Buist Investments Pty Ltd v Body Corporate "Sonata"
[2010] QCAT 407
•17 August 2010
| CITATION: | Buist Investments Pty Ltd v Body Corporate "Sonata" [2010] QCAT 407 |
| PARTIES: | Buist Investments Pty Ltd |
| v | |
| Body Corporate "Sonata" CTS 30905 |
| APPLICATION NUMBER: | KL069-09 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | Determined on the papers |
| HEARD AT: | Brisbane |
| DECISION OF: | Kenneth Barlow, Member |
| DELIVERED ON: | 17 August 2010 |
| DELIVERED AT: | Brisbane |
ORDERS MADE: | The contribution schedule of the “Sonata” Community Titles Scheme 30905 be adjusted so that the respective contribution schedule lot entitlements for each lot are the number allocated to the lot in the table annexed to this order. |
| CATCHWORDS : | Body Corporate and Community Management – Adjustment of contribution lot entitlement schedule – Whether any matters make it just and equitable that lot entitlements not be equal - What adjustments are just and equitable - Body Corporate and Community Management Act 1997 (Qld), ss48, 49 |
APPEARANCES and REPRESENTATION (if any):
| Decision heard on the papers in the absence of the parties. |
REASONS FOR DECISION
Part 1 - Introduction
This is an application, pursuant to section 48 of the Body Corporate and Community Management Act 1997 (Qld) (the “BCCM Act”), for the adjustment of a contribution lot entitlement schedule.
Sonata is a Community Titles Scheme situated in Broadbeach. It comprises a high rise tower containing 32 lots. The Applicant is the owner of lot 1.
Lots 1 to 7, which are located on the ground floor, are retail premises. Lots 8 to 12 are commercial premises, situated on the first and second floors above ground level. There is also a recreational podium and swimming pool on the first floor above ground level. The remaining lots are residential lots, which are on the higher floors.
The complex contains three levels of basement car parking. Lots 13 to 32 have allocated car spaces, principally on level A, while lots 1 to 12 have “special privilege use” of the general common property parking on levels B and C.
At the ground level, there are an entry foyer with lift and emergency stair access, passageways providing access to ground level toilets, service cupboards, and the rear of some of the ground level lots. Lots 1 to 7 are located on this level. Lots 1 to 6 have been granted exclusive use of the footpath area located in front of each of their respective lots for use as outdoor dining activities.
Their respective proposed alterations will. An adjustment to the contribution schedule along the lines of that sought by the applicant would result in large reductions in the annual levies for lots 1, 6, 7, 11 and 12, smaller (but not insignificant) reductions in the levies for lots 27, 28 and 29, and increases in the levies of all other lots.
The Body Corporate opposes the application, but (at least by the evidence of its experts) acknowledges that some adjustments ought be made to the contribution schedule.
Part 2 - The law
Section 48 of the BCCM Act provides that the owner of a lot in a community title scheme may apply for an order for the adjustment of a lot entitlement schedule. Subsection 48(5) relevantly provides that an order about the contribution schedule must be consistent with the principle stated in subsection 6. Subsection 6 provides that, for the contribution schedule, the respective lot entitlements should be equal, except to the extent to which it is just and equitable in the circumstances for them not to be equal.
The principle stated in subsection 48(6) is consistent with the principle set out in subsection 46(7), which applies to schemes for which development approval is given after the commencement of that subsection: namely, that the respective 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. Section 48 in effect allows the owner of a lot in a community title scheme that was established before the commencement of subsection 46(7) to apply for adjustment of a lot entitlement schedule so that it is consistent with the principle applying to more recently created schemes. (This scheme was created before the commencement of subs.46(7).)
Section 49 of the BCCM Act relevantly provides that the Tribunal, in deciding whether it is just and equitable in the circumstances for the respective lot entitlements not to be equal, may have regard to:
(a) how the community title scheme is structured; and
(b) the nature, features and characteristics of the lots included in the scheme; and
(c) the purposes for which the lots are used,
but the Tribunal is not limited to considering those matters.[1]
[1] This is a summary, in particular, of subsections 49(2), (3) and (4).
The construction of section 48 was considered by the Court of Appeal in Fischer v Body Corporate for Centre Point Community Title Scheme 7779.[2] Chesterman J (with whom McPherson JA and Atkinson J agreed) relevantly said the following:
“[26]Although the Act gives no clear indication one way or the other, the preferable view is that a contribution schedule should provide for equal contributions by apartment owners, except insofar as some apartments can be shown to give rise to particular costs to 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 at issue is the ‘equitable’ distribution of the costs.
