Crowbay Pty Ltd & Anor v Body Corporate for Southbank Chambers [2007] QDC 62

DISTRICT COURT OF QUEENSLAND CITATION: Crowbay Pty Ltd & Anor v Body Corporate for Southbank Chambers [2007] QDC 062 PARTIES: CROWBAY PTY LTD (ACN 010 818 390) (first appellant) & DIANE MARIE WRIGHT (second appellant) v BODY CORPORATE FOR ‘SOUTHBANK CHAMBERS’ CTS 25675 (respondent) FILE NO/S: BD3182/06 DIVISION: Civil PROCEEDING: Appeal ORIGINATING COURT: District Court Brisbane DELIVERED ON: 13 April 2007 DELIVERED AT: Brisbane HEARING DATE: 27 March 2007 JUDGE: Ryrie DCJ ORDER: 1. The appeal is dismissed 2. The appellants to pay the respondent’s costs of the appeal to be assessed on a standard basis. CATCHWORDS: APPEAL – Body Corporate and Community Management Act 1997– appeal from adjudicator – common property – change of use – exclusive use – by-laws – whether adjudicator failed to correctly apply and interpret section 60 of the Act – whether adjudicator failed to observe the rules of natural justice – whether adjudicator erred in determining that a body corporate by ordinary resolution could give consent to a lot owner’s exclusive use area as a bar and licensed premises. Body Corporate and Community Management Act 1997, ss 35, 60, 61, 159, 269, 270 & 289(2) Body Corporate and Community Management (Standard Module) Regulation 1997, s159 -- 1 of 8 -- 2 Integrated Planning Act 1997, s3.2.1(3), 4.1.2 & Part 3 COUNSEL: Mr A Skoien for the first appellant Mr B G Cronin for the respondent SOLICITORS: D M Wrights & Associates for the first appellant Redchip Lawyers for the respondent Introduction [1] This is an appeal from a decision by an adjudicator pursuant to s.289(2) of the Body Corporate and Community Management Act 1997. The appellants had applied to the commissioner for orders to the effect that the last recorded community management statement for the relevant scheme (‘3rd CMS’) was invalid on the basis that it did not have the relevant local government notation on it and as a consequence, any motions passed by the Body Corporate for Southbank Chambers (‘respondent’) in reliance of the 3rd CMS (Resolutions 2 and 4) were invalid. The appellants also sought a determination that the respondent did not have the power to consent to a material change of use in respect of Lot 1’s exclusive use area (Resolution 3). On the 18th September 2006, the adjudicator hearing the application dismissed it. [2] The appellants’ grounds of appeal before this court have been set out in succinct form in the Certificate of Readiness which was filed 19th January 2007. Both counsel used it as a useful reference tool for the purpose of the hearing. [3] Both parties also provided, for the court’s consideration, detailed and helpful written submissions. Background Facts [4] The appellants are the registered owners of Lot 3 in respect of a four (4) lot commercial premises (described as CTS 25 675 604-610) in South Brisbane. Each lot received a right of exclusive use of an area situated at the rear of that respective lot under the last CMS recorded. The 1st CMS recorded in respect of the premises (exhibit 1 Tab 10), contained a ‘community management statement notation’ from the local government (‘the notation’). The 2nd CMS recorded for the scheme did not contain that notation. (exhibit 1 Tab 11). Nor did the last CMS recorded. By-law 15 in set out in the 1st CMS provided for the exclusive use area (situated at the rear of the premises) to be used for car parking use only. Each lot was granted two car spaces each and the right to use two visitor car spaces. In the 2nd CMS (exhibit 1 Tab 11) that exclusive use by-law was re-numbered to by-law 19 but essentially remained unchanged in substance. By-law 19 in the 3rd CMS (exhibit 1 Tab 12) however altered that last position in several ways. The restriction on the use of the exclusive use area for car parking only was removed and in its’ place, an allocation of the whole of the portion of the common property situated behind each lot was made for that respective lot’s exclusive use. The question of the 3rd CMS’ validity however only arose after the owners of Lot 1 indicated an intention of their wish to operate a licensed bar and restaurant on their lot. That intention also included the use of the exclusive use area which had been allocated to it under by-law 19. At an extraordinary general meeting held on the 21st March 2006 by the respondent, three -- 2 of 8 -- 3 resolutions (2, 3 and 4) were passed (Lot 3 being the only dissenter). Resolution 2 consented to improvements being made to the exclusive use car park of Lot 1, including fencing off the exclusive use area and erecting an awning over that area. Resolution 3 consented to the use of Lot 1 and its exclusive use area as a bar and licensed premises and Resolution 4 consented to certain alterations to Lot 1. A development application had been submitted by the owners of Lot 1 with the Brisbane City Council for approval. The Council’s decision in respect of that application is however in abeyance as a result of this dispute. [5] The appellants’ argument before the adjudicator were, in essence, the same as they are now, with the exception of the ‘natural justice’ argument now been argued before this Court. [6] Essentially what the appellants argue is that even though the 3rd CMS was recorded with the Land Registry, because it did not have the notation required in accordance with s.60 and 61 of the Body Corporate and Community Management Act 1997, reprint no 7D. (‘BCCM Act’), it is invalid and consequently of no effect. It follows that if that assertion is correct, then the motions passed in reliance of that CMS (resolutions 2 and 4) would also be invalid. The appellants also argues that the respondent did not have the power to consent to a material change of use in respect of Lot 1’s