions Covenants And Conditions Subject To Which Leases Of Units Are Held’, dated 23 March, 2010.  Clause 3(c):

“(c)To use Units 1 to 81 for one or more of the following purposes:

(i)Units 1 to 66 inclusive for apartments;

(ii)Units 67 to 81 inclusive for the following uses:

(l)        office LIMITED to a combined maximum gross floor area of 2,000
               square meters;

(ll)restaurant; and

(lll)       shop RESTRICTED to the sale of items that are consistent with the
               use of the parcel of land for entertainment accommodation or leisure
               purposes such as speciality (sic) goods, arts, crafts and souvenirs, or
               be for the provision of convenience shopping and personal services
               for the local workforce and residents PROVIDED THAT the
               maximum gross floor area of any shop selling food (other than
               restaurant) shall be 250 square meters;”

5.Section 166 of the Unit Titles Act 2001 (ACT) provides that an application for development approval for a variation of a lease of a unit may be made under the Planning and Development Act 2007, chapter 7 (Development Approvals) only if all members of the owners corporation have been given notice of the proposed application (subsection (1) (a)) and the application is authorised by unopposed resolution (subsection (1)(b)) of a general meeting of the owners corporation.

6.Three general meetings of the owners corporation unit plan, held on
 27 September 2011, and 1 and 24 November 2011 respectively, considered a motion to amend the Crown Lease Purpose Clause to allow for an indoor recreation facility LIMITED to a gym/fitness centre to be established and operated in units 67 and 71.  The motion was not passed by an unopposed resolution at any of the general meetings.   At the hearing Mr Lewis informed the Tribunal he was the only remaining owner to oppose the resolution.

7.The Applicant sought an order under section 125(1)(g) of the Unit Titles Act (Republication No 22)  which empowers the Tribunal to make an order “giving effect to an unsuccessful motion for a resolution of a general meeting (either as originally proposed or as amended by the ACAT) if the ACAT is satisfied after a merits review of the motion that opposition to the motion was unreasonable”.

8.The Tribunal reserved its decision after hearing the parties’ submissions and receiving their documentary evidence on 19 April 2012.  A summary of the parties’ oral and written submissions follow, then the Tribunal’s reasons and decision.

Applicant’s Submissions

9.The Applicant submitted that opposition to the motion is unreasonable in all the circumstances.  Its arguments follow:

a.There is only one unit owner opposing the motion.  The majority of unit owners voted in support of the motion to vary the Crown Lease Purpose Clause at the second and third general meetings on 1 and 24 November 2011; there was no vote taken at the initial general meeting.  Mr Lewis and the owner of unit 45 opposed the motion at the third general meeting: Mr Lewis did not give reasons for his opposition; the owner of unit 45 gave as his reason that he would be financially disadvantaged by the change of lease purpose and did not want a change to the original purpose that attracted him to invest in the development.  During the course of the proceedings at the Tribunal, the owner of unit 45 ceased to oppose the motion for the variation, leaving Mr Lewis as the sole unit owner to oppose the resolution.  

b.The proposed variation is consistent with the Territory Plan 2008.  The Kingston Foreshore Development is zoned CZ5 which is a mixed use development zone.  The CZ5 Mixed Zone Development Code states that this zone is intended to ensure that the type and form of development within the CZ5 zone is responsive and sympathetic to the character of the locality. The Structure Plan Kingston Foreshore document states that one of the objectives of the development is to encourage a mix of land uses which will contribute to a diverse and active character for the Kingston Foreshore.   The provision of an indoor recreation facility will further such a mix of land uses.  An indoor recreation facility is an assessable development under the CZ2 Mixed Zone Development Code.  

c.The fact that units 67 and 71 are located on a prominent corner of the development and that they are currently vacant has a negative effect on the attractiveness of the development to investors, residential tenants and potential commercial lessees.   If the units are occupied, it will be a benefit to all owners of units in Aspire.  This is supported by Ms Maree Harman, Director – Valuation & Advisory Services, CBRE Valuations Pty Limited, who advised Mr Tokich on 27 March 2012 that:        

“By broadening the purpose clause of Units 67 and 76 to allow for ‘indoor recreation facility’ positively adding (sic) to the amenity of the development as follows:

The use of an indoor recreation facility may attract purchasers to this particular development over others;

The units in question take up a prominent street frontage and an indoor recreation centre is unlikely to have an overbearing impact on the façade of the building whereas for example a souvenir shop may cheapen the perception of the development;

Vacant commercial tenancies in the area may benefit with businesses choosing to set up in this locality which would be expected to have a positive impact on demand in the foreshore precinct.

