Mary & Chaplin v Body Corporate for Innisfail Light Industrial Centre
[2010] QCAT 199
•7 May 2010
| CITATION: | Mary & Chaplin v Body Corporate for Innisfail Light Industrial Centre [2010] QCAT 199 |
| PARTIES: | Mrs Effie Mary & Brian William Chaplin |
| v | |
| Body Corporate for Innisfail Light Industrial Centre CTS 18712 |
| APPLICATION NUMBER: | KL042-09 |
APPLICATION NUMBER: | KL042-09 | |
MATTER TYPE: | Other civil disputes matters | |
HEARING DATE: | Determined on the papers | |
HEARD AT: | Brisbane | |
DECISION OF: | Kenneth Barlow | |
DELIVERED ON: | 7 May 2010 | |
DELIVERED AT: | Brisbane | |
ORDERS MADE: | The contribution schedule of the Innisfail Light Industrial Centre Community Titles Scheme 18712 be adjusted so that the respective contribution schedule lot entitlements for each lot are the number allocated to the lot in the following table. | |
| Lot number on GTP 70218 | Contribution schedule lot entitlement | |
| 1 | 35 | |
| 2 | 56 | |
| 3 | 43 | |
| 4 | 41 | |
| 5 | 39 | |
| 6 | 37 | |
| 7 | 64 | |
| 8 | 25 | |
| 9 | 110 | |
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 - Body Corporate and Community Management Act 1997 (Qld), ss48, 49 | |
APPEARANCES and REPRESENTATION (if any): Decision on the papers
REASONS FOR DECISION
This is an application, pursuant to section 48 of the Body Corporate and Community Management Act 1997 (Qld) (the “Act”), for the adjustment of a contribution lot entitlement schedule.
The Innisfail Light Industrial Centre is a community titles scheme situated on the Bruce Highway in Innisfail. The scheme has a total area of 4,061m², of which 1,674m² is common property. The remainder is divided into 9 lots of varying sizes. The smallest (lot 1) is 106m². The largest (lot 9) is 856m². As its name suggests, the scheme, and the lots on it, are used for light industrial purposes. The largest lot (lot 9) is used for a service station and garage and the remainder (apart from lot 8) are used for a variety of light industrial purposes. Lot 8, which is at the front of the property (bordering the Bruce Highway) is essentially vacant, comprising a grassed area fenced with a chain link fence and over which a sail-type canopy has been erected, although for what purpose it is unclear.
The community title scheme was created in 1986. The applicants, Mr and Mrs Chaplin, are the owners of lots 7 and 8, having purchased them in September 2007. As I have said, lot 8 is currently essentially vacant. Lot 7 has two buildings constructed on it, separated by an open, bitumen covered area. The latter area appears to be used for parking for lot 7 as well as for the storage of a large industrial rubbish bin. (I take this description from photographs tendered on behalf of the respondent as attachments to a statement of Megan Lesley Grainger.) The current contribution lot entitlement schedule does not provide for equal contributions between the lots. The applicants seek an adjustment of that schedule that will continue to provide for unequal lot entitlements, but in different proportions. The respondent opposes the application and contends that the current lot entitlements are just and equitable.
The following table sets out, in respect of each of the lots in the scheme, its area, its contribution schedule lot entitlement according to the current contribution schedule, and the contribution schedule lot entitlements proposed by the applicants.
Lot Number on GTP 70218 Area (m²) Current lot entitlement Proposed lot entitlement 1 106 12 18 2 315 27 41 3 178 20 27 4 157 18 24 5 137 16 22 6 117 14 19 7 395 58 45 8 126 35 19 9 856 200 185
The law
Section 48 of the 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 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).
Subsection 49(5), however, provides that the Tribunal may not have regard to any knowledge or understanding the applicant had, or any lack of knowledge or understanding on the part of the applicant, about the lot entitlement for the subject lot or other lots included in the community title scheme, at the time that the applicant entered into a contract to buy the applicant’s lot.
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:
[2] [2004] QCA 214.
“[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.”
In submissions filed on behalf of the respondent, reference is made to some of the above statements of Chesterman J. In addition, the respondent relies on the following discussion of the onus of proof in applications such as this, in a decision of Mr K D Dorney QC (as his Honour then was) in the Commercial and Consumer Tribunal:[3]
“[24] It has been suggested in two District Court cases, Woodley & Anor v the Proprietors of Quay West Community Title Scheme 16610 [2006] QDC 277 and Battin & Battin v Body Corporate for Amity Community Title Scheme 17543 [2006] QDC 278, that there is an onus on a respondent, once an applicant has established a prima facie case that the existing schedule is ‘unjust and unequal’, to place material before the Court or Tribunal ‘to prove’ that any departure from equality in the schedule is just and equitable: see Woodley at [3] and Battin at [12], noting that, in the latter, another lot owner became an additional respondent. For my own part, while I do accept that there is an evidentiary onus on a respondent which arises when evidence about the existing schedule has the effect that the relevant costs are shared other than on an equal basis, it must be that, in the end, the ultimate onus is still on the applicant: see, for example, Hawksford v Hawksford [2005] NSWSC 463, at [54].
