Lips v Body Corporate for Villa Florida

[2010] QCAT 200

CITATION:Lips v Body Corporate for Villa Florida [2010] QCAT 200

PARTIES:	Ms Huberdina Catharina Petronella Lips
v
Body Corporate for Villa Florida CTS 21854

APPLICATION NUMBER:   KL064-09      

MATTER TYPE: Other civil dispute matters

HEARING DATE:     9 April 2010

HEARD AT:  On the papers

DECISION OF: Dr Bridget Cullen Mandikos

DELIVERED ON: 10 May 2010

DELIVERED AT:      Brisbane

ORDERS MADE:

1.     The contribution schedule lot entitlements for Villa Floridia CTS 21854 be adjusted such that the lot entitlements be as follows:

Lot No. in Group Titles Plan No. 643	Contribution schedule lot entitlement
1	6
2	5
3	5
4	5
5	5
6	5
7	5
8	5
9	5
10	5
11	5
12	6
Total Lots	62

2. The Body Corporate for Villa Floridia must act in accordance with section 48(10) of the Body Corporate and Community Management Act 1997 (Qld) as quickly as possible, and no later than Wednesday, 9 June 2010, in lodging a request to record a new Community Management Statement reflecting the adjustments ordered.

CATCHWORDS :  Sections 48-49, Body Corporate and Community Management Act 1997 (Qld); lot entitlement contribution schedule adjustment

APPEARANCES and REPRESENTATION (if any):

On the papers

REASONS FOR DECISION

Background

1. On 27 October 2009, Mrs Huberdina Catharina Petronella Lips(“Mrs Lips”) filed an application for a Lot Entitlement Adjustment in the then Commercial and Consumer Tribunal (“the CCT”), pursuant to section 48 of the Body Corporate and Community management Act 1997 (“the BCCM Act”). The application was served upon the Body Corporate for Villa Floridia CTS 21854 (“the Body Corporate”) on 4 November 2009, as is require by section 48(2) of the BCCM Act.

1. The CCT has now been amalgamated into the Queensland Civil and Administrative Tribunal (“QCAT”), which has jurisdiction to make a decision in this matter by virtue of s9 of the Queensland Civil and Administrative Tribunal Act 2009 (“QCAT Act”).

1. Mrs Lips’ application seeks that the lot entitlement schedule for Villa Floridia be adjusted so that the respective contribution lot entitlements recorded in the community management statement be equal - 10 for each lot, with a total of 120 entitlements.

Legal framework

1. The law that relates to lot entitlement schedule adjustments is clear, namely, s48(6) of the BCCM Act mandates 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.

1. The matters that QCAT may have regard to in determining what is just and equitable are set out in s49(4) of the BCCM Act:

(a)how the community titles scheme is structured;

(b)the nature, features and characteristics of the lots included in the community titles scheme; and

(c)the purposes for which the lots are used.

1. The relevant provisions of the BCCM Act have been interpreted by the Queensland Court of Appeal in Fisher & Ors v Body Corporate for Centrepoint CTS 7779 [2004] QCA 214 (“Centrepoint”).  The Centrepoint decision has been nicely summarised by Member Dorney, QC (as he was before his appointment to the District Court) in Flanders v Aquila Bay CTS 7698 [2009] QCCTBCCM 1 at paragraph 14, as follows:

·the trial judge’s view was in error when he thought it appropriate to consider the adjustment of the contribution lot entitlements by reference to the effect of the change on the value of the lots, and the amenity of the lots: at 644 [24] – [26];

·this error arose because the preferable view is that a contribution schedule should provide for equal contributions by lot owners, except insofar as some lots can be shown to give rise to particular costs to the Body Corporate which other lots do not: at 644 [26];

·the 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 lots, or their contribution to the costs incurred by the Body Corporate: at 644 [26];

·more general considerations of amenity, value or history are to be “disregarded” because what is at issue is the “equitable” distribution of the “costs”: at 644 [26];

·the Explanatory Note which accompanied the Act which enacted the relevant provisions gave as an example (example 3) the outcome that in a basic scheme, if all the lots were residential lots ranging in size “from a small lot to a penthouse”, the contribution schedule lot entitlements “generally would be equal” and, while the contribution schedule might be different if the penthouse had its own swimming pool and private lift (with the contribution schedule recognising this type of difference), the other lots in the scheme “despite being of differing size or aspect” would be expected to have “equal contribution schedule lot entitlements”: at 644-5 [28];

·both the Explanatory Note and the Second Reading Speech make it tolerably plain that the replacement provision (which replaced legislation that formerly had the effect, upon registration, that the CTS did not have to provide for equal contribution lot entitlements) is intended to produce a contribution lot entitlement schedule which divides Body Corporate expenses “equally” except to the extent that the Lots disproportionately give rise to those expenses, or disproportionately consume services: at 645 [30];

·a determination for a proper contribution lot entitlement can only be made by reference to factors which have a “financial” impact or consequence on the body corporate and cannot be affected by factors which go to a lot’s value or amenity: at 645 [30]; and

·the starting point for determining a lot’s share of the outgoings is that the contribution lot entitlements be equal, with a departure from that principle being allowable only where it is just, or fair, to recognise “inequality”, since the focus of the inquiry is the extent to which a lot unequally causes costs to the Body Corporate: at 645 [31].