In conclusion the addition of use ‘indoor recreation facility’ to the purpose clause for Units 67 and 71 of Units Plan 3461 is, in our opinion’ not going to have a negative impact on units within the development be they residential or commercial.”

d.In paragraph 13 of his Witness Statement dated 23 March 2012, Mr Tokich stated that, based on his experience of over 10 years as a Director of Artico and his involvement in other property development companies and investments, he believes that having a gym or fitness centre in the Units Plan No 3461will have a positive effect upon the property values of other units in Aspire and on the amount of rent that could be expected for other units in Aspire.   Such a gym or fitness centre would also add to the diversity of services at the property again adding to the value of other units in Aspire and the rent that could be expected for them.

e.There is no evidence that there would be a financial disadvantage for either the owners of units in Aspire or for the Owners Corporation if a gym or fitness facility is located in units 67 and 71 as compared to an office, restaurant or shop which are provided for in the current Crown Lease Purpose Clause.

f.Mr Lewis makes a number of allegations about the conduct of Independent Body Corporate services Pty Limited and Independent Property Group Sales Limited, including in relation to alleged failures to disclose information about lift maintenance, and to correctly install Foxtel, and consistently deal with rectification of alleged defects. Mr Lewis also alleges that there is a “conflict of interest” between Artico, Mr Tokich and the Independent companies.  Artico disputes all these allegations and contends, in any case, that they are irrelevant to the issues before the Tribunal.

10.Section 166 of the Unit Titles Act in providing a mechanism for varying a Crown Lease Purpose Clause contemplates that such a change is possible. It follows that a motion to change such a clause is not unreasonable per se. 

11.Concerning the allegation that there will be noise problems from a gym or fitness centre in units 67 and 71 caused to residents in other units in the building, Artico argued against the allegations on the following bases:

i.Mr Tokich, as a Director of Artico, stated he would personally ensure that any tenant of units 67 and 71 which provided a gym or fitness facility would take steps to ensure that noise would not be a problem. 

ii.Should a gym or fitness centre become the tenant of units 67 and 71, Artico would require the lease to contain the articles of the Owners Corporation as express terms and would require a term that the tenant comply with all of the conditions the articles require including those dealing with nuisance and noise.  The lease would also contain an express term that failure by the tenant to comply with the articles and the conditions relating to nuisance and noise would be a breach of the lease by the tenant.

iii.A prospective tenant for units 67 and 71 is Anytime Fitness Pty Limited (‘Anytime Fitness’) which has provided Artico with a draft floor plan of the fitness club it proposes for Aspire.  The activity with the greatest potential to generate noise in a gym or fitness club is weight training with heavy weights which can be dropped on the floor.  The Anytime Fitness floor plan shows that weight training would be located on the ground floor in unit 67 to minimize any noise travelling outside the fitness club.  The draft floor plan also shows that internal or common walls would be left vacant, with no machines or other equipment located against any of the internal or common walls.  This also minimizes any noise travelling outside the fitness club.

iv.Anytime Fitness has informed Mr Tokich, and thus Artico, that if it entered into a lease of units 67 and 71, it would install a special sport and fitness facility rubber flooring and rubber matting which would also minimize noise.

v.Mr Tokich, as a Director of Artico, stated he would require any tenant of units 67 and 71 for use as a gym or fitness centre to obtain an acoustic assessment and report and then act in accordance with the recommendations of such a report.  Mr Tokich attached to his Witness Statement a report obtained by Anytime Fitness for another development as a sample of the type of report he would require, (Attachment ‘N’, Witness Statement).