exclusive use area in the manner which it did ( resolution 3), and as such, that motion is also invalid. The appellants further argue before this court that the appellants were denied natural justice as a result of adjudicator’s failure to properly investigate the matters raised in the dispute, by her imposition of the burden of proof upon the appellants to show why the relevant exclusionary section of the Act (s.60(6)) did not apply, by the unilateral receipt of correspondence from the solicitors acting on behalf of Lot 1 and the comments she made in her reasons for her decision regarding why the appellants may have been taking the stance they were indicative of bias, and as such, the whole of her decision ought to be set aside. [7] Accordingly, I shall deal with each of these issues as identified in the Certificate of Readiness in the following order for convenience. [8] Exhibit 1 contains the material that was placed before the adjudicator for her consideration in respect of the dispute. Issue 1(a) (i), (ii), (iii) and (b) – Did the Adjudicator fail to correctly apply and interpret s.60 of the BCCM Act 1997? [9] On any view of the reasons given for the decision, it is clear that the adjudicator considered that two interpretations were open in respect of s.60 of the BCMM Act. The adjudicator properly identified that s.60(1) established a prima facie requirement that a notation is required for any CMS to be recorded. She also properly identified that ss.(6) of s.60 provided several exemptions to that requirement, significantly s.60(6)(a) (which in turn refers back to s.60(4)(a),(b) and (c)). [10] There is consensus between the parties before this court that the second interpretation (page 6, 1st paragraph of the decision) primarily relied upon in support of her decision on this issue was not one that was open if proper regard is had to the plain and ordinary meaning of that section as a whole. Counsel for the respondent properly conceded this point and I agree. However, that is not the end of the matter -- 3 of 8 -- 4 as it is clear that the adjudicator also relied upon the 1st interpretation which she had made, in support of her decision. The appellant argue that the adjudicator fell into error even on this interpretation when she failed to correctly to apply and interpret the relevant provisions of s.60 which were under consideration. The appellant argues that even though the adjudicator properly identified that there was a difference between the 2nd and 3rd CMS, as it related to by-law 19, the adjudicator fell into error when she determined that there it wasn’t a ‘difference’ of a kind that would fall for consideration in respect of the matters set out in s.60(4)(a)(b) or (c).The appellant submits that the very nature of the changes made to by-law 19 as set out in the 3rd CMS clearly supports the view that those changes were of a type which the local authority could have regard to for identifying an inconsistency of a type specifically envisaged by s.60(4)(a), (b) but more particularly (c). In support of that argument, the appellant pointed to the fact that under by-law 19 as it currently stands, the changes which have been made under that by-law allows for any use whatsoever of the exclusive use area by an allocated lot owner as opposed to that use being restricted to car parking usage only as it had been previously. The appellant argues that by ‘opening’ that exclusive use area to any use ‘whatsoever’, those changes in themselves create an issue of a type contemplated by s.60(4) (a),(b) or (c) and as such, the 3rd CMS ought to have received the local authority’s notation prior to its’ registration. The appellant makes that submission even notwithstanding the effect of clause 3 of by-law 19. While the argument put forward by Counsel for the appellant, at first blush, certainly holds some attraction, I am unable to accept that submission. It ignores in my mind, the true meaning of s.60(6) and s.60(4) and its’ intended effect, particularly when regard is had to s.60 as a whole. In this instance, clause 3 of by-law 19 specifically states that owners may only use an exclusive use area for the purposes permitted by the town planning scheme of the local government and other relevant bodies and shall ensure that all necessary consents, permits and approvals are obtained before commencing such use. The adjudicator was of the view that clause by-law 19 therefore covered the situation, whether it was accepted or not, that the use of that area might include tandem car parking arrangements, a matter relevant under the local government town planning scheme, clause (3) of by-law 19 would cover that situation together with any other situation where the proposed use might be of a kind that a relevant government body could have regard to for identifying whether there was an inconsistency between that provision in the 3rd CMS and any of the matters set out in s.60(4)(a), (b) or (c). While there is no case authority relating to the interpretation of s.60 of the Act which may have been of assistance, I am of the view that the adjudicator was correct in her approach to s.60 and as such, did not fall into error as asserted. [11] Accordingly, these grounds must fail. Issue 1 (d) and (e) – Did the adjudicator fail to observe the rules of nature justice? [12] s.269 of the Act requires that an adjudicator act with as little formality and technicality as is consistent with a fair and proper consideration of an application, although he or she must observe natural justice. [13] The appellants argue that the adjudicator failed to observe those rules when she placed the onus upon the appellants to show why the relevant exclusionary provision (s.60(6)(a) did not apply (see page 6 last paragraph of the reasons for decision). In support of that submission, the