Lack of public understanding about the BCCM Act

1. Despite the clarity of the law, as it presently stands, relating to lot entitlement schedule adjustments, there is a lack of understanding amongst the public about this issue.  This problem is exacerbated by the fact that in order to avoid making an application to QCAT, an owner wishing to adjust the current schedule of lot entitlement allocation for a scheme may propose a change to the existing community management statement to adjust the schedule, which must then be put to a body corporate resolution.  Any resulting change requires a body corporate resolution without dissent.  As the end result will almost always negatively impact on at least one, and oftentimes several owners, and significantly in some cases, achieving consensus on a resolution vote is virtually impossible.  As such, QCAT, and its predecessor, the CCT, are often called upon to make a decision where achieving community consensus has failed.  That is where Mrs Lips’ application presently finds itself.

Response of the Body Corporate

1. Through its managers, Active Bodycorp Management, the Body Corporate filed a response to Mrs Lips’ application, on 25^th November 2009. The response outlines several arguments raised by owners in response to Mrs Lips’ application. With respect, and this is not specific to the objecting owners of Villa Floridia Units, there is considerable misunderstanding about the application of the BCCM Act in this regard. For this reason, I think it is worth explaining the reasons that the arguments raised lack merit, in the legislative context within which they must be viewed.

1. Firstly, the Body Corporate asserts that Mrs Lips has failed to draw its attention to the correct legislation, as the application refers to s(28)6 of the BCCM Act, rather than the correct s(48)6. I find this assertion disingenuous, as the top of the Application form itself, which is entitled “Application – Lot Entitlement Adjustment”, references s48 of the BCCM Act.

1. The Body Corporate then asserts that if Mrs Lips’ application is successful, ten out of twelve owners will be adversely affected, as they will be paying more levies.  Inevitably, this will be the case, and is the reason that many owners vote against such resolutions.  However, this is not a basis for refusing to calculate a just and equitable contribution schedule. 

1. Likewise, the Body Corporate’s arguments that Mrs Lips’ would have been aware of the lot entitlement allocation at the time of purchase are not relevant. In fact, s49(5) of the BCCM Act specifically states that such matters are not relevant.

Compulsory Conference – agreement on evidence

1. The Body Corporate also asserted that Mrs Lips had not provided sufficient information to enable consideration of her application to adjust the lot entitlements.  A compulsory conference was held on the 9^th April 2010, onsite at Villa Floridia, attended by Mrs Lips and the Secretary for the Body Corporate, Mr Robert Ryan (“Mr Ryan”).  A viewing of the complex revealed that Units 1 and 12 (owned by Mrs Lips) are at the far ends of the complex, which is a row of 12 Units.  Thus, Units 1 and 12 have more external wall area than Units 2-11.  

1. Following a review of the historical costs and budgeted figures included in the Villa Floridia income statement, together with Group Titles Plan No. 643 (inclusive of measurements of external walls), the parties agreed that:

There are additional maintenance and insurance costs associated with Units 1 and 12, due to the placement of windows and doors on the ends of these Units.

(Units 1 and 2 are at the far ends of the complex, and not in the middle like Units 2-11).

1. The parties also agreed that the following schedule reflects a just and equitable contribution schedule:

Lot No. in Group Titles Plan No. 643	Contribution schedule lot entitlement
1	6
2	5
3	5
4	5
5	5
6	5
7	5
8	5
9	5
10	5
11	5
12	6
Total Lots	62

1. I have no doubt that the parties’ agreement was motivated by a desire to save the costs of obtaining an expert report, which would invariably be deflected back to all lot owners, and which could potentially cost thousands of dollars.  The parties further consented to QCAT’s making a decision on the papers, based upon the agreement reached at the compulsory conference, saving the parties the time and inconvenience of proceeding with an oral hearing.

Impact of potential change of legislation

1. As this decision may be circulated to other lot holders at Villa Floridia, it may be useful to address the public speculation that exists about an impending change to the BCCM Act where contribution schedule lot entitlement adjustments are concerned.

1. Whilst there have been government announcements indicating that there may be changes to the BCCM Act, QCAT must apply the law as it presently stands. QCAT cannot speculate about what form the legislation may take, nor can it delay making a decision. There is simply no scope for QCAT to consider anything other than the application of the BCCM Act in its present form to the evidence before it.

Conclusion

1. QCAT accepts that the contribution schedule, in its present form, is not just and equitable.  There is no justifiable basis for Mrs Lips’ Unit 12 to pay 40% more than Units 2-11 (based on Unit 12 paying 7 lots, Unit 1 paying 6 lots, and Units 2-11 paying 5 lots).

1. QCAT accepts that the proposal reached by the parties during the compulsory conference, whilst not equal, is just and equitable, based upon the Tribunal’s viewing of the premises, and the agreement of the parties that the proposed schedule is, although not equal, just and equitable based upon the differences of Units 1 and 12.  This position is consistent with the decision in Centrepoint.

Orders

1. In view of the conclusions I have reached above, I order that the contribution schedule lot entitlements for Villa Floridia CTS 21854 be adjusted such that the lot entitlements be as follows:

Lot No. in Group Titles Plan No. 643	Contribution schedule lot entitlement
1	6
2	5
3	5
4	5
5	5
6	5
7	5
8	5
9	5
10	5
11	5
12	6
Total Lots	62

1. Further, the Body Corporate for Villa Floridia must act in accordance with section 48(10) of the Body Corporate and Community Management Act 1997 (Qld) as quickly as possible, and no later than Wednesday, 9 June 2010, in lodging a request to record a new Community Management Statement reflecting the adjustments ordered.