Board v Chichester Court Community Titles Scheme 11215 [2013] QCATA 327

CITATION: Board v Chichester Court Community Titles Scheme 11215 [2013] QCATA 327 PARTIES: Ronald Anthony Board (Applicant) v Chichester Court Community Titles Scheme 11215 (Respondent) APPLICATION NUMBER: APL234-13 MATTER TYPE: Appeals HEARING DATE: 22 October 2013 HEARD AT: Brisbane DECISION OF: Member Barlow QC DELIVERED ON: 5 November 2013 DELIVERED AT: Brisbane ORDERS MADE: 1. The appeal be dismissed. CATCHWORDS: Body Corporate and Community Management – validity of resolutions to approve administrative fund budgets – whether body corporate liable for, and entitled to take account of, particular expected expenditure Body Corporate and Community Management Act 1997 ss11, 155, 156 Body Corporate and Community Management (Standard Module) Regulation 2008 ss 138, 141, 166 Body Corporate and Community Management – name and status of body corporate existing before commencement of Act Building Units and Group Titles Act 1980 s 27 Body Corporate and Community Management Act 1997 ss 22, 330 -- 1 of 9 -- 2 APPEARANCES and REPRESENTATION (if any): APPLICANT: Ronald Board Represented by himself RESPONDENT: Chichester Court CTS 11215 Represented by Mr Ian Bynon, Chairman REASONS FOR DECISION [1] Chichester Court Community Titles Scheme comprises 12 lots and common property. Mr Board owns one of the lots in the scheme. The scheme is registered under the Body Corporate and Community Management Act 1997 (BCCM Act) and the land on which it is situated is registered Building Units Plan 3964. [2] Chichester Court forms part of a waterfront area known as “Nyamba Village”. The overall area comprises the Chichester Court Community Titles Scheme, another scheme known as Hardy Court Community Titles Scheme (registered Building Units Plan 3963), which has 16 lots and its own common property, and other areas comprising gardens, an access road, a swimming pool and amenities block, a boat ramp and 11 boat sheds, which are on land owned by a separate unlisted public company, Nyamba Village Management Limited. [3] Nyamba Village Management leases each of the boat sheds to individual owners of lots in the Chichester Court and Hardy Court schemes. [4] The other areas owned by Nyamba Village Management are effectively made available for the exclusive use of the Chichester Court and Hardy Court bodies corporate, the owners of lots in those two schemes and their invitees. [5] In the application to an adjudicator which has led to this appeal, Mr Board challenged the validity of 4 resolutions of Chichester Court in 2 general meetings in 2012. The resolutions at the annual general meeting approved the budget and levies for the administrative fund for that financial year. The resolutions at a subsequent extraordinary general meeting ratified the 2010 administrative fund budget and levies, which had not previously been voted on by the body corporate in general meeting and had therefore not been validly adopted. Mr Board also sought consequential orders to the effect that he was not liable to pay Chichester Court the full amount of the administrative fund levies that had been imposed. [6] The essential basis for Mr Board‟s challenge to those decisions was that the budgets and levies included a component to cover amounts expected to be paid to Nyamba Village Management for a proportion of its costs of maintaining the land owned by it and used by the occupiers and invitees of lots in Chichester Court and Hardy Court. -- 2 of 9 -- 3 [7] The legal structure of the Nyamba Village was set up in the early 1980s under the Building Units and Group Titles Act 1980. The structure and management of the two bodies corporate (Chichester Court and Hardy Court) are now governed by the BCCM Act. [8] Under a lease entered into between the predecessor in title of Nyamba Village Management and the two bodies corporate (Chichester Court and Hardy Court), Nyamba Village Management leases the area owned by it (apart from the access road and the boat sheds) to the two bodies corporate as joint tenants, for 999 years at a rental of one cent or one peppercorn (if demanded) per calendar year. The lease describes the lessees by their names as respectively THE PROPRIETORS HARDY COURT BUILDING UNITS PLAN NO 3963 a body corporate constituted pursuant to the Building Units and Group Titles Act upon registration of Building Units Plan No 3963 and THE PROPRIETORS CHICHESTER COURT BUILDING UNITS PLAN NO 3964 a body corporate constituted pursuant to the Building Units and Group Titles Act 1980 upon registration of Building Units Plan No 3964. They are described in the lease as “the Lessee”. [9] Only the first page of the lease was in evidence before the adjudicator. Relevantly it provided that the Lessee