Burgess & Ors v Body Corporate for La Sabbia [2010] QCAT 337

CITATION: Burgess & Ors v Body Corporate for La Sabbia [2010] QCAT 337 PARTIES: Robert Burgess and others as listed in the application lodged 8 September 2009 v Body Corporate for La Sabbia CTS 24687 APPLICATION NUMBER: KL058-09 MATTER TYPE: Other civil dispute matters HEARING DATE: On the papers DECISION OF: Mr Paul Favell DELIVERED ON: 8 July 2010 DELIVERED AT: Brisbane ORDERS MADE: A new contribution schedule should be registered based on the recommended contribution schedule in accord with Part B Table 5 to the L & P report dated 24 July 2009 CATCHWORDS : Body Corporate and Community Management Act 1997– sections 46, 47, 48, 49 – contribution lot entitlement – lot entitlements – just and equitable APPEARANCES and REPRESENTATION (if any): Decision on the papers. -- 1 of 6 -- KL058-09 / Page 2 of 6 REASONS FOR DECISION 1. La Sabbia CTS 24687 is the body corporate for a scheme located at 74 Old Burleigh Road, Surfers Paradise, positioned on absolute beachfront a short walk to the Broadbeach Surf Life Saving Club. The scheme was created upon the registration of Building Units Plan No 106875 on 27 August 1998. 2. The scheme consists of a 33 level high rise Tower and 3 Villas. 3. The scheme sits on a podium level that contains a basement car park. The thirty-thee level Tower consists of one level of car parking and storage (level A), two levels which contain three lots per level with one lot being a sub- penthouse on both levels (lots 4, 5, 7, 8 and 6 on levels B & C), twenty one 4 levels of 4 lots per level and a common property area (lots 8 through 92 on levels E through Y), four levels of one lot per floor (lots 93, 94, 95 and 96 on levels Z, AA, BB and CC), the penthouse on the ‘Top’ which has three exclusive levels (lot 97 on level DD, EE and FF) and the roof top plant room (level GG and HH). 4. The three villas are on the same podium as the tower and share common walls to each other. They have private courtyards at the rear and are totally walled off. Each Villa has three levels with the bottom being the basement car park. They can be accessed through the basement car park or a private security gate through the main foyer or from the beach. 5. The basement is on Level A and contains a car park, storage areas and access to the elevators. There are three elevators which go to every floor. Common facilities on Level B of the podium include an outdoor salt water pool, BBQ terrace and gazebo, a well equipped gym and spa bath, an indoor half sized heated pool and a sauna which sits directly below a full sized tennis court (Level D). The podium level includes very well maintained gardens and a fountain. 6. The applicants seek a lot entitlement adjustment relating to the contribution schedule. They support the application with a report from Stewart Silver King and Burns Community Managers (the SSKB report) dated 3 November 2008. That report found that the current schedule is not just and equitable and recommended that the contribution schedule be adjusted in accord with a working paper provided. The report concludes that the contribution schedule should not be equal for each lot because it is just and equitable for the contributions not to be equal for each lot. The report is not signed and is the only material supplied to the Tribunal with the application. 7. The body corporate at its AGM held on 6 November 2009 voted on two motions which concerned an adjustment of the Contribution Lot Entitlement Schedule either in accord with the SSKB report or in accord with a report obtained by the Body Corporate for Leary and Partners Pty Ltd (the L & P report). Both motions were defeated as was a motion that the body corporate engage lawyers and authorise expenditure of up to $30,000 to obtain advice and defend the application made. A copy of the minutes of that AGM have been provided to the Tribunal. -- 2 of 6 -- KL058-09 / Page 3 of 6 8. The L & P report dated 24 July 2009 and signed by Kaylene Arkcoll, a surveyor specialising in providing building and asset management related services, has been provided by the body corporate along with a 43 paragraph document expressing the thoughts of the Committee of the body corporate. 9. The L & P report concluded that the current contribution schedule for La Sabbia is not just or equitable and provided a new contribution schedule. 10. On 22 February 2010, solicitors acting on behalf of the applicants provided a report in response to the L & P report and indicated that the application was ready to be determined on the papers. That report carried out an analysis of the costs of the body corporate and found that the current schedule is not just and equitable. The report noted similar suggested changes to that of the L & P report, differing only on the inclusion of elevator costs. The report suggests that because the usage of the elevators by the Villa lots can be debated, a middle ground approach should be taken and that a lower portion of the elevator costs are placed on the Villa lots that that of the Tower lots. It is said that although access to the elevators is available, usage by the Villa lots would only be 33% of that of the Tower lots. 11. La Sabbia was registered as BUP 106875 on 3 September 1998. The contribution entitlements were identical to the market value based interest entitlements. 12. Under the Body Corporate and Community Management Act 1997 (the BCCMA) the existing entitlement schedule is the basis for the interest and the contribution schedules contained in the current Community Management Statement. 13. Section 47(2) of the BCCMA makes the contribution lot entitlement schedule the basis for calculating: (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 for a particular purpose is specifically otherwise provided for in this Act, and (b) The value of lot owner’s vote for voting on an ordinary resolution if a poll is conducted for voting on the resolution. 14. Section 47(3) make the interest lot entitlement schedule the basis for calculating the lot owners legal interest in the schemes common property and assets. 15. Section 46(7) of the BCCMA provides: For the contribution schedule for a scheme for which development approval is given after the commencement of this subsection, 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. 16. If contribution entitlements are not consistent with the current cost impact based principle of section 46(7), a lot owner is entitled to ask for the -- 3 of 6 -- KL058-09 / Page 4 of 6 entitlements to be changed to bring them into line with the current calculation principle. 17. Section 48(1) of the BCCMA provides: The owner of a lot in a community titles scheme may apply— (a) under chapter 6, for an order of a specialist adjudicator for the adjustment of a lot entitlement schedule; or (b) as provided under the QCAT Act, for an order of QCAT exercising the tribunal’s original jurisdiction for the adjustment of a lot entitlement schedule. 