…
[30]The Act is intended to produce a contribution lot entitlement schedule which divides body corporate expenses equally except to the extent that the apartments disproportionately give rise to those expenses, or disproportionately consume services. That determination can only be made by reference to factors which have a financial impact or consequence on the body corporate. It cannot be affected by factors which go to an apartment’s value or amenity.
[31]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.
…
[33]Accordingly I would construe S 49 of the Act, and in particular subsection (4), as meaning that those identified matters to which a court may have regard are to be regarded only to the extent, if any, that they affect the cost of operating a community titles scheme.”
[2] [2004] 2 Qd R 638.
Also relevant to the issues in this application is the following discussion, from a decision of Mr K D Dorney QC (as his Honour then was) in the Commercial and Consumer Tribunal:[3]
“[25]In Woodley,[4] it was held that, where there is access by all owners to the common property, the costs should be shared equally, since the costs are equally beneficial to all of the lots in the scheme: at [16]. Also in Woodley, after considering Fischer, it was held that the question must be answered as to what extent that the nature, feature or characteristic of an apartment does affect the costs of operating the community title scheme (that is, what demands are made on the services and amenities provided by the body corporate): at [34]. The answer provided was that such expenses should be divided equally except to the extent that the lot in question disproportionately gives rise to those expenses or disproportionately consumes services, since those matters must have a financial impact for the body corporate which can be measured: also at [34]. As remarked in the decision, the respondent failed to produce such figures: also at [34].
[26] In Battin,[5] illustrations were given of where there might be an argument for ‘inequality’. Examples that were given were: if there was provision under the scheme for exclusive use, such as of a lift or a pool; or, possibly, where members of the public used common areas seldom used by residents, including, for example, accessing a restaurant and using a car park which was part of a high rise building and which some residents might never use: at [22]. As for equality, the examples given were: the costs of maintaining common areas surrounded by landscaping or where there is wear and tear on a car park, road or garden (even though a particular party may get little or no benefit from the condition of such items): also at [22].”
Part 3 - The evidence
3.1 The expert evidence
[3] Lidster v Body Corporate Parkhaven No. 3 CTS 22556 [2007] QCCTBCCM 003.
[4]Woodley & Anor v the Proprietors of Quay West Community Title Scheme 16610 [2006] QDC 277.
[5]Battin & Battin v Body Corporate for Amity Community Title Scheme 17543 [2006] QDC 278.
3.1.1 The evidence in this case
The applicant relies exclusively, in support of its case, on a report prepared by Kaylene Arkcol of Leary & Partners Pty Ltd (Quantity Surveyors), and a supplement to that report attached to a joint report by the parties’ experts. Ms Arkcol states that she has analysed each of the expense items of the administrative fund and the sinking fund with a view to determining whether the cost of each item is attributable to the use of one or more particular lots and thus it might be a more just and equitable allocation of that expense to be allocated towards the contribution lot entitlement of that lot than equally across all lots.
The respondent relies principally upon a report prepared by Dell Linkhorn and Scott Simpson of Resident Building Services (“RBS”), in which the authors have undertaken their own analysis of the expenses and sinking fund budget of the body corporate. That report has also been supplemented by attachments to the joint report, as well as by an explanation of a change in the witnesses’ conclusions about the allocation of some particular expenses.
The expertise of the authors is not stated in their reports, nor in any other evidence. However, no challenge has been made to their expertise and I am aware that reports from those authors have been accepted in this Tribunal or its predecessor in many similar cases.[6] For the purpose of this decision I shall assume that they have appropriate expertise.
[6]For example, Pivotalcom Pty Ltd v Body Corporate for Pivotal Point Commercial CTS 33687 [2009] QCCT BCCM 47.
Each of the experts has undertaken a similar exercise in a purported attempt to assist in the determination whether it is just and equitable that contribution lot entitlements be other than equal. The exercise undertaken was to analyse each expense incurred by the body corporate in recent years from its administrative fund and each budgeted item for its sinking fund and, in respect of each expense, to ascertain whether it may properly be said to have been incurred because of the particular impact that individual lots have upon the cost of operating and running the community title scheme.
Having each provided reports, Ms Arkcol and Mr Linkhorn met in a conclave directed by the Tribunal. They subsequently filed a joint report, to which they attached amended tables setting out their respective allocations and a table setting out their differences.
At the end of this complicated (and no doubt very expensive) process, the differences between the two experts are, in my view, minimal. Those differences are demonstrated most graphically by table G (as amended) to the report of Messrs Linkhorn and Simpson. That table sets out the current contribution lot entitlements, the current annual levies per lot, Messrs Linkhorn and Simpson’s proposed new contribution lot entitlements and the levies that they would result in and Ms Arkcol’s proposed new contribution lot entitlements and the levies that they would result in. The table demonstrates that the differences between them, in the case of every lot except one, as to what would be just and equitable contribution lot entitlements, are reflected by differences in levies per lot of less than $200 per year.