12.Concerning the allegation that there will be security problems for residents in other units in the building from a gym or fitness centre in units 67 and 71, Artico argued against the allegations on the following bases:

i.In his Witness Statement (paragraph 27) Mr Tokich stated that the proposed gym or fitness centre will have a separate entrance on the ground floor of Aspire off Printers Way with an internal staircase between units 67 and 71.  There would be no internal access from the gym or fitness centre to other parts of Aspire. 

ii.The prospective tenant, Anytime Fitness, provided Artico with a copy of a document setting out the typical security systems operating in each of its gym clubs worldwide.  These systems include closed circuit television throughout the facility and a ‘check-in’ software that scans a member’s key fob or membership card for validity at the entrance to the facility.  According to a testimonial attached to the document Thomas Ademite, Executive Director of Enterprise Insurance Advisors, said the security in Anytime Fitness premises “has put Anytime Fitness at the forefront of the fitness industry.”  Mr Tokich stated that Artico would require such complete security systems to be a requirement for a tenant to install in any lease of units 67 and 71 for a gym or fitness centre.

Respondent’s Submissions

13.On behalf of the Respondent, Ms Drover, Independent Body Corporate Services Pty Limited, submitted that all owners other than Mr Lewis now did not oppose the motion for the variation. 

14.Ms Drover stated that there may be an additional insurance cost if a gym or fitness centre was located in Aspire, compared with a restaurant, office or shop as CHU Underwriting Agencies Pty Limited had advised on 18 April 2012 that, assuming no other factors change (other than a gym being installed in the building), any increase in rate could be as small as $300 (less than 3%).  This would mean that there would be an increased levy of about $3-4 for each unit in Aspire, a minimal amount.  This was contrary to the information Ms Drover had in September 2011 when she advised unit owners that there would be no additional fees incurred by the body corporate if a gym was installed. 

15.Independent Body Corporate Services Pty Limited is part of the Independent Property Group.  It is a separate entity to Independent Property Group Sales Limited which is also part of the Independent Property Group.  It was Independent Property Group Sales Limited which had the contract to market and sells the units in Aspire.  Independent Body Corporate Services Pty Limited has the contract to manage the body corporate.  Each company operates independently.  Both companies are independent of Mr Tokich.  Ms Drover denied Mr Lewis’ allegation that there is a conflict of interest between Independent Body Corporate Services Pty Limited, which manages the body corporate, and Artico and/or Mr Tokich, a Director of Artico.

Party Joined Submissions

16.Mr Lewis’ major submission was that Mr Tokich, and/or Artico, was not credible and thus could not provide credibility for the application to vary the Crown Lease Purpose Clause for the units corporation.  He instanced a number of issues in which he submitted Artico and/or Mr Tokich had not been credible in their/his dealings with either Mr Lewis personally or with the Owners Corporation.  The instances are:

a.Mr Lewis stated that he inspected the development on 12 occasions prior to March 2010 and took an active interest in the development.  Mr Lewis stated at the hearing that prior to purchasing unit 58 he was informed by a representative of Independent Body Corporate Services Pty Limited there was no proposal for a gym to be included in the development.  At the hearing Mr Lewis stated he was totally opposed to gyms in developments as the cost of gyms are imposts on the strata development fund and increase strata levies.  Yet now a gym is being proposed by Mr Tokich and/or Artico.

b.

Mr Lewis submitted that information in a letter sent to unit owners in Aspire by Ms Drover, Independent Body Corporate Services, on

19 September 2011 was not accurate as, in relation to any additional cost to the body corporate from a gym being included in the complex, Ms Drover indicated that the body corporate would not incur any additional fees.  Subsequently on 19 April 2012, Ms Drover forwarded to Mr Lewis an email from Mr Scott Driscoll, CHU Underwriting Agencies Pty Limited who stated that as commercial insurance policies are rated by use and each unit is included in the calculation of insurance for a block of units, there would be a minimal difference in the insurance rate for Aspire if a gym was included in the block since a gym would attract a higher rate that an office.  Mr Driscoll estimated that the difference for Aspire could be as small as $300 in a year (less than 1%) if no other factors changed in relation to the policy.  Mr Lewis gave this as an instance of Mr Tokich and/or Artico not being credible in his or its dealings with unit owners in Aspire. 