covenanted: to pay all outgoings payable in respect of the demised premises or the use of the demised premises including but without limiting the generality of the foregoing all charges in respect of electric power and light and gas (if any) and all telephone charges and all excess water rates, trade waste charges (if any), cleansing dues and licence permit or inspection fees which may from time to time be assessed, imposed, levied or charged in respect of or attributable to the demised premises or the Lessee‟s occupancy or use thereof and all costs and expenses of the installation and/or rentals (if applicable) of or for all necessary meters in the demised premises.. [10] Use of the access road is given to the bodies corporate and lot owners under two easements for right of way granted by Nyamba Village Management‟s predecessor in title. The easements are in identical terms, except in one respect to which I shall refer shortly. Unfortunately, it is necessary to set out the parts of the easement to Chichester Court in these reasons, as they are important to my decision. That easement relevantly provides as follows: LAE ENTERPRISES PTY LTD (hereinafter called „the Grantor‟) … IN CONSIDERATION of the sum of $1.00 paid to the Grantor by THE PROPRIETORS CHICHESTER COURT BUILDING UNITS PLAN NO. 3964 … for and on behalf of each and all of the respective registered proprietors from time to time (hereinafter referred to as „the said unit owners‟) of the respective lots created upon registration of Building Units Plan 3964 and which lots and the common property created upon registration of Building Units Plan No 3964 are hereinafter collectively referred to as „the Dominant Tenement‟) DOES HEREBY GRANT AND TRANSFER unto the said THE PROPRIETORS CHICHESTER COURT BUILDING UNITS PLAN NO. 3964 AND unto each and all of the said unit owners (all of which and whom the said THE PROPRIETORS CHICHESTER COURT BUILDING UNITS PLAN NO 3964 and the said unit owners are hereinafter jointly and severally called „the Grantees‟) THE FULL AND FREE RIGHT AND LIBERTY of way and of passage for the Grantees … and for all of their tenants, servants, -- 3 of 9 -- 4 agents, invitees and licensees … IN COMMON WITH the Grantor and the successors in title of the Grantor and all others (including but without limiting the generality thereof THE PROPRIETORS HARDY COURT BUILDING UNITS PLAN NO 3963 and each of the respective registered proprietors from time to time of the respective lots created upon registration of Building Units Plan No 3963 …) … for any and all purposes connected with the use and enjoyment of the Dominant Tenement TO GO RETURN PASS AND REPASS across along and over the Servient Tenement … AND IT IS FURTHER AGREED by and between the Grantor and the Grantees and each and all of them … that: … (ii) the costs and expenses of keeping and maintaining the Servient Tenement in good and substantial repair shall be borne and paid as to twelve twenty- eighths (12/28) thereof by the Grantees who shall be jointly and severally liable for the payment thereof … [11] The easement to Hardy Court and its unit owners differs from the Chichester Court easement only in that the Grantees under the Hardy Court easement are required to bear 16/28 of the costs and expenses of keeping and maintaining the servient tenement in good and substantial repair. [12] In the application determined by the adjudicator, Mr Board sought the following orders: 1. that the resolutions carried at the last annual general meeting, held on 29 August 2012 marked as item 5 “Adoption of administrative fund budget and contributions” and item 8 “Administrative fund contributions – advance issue” be invalidated; 2. that the resolutions carried at the extraordinary general meeting held on 10 October 2012, marked item 2 “ratification of administrative fund special levy” and “ratification of administrative fund adjustment levy” be invalidated; 3. that the body corporate be instructed to inform the directors of Nyamba Village Management that the body corporate has no authority to collect Nyamba‟s levy; 4. that the body corporate be advised that any penalties imposed on the applicant for non-payment of levies to Nyamba be invalidated and no further penalties apply; 5. that the body corporate show how it calculated any arrears allegedly owed by the applicant. [13] The adjudicator dismissed the application. [14] In the appeal filed in the tribunal by Mr Board, he appeals the whole of the adjudicator‟s orders, but the orders which he seeks are somewhat different, being: 1. that the body corporate is to inform the directors of Nyamba Village Management Limited that the body corporate has no authority to collect Nyamba‟s member‟s [sic] proportion of expenses from their owners through the body corporate; 2. that the penalties imposed by the body corporate for my non-payment of the proportion of expenses that were included in my body corporate administration levy but were expenses that should have been directly billed to me by Nyamba as per their memorandum and articles of association be annulled; -- 4 of 9 -- 5 3. that any arrears that the body corporate believe I owe that they show proof of such arrears and how they were accounted for; 4. the directors of the company Nyamba have been conducting the affairs of that company illegally since 31 March 2010. The body corporate is to call for an extraordinary general meeting inviting the body corporate of Hardy and the agenda is to address the past improper actions and make corrections as appropriate. [15] An appeal from an order of an adjudicator may only be on a question of law: BCCM Act s 289(2). It is an appeal in the strict sense and therefore must be determined upon the evidence before the adjudicator. [16] Mr Board‟s submissions to the adjudicator and to the tribunal were to the effect that Nyamba Village Management has no right or entitlement to charge the two bodies corporate with the costs of maintenance of the land owned by Nyamba Village Management which is used by the bodies corporate and their lot owners. Nyamba is only entitled to charge the individual lot owners of Chichester Court and Hardy Court their respective proportionate shares of those costs. Therefore Chichester Court is not entitled to impose levies on its lot owners to cover the costs of paying Nyamba Village Management. This conclusion derives, in his submission, from the following factors: a) each of the lease and the easements is granted to the proprietors of the respective bodies corporate, because that is how the lessees and the grantees of the easement are described; b) therefore, any expenses that the lessees and the grantees are required to pay for the maintenance of the areas the subject of those documents must be paid directly by the “proprietors” or owners of the lots in the respective bodies corporate and not by the bodies corporate themselves; c) this is also the effect of article 44 of Nyamba Village Management‟s Articles of Association, which relevantly provides that if the directors determine that any act or thing in connection with any object of the company is necessary or desirable and that it will involve the expenditure of money by the company, the directors may demand from each owner member the payment of his due proportion of the estimated cost of such act and may refrain from doing such act or thing until each owner member has paid that proportion to the company; „owner member‟ is defined as the respective unit owners, in contrast to the corporate members, who are the Chichester Court and Hardy Court bodies corporate; d) the levies the subject of the resolutions at the general meetings were calculated, among other things, by reference to the budgets of costs provided by Nyamba Village Management to the bodies corporate in respect of Nyamba Village Management‟s anticipated costs of maintaining the relevant land owned by it; to that extent, the levies were invalidly calculated, because the bodies corporate are not liable for those estimated costs, as Nyamba Village Management may only -- 5 of 9 -- 6 charge anticipated costs to its owner members in accordance with its articles of association. [17] Mr Board therefore maintained that, to the extent that the levies imposed on him by Chichester Court incorporated a proportion of Nyamba Village Management‟s estimated costs of maintaining its land, the levy was invalid and he was therefore justified in refusing to pay that proportion of the levies imposed on him. [18] In my opinion, Mr Board‟s submissions are incorrect, for the following reasons. [19] Mr Board is mistaken about the meaning of the phrase „The Proprietors Chichester Court Building Units Plan No 3964‟ in each of the lease and grant of easement. That phrase is simply the name of the body corporate as it was at the time that those documents were made. At that time, s 27 of the BUGTA provided that the proprietor or proprietors from time to time should, by virtue of that Act, upon registration of the plan be a body corporate under the name “The Proprietors – (insert name of the building) Building Units Plan No _____”. The name of the body corporate is now, under s 22 of the BCCM Act and its new community management statement, “Chichester Court Community Titles Scheme 11215”. The body corporate that previously existed under the BUGTA now exists under the BCCM Act (under a different name). This is a consequence of s 330 of the BCCM Act, which relevantly provides that, on the commencement of that Act, a community titles scheme is established for the pre-existing plan under the BUGTA and the body corporate under the BUGTA for the existing plan is taken to be, without change to its corporate identity, the body corporate for the new scheme. [20] Therefore, the references in each of the lease and the grant of easement to The Proprietors Chichester Court Building Units Plan No 3964 is not to the owners of lots within that plan but to the body corporate for that plan, which is now known as Chichester Court Community Titles Scheme 11215: that is, the respondent to this appeal. [21] This is even clearer when one looks at the terms of the easement, which refers not only to the body corporate by its name, but also to „each and all of the respective registered proprietors from time to time of the respective lots created upon registration of Building Units Plan 3964‟. That document clearly distinguishes between the body corporate on the one hand and the owners (or proprietors) of the individual lots within the plan on the other. [22] As a body corporate, Chichester Court can acquire, and enter into agreements for the use of, real property, and accept the grant of easements for the benefit of the common property and of lot owners: BCCM Act ss 155 and 156 and Standard Module s 166. Of course, the lease was granted long before the commencement of that Act, but as the body corporate has remained in existence, the lease also remains in existence. -- 6 of 9 -- 7 [23] Under the lease, the lessee (Chichester Court and Hardy Court) is obliged to pay all outgoings payable in respect of the premises or their use. The term “outgoings” is very broad and arguably could extend to the costs of maintenance of the leased land. It has been described as „every expense relating to the estate which in the ordinary course of management would require to be made to earn rent or would be a proper deduction before ascertaining the net rent receivable as income‟.1 The parties seemed to accept that it was the lessee‟s obligation to pay the costs of maintenance of the leased land and I do not have to decide whether or not there is such an obligation (nor can I without having seen the full lease, as only the first page was before the adjudicator).2 [24] The lease is between Nyamba Village Management and Chichester Court and Hardy Court, not between Nyamba Village Management and the owners of lots in Chichester Court and Hardy Court. Therefore if, under the lease, Chichester Court and Hardy Court are liable to Nyamba Village Management for the costs of maintaining the land the subject of the lease, then those bodies corporate are liable to Nyamba Village Management for those costs, and the individual lot owners are not. [25] Under s 139 of the Standard Module, the body corporate must adopt two budgets for each financial year: the administrative fund budget and the sinking fund budget. The administrative fund budget must contain estimates for the financial year of necessary and reasonable spending to cover the cost of maintaining, among other things, the body corporate assets. “Body corporate assets” are all real (that is land interests) and personal assets acquired by the body corporate which have not been incorporated into and become a part of the common property: BCCM Act s 11. The budget must also contain estimates for other expenditure of a recurrent nature. And the budget must fix the amount to be raised by way of contribution to cover the estimated recurrent expenditure. [26] Under s 141 of the Standard Module, the body corporate must, by ordinary resolution, fix, on the basis of its budgets for a financial year, the contributions to be levied on the owner of each lot for the financial year and decide the number and dates for payment of instalments in which the contributions are to be paid. 1 Re Duke of Cleveland’s Estate; Viscount Wilmer v Forrester [1894] 1 Ch 164 at 175. 2 As an aside, I note that s45(2) of the BCCM Act provides that property cannot be a body corporate asset for more than one community titles scheme, although a body corporate asset may comprise a share as tenant in common in an item of property, including, for example, property in which the body corporate for another community titles scheme also has a share. The lease in this case provides that the two bodies corporate are lessees as joint tenants rather than as tenants in common. I do not have to consider whether the validity of the lease, or the rights of the bodies corporate as lessee under the lease, are affected by the enactment of s45(2), but I note that it may be beneficial for the bodies corporate to determine this or to agree with each other and Nyamba Village Management to amend the lease so that they become lessees as tenants in common. -- 7 of 9 -- 8 [27] Chichester Court‟s leasehold interest in the land owned by Nyamba Village Management is clearly a “body corporate asset”. Similarly, its interest as grantee of the easement is an interest in land3 and therefore a body corporate asset. [28] Chichester Court is therefore entitled (indeed, obliged) to include the costs for which it is liable under the lease and the easement in the budgets upon which its levies to lot owners are based. [29] In order to ascertain its administrative fund budget, it is clearly necessary for Chichester Court to ascertain Nyamba‟s budget for the costs of maintaining the leased and easement property. That is what Chichester Court did in fixing the administrative fund budget and contributions at its annual general meeting on 29 August 2012. There is no suggestion that that meeting was not properly called or conducted. The levy was therefore properly approved in accordance with Standard Module s 141. [30] Nyamba Village Management‟s constitution does not affect its legal relationship with Chichester Court, which is governed by the agreements it has with Chichester Court. Those agreements are principally the lease and the grant of easement. There appears possibly to be another, informal, agreement by which it has been agreed that Nyamba Village Management will undertake the tasks of maintenance and will engage contractors for that purpose and then charge the two bodies corporate who have rights over the property (Chichester Court and Hardy Court) their respective proportionate shares of the costs of that maintenance. I see no reason why such an agreement would not be valid or why Nyamba Village Management cannot charge Chichester Court for its proportionate share of those costs. [31] The easement requires the “Grantees” of the easement to bear 12/28ths of the costs and expenses of keeping and maintaining the easement land in good and substantial repair. The grantees under the easement are not only the body corporate (Chichester Court) but also each and all of the owners of lots in the Scheme. Each of the grantees is jointly and severally liable for the costs for which the grantees are liable. Therefore, strictly speaking, each of Chichester Court and the lot owners within the scheme is wholly liable for all of the 12/28ths of the costs of maintaining the easement. As each of them is wholly liable, Chichester Court is wholly liable to Nyamba Village Management and may therefore properly be charged by Nyamba Village Management and include that cost within its budget for the purpose of calculation of levies to its lot owners. [32] So far as clause 44 of Nyamba‟s articles of association is concerned, it does not prevent Nyamba entering into such an agreement with its corporate members. It is simply a mechanism by which the directors of Nyamba Village Management may determine that the company will not incur an expense without first obtaining the estimated cost of that expense in advance from its owner members. The company and the directors are 3 An easement is an incorporeal hereditament – that is, a form of intangible real property. -- 8 of 9 -- 9 not obliged to make such a determination, but they may do so. Instead of doing so, Nyamba Village Management has agreements with the two bodies corporate whereby they will pay for the maintenance costs. Nyamba Village Management also has separate lease agreements in respect of the eleven boat sheds with the eleven lessees of those boat sheds. [33] Mr Board has not suggested any other basis for his challenge to the resolutions made at the annual general meeting. [34] So far as the extraordinary general meeting is concerned, Mr Board‟s objection to the resolutions ratifying the 2010 administrative fund special levy and adjustment levy appears to be on the basis that those levies included amounts which would be payable to Nyamba Village Management for maintenance of the leased and easement properties. [35] It is open to the members of the body corporate in general meeting to ratify decisions made earlier by the committee or otherwise by its directors.4 It appears that each of these levies was raised on 20 October 2010 without there first having been a resolution of the body corporate in general meeting in accordance with s141 of the Standard Module. The body corporate in general meeting has now passed resolutions fixing those levies retrospectively and Mr Board has not identified any reason why such a resolution would not be valid. [36] As the levies were properly raised, Mr Board is liable to pay them, and he is liable to pay interest on the outstanding portions of the levies that have been billed to him. [37] In my opinion, none of Mr Board‟s submissions is correct and the appeal should therefore be dismissed. 4 Bamford v Bamford [1970] Ch 212, at 238-9; Winthrop Investments Ltd v Winn Ltd [1975] 2 NSWLR 666 at 671. -- 9 of 9 --