18. A lot owner may seek an adjustment of the contribution lot schedule by applying to the Tribunal. 19. Section 48(6) of the BCCMA provides: 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. 20. When the BCCMA was amended by the Body Corporate and Community Management and other Legislation Amendment Bill 2002, the second reading speech for the Bill stated: “The guiding principle for both setting and adjusting the contributions schedule is that it involves the equitable sharing of the cost of operating and maintaining the common property. These costs should be borne in proportion to the benefit not in proportion to the units value. It is not a contribution linked to an ability to pay but as payment for services.” 21. Section 49(4) BCCMA provides for the matters to which regard may be had as follows: The specialist adjudicator or QCAT may have regard to— (a) how the community titles 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. 22. In Fischer v Body Corporate for Centrepoint Community Title Scheme 7779 [2004] QCA 214, the court stated: “…the preferable view is that a contribution schedule should provide for equal contributions by apartment owners, except so far 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 issues -- 4 of 6 -- KL058-09 / Page 5 of 6 of amenity, value or history are to be disregarded. What is at issue is the ‘equitable’ distribution of costs” “As the evidence in this application shows, if the enquiry is limited to the extent to which an apartment creates costs, or consumes services, above or below average, one can readily determine what the contribution lot entitlement should be. … If the enquiry be wider … 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 on to depart from, and therefore erode, the principle said to be paramount, that there should be an equity of entitlements. Therefore 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 title scheme.” 23. The L & P report by Kaylene Arkcoll has carried out an analysis of expense items and has taken into account lot related factors which 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. The report required proof of a significant variation in cost impact and an appropriate method to stabilise monetary value over a reasonable time period before the legislative default position of “all costs shared equally” was altered. 24. In my view that is an appropriate methodology. 25. The analysis identified areas where costs varied over the variety of lots. Those areas included external painting, fire protection systems, balustrades and window replacement/repairs. The report found a variation of $1,100.68 between the lowest and highest cost allocations in the analysis and the view was formed that that figure was too large to reasonably recommend an equal entitlement schedule. The report recommended the adoption of the contribution schedule in Part B, Table 5 of the L & P report. 26. The SSKB report dated 3 November 2008 examined the just and equitable apportionment of the costs to each lot in the scheme. Each item of expenditure by the Body Corporate was examined and consideration was given to whether the costs could be distributed equally or if the cost is one that is disproportionably consumed or caused by some lots in comparison to others. The report identifies three general circumstances which in the view of the author require a departure in the contribution schedule from a position of equality for each lot. Those circumstances were the different types of lots, the significant differing sizes of lots and the access to elevators. 27. In my view the methodology adopted in all the reports is appropriate and is consistent with the Court of Appeal approach in Fisher & Ors v Body Corporate for Centrepoint Community Title Scheme 7779. 28. However the first SSKB report when discussing what it identifies as “Method 2 – Supported Shelter Costs” says “the nature of the construction makes it -- 5 of 6 -- KL058-09 / Page 6 of 6 appropriate to share the support and shelter costs based on the area of the lot in proportion to the total area of all lots. Intuitively, if lot A is twice as big as lot B then it requires twice the support and shelter”. In my view that statement is overly simplistic and in my view the more detailed approach taken in the L & P report identifies the cost issues in a more appropriate manner. 29. There is a difference between the treatment of lift expenses in the initial SSKB report and the report of L & P. The SSKB report states “on our analysis the villa occupants would have no need to utilise the elevators and therefore it is inappropriate to share this cost”. That statement is not supported and it appears that the villa occupants have an ability to use the lifts and may choose to do so to access carparks (although there is stair access) and to access common recreational facilities located in the gym area, spa, sauna and toilet facilities. I accept that the villa occupants have a choice whether to use the lifts or not for such occasions. I also accept that the costs associated with maintaining a lift are not associated with the length of trip by the lift car but rather the number of trips. Whilst the received SSKB report suggests a percentage usage of 33% for the villa occupants there is no evidence to support such a usage nor to suggest that in respect of the lifts just and equitable circumstances exist so as to require a departure in the cost submission schedule from a position of equality for each lot. 30. I prefer the methodology of the L & P report as it provides for the extra costs associated with exterior painting and balustrade replacement according to the differing tower apartments. I also accept the reasoning associated with the use of high floor foyers in that there is no use of them by the villa occupants. In my view the current contribution schedule for La Sabbia is not just and equitable. 31. I accept on the material available there is no reliable way for an estimate of cost variation associated with the villas probably lower use of the lifts. I note the evidence that by not excluding the villas from the lift maintenance and lift power costs the annual cost per lot in that respect is $717.25. Based on the L & P report the variation with the lift expenses excluded from the villas and with the lift expenses included are: Unit 1 $-2,155.76 to $-2,932.20, Unit 2 $- 2,336.82 - $-3,043.21 and Unit 3 $-2,434.24 to $3,140.74 per annum. 32. In my view a new contribution schedule should be registered based on recommended contributions schedule as per Part B Table 5 to the L & P report dated 24 July 2009. -- 6 of 6 --