[25] In Woodley, 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, 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].”
[3] Lidster v Body Corporate Parkhaven No. 3 CTS 22556 [2007] QCCTBCCM 003.
The evidence and submissions concerning this scheme
A copy of a sketch comprising the plan of exclusive use of common property on the group titles plan, which was tendered by the respondent as an attachment to a statement of Megan Lesley Grainger, is appended to these reasons. As that indicates, lots 9 and 8 are the only lots with a direct frontage to the Bruce Highway. Lots 1 to 6 are at the rear of the block, facing onto the central area of common property. Lot 7 extends a little over 31.5 metres along the Eastern Boundary, from just behind lot 8. Lots 7 and 8 face onto that area of the common property that comprises the eastern driveway into the property, with lot 7 extending back so that the rear building faces the central area of the common property.
The common property comprises driveway entrances on either side of lot 9 (the service station), a large area between the rear of lot 9 and the fronts of lots 1 to 6 and a driveway that extends behind each of lots 2 to 6. The large area of common property is, in essence, used for access as well as parking. The only exclusive use parking areas are those indicated on the sketch plan as associated exclusively with lot 9.
In its submissions, supported by Ms Grainger’s evidence, the respondent noted that there is a large car parking area operated by the local council situated on land immediately to the east of lots 7 and 8. I take that to be a public car parking area.
In supplementary submissions sent to the tribunal by the applicants, they stated that they had purchased lots 7 and 8 in September 2007 for $225,000. They disputed some of the matters raised in the respondents’ submissions and evidence and added to the description of the car parking areas, both in the common property and on the Council owned land adjoining the scheme land. They also give evidence about the difference in the economic activity in Innisfail between when the scheme was created and now.
The respondent objected to these additional submissions being taken into account by the tribunal. In my opinion, if there are any facts in those additional submissions that are of relevance, then the tribunal must take them into account in determining whether or not it is just and equitable that contributions not be equal. However, I do not consider that the date on which and the price of which the applicants purchased their lots in a scheme, nor the economic activity in the town in which the scheme is situated are relevant to the matters which I have to (or may) consider. But equally, the fact that there is a public car park on land adjoining the scheme land is, in my view, irrelevant to the determination of just and equitable contribution entitlements under the scheme.
The applicants assert that the lot entitlements should be changed so that they are distributed more fairly than as provided under the current contribution schedule. They do not assert that the lot entitlement should be equal, notwithstanding the principle set out in section 48(6) of the Act. They accept that it is just and equitable that the contributions not be equal, but they assert that the current contribution entitlements are not just and equitable.
The applicants’ reasons for this assertion are in essence the following:
(a)lot 8 is a vacant block of land and yet it has more lot entitlements than lots 2, 3, 4, 5 and 6, which are larger than it and have buildings constructed on them;
(b)lot 8 has no direct access to customer parking in the scheme, as it is situated at the front of the scheme land, whereas parking is located in the common property area toward the rear;
(c)customer parking for lot 8 will therefore be difficult if, in the future, a commercial building is constructed on that lot;
(d)lots 7 and 8 are parallel to the access road leading to the rear buildings, so that it is at times difficult to enter and exit the premises because of traffic to the rear lots;
(e)lots 1, 2, 3, 4, 5 and 6 have direct parking areas in front of their premises in the common area for customer parking and they have rear access to their premises;
(f)lot 9 is entitled to the exclusive use of 3 of the car parking spaces at the rear of their premises;
(g)the current lot entitlements result in body corporate fees for lots 7 and 8 being considerably higher than those for lots 1, 2, 3, 4, 5 and 6.
The body corporate opposes the application. It asserts that, while the current contribution entitlements are not equal, they are just and equitable, and the contribution entitlements proposed by the applicants would not be just and equitable.
In support of its defence, the respondent has tendered 2 statements. The first is of Mark Peter Stallman, who is a valuer and property consultant. Mr Stallman valued each of the lots in the group titles plan in May 1986 for the purpose of assisting in the allocation of lot entitlements upon the commencement of the scheme. He did so in accordance with the law governing community title schemes as it then was. It then provided that, in a group titles plan, the lot entitlement of each lot should (as nearly as was practicable) bear in relation to the aggregate lot entitlement of all lots contained in the plan the same proportion as the unimproved value of that lot bore to the sum of the unimproved values of all the lots contained in the plan.
Mr Stallman described the factors which he considered when determining the unimproved values of the lots. Those factors included the size of each lot, the location of each lot within the group title area and, by association, the exposure of each lot to the street frontage (which was considered an advantage), and the fact that the Bruce Highway was a busy road in the Innisfail street network, being the main access to the town from the north. In respect of lot 8, it had direct access to the street and excellent exposure to the high volume of traffic passing along the street.
The second statement tendered by the respondent is of Megan Lesley Grainger. She is a manager employed by a body corporate management company that is engaged by the body corporate for the scheme to undertake its management.
Ms Grainger describes the property, including the uses to which the common property is put, and has annexed to her statement a plan of exclusive use of the common property, which identifies the three car parking areas designated for the exclusive use of lot 9, and several photographs of the property from various angles.
According to Ms Grainger the common property comprises the following features:
(a)a fully concreted common property area;
(b)two functioning toilets, male and female, that are located immediately opposite the entrance of lot 1 and situated on the boundary between the common property and the neighbouring property on the western side;
(c)unofficial designated car parking located throughout the common property area (by which I take her to mean around the edges of the large area of common property between lot 9, lot 7 and the frontages of lots 1-6). In essence, anyone is allowed to park in any of the designated spaces on the common property subject to usual courtesy rules applying, apart from the 3 exclusive use parking spaces allocated to lot 9.
Ms Grainger also gives evidence that there is only one water inlet pipe which is metered by the Council and none of the 9 lots is individually metered for water consumption. Each lot owner is levied proportionately for water and rates in accordance with its contribution lot entitlement.
Ms Grainger also gives evidence about the budgets for the administrative and sinking funds and attaches a sinking fund analysis. Those documents demonstrate the nature of the expenses incurred by the body corporate in respect of its management and the management and upkeep of the common property.
Ms Grainger’s evidence as to these matters demonstrates the following facts.
Water rates are the largest of the expenses of the administrative fund. The budget for the year to 28 February 2010 for the total fund expenditure (not including GST) was $10,621.82, of which water rates comprised $5,220.
The administrative fund budget also identified the following expenses, which together totalled $4,432: audit fees, bank charges, business activity statements, community power, disbursement charges, management fees, post and stationery, telephone, internet and PABX and work orders for repairs and maintenance tasks. In addition there were building and public liability insurance of $770 and plumbing repairs and maintenance of $200.
The sinking fund analysis appended to Ms Grainger’s statement indicated that the following items have been budgeted for:
(a)items which appear to me to relate to buildings within the scheme – repainting external surfaces, cleaning gutters and downpipes, repairs to gutters and downpipes and pressure wash roofing – totalling $20,429;
(b)items which appear to me to relate to the common areas - high pressure wash driveways, car parking line marking, replacing parking guard rail, repairing or replacing side colourbond fence, replacing side chain link fence, repainting the toilet block internally, replacing cisterns in the toilets, clearing blocked stormwater drains, weed control and upgrade of sinking fund – totalling $8,167.
The total budget for the sinking fund on an adjusted replacement cost basis was $28,596.
Discussion
I accept, as Mr Dorney QC stated in Lidster, that the ultimate onus is on the applicant to demonstrate that there should be a lot adjustment. However, where the current contribution schedule does not have equal lot entitlements, that onus is very easily satisfied, having regard to the principle stated in subs. 48(6) and the obligation in subs. 48(5). The onus is then on the respondent to demonstrate why it is just and equitable in all the circumstances for the lot entitlements not to be equal.
In this case, it is accepted by both parties that it is just and equitable that the lot entitlements not be equal. They differ, however, as to whether the current lot entitlements are just and equitable.
Ultimately, it is for this tribunal to determine, on the facts before it, whether the current lot entitlements are just and equitable or whether, indeed, any lot entitlement contributions other than equal contributions would be just and equitable in all the circumstances.
It is clear from the evidence of Mr Stallman that the basis upon which the current lot entitlements were determined was the value of each of the lots. Given that the matters identified in subs. 49(4) to which the Tribunal may have regard may be regarded only to the extent, if any, that they affect the cost of operating the scheme,[4] the values of the respective lots may only be taken into account if and to the extent that those values would affect the cost of operating the scheme.
[4] Fischer, at [33].
There is no evidence that the unimproved values of the respective lots affect the costs of operating the scheme. One might anticipate that, if the body corporate were charged Council rates based upon the overall unimproved value of the land and the scheme, then the respective values for each of the lots might have some bearing on that aspect of the costs of operating the scheme.[5] There is no evidence to that effect, however.
[5]See, for example, the extract from the second reading speech for the relevant amendments to the Act quoted in Fischer at [29].
As I have said, each of the lots, except lot 8, has a building constructed on it in respect of which the body corporate incurs either ongoing or sinking fund type costs. The total of the costs related to buildings, by reference to the administrative fund budget and the sinking fund analysis, is approximately 52% of the costs (both administrative and sinking) incurred or to be incurred by the body corporate in relation to the total management and maintenance of the common property.[6]
[6]Building related expenses total $20,429; common expenses total $18,789, a total of $39,218.
The other major expenses are expenses common to the general management of the body corporate or to the maintenance of the common property that essentially comprises the driveways and car parking areas. There is no evidence that (and it would be surprising if) there are any substantial expenses incurred by the body corporate in respect of the 3 designated car parking spaces allocated to lot 9, so the allocation of those spaces may be ignored for the purpose of this discussion.
While lot 8 is likely (at least at present, and possibly even if a building were constructed on it) to have less use of the driveways and car parking areas than most of the other lots, in my view the same cannot be said of lot 7. Furthermore whether a particular lot will make use of common areas is not strictly to the point. The question is whether a particular lot will make a greater demand on services and amenities provided by the body corporate to their respective lots than other lots would.[7]
[7] Fischer, at [26].
Furthermore, more general considerations of amenity, value or history are to be disregarded. “Amenity” in this regard would, in my opinion, include the location within the scheme of a particular lot.
In my opinion, therefore, those costs that relate to the maintenance and repair of the common property, as well as costs relating to the overall management of the body corporate, ought be shared equally between all of the lots. However, costs relating to the maintenance and repair of buildings comprising the common property which are used exclusively by respective lot owners (that is, each of the respective buildings on this property other than the toilet block, which is available to all lot owners) ought be shared only between the lots on which the buildings are constructed and, as between them, ought be shared equally.
Thus, all of the costs reflected in the administrative fund budget ought be shared equally between all of the lots. However, those costs in the sinking fund budget that are related exclusively to buildings on the lots ought be shared equally between the lots on which the buildings are constructed (that is between all lots other than lot 8).
Having regard to the currently budgeted expenses, which I understand to be reflective of ongoing or expected expenses, it seems to me therefore that:
(a)it would not be just and equitable for lot entitlement contributions to be equal; but
(b)the current lot entitlement contributions are not just and equitable.
In dividing lot entitlements by reference to the building related expenses, a proxy for the costs incurred by the body corporate for each lot in relation to those expenses is the area of the respective lots. Therefore, in respect of those types of expenses, they ought be divided according to the approximate area of the respective lots upon which buildings are situated.
Lot 8 does not currently have a building on it. The buildings on the other lots constitute a characteristic of those lots which affect the cost of operating the scheme in a particular, and not insignificant, respect that does not apply to lot 8. While it might be said that lot 8 obtains some benefit from those items in any event as the general appearance of the entire scheme will reflects on all lots in the scheme, that benefit (if any) is ephemeral and in any event concerns the amenity of the scheme. In my view, until a building is constructed on lot 8, to the maintenance of which the body corporate is obliged to contribute, it is would be unjust and inequitable for lot 8 to have to contribute to the building-related expenses of the body corporate.
Having regard to these factors, in my opinion a just and equitable adjustment of lot entitlements for the contribution schedule should be determined as follows:
(a)half of the lot entitlements ought be shared equally between the lots, thus roughly reflecting an equal contribution toward approximately 50% of the total expenses of the body corporate;
(b)half of the lot entitlements ought be shared between those lots on which buildings are constructed, in the proportion of one lot entitlement per 10m² (approximately) of its area.
On this basis, a just and equitable contribution schedule of lot entitlements would be as follows, having regard to the calculations shown in the following table:
| Lot number | Entitlements for common expenses | Entitlements for building related expenses | Total lot entitlement |
| 1 | 25 | 10 | 35 |
| 2 | 25 | 31 | 56 |
| 3 | 25 | 18 | 43 |
| 4 | 25 | 16 | 41 |
| 5 | 25 | 14 | 39 |
| 6 | 25 | 12 | 37 |
| 7 | 25 | 39 | 64 |
| 8 | 25 | Nil | 25 |
| 9 | 25 | 85 | 110 |
| Total | 225 | 225 | 450 |
I therefore propose to order that the contribution schedule for the scheme be adjusted accordingly.
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