Brandenburg v Body Corporate for Panama on Spence
[2010] QCAT 469
•27 September 2010
| CITATION: | Brandenburg v Body Corporate for Panama on Spence [2010] QCAT 469 |
| PARTIES: | Mrs Jennifer Ann Brandenburg |
| v | |
| Body Corporate for Panama on Spence CTS 16243 |
| APPLICATION NUMBER: | OCL015-09 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 16 September 2010 |
| HEARD AT: | Cairns |
| DECISION OF: | Mark Johnston - Member |
| DELIVERED ON: | 27 September 2010 |
| DELIVERED AT: | Cairns |
ORDERS MADE: | 1. The Contribution Schedule for the Community Title Scheme known as Panama on Spence CTS 16243 be adjusted in accordance with the schedule attached to this Order. 2. The Body Corporate shall within 14 days of receipt of this order lodge a new Community Management Statement with the titles office in the Department of Natural Resources effecting the change. 3. That each party to the proceedings are to bear their own costs of and incidental to the proceedings. |
| CATCHWORDS : | Sections 47-49 Body Corporate and Community Management Act 1997 (Qld), lot entitlement contribution schedule adjustment Fischer & Ors v Body Corporate for Centrepoint Community Title Scheme 7779 (2004) QCA214 followed. |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Mrs Jennifer Brandenburg; supported by Kaylene Arkcoll from Leary & Partners; |
| RESPONDENT: | Body Corporate for Panama on Spence CTS 16243 represented by Habib A Mellick owner of Lot 22 and ; also supported by Claude Regheuzave owner of Lot 23; Eva Marti; Colin Hewitt owner of Lot 1 and 4; George Massouras owner of Lot 8; Murag MacNunn owner of Lot 13; and Stephen Hinge owner of Lot 14. |
REASONS FOR DECISION
History of the Application
Mrs. Brandenburg is the owner of Lot 27 in the Community Title Scheme Panama on Spence. On 22 December 2009 she filed an Application with the Queensland Civil and Administrative Tribunal for the Adjustment of the Lot Entitlement Schedule pursuant to the provisions of the Body Corporate and Community Management Act 1997 (“the Act”).
The Application was accompanied with a report entitled “Contribution Lot Entitlement Analysis For Panama on Spence” undertaken by Leary & Partners Pty Ltd Quantity Surveyors (“the Report”).
The Application was duly served on the Body Corporate on or about 11 January 2010.
On 20 January 2010 the Representative for the Body Corporate wrote to the Tribunal requesting an extension of the time in which to respond to the Application.
On 19 March 2010 the Response of the Body Corporate was filed with the Tribunal.
On 31 March 2010 Directions Hearings conducted by the Tribunal.
On 31 May 2010 the Tribunal conducted a Compulsory Conference and the Tribunal issued Directions fixing the date the hearing and making directions for the provision of witness lists and further written material. The matter was set down to hearing on 8 September 2010.
The Evidence
In addition to the written material contained on the Tribunal file, all of the parties attending the hearing were given the opportunity to express their views. These views, where specifically relied upon by the Tribunal, are discussed below.
In November 2009 the Applicant commissioned Kaylene Arkcoll of Leary & Partners to compile a Lot Entitlement Adjustment Report on the Lot entitlement of the Body Corporate of Panama on Spence.
10. Ms Arkcoll gave evidence of the hearing.
11. Mr. Mellick provided a letter and gave evidence at the hearing.
12. Mr. George Massouras provided a letter and gave gave evidence at the hearing.
13. Mr. Neville Burman the developer of Panama in Spence provided a statement and gave evidence at the hearing.
14. Murag McMunn provided a statement and gave evidence at the hearing.
15. Mr. Colin Hewett provided a statement and gave evidence at the hearing.
The Law
16. The basis for calculating the contributions per lot entitlements is in accordance with section 47(2) of the Act which provides:
(a) the lot owner’s share of amounts levied by the body corporate, unless the extent of the lot owner’s obligation to contribute to a levy to a particular purpose is specifically otherwise provided for in this Act; and
(b) the value of the lot owner’s vote for voting on an ordinary resolution if a poll is conducted for voting on the resolution.