c.Independent Body Corporate Services was appointed managing agents for Aspire under a contract signed by Mr Tokich on behalf of the Owners Corporation on 11 March 2010.  Independent Property Group were the marketing agents for the development.  Mr Lewis submitted that there was a close relationship between Mr Tokich and Independent Property Group which results in Independent Body Corporate Services not being free of conflicts of interest when dealing with unit owners in Aspire.

d.Mr Lewis stated that although Mr Tokich owns or has an interest in 32 of the 81 units in Aspire, Mr Tokich has no personal interest in Aspire, only attending meetings of the Owners Corporation of the units when he wants something.  Mr Tokich has not attended two of the AGMs of the Owners Corporation so far.  When issues have been raised through Independent Body Corporate Services, Mr Tokich does not answer letters personally; examples are issues concerning the exhaust fans and cracking in the exterior facade.

e.

In his Witness Statement (paragraphs 13-15), Mr Tokich stated that the variation to the Crown Lease Purpose would benefit all owners of units in Aspire as it will improve the value of each unit.   Mr Lewis questioned this on the basis that the value of units in Aspire has been affected by delays in the foreshore development.  Also, Mr Lewis alleged that

Mr Tokich has not been able to sell the units he has and may be having problems with his return from the development.  Mr Lewis suggested that the gym is being proposed by Mr Tokich to negate his losses, not to improve the building or to benefit all the owners.

f.

As another instance of Mr Tokich’s lack of credibility, Mr Lewis instanced an issue concerning the contract for lift maintenance in Aspire.  At the AGM held on 30 June 2010, Mr Lewis stated it was noted that there was a 12 month free maintenance period for the lift.  However, it was not disclosed at the AGM that the 12 month period operated from

29 March 2010, the date of commencement of the lift maintenance contract.  Mr Lewis stated that this was not revealed for over 12 months.

g.

As an issue demonstrating that Artico is not forthcoming in its dealings with unit owners, Mr Lewis raised an issue with the cabling for a proposed Foxtel hook up to Aspire.  Mr Lewis stated he was advised that cabling had been installed but later it appeared that there were deficiencies with the cabling. A report by Mr Andrew Goleby, Electronics Pty Limited, dated 12 August 2010 to Independent Body Corporate Services showed that the cabling did not appear to satisfy the requirements stipulated in the Foxtel Satellite Installation Manual – SIM for Multi-Dwelling Units Multi-Residential Estates and Commercial Installations FD/T/E/2207. 

Mr Goleby quoted $11,225.20 to carry out the work to comply with the Foxtel requirements for installation of Foxtel at Aspire.  This resulted in an impost on unit owners to cover the cost of making Aspire “Foxtel ready”.

Finding and Reasoning

17.Section 125(1)(g) of the Unit Titles Act provides that the Tribunal may make the following orders:

“An order giving effect to an unsuccessful motion for a resolution of a general meeting (either as originally proposed or as amended by the ACAT) if the ACAT is satisfied after a merits review of the motion that opposition to the motion was unreasonable”

18.

The Unit Titles Act does not define the meaning of “unreasonable opposition” used in section 125(1)(g). The Tribunal was referred by the Applicant to Lanfranchi & Owners of Unit Plan 809 (Civil Dispute) [2011] ACAT 73 where Senior Member Lennard considered and applied to section 51A(3) of the Unit Titles Act the meaning given to “unreasonable” by Davies J in Curragh Coal Sales Company Pty Limited v Wilcox, Bowen and Walsh [1984] FCA 168. Davies J said that “unreasonably” is to be given its meaning in the ordinary parlance where it was used in

sub-regulation (3H) of Regulation 9 of the Customs (Prohibited Export) Regulations (C’th). That sub-regulation provided that the Minister or other authorized person shall not unreasonably refuse “to grant a permission” or “to consent to the assignment or surrender of a permission” under the sub-regulation. The Tribunal accepts that a similar meaning is to be applied to the word “unreasonable” in section 125((1)(g) of the Unit Titles Act.

19.Senior Member Lennard referred to the definition of “unreasonable” in the Macquarie Dictionary for its meaning in ordinary parlance: that definition is, “not reasonable, not endowed with reason, not guided by reason or good sense, not based or in accordance with reason or sound judgment”.