The experts are agreed that the current lot entitlements are not equitable. The ultimate result, if the experts’ proposals are accepted, is that all lots’ contribution lot entitlements and levies will be relatively similar, although not equal. This reflects the evidence that, in substantial respects, the costs incurred by the body corporate are not greatly referable to one or more lots over others or, where they are, the costs themselves (or the differences in allocation) are not great.
3.1.2Expert analyses and QCAT proceedings generally
Unfortunately, the process of detailed analysis of the expenses and budget of the body corporate, that has been undertaken by each of the experts, is not ultimately of much assistance to the Tribunal.
This process seems to be common to many applications of this nature, particularly those involving high rise community title schemes. It seems to me that it is also likely to be of little assistance to the Tribunal in many other cases. That should be of concern to parties and the Tribunal, as it simply adds to the expense and delay of proceedings, contrary to the philosophy of the Queensland Civil and Administrative Tribunal Act 2009 (the “QCAT Act”).
The BCCM Act prescribes that the starting point for contributions is that they be equal between all lots. Having regard to that starting point, there seems little point in expending considerable sums of money, quite possibly once every several years, to try to make minimal adjustments to annual contribution levies. Indeed, this exercise disregards the proper construction of the BCCM Act, which requires equality except to the extent that any lots give rise disproportionately to expenses or disproportionately consume the body corporate’s services.[7] A minute analysis of expenses and the use of services to which they relate ignores the requirement of disproportionate expense or consumption.
[7] See Fisher at [30].
In my opinion, the more appropriate and useful method of determining whether it is just and equitable, in such cases, that contributions be other than equal, would be to identify the largest expenses of a body corporate (both recurring, and of a sinking fund) and, in respect of those expenses, to identify whether any particular lots disproportionately give rise to those expenses or disproportionately consume the services to which those expenses relate. If there is a disproportionate level of expense or consumption, giving rise to a substantial expense incurred by the body corporate which it would be just and equitable to be shared solely by one or some of the lots, then it might be appropriate to adjust the contributions so that they are other than equal.
But the exercise which has been undertaken in this case (and, it seems, in many others) seems to me to be the antipathy of discerning justice and equitability. This is particularly so when the question is raised within the context of an Act (the BCCM Act) which attempts to allow for the determination of lot entitlements in a way that is not likely to cause considerable expense and dispute between lot owners.
It is also a process that is inconsistent with the functions and objects of the QCAT Act, particularly:
(a) the object that matters before the Tribunal are to be dealt with in a way that is accessible, fair, just, economical, informal and quick;[8] and
(b) the function of this Tribunal that those objects are to be achieved by, among other things, ensuring that proceedings are conducted in an informal way that minimises costs to parties and is as quick as is consistent with achieving justice.[9]
[8] QCAT Act, s.3(b).
[9] QCAT Act, s.4(c).
Neither that object nor that function is promoted by the sort of exercise undertaken in this case by the experts.
3.1.3 The most relevant expert evidence in this case
Having said that, I shall now consider the evidence before me.
The net result of the reports from the experts is that, while they differ in some respects in the methodology for allocating costs, they broadly agree that the current contribution lot entitlements are not just and equitable, and nor would be equal entitlements. I accept that evidence and agree with the conclusion.
In the case of this body corporate, the biggest expenses incurred in the administrative fund, about which there is any controversy indicated in the evidence before the Tribunal, were building management (approximately $50,000 per annum), cleaning and cleaning materials (approximately $11,400 per annum) and cleaning contractors (approximately $36,500 per annum).
I shall therefore give particular attention to those expenses in determining this application. The other expenses, and the differences between the experts about them, are comparatively inconsequential to the resolution of the question whether it is just and equitable that contribution lot entitlements be other than equal.
Part 4 - The other evidence
The controversy in respect of the above items derives from evidence (if it may be put so highly) filed on behalf of the body corporate about the costs of cleaning and building management.
The body corporate has filed a letter from its chairman attaching a letter from the manager. Together, in essence, they say the following:
(a) that the manager is paid $50,000 a year and estimates that about 70% of his time is devoted to attending to issues concerning the retail part of the building (lots 1 to 7);
(b) that the cleaner is engaged for approximately $50,000 per year (including materials) and the greater proportion of the cleaner’s time (which the chairman asserts is over 75% of his time) is allocated to cleaning duties arising from the retail lots, particularly the public toilets and other common areas on the ground floor; and
(c) that the building has an enormous output of rubbish as a result of the retail tenancies, with a large commercial skip being emptied 5 or 6 times a week.