17. There is a separate interest scheduled lot entitlement which in accordance with section 47(3) of the Act is the basis for calculating:
(a) the lot owner’s share of common property; and
(b) the lot owner’s interest on termination of the scheme, including the lot owner’s share in body corporate assets...; and
(c) the unimproved value of the lot for rating and tax purposes.
18. By section 46(7) of the Act the respective contribution lot entitlements must be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal.
19. An owner of a lot in the community titles scheme may apply for an order for an adjustment of the lot entitlement schedule under section 48(1) of the Act. The order of the Tribunal in relation to the contribution schedule must be in accordance with section 48(5) of the Act, be consistent with the principle that the respective lot entitlements should be equal, except to the extent of which is it just and equitable in the circumstances for them not to be equal.
20. Section 49 of the Act sets out the matters which the Tribunal may, and may not have regard to for deciding if it is just and equitable in the circumstances for the respective lot entitlements not to be equal. By section 49(4) of the Act the Tribunal may have regard to:
(a) How the community titles scheme is structured;
(b) The nature, features and characteristics of the lots included in the scheme; and
(c) The purpose for which the lots are used.
21. This is not an exhaustive list, as in accordance with section 49(3) of the Act matters that the Tribunal may have regard to for deciding a matter are not limited to the matters stated in the section.
22. The matters which the Tribunal may not have regard to are set out in section 49(5) of the Act and include any knowledge or understanding that the Applicant had, or any lack of knowledge or misunderstanding on the part of the applicant at the relevant time, about-
(a) the lot entitlement for the subject lot or other lots included in the community titles scheme; or
(b) the purpose for which a lot entitlement is used.
23. The leading decision in respect of applications under Section 48 of the Act is that of Fischer and others v Body Corporate for Centrepoint Community Title Scheme 7779 (2004) QCA214. In his judgement Chesterman J with whom Justices McPherson and Atkinson agreed, stated at paragraph 26:
“Although the Act gives no clear indication one way or another, the preferable view is that a contribution schedule should provide for equal contributions by apartment owners, except in so far as some apartments can be shown to give rise to particular costs of the body corporate which other apartments do not. That question, whether a schedule should be adjusted, is to be answered with regard to the demand made on the services and amenities provided by a body corporate to the respective apartments, or their contribution to the costs incurred by the body corporate. More general considerations of amenity, value or history are to be disregarded. What is an issue is the “equitable” distribution of the costs.”.
At paragraph 31 of the judgement Chesterman J said:
“Secondly, the nature of a contribution lot entitlement schedule itself suggests that the allocation of lot entitlements is to be made on the basis of the impact that individual apartments make upon the costs of operating and running a community title scheme. Contribution lot entitlements determine the apartment’s share of the outgoings the starting point is that the entitlements should be equal. A departure from that principle is allowable only where it is just, or fair, to recognise inequality. The departure must take as its reference point the proposition, from which it departs, that apartment owners should contribute equally to the costs of the building. The focus of the enquiry is the extent to which an apartment unequally causes costs to the body corporate.
At paragraph 32 of the judgement Chesterman J said:
The third consideration is that if this principle not be the applicable one then there is no basis upon which application for adjustment of contribution lot entitlement schedules can consistently be made. As the evidence in this application shows, if the enquiry is limited to the extent to which the apartment creates costs, or consumes services, above or below the average, one can readily determine what the contribution lot entitlement should be. The high degree of similarity in the reports of Mr. Sheehan and Mr. Linkhorn demonstrates this, if the enquiry be wider and include such nebulous criteria as the structure of the scheme, or the nature, features and characteristics of the apartments in the scheme, and the purposes for which they are used, there is no intelligible basis on which there could be a consistent and coherent determination of applications for adjustment of lot entitlements. Each case would be determined idiosyncratically and a vast variety of circumstances might be relied upon to depart from, and therefore erode, a principle said to be paramount, that there should be an equality of entitlements.”
His Honour went on to state in paragraph 33:
“Accordingly I would construe section 49 of the Act, and in particular sub-section (4) as meaning that those identified matters to which a court may have regard are to be regarded only to the extent, if any, they effect the cost of operating a community title scheme.”
Discussion of the evidence
24. The Report at paragraph 2.0 sets out the Description of Panama on Spence as follows:
Panama on Spence has a 27 lot residential high-rise that includes the following infrastructure (reference to levels as shown on BUP 104001):
Levels A –C (basement and ground): These levels include on title parking and storage lockers, plant rooms, a refuse room and a lift and stair lobbies. The main entrance lobby is located on level B.