20.Therefore, the Tribunal has the task of considering whether in all the circumstances, after reviewing the merits of the motion concerning the proposed variation of the Crown Lease Purpose Clause to include provision of a gym or fitness centre, the opposition to the motion was, or was not, based on, or in accordance with, reason or sound judgment.   To carry out this task the Tribunal considered the oral and written submissions of the Applicant, the Respondent and the Party Joined.

21.The Tribunal notes that units 67 and 71 which are the subject of the motion are located on the corner of Giles Street and Printers Way in the Kingston Foreshore development.  They are located on the ground floor and mezzanine levels respectively.  All the owners of the units surrounding these two units do not oppose the variation motion.

Procedures for development applications

22.

In relation to the procedures for development applications for variation of a unit or common property lease, section 166 of the Unit Titles Act provides that such an application may be made only after all members of the owners corporation have been given notice of the proposed application and it is authorised by an unopposed resolution.   In paragraph 7 of his Witness Statement, Mr Tokich stated a letter was sent to all unit owners by Ms Drover of Independent Body Corporate Services on

19 September 2011 (Attachment “D”). The letter sought to answer questions posed by the Executive Committee of the Owners Corporation regarding the proposed change. The letter dealt with the location of units 67 and 71, the hours of operation of a recreation facility, parking, noise, access (including to the rest of the building), water consumption, facilities for the two units involved and any additional costs to the body corporate in relation to the gym (such as insurance or cleaning). Information was also given to unit owners at the three General meetings in which the motion was considered. Therefore, the Tribunal accepts that all unit owners were given notice of the proposed application and also information concerning detail of the operation of the proposed gym or recreational facility, thus satisfying this requirement of section 166. The Tribunal accepts that the information given concerning the operation of the proposed gym was not final as the final detail will depend on whether the application is allowed by the ACT Planning and Land Authority (presently, ACT Environment and Sustainable Development Directorate) and which organisation gains the lease of units 67 and 71 to operate a gym and/or recreational facility.

Consistent with Territory Plan

23.The Tribunal accepts that the proposed variation is consistent with the Territory
Plan 2008.  The Kingston Foreshore Development is zoned CZ5 which is a mixed use development zone.  The CZ5 Mixed Zone Development Code states that this zone is intended to ensure that the type and form of development within the CZ5 zone is responsive and sympathetic to the character of the locality.  Part A of the Code provides general controls that are applicable to all CZ5 Zones and Part B provides additional specific controls for particular areas, including the Kingston Foreshore. Part A states that CZ5 zones combine residential and commercial accommodation with uses such as offices, small scale shops and restaurants (the wording of the original Crown Lease Purpose Clause for Aspire) in the form of multiuse or mixed use developments.  In the document 4.1 CZ5 Mixed Use Zone Objectives, an indoor recreation facility is listed as a development that will be assessed in the merit track in a CZ5 zone development application.  Such a development is therefore contemplated and available for a CZ5 zone, and thus for the Kingston Foreshore.  The Tribunal notes that in the CZ5 Mixed Use Zone Development Table the only development prohibited in the Kingston Foreshore precinct area (d), in which Aspire is located, is a hotel.

24.Having considered all the above, and the parties’ oral and written submissions, the Tribunal is of the opinion that it is not reasonable to oppose the motion on the basis that locating a gym or fitness centre in units 67 and 71 of Aspire is contrary to the Territory Plan for the Kingston Foreshore Development.

Noise

25.

The Tribunal notes Artico’s submissions set out in paragraph 11 above concerning noise arising out of a gym or fitness centre being located in units 67 and 71. 

Mr Lewis did not present evidence to refute Artico’s comprehensive submissions to deal with this issue.  The Tribunal considers that the type of provisions suggested by Anytime Fitness to deal with noise as well as the proposed terms suggested by Artico for inclusion in any lease of the two units for a gym or fitness centre are sufficient to cover any noise issues.

26.Concerns about noise from a gym or fitness centre in Aspire would also appear to be addressed by the requirements for applications for development in CZ5 zones.  Clause 6.10 in the Element 6 – Environment of the General Development Controls for CZ5 zones, addresses the issue of noise for applications in these developments and provides that a Noise Management Plan, prepared by an accredited acoustic specialist, is to be provided for any use of the development as a club.  The Plan is to detail the design, siting and construction methods which will be used to minimise the impact of noise on neighbours.