Similar assertions have been made in submissions filed separately by some residential lot owners, in support of the respondent.
In fact, far from being evidence, these letters contain only assertions. None of the assertions is supported by any facts on which the conclusions stated are based. Indeed, in a supplementary report dated 21 July 2010 from Mr Linkhorn (filed in response to a direction from the Tribunal), he states that “without a qualified expert’s building management analysis report … it will not be possible to provide positive documented proof calculating and declaring a fair and just percentage allocation of the costs for the building management, the cleaning and cleaning materials, and the cleaning contractor’s service fees for the scheme.” In response to that report, Ms Arkcol stated in a supplementary report filed by the Applicant that “the potential cost allocation variation does not justify the time and expense (normally between $3,000-$4,500) involved in obtaining a detailed ‘time and motion’ style analysis of the work required to satisfy the caretaker’s duties.”
I tend to disagree with that assertion by Ms Arkcol. Given that those expenses add up to about $100,000 per annum (which is nearly 50% of the total annual administrative fund expenses), if a large proportion of the services to which they relate were undertaken in respect of only 6 or 7 lots, then it might well be just and equitable that those lots incur that proportion of the expenses, and such an adjustment may well result in a considerable difference in lot entitlements and consequent levies. If the cost of the exercise is $3,000-$4,500, it may be far less than the sum of any additional levies payable by those lots. Alternatively, it may put to bed entirely the notion that those lots disproportionately consume those services. Indeed, one might think that the parties’ resources would have been better utilised in arranging for a time and motion study of the type referred to by Ms Arkcol, rather than the cost of producing the experts’ reports before the Tribunal.
However, while there may be some factual basis for the assertions made by the chairman and the building manager (and also some of the lot owners) concerning the disproportionate use of building management and cleaning services by the retail premises, there is no evidence before the Tribunal, in this application, to prove such a basis or to justify the assertions made.
In any event, the experts have now agreed that those expenses ought be shared equally between the lot owners.
In the absence of evidence demonstrating any relevant disproportion, it has not been demonstrated that it would be just and equitable that those expenses be borne other than equally between all lots.
In the circumstances, the Tribunal cannot conclude other than that those expenses ought be shared equally, in accordance with the prescription of the BCCM Act.
Part 5 - Conclusions
In essence, there is very little difference between the experts that would have any material effect on a just and equitable adjustment to the contribution lot entitlements. Table G (as amended) to the report of Messrs Linkhorn and Simpson demonstrates that Ms Arkcol’s proposed lot entitlement schedule appears to favour the respondent’s case over that of the applicant: that is, it proposes a greater liability for contributions on the commercial (including retail) lot owners than on the residential lot owners. It does so by reference to some large expenses that are clearly representative of expenses incurred solely on behalf of the commercial lots, while also taking into account some expenses incurred on behalf of residential, rather than commercial and retail lots.
In these circumstances, and for the reasons discussed in Part 3.1.2 above, there seems to me to be little point in this Tribunal undertaking its own detailed analysis of the comparatively minor differences between the two experts.
However, I do accept the evidence of both experts that neither the current contribution lot entitlements are just and equitable, nor would equal entitlements be just and equitable. It seems to me, based on the evidence, that it would be just and equitable to adjust the contribution lot entitlements to reflect those suggested in Ms Arkcol’s amended table which is attached to the joint experts’ report.
I therefore propose to order that the contribution lot entitlements for the scheme be adjusted to reflect the lot entitlements proposed by Ms Arkcol. Those entitlements are set out in the following table, which will be annexed to my formal order.
Lot number | Contribution schedule lot entitlements |
| 1 | 321 |
| 2 | 320 |
| 3 | 321 |
| 4 | 323 |
| 5 | 321 |
| 6 | 323 |
| 7 | 330 |
| 8 | 337 |
| 9 | 316 |
| 10 | 317 |
| 11 | 336 |
| 12 | 326 |
| 13 | 299 |
| 14 | 300 |
| 15 | 295 |
| 16 | 303 |
| 17 | 295 |
| 18 | 303 |
| 19 | 295 |
| 20 | 303 |
| 21 | 295 |
| 22 | 303 |
| 23 | 295 |
| 24 | 303 |
| 25 | 295 |
| 26 | 303 |
| 27 | 318 |
| 28 | 317 |
| 29 | 318 |
| 30 | 315 |
| 31 | 315 |
| 32 | 342 |
Key Legal Topics
Areas of Law
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Property Law
Legal Concepts
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Adverse Possession
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Easements & Covenants
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Equitable Estoppel
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