appellants point to the matters which were not placed before her by the appellants for consideration and argue that if the -- 4 of 8 -- 5 adjudicator thought she was unable to make a determination without that evidence, then she ought to have found that prima facie, a notation was required in respect of the 3rd CMS. I cannot agree with that submission. On any reading of the adjudicator’s reasons in respect to this issue, the adjudicator was simply setting out the basis upon which she says was the reasons that she was unable to make the determination which being sought by the appellants, namely that the use of an exclusive use area which could include tandem parking was therefore inconsistent with a lawful requirement of or approval given by the local government under the Integrated Planning Act 1997(‘IPA’) or its town planning scheme. The adjudicator quite properly, in my view, noted that it was not a matter within her jurisdiction to make. [14] The appellants further argue that the adjudicator ought to have informed the appellants in any event of any ‘equivocation’ on the part of the Brisbane City Council (as demonstrated in its’ letter dated 8th September 2006 to the solicitors for Lot 1), in order that the appellants could have then placed before her, any material on that issue so that the issue could be decided ‘one way or another’. I cannot accept that submission. Firstly, the contents of that letter referred to by the adjudicator (page 7 2nd paragraph of the reasons for decision) simply states the council’s position which was that it did not consider (quite properly) that it was an issue which it could make a determination on at that point. Secondly, the issue for determination before the adjudicator (namely whether or not the 3rd CMS ought to have contained a local government notation before it was recorded) was, in any event, only able to be resolved by reference to s.60 of the Act and a determination of its’ intended meaning, which is exactly what the adjudicator did. [15] The appellants also argue that they were denied natural justice when the adjudicator unilaterally received the correspondence referred to above from the solicitor for Lot 1 and an earlier communication from that same solicitor on 12th September 2006. (page 2 paragraph 5 of the reasons for decision). The appellants say that those communications ought to have been disclosed to the appellants and relies on case authorities in support of its submission that the receipt of those communications in those circumstances, gives rise to a reasonable apprehension of bias. [16] While it is true that a receipt by a (judge) of a private communication seeking to influence the outcome of litigation before him places the integrity of the judicial process at risk, it is also true that an examination of the circumstances of each case is also important. That examination will include the nature of the communication, the situation in which it took place, its relationship to the issues for determination and the nature of the disclosure made by the judge: Re JRL; Ex parte CJL (1986) 161 CLR 342 per Mason J at 351. [17] In this case, the nature of the communications included a letter sent (8th September 2006) by the solicitor on behalf of the owner of Lot 1 and an earlier oral communication (12th September 2006) by them again on behalf of the owner of Lot 1 to the Commissioner’s Office indicating that the Brisbane City Council had taken a neutral position with respect to the development application which it had earlier received from Lot 1 and that it would not be processing it now until the dispute had been resolved. Both of those communications were only disclosed by the adjudicator in her reasons for decision. While the appellants consider that such failure gives rise to a reasonable apprehension of bias, I am unable to agree. While I do agree that a more prudent course would have been the disclosure of those -- 5 of 8 -- 6 communications to all parties prior to the decision being given, it is also true that the relationship of those communications to the issues for determination is also a relevant factor when determining whether or not a reasonable apprehension of bias has been raised. Here the only issue for determination as it relates to this point was whether the 3rd CMS recorded was invalid by reference to s.60 of the Act. Both of the communications received do no more, in my view, than to confirm the council’s position, that it was not a matter which it could resolve, but rather, a matter which ultimately had to be determined by the adjudicator. [18] Accordingly, this submission cannot succeed. [19] The appellant further submits (in its written outline) that the comments (page 12 paragraph 2 of the reasons for decision) made by the adjudicator when considering s.270 of the Act (dismissal of applications) also give rise to a reasonable apprehension of bias. That submission however ignores the fact that the evidence before the adjudicator regarding whether the appellants had been acting vexatiously or not, when read as a whole, does support a view that there are indications that the appellants had sought to stall the business plans of Lot 1 and as such, a reasonable inference that was also open, was that the appellants were seeking to pursue their own business arrangements inconsistent to that of the proposed use of Lot 1’s exclusive use area. [20] Accordingly, this submission cannot succeed. Issue 1 (c) – Did the adjudicator fall into error when she determined that the Body Corporate could, by ordinary resolution (3:1), give consent to the use of Lot 1’s exclusive use area as a bar and licensed premises? [21] The appellants argue that because Lot 1’s proposed development application for the bar and licensed premises involves the exclusive use area, the Body Corporate can only