27.In its written submissions, Artico stated that it would incorporate into any lease agreement with a tenant which would operate a gym or fitness centre both Clauses 7 and 8 of the Owners Corporation Articles dealing with noise or nuisance by tenants of units in Aspire.  In his Witness Statement (paragraph 20), Mr Tokich said that a failure by any tenant of units 7 and 71 to comply with those clauses would be a breach of the lease.

28.

Further, in the Minutes of the General Meeting of Units Plan 3461 on

27 September 2011, it is noted that possibly a “females only” gym would be located on the mezzanine level as an additional noise barrier as the majority of equipment in such an area would be of the exercise bikes and treadmills variety.

29.Having considered all the above, and the parties’ oral and written submissions, concerning the issue of noise, the Tribunal is of the opinion that it is not reasonable to oppose the motion on the ground of noise arising from a gym or fitness centre being located in units 67 and 71 of Aspire.

Security

30.The Tribunal notes Artico’s submissions set out in paragraph 12 above concerning security issues possibly arising out of a gym or fitness centre being located in units 67 and 71.  Mr Lewis did not present evidence to refute Artico’s various submissions dealing with this issue.   The type of provision suggested by Anytime Fitness to deal with security issues and the proposed terms suggested by Artico for inclusion in any lease of the two units for a gym or fitness centre are comprehensively sufficient to cover any security issues.

31.In the Minutes of the General Meeting Units Plan No 3461 dated 27 September 2011, it is noted that Artico will require a term in any lease to a tenant for a gym or fitness centre that the door from unit 71, which has access to an internal corridor in Aspire, would be locked, blocked off or alarmed.  The only access to the gym would be via the entrance to unit 67 in either Giles Street or Printers Way (the evidence varied on which street the entrance was to be located).   There would be no access from the gym or fitness centre to any other part of the building such as lifts, entry foyers or corridors.  A staircase would be erected for access between the ground and mezzanine floors in the gym or fitness centre.

32.Having considered all the above, and the parties’ oral and written submissions, the Tribunal is of the opinion that it is not reasonable to oppose the motion to vary the Crown Lease Purpose Clause on the ground of security issues arising out of a gym or fitness centre being located in units 67 and 71 of Aspire.

Costs to Body Corporate

33.The motion to vary the Crown Lease Purpose Clause itself provides that “all costs associated with the amendments being the responsibility of the owner of units 67 and 71”, that is Artico.  Thus there is no proposed additional cost arising from the motion either to the body corporate or to other owners of units in Aspire.

34.The letter from CHU Underwriting Agencies Pty Limited concerning any increase in the outlays of the body corporate if a gym or fitness centre is located in Aspire provides credible evidence that it is likely that there will be only a minimal increase.   CHU estimated that the difference could be as small as $300 in a year (less than 1%) if no other factors changed in relation to the policy.   With 81 units in Aspire it is unlikely that this will increase individual levies by any significant amount.

35.There was no evidence presented to show that locating a gym or fitness centre in units 67 and 71 will place owners of all units at a financial disadvantage that would be greater than a disadvantage (if any) that would be experienced if a shop, restaurant or offices were to be located in the units.

36.Having considered all the above, and the parties’ oral and written submissions, concerning the issue of additional cost, the Tribunal is of the opinion that it is not reasonable to oppose the motion on the ground of additional cost to the Units Plan No 3461 or to the owners of individual unit owners arising from a gym or fitness centre being located in units 67 and 71 of Aspire.

Alleged Conflicts of Interest

37.The Tribunal accepts the submission of the Artico that the allegations by Mr Lewis about the conduct of Independent Body Corporate Services Pty Limited and Independent Property Group Sales Limited, including alleged failures to disclose information about lift maintenance, and to provide information about incorrectly installing Foxtel and an allegation about consistently not dealing with rectifying alleged defects, are not relevant to the issues before the Tribunal.  The alleged “conflict of interest” between Artico, Mr Tokich and the Independent companies is also not relevant. 