Level D: This level of the building contains a stair/lift lobby as well as 4 lots. Lots 1 to 4 are located on these levels. This level of the building also contains the recreational podium which has a swimming pool and pool amenities and barbecue pergola.
Levels E to G: These levels each contain a stair/ lift lobby as well as 4 lots. Lots 5 to 16 are located on these levels.
Levels H to J: These levels each contain a stair/lift lobby as well as lots. Lots 17 to 25 are located on these levels.
Level K: this level contains a stair/lift lobby as well as lots 26 and 27.
Level L (rooftop): This level contains the rooftop plantroom.
The external grounds of Panama on Spence comprise a limited area of paving and landscaping as well as front fence and entry gatehouse.
25. The methodology of Ms Arkcoll’s approach is set out on page 4 and following in the Report:
Our analysis takes into account only those lot related factors that have the potential to directly affect the cost to the body corporate of providing the services itemised in the administrative budget and sinking fund forecast.
In our analysis of expense items we have used the legislative default position of ‘ all costs shared equally’ unless compelling evidence is present to prove that for a specific cost item a more just and equitable allocation can be calculated and should be applied. This requires both proof that a significant variation in cost impact exists and that there is an appropriate method to establish its monetary value over a reasonable future time period.
After analysing each of the expense items, we will recommend the default ‘ all contribution entitlements equal unless, in our opinion, the total cost allocated to each lot varies sufficiently for justice and equity to demand an unequal entitlement schedule.
26. In the Report and in her oral evidence Ms Arkcoll held the view that where people elected to purchase a lot in a particular development they were purchasing an interest in the development as a whole and did not have the right automatically reduced their contributions merely because they chose not to use certain communal facilities or are not forced to do so by the scheme is designed (for example contributions to emergency stair maintenance by an owner on the ground floor).
27. It was noted that the body corporate provided a wide range of services to lot owners and that if:
(a) the same services provided to all lots or all the lots obtained the same benefit from a service to the common property (for example, pest control power for lighting of the common areas), and
(b) the design or use of the individual lots is unlikely to predictably affect the cost of providing the service, she would apportion the cost of the service equally between the lots.
28. Ms Arkcoll had also allocated a number of repair and maintenance items equally because they are of an unpredictable nature and it is not possible forecast with any degree of long term certainty if, or how, they may be affected by what specific factors.
29. The areas where there was some measurable difference related to: painting balcony metalwork; maintain glazed balustrade panels; and external facade painting (see clause 6 of the Report).
30. In her tables which form Part B of the Report, Ms Arkcoll sets out how she has worked through the administrative budget expenses and allocated items from the administrative budget and sinking fund expenses. Table 5 sets out the Cost Impact Assessment and Recommended Entitlement Schedule.
31. Ms Arkcoll advised the Tribunal that she had first started undertaking these assessments around 2000 and it provided some hundred and twenty reports and some 700 check reports the body corporate.
32. She informed the Tribunal that she had adopted the methodology contained in the Report from the decision in Fisher v Centrepoint.
33. The Respondent was given the opportunity to gain an expert report but did not do so.
34. The witnesses for the Respondent argued that:
●The status quo should not be altered because the owners had entered into contracts to buy their lots of aware of the arrangements for payment contributions;
●That it was inequitable for the changes to be made because Lot 27 consumed a higher proportion of costs;
●That the lifts were not of benefit to the owners on the lower floors;
●The methodology adopted by Leary and Partners Pty Ltd was flawed. There was a discussion about the need for a cherry picker in the other specialist equipment to paint the higher parts of the building; and
●That the law was before Parliament to change the basis for attributing contributions.
35. There was also an undercurrent that was influencing the owners namely that there had been a nearly 500% in body corporate levies over the last several years. This was not relevant to the Tribunal’s deliberations in this matter.
36. Mr. Burman gave evidence that the allocation of contribution entitlements was based on a range of factors which included the value of the lots as was the common practice in the industry at the time.
37. The alteration of property rights and obligations results in winners and losers. The alteration of lot entitlements will be seen to benefit some lot owners and will be seen to be to the detriment to other lot owners. This is unfortunate and these lot owners are innocent of any fault or wrongdoing. They are the victims of a change that was meant to produce a more equitable basis for dealing with common costs. The concerns that lot owners expressed about changes that would increase their share of costs were reasonable concerns. However Parliament has enacted legislation which restricts the way in which the Tribunal can approach the matter.
38. The Applicant provided the Report in December of 2009. This put the Respondent on notice well in advance of the hearing of the case that the Applicant would be presenting. The leading case upon which the methodology for the report was based was cited in the report. The Tribunal encouraged the Respondent to engage an appropriately qualified expert to give it a second opinion.
39. The Tribunal afforded the Respondent every opportunity at which to present evidence and to address the requirements of the legislation.
40. There is an onus on the Respondent to produce compelling evidence that the cost should not be shared equally if it was the view this was the case. The Respondent has not discharged that onus.
Conclusion
41. The Tribunal accepts the evidence of Ms Arkcoll. She has significant expertise as an expert providing reports in this area.
42. Ms Arkcoll set out a methodology for undertaking the task in the Report in a clear and easy to follow fashion.
43. The Tribunal was impressed with the way in which she gave evidence at the hearing and answered questions. Her focus was on matters that affected the cost of operation of the community title scheme. She adequately answered in the view of the Tribunal the attacks that had been made on her methodology.
44. The Tribunal accepts in the case of Panama on Spence where it is a single building made up of residential lots that it is appropriate for the building to be treated as a whole. The Tribunal for example does not accept that the owners of all lots on the ground floor have an right to be quarantined from the cost of the lifts.
45. The Tribunal does not accept that the status quo is an sustainable argument to address a change of law that came into operation in 2003.
46. The Tribunal accepts the contention that where there is compelling evidence present to prove for a specific cost item a more just and equitable allocation can be calculated, then it should be applied. The Tribunal also accepts that in order for this to occur it requires both proof that a significant variation in cost impact exists and that there is an appropriate method to establish its monetary value over a reasonable future time period.
47. The Tribunal is satisfied that Ms Arkcoll has identified specific cost items that should be exceptions and has included those in her adjustment of contribution entitlements.
48. Whilst lot owners raised several queries about the methodology the Tribunal was not satisfied that these undermined in any way the content and recommendations contained in the report.
49. The law changed in 2003 with the insertion of section 46(7). The Act now requires that lot entitlements must be equal except to the extent that is not just and equal in the circumstances. The decision of Fisher v Centrepoint cited above has limited the challenges that can be made on the just and equal basis and emphasized the importance of the effect of cost on the operation of the body corporate.
50. The Tribunal must act in accordance with the Law as it presently stands. This law has existed since 2003. The Applicant has established her case by producing expert evidence which the Tribunal accepts. If the Respondent is aggrieved by the decision it has the right to appeal.
51. The Tribunal has not been asked to stay the decision a formal way as provided by the Queensland Civil and Administrative Act and Rules.
52. In relation to costs the Tribunal is of the view that it is in the interests of justice that both parties proceedings bear their own costs.
Findings
53. The evidence produced by the parties established that:
●The present lot entitlement schedule is not equal;
●The present lot entitlement schedule is not just and equitable; and
●An equal contribution lot entitlement schedule would be not just and equitable.
Application of the Law
54. A contribution lot entitlement schedule in terms of the supplementary report of Leary and Partners of 9 September 2010 would be just and equitable.
Orders Made
The Contribution Schedule for the Community Title Scheme known as Panama on Spence CTS 16243 be adjusted in accordance with the schedule attached to this Order.
The Body Corporate shall within 14 days of receipt of this order lodge a new Community Management Statement with the titles office in the Department of Natural Resources effecting the change.
That each party to the proceedings bear their own costs of and incidental to the proceedings.
Adjusted Contribution Schedule for the Community Title Scheme known as Panama on Spence CTS 16243
Lot
NumbersAdjusted contribution
entitlementsLot
NumbersAdjusted contribution
entitlementsLot
NumbersAdjusted contribution
entitlements1 75 14 73 27 74 2 75 15 72 3 73 16 74 4 76 17 75 5 74 18 77 6 73 19 74 7 72 20 74 8 74 21 76 9 74 22 74 10 73 23 74 11 72 24 75 12 74 25 73 13 74 26 79
0
0
0