give its’ consent to such use through an ordinary resolution without dissent rather than by ordinary resolution by majority. The appellants argue that the Body Corporate must obtain the consent of all of the owners of that common property before any development of a kind proposed by Lot 1 can be approved. The appellant referred to s.3.2.1(3) of IPA which provides that a development application must contain, or be supported by, the written consent of the owner of the land to the making of the application if the application is for, amongst other matters, a material change of use of premises. [22] Both parties agree that the proposed development of Lot 1 will also include the Lot 1’s allocated exclusive use area situated behind it. Both parties also agree that the designation of common property of the Body Corporate as an exclusive use area for a lot owner’s use does not alter the fact that the area remains part of the common property and held by the owners of the lots as tenants in common: s.35 BCCM Act. The appellant has relied on a number of case authorities in support of its’ submission that the Body Corporate must first obtain the consent of all of the owners of the common property in order that it may approve any use of a kind proposed by Lot 1. [23] Most, if not all of those authorities however relate to decisions which have been given by the Queensland Planning and Environment Court exercising its’ jurisdiction and as such, appear more to lend support to the submissions made by -- 6 of 8 -- 7 the respondent on this issue. The respondent had submitted that all that those cases demonstrate is, that any question regarding whether valid consent has been given in respect of a development application in terms of s.3.2.1(3) of IPA is solely within the province of a local authority and the Planning and Environment Court pursuant to s.4.1.2.of IPA, and as such, it matters not about the validity of the resolution which has been passed by the Body Corporate. The respondent submits that even if resolution 3 on its’ face authorises the granting of consent, whether that consent is valid or not for the purpose of IPA is another matter entirely and not one which is within the province of the adjudicator (or even this court) to make. [24] The appellant, on the other hand, relies on those authorities in support of their submission that the Body Corporate simply cannot give its’ consent in the manner which it has unless there was a resolution without dissent as the (purported) consent obtained by resolution by majority was in respect of common property, the ownership of which is held by all lot owners as tenants in common. [25] As the appellant stressed, neither the adjudicator or this court is being asked whether or not the development application made is a ‘properly made application’ for the purposes of IPA, but rather it is asked to consider whether or not the resolution (3) passed by majority by the body corporate is a valid resolution or not. [26] The determination of this issue has not been an easy one, particularly in view of the fact that both Counsel have been unable to refer me to a case which specifically deals with this point. [27] An examination of the BCCM Act certainly provides power to a body corporate to authorise an owner of a lot to make an improvement to the common property for the benefit of the owner’s lot: s.159 of the Act and s.114 of the Body Corporate and Community Management (Standard Module) Regulation 1997. [28] ‘Improvement’ is defined in the Act as including: (a) the erection of a building; and (b) a structural change; and (c) a non-structural change. [29] While it would appear that resolutions 2 and 4 relate to improvements proposed in respect of Lot 1 and its’ exclusive use area, the same cannot be said in respect of resolution 3. That resolution appears to relate to the proposed use of lot 1 as a bar and licensed premises rather than simply with respect of any improvements which are to be made for that purpose. Under the Integrated Planning Act 1997 reprint no. 7, a ‘material change of use’ is relevantly defined in Part 3 Definitions generally as (i) the start of a new use of the premises; or (iii) a material change in the intensity or scale of the use of the premises. That definition is therefore different to the definition relating to an improvement under the BCCM Act. [30] At first blush, the argument proposed by the appellants has some attraction in support of the argument that the body corporate simply cannot pass a resolution (by majority) giving its’ consent to the use of Lot 1 as a bar and premises. To adopt the position contended for by the appellants however would, in my view, have the effect of leading to a situation that a lot owner in a scheme will rarely, if ever, be able to make a development application (with the necessary consent) with respect to -- 7 of 8 -- 8 his own lot and its’ exclusive use area (involving common property) unless he obtains the consent of the body corporate through a resolution without dissent. That in my view would have the effect of allowing one lot owner of the scheme to withhold his or her consent in respect of any other lot owners’ proposed development application involving common property even notwithstanding the majority of the other lot owners in the scheme may well have been in favour of the development going ahead, as indicated by the vote taken at a meeting which had been held by the body corporate for the purpose. [31] On balance then, I am of the view that the conclusion by the adjudicator on this issue (page 11 paragraph 4 of the reasons for decision) is the correct one. [32] Accordingly, this ground cannot succeed. Orders 1. The appeal is dismissed. 2. The appellants to pay the respondent’s costs of the appeal to be assessed on a standard basis. -- 8 of 8 --