38.The Tribunal considers that Mr Lewis’ submission that neither Artico nor Mr Tokich  personally is interested in Aspire and/or is not credible, is not relevant to the reasonableness or unreasonableness of the opposition to the motion to vary the Crown Lease Purpose Clause.   The motivation of Artico and/or Mr Tokich in proposing the gym or fitness centre be located in Aspire is not relevant to a merits review of the motion.

39.Having considered all the above, and the parties’ oral and written submissions, concerning the issues of conflict of interest and credibility, the Tribunal is of the opinion that it is not reasonable to oppose the motion on the ground of these issues.

Benefit to Owners of Units

40.Mr Lewis questioned whether the inclusion of a gym or fitness centre in Aspire would benefit all unit owners as was submitted by Artico and Mr Tokich.  The submissions of Artico and Mr Tokich are summarised in paragraph 9 (c) – (e) above.  These submissions demonstrate there is more likely to be a benefit to all unit owners in having unit 67 on the ground floor occupied, rather than vacant as at present, as it will increase the attractiveness of the development to investors, residential tenants and potential commercial lessees.  There is a perception that vacant units on the ground floor of Aspire give the impression of an “empty shell”, which detracts from the marketability of the property. 

41.CBRE Valuations Pty Limited advised that vacant commercial tenancies in the Kingston Foreshore area may benefit from businesses choosing to set up in the locality as this would be expected to have a positive impact on demand in the foreshore precinct.   Also, CBRE advised that an indoor recreation centre is unlikely to have an overbearing impact on the façade of the building whereas, for example, a souvenir shop (already within the Crown Lease Purpose Clause) may cheapen perceptions of the development. 

42.Having considered all the above, and the parties’ oral and written submissions, concerning the issue of benefit to owners of units in Aspire, the Tribunal is of the opinion that it is not reasonable to oppose the motion on the ground of no or little benefit to the owners of individual unit owners arising from a gym of fitness centre being located in units 67 and 71 of Aspire.

Overall

43.Therefore, the Tribunal has had the task of considering whether in all the circumstances, after the above review of the merits of the motion concerning the proposed variation of the Crown Lease Purpose Clause to include provision of a gym or fitness centre, the opposition to the motion was, or was not, based on or in accordance with reason or sound judgment.  

44.Based on the above reasoning, the Tribunal finds that the opposition to the motion that the existing Crown Lease Purpose Clause be amended to allow for an indoor recreation facility limited to a gym or fitness centre to be located in units 67 and 71 in Aspire was unreasonable.  The decision of the Owners Corporation not to pass the motion, was not based on sound judgment and was not reasonable.   The Tribunal notes that that decision was based on the opposition of the then two owners who did oppose the motion.

45.

Therefore, in the exercise of its powers under section 125(1)(g) of the Unit Titles Act, the Tribunal makes an order to give effect to the following unsuccessful motion for a resolution of a general meeting of the Owners Corporation of Units Plan No.3461:

   

The motion:

‘That the existing Lease Purpose Clause for Units Plan 3461 be amended to allow for “Indoor recreation facility LIMITED to a gym/fitness centre”, with all costs associated with the amenities being the responsibility of the owner of Units 67 and 71.’ be given effect to.

The motion is taken to have been passed as an unopposed resolution of a general meeting of the respondent owners corporation of Units Plan No.3461.

………………………………..

Ms L. Crebbin, General President

For and on behalf of

Ms J. David, Senior Member

PUBLICATION DETAILS

TO BE PUBLISHED

To be completed by Tribunal Staff

PART A

FILE NUMBER:	XD 12/78
PARTIES, APPLICANT:	Artico Pty Limited
PARTIES, RESPONDENT:	The Owners Units Plan No 3461
SOLICITORS FOR APPLICANT	J. Cummins, Clayton Utz Solicitors
RESPONDENT	R. Droven. Independent Property Group
TRIBUNAL MEMBERS:	Ms J. David, Senior Memebr
DATES OF HEARING:	11 April 2012
PLACE OF HEARING:	CANBERRA ACT

PART B

RECOMMENDATION:

FULL REPORT ( )       CASE NOTE ( )        UNREPORTED DECISION ( )

COMMENTS: