Battin v Body Corporate for Amity [2006] QDC 278

DISTRICT COURT OF QUEENSLAND CITATION: Battin & Battin v Body Corporate for Amity Community Titles Scheme 17543 [2006] QDC 278 PARTIES: Linda Battin (Applicant) & Joan Battin (Applicant) v Body Corporate for Amity Community Titles Scheme 17543 (First respondent) & Chris Jacobs (Second Respondent) FILE NO/S: BD 2728/05 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: District Court DELIVERED ON: 18 August 2006 DELIVERED AT: Brisbane HEARING DATE: 1 August 2006 JUDGE: Forde DCJ ORDER: 1. That, pursuant to section 48 of the Body Corporate and Community Management Act 1997, the lot entitlement contribution schedule for Amity Community Titles Scheme 17543 be adjusted so that the respective contribution lot entitlements recorded in the Community Management Statement are as follows: LOT NUMBER CONTRIBUTION LOT -- 1 of 15 -- 2 ENTITLEMENT 1 208 2 309 3 140 4 140 5 141 6 141 7 143 8 141 9 141 10 141 11 141 12 196 13 195 14 195 15 196 16 195 17 195 18 198 19 196 20 195 21 195 11 195 23 195 24 195 25 196 26 196 27 195 28 195 29 195 30 195 31 195 32 196 33 196 34 195 35 195 36 195 37 195 38 195 39 196 40 196 41 195 42 195 43 195 44 195 45 195 46 196 47 196 48 195 -- 2 of 15 -- 3 49 195 50 195 51 195 52 195 53 196 TOTAL 9991 2. That, pursuant to section 48(9) of the Body Corporate and Community Management Act 1997, the Body Corporate for Amity Community titles Scheme 17543, as quickly as practicable (but not later than 21 days after the date of this order), lodge with the Registrar a Request to Record a New Community Management Statement adopting the lot entitlement contribution schedule as set out in paragraph 1 above. CATCHWORDS: REAL PROPERTY – strata and related titles and occupancy – adjustment of contribution lot entitlement schedule – relevant considerations – Body Corporate and Community Management Act 1997 (Qld), ss 48, 49 Uniform Civil Procedure Rules, r394 Fischer v Body Corporate for Centrepoint Community Titles Scheme 7779 [2004] 2 Qd R 638 Surfers Hawaiian [2003] QBCCM140Cmr 251 UI international Pty Ltd v Body Corporate for Raby Bay Harbour Community title Scheme 30942 [2005] QDC 244 COUNSEL: Mr Atkinson for the Applicants Ms Heyworth-Smith for the Respondent SOLICITORS: Kinneally Miley for the Applicants Mahoney Lawyers for the Respondents Introduction [1] The “Dockside” area is a residential precinct and is predominantly used for permanent accommodation but includes some short term accommodation, -- 3 of 15 -- 4 restaurants, cafes and other smaller retail outlets.1 The respondent is the body corporate of the residential tower known as “Amity” situated in the “Dockside” precinct at 35 Ferry Street, Kangaroo Point. [2] The applicants own lots 10 and 11 of the respondent body corporate. They operate from those lots, the outlets of “Asian Spice” and “Linda’s Deli Bar”. The contribution schedule lot entitlement for Lots 10 and 11 are 246 which is 4.92% of the aggregate and 200, which is 4% of the aggregate contribution schedule lot entitlements respectively.2 The present application seeks to alter the Contribution Lot Entitlement for Lots 10 and 11 to 141 each. [3] The respondent was created by Building Units Plan No 101701 on 24 January 1995. The residential tower was built approximately six years after the commercial/retail lots were constructed. The plan creating the body corporate was registered upon the completion of the construction of the residential tower.3 The scheme which goes to make up Amity CTS 17543 includes car parks, commercial/ retail and the residential tower. [4] There are public or primary thoroughfare areas which adjoin the scheme that forms a central square for a number of schemes in the “Dockside” precinct. They allow access to the residential towers, the boardwalk and the commercial/retail areas. The primary thoroughfare area is part of the common property of the “Dockside Hotel Community Titles Scheme”. The residents of the respondent body corporate have rights of access to enter the said area. Also, easements provide rights of way over the areas to members of the public.4 [5] As stated by Mr. Sheehan: 5 The easements establish cost sharing arrangements for the repair and maintenance of the primary thoroughfare areas. Pursuant to the easements, the Amity Body Corporate makes annual primary thoroughfare contributions to the “Dockside Hotel Community Titled Scheme. 1 Exhibit LMB-2 to the Affidavit of Linda Battin sworn on 22.07.05 and which is the report of Mr. Sheehan p.4. 2 Ibid.para.9. 3 Exhibit LMB-2 p.4. 4 Ex. LMB-2 p.4 5 Ibid.p. 4. -- 4 of 15 -- 5 Principal access to the residential lots and the residential lot’s car parking is via Prospect Street. Access to the commercial lots is via the primary thoroughfare. [6] Under the terms of the Dockside Precinct Management Area, Control and Management Deed, each member, which includes the respondent, has agreed to pay charges “to allow Dockside to carry out general duties for the upkeep, maintenance and security of, and other services for the Dockside Precinct Management Area”.6 Issue for determination [7] The only issue for determination in this case is on what basis, if any, should the owners of the lots of the respondent contribute to costs of maintaining etc. the primary thoroughfare areas. The primary thoroughfare areas are defined in the easements as follows: Those parts of the parcels within Dockside that comprise what is known within that development as the town square, the public boardwalk and the access ways from parcels to Cairns Street, Ferry Street and Goodwin Street. [8] In the present case, there is strangely unanimity between the experts as to how the contributions should be made. In his report, Mr. Sheehan for the applicants states: From a review of the easements that create the public thoroughfare areas, I am of the view the public thoroughfare contribution paid by the Amity Body Corporate to the Dockside Hotel Body Corporate should be shared equally between all lots [9] In justifying his decision, Mr. Sheehan accepts that the commercial/retail lots would benefit more from the public access, but on the other hand they contribute additional licence fees to the Dockside Hotel Body Corporate. Those licence fees relate to the use of the areas adjacent to their lots. This includes, of course, lots 10 and 11. Mr. Sheehan correctly points out that the amenity issue is not relevant to the present issue.7 The contribution on an equal basis would mean that the levies for lots 10 and 11 would fall from $18,083.00 and $14,694.00 respectively to $6,931.00 per 6 Report of Mr. Linkhorn para.3.4. 7 Fischer v Body Corporate for Centrepoint Community Titles Scheme 7779 [2004] 2 Qd R 638 at para.9. -- 5 of 15 -- 6 lot.8 However, Mr Linkhorn states that the figures are $13, 522.47 and $10,993.88 (respectively) to $3,878.83.9 [10] The respondent’s solicitors obtained a report from a Mr. Linkhorn.10 Mr. Linkhorn contends that the commercial lot owners obtain a much greater benefit from the primary thoroughfare arrangements than the residential owners, and that they should therefore contribute a greater proportion of the costs associated with those arrangements. However, he concedes that there is no supporting documents as to the costs of those arrangements, and so those costs can only be borne equally amongst the lot owners absent such detail.11 Until that occurs, Mr. Linkhorn says that there can be no other calculation to determine the Contribution Schedule of Lot Entitlements.12 Legislative requirements [11] The relevant provisions of the Act are as follows: Section 48 … (5) 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. … (9) If the court or specialist adjudicator orders an adjustment of a lot entitlement schedule, the body corporate must, as quickly as practicable, lodge a request to record a new community management statement reflecting the adjustment ordered. Maximum penalty for subsection (9)—100 penalty units. Section 49 (1) This section applies if an application is made for an order of the District Court or a specialist adjudicator for the adjustment of a lot entitlement schedule. 8 Para.12 of affidavit of L. Buttin op.cit. 9 Ex A to the affidavit of Mr Grealy sworn 12 July 2006 and filed by leave. 10 Exhibit A to the affidavit of Mr. Grealy filed 13 December 2005. 11 Ibid. paras5.4 and 5.6. 12 Ibid. para. 6.8. -- 6 of 15 -- 7 (2) This section sets out matters to which the court or specialist adjudicator may, and may not, have regard for deciding— (a) for a contribution schedule—if it is just and equitable in the circumstances for the respective lot entitlements not to be equal; and (b) for an interest schedule—if it is just and equitable in the circumstances for the individual lot entitlements to reflect other than the respective market values of the lots. (3) However, the matters the court or specialist adjudicator may have regard to for deciding a matter mentioned in subsection (2) are not limited to the matters stated in this section. (4) The court or specialist adjudicator 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. (5) The court or specialist adjudicator may not have regard to any knowledge or understanding the applicant had, or any lack of knowledge or misunderstanding on the part of the applicant, at the relevant time, about— (a) the lot entitlement for the subject lot or other lots included in the community titles scheme; or (b) the purpose for which a lot entitlement is used. (6) In this section— relevant time means the time the applicant entered into a contract to buy the subject lot. subject lot means the lot owned by the applicant. [12] The onus is upon the respondent to prove that the costs relating to the respondent’s contribution to the costs of maintaining the primary thoroughfare areas should be shared other than on an equal basis. That is, that it would be just and equitable that an alternative basis be chosen which would then be used to determine the Contribution Lot Entitlement Schedule. In the present case, the respondent has assumed a heavy burden given that both experts are ad idem on the material presented to them. Objections to evidence [13] The respondent’s counsel objected to certain evidence in the applicants’ material. Those objections are set out in Exhibit 4. I allow those objections in general. In relation to p. 9 of the report of Mr. Sheehan, the evidence is rejected to the extent -- 7 of 15 -- 8 that it swears the issue. In relation to the report of Mr. Sheehan dated 30 November 200513 the objection is allowed save for the following: I further note that the primary thoroughfare contribution would go towards many “static” expenses of maintaining the primary thoroughfare areas. This means that the expenditure is necessary to maintain the primary thoroughfare to a particular standard irrespective of use or non use. An example of this type of expenditure is gardening and landscaping costs. Gardens grow irrespective of the number of people who are in the garden or looking at the garden from afar. In this regard, the decision to exercise a right of use does not impact upon the cost. Consequently, it is inappropriate to vary the report based on whether various individuals choose to exercise their rights. [14] The respondent sought to lead evidence from absentee landowners who had little or no familiarity with the amount of use and by whom of the primary thoroughfare areas. This evidence was disallowed but evidence from other owners or tenants was allowed to be given and its admissibility reserved. Having considered the matter, such evidence seems relevant.14 What weight is given to it may depend upon a determination of the broader questions: If a lot owner has a right to use the areas and fails to do so, does it mean that the contribution for its upkeep should be less? Because members of the public have a right to use the areas, does that mean that the residential lot owners do not have to contribute on an equal basis with the commercial lot owners? Evidence presented by the respondent [15] The general thrust of the evidence of the residents called by the respondent was that they used the primary thoroughfare areas very occasionally or not at all.15 Some of the witnesses accepted that they used the commercial/retail complex from time to time. Mr. Woodhead is the owner of a commercial lot. He said that his customers used the primary thoroughfare areas. The witnesses accepted that they got the benefit of the space around the building16 and the landscaped areas17 As was put to Mr. Gibbs, the landscaped area near Amity was the gathering area when there was a 13 Exhibit MHR-1 to the affidavit of Mr. Ruddy filed 5 December 2005. 14 See also UCPR r394(1) which allows the court to dispense with the strict rules of evidence if unnecessary expense and inconvenience is involved. I am satisfied that rule applies to the present case. 15 Affidavits and oral evidence of Messrs. Jacobs, Sackett, Gibbs, Oulton and Woodhead. 16 Mr. Gibbs T.p.42.10-20. 17 Mr. Gibbs T.p.41.1-4; Mr.Sackett T.45.10-40. -- 8 of 15 -- 9 fire alarm. 18 Mr Gibbs took advantage of the dock area which was accessed by the easement as was the ferry. [16] Other evidence led from the respondent related to the pedestrian use of the area and where most of the pedestrian traffic went. The primary material can be found in two affidavits of Se Hee Kim and Harriet Park.19 Each of those witnesses made observations. For convenience, the solicitor for the respondent reduced the primary material into categories.20 Relevantly, of the several hundred persons accessing the Amity block and surrounds, only 4.53% accessed the residential entrances to Amity from Ferry Street in the morning and 8.83% in the afternoon. Persons accessing Ferry Street from the residential exits of Amity were 4.34% in the morning and 5.05% in the afternoon. The commercial areas attracted the vast majority of pedestrian traffic in the area. The observations were made on Tuesday 4 April 2006. [17] As was pointed out by Mr. Linkhorn, it is difficult to quantify the comparative use of the primary thoroughfare areas. Both the public and the residents enjoy the right to use such areas. Public easements allow such use by the public. The residents enjoy not only the use, but the added enjoyment of having a pleasant, clean and secure environment. The security of the area whether it be appropriate lighting or personnel cannot be underestimated. Such items would apply not only to the residents but their visitors. The ready access to the boardwalk during the day or evening is available to the residents and their visitors who may park in the adjacent street or carparks. The licence fee payable by the commercial lot owners to Dockside is an acknowledgment of the additional use made by those lot owners to the areas adjacent to their outlets. Submissions of parties [18] It was submitted that the residential owners do not want to and do not use the primary thoroughfare areas very much. The residential owners do not get the same benefit as the commercial owners. It was submitted that where there is a disproportionate benefit, then equality as far as the costs are concerned is not fair 18 T.41.20-25. 19 Filed on 13 April 2006. 20 Exhibit 5. -- 9 of 15 -- 10 and equitable. Reference was made to Fischer’s case.21 What that case says, in fact, is: [30] These materials make it tolerably plain that 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 of 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 titles 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 inquiry is the extent to which an apartment unequally causes costs to the body corporate. [32] the third consideration is that if this principle not be the applicable one then there is no basis on which applications for adjustment of contribution lot entitlements schedules can consistently be made. As the evidence in this application shows, if the inquiry is limited to the extent to which an apartment creates costs, or consumer services, above or below the average, one can readily determine what the contribution lot entitlement should be the high degree of similarity in the reports of Mr Sheehan and Mr Linkhorn demonstrate this. If the inquiry be wider and include such nebulous criteria as the structure of the scheme, and the purposes for which they are used, there is no intelligible bases on which vast variety of circumstances might be relied upon to depart from, and therefore erode, the principle said to be paramount, that there should be an equality of entitlements. 22 [19] As both experts accept in the present case, at least when they wrote their reports which are before the court, there are no details upon which one could proceed to divide the costs other than on an equal basis. Mr. Linkhorn hinted that if there were figures provided, he might proceed on a different basis. He was not called to interpret the effect of the survey as summarised by Mr. Grealy in Exhibit 5. The reason for that might be that it is difficult to quantify the benefit flowing to the residents in comparison to the commercial lot owners. If one looks at the present 21 Fischer v Body Corporate for Centrepoint Community Scheme 7779 Op. Cit at 645. 22 Ibid. -- 10 of 15 -- 11 figures as discussed above,23 then it seems that Lots 10 and 11 have been paying an unusually unfair and inequitable amount to date. The fact that both experts accept the equality approach confirms that it is the appropriate one to adopt based on the present evidence. In other words, there is no intelligible basis to proceed other than to divide the costs equally. [20] One other point raised by the respondent’s counsel in her helpful address was that the primary thoroughfare areas and the commercial lots existed some four years before the residential lots were built. It was submitted that the sharing of the cost paid to Dockside equally amongst all 42 lots would be a “huge windfall to the commercial lot owners” who did not have the benefit of sharing the costs prior to the residential tower being built.24 It must be remembered that the scheme was set up before the Act came into effect. Counsel for the applicants stated that there was “no rhyme or reason” to the old schedule25 There is some merit in that as the provisions of ss 48 and 49 specifically provide for what approach to adopt. Its application in Fischer’s case26 is also illustrative and binding on this court. It was further submitted that the residential lot owners receive many intangible benefits from having such an open, landscaped and secure area. Mr Sheehan summarised it as follows:27 You heard his Honour ask before whether there are similar developments to this one. Have you had experience in that regard? – Yes, I have. The issue when one is developing an area of land is to present a product which is at a high level to encourage people to come there and to give those that are resident in the area amenity. The open space is generally public open space maintained by local authorities. The challenge for developers is to have the public open space maintained in perpetuity to a very high standard. What we have at Dockside is a mechanism to allow what is effectively public open space to be maintained to a very high standard because the stakeholders in the area, being those that are resident and property owners around it, have this responsibility to contribute to costs by way of the easements. So they put money to maintain the area to keep up the amenity. Now that’s a satisfactory result for the Council because it’s not coming out of the rate base generally, and it’s a satisfactory result for residents because they get a much better place to live. 23 Para.8. 24 T.62.17. 25 T.63.7 26 Op. cit. 27 T21.42-22.5. -- 11 of 15 -- 12 [21] It was submitted by counsel for the applicants that the approach by the respondent would be to quarantine the use of the primary thoroughfare areas. That approach would be wrong, as the residential lots do get some benefit.28 He relied upon the passage in Surfers Hawaiian:29 I expect that in the case of virtually every community titles scheme an argument can be mounted that it is fair and equitable for the contribution schedule lot entitlements not to be equal. For example, in the case of a 4 unit walk-up building with 2 units on the ground floor and 2 units on the first floor: • The carpet on the stairs is not used by the 2 ground floor units • The 2 ground floor units do not dirty the walls of the stairwell above the ground floor • The external walls of the top floor units are more expensive to paint than the walls of the ground floor units because of the need for scaffolding. I think it could hardly be said that the legislature intended that the contribution schedule lot entitlements should not be equal in the case of such a scheme. [22] That passage does illustrate that although a party may get little or no benefit from the condition of some item whether it be a carpet, a road or a garden, that equality in relation to maintenance is the primary position. The other position is where there is provision under the scheme for exclusive use. The cost of exclusive use of a lift or pool can be determined. Equality in that situation is not relevant. A different example is where members of the public use common areas seldom used by residents. For example, accessing a restaurant and using a car park which is part of a high rise building and which some residents may never use. The cost of maintaining the common areas which may be surrounded by landscaping is usually distributed equally. The present case is no exception. [23] Counsel for the respondent relied upon the decision of UI International Pty Ltd v Body Corporate for Raby Bay Harbour Community Titles Scheme 30942.30 In that case any construction on the building had stopped. The body corporate continued to incur expenses for administration, fire protection equipment, insurance and maintenance. The owner of four unfinished, unoccupied penthouse apartments applied to lower its contribution lot entitlement. There were also commercial 28 T.66.50-60. 29 [2003] QBCCM140Cmr 251 at [42] 30 [2005] QDC 244. Per Judge Tutt DCJ. -- 12 of 15 -- 13 offices and a function room. The original lot entitlement was based on area. His honour varied the lot entitlement schedule from 7 to 3. There was a lack of demand for services. It was submitted that the just and equitable provision of s49 ought to apply. [24] That case can be distinguished from the present case. UI Iinternational was set up under the pre- 2003 amendment and costs were distributed by area. In the present case the owners of the residential lots continue to enjoy benefits, as discussed, from their contributions. Both experts agree that the present contribution lot schedule is unfair and unequitable. The fact that less than 5% on a particular day go to the residential tower, overlooks the general benefits referred to by Mr Sheehan. [25] Counsel for the respondent argued that under the by-laws the residents were given no legal right or benefit over and above members of the public, and certainly not the obvious benefits of the commercial owners. The members of the public do not live in the precinct. The commercial lot owners are required to pay a further licence fee for areas adjacent to their lots to allow them to use tables and erect signs. [26] It was submitted that the residential lots are paying for a “higher level of finish”.31 That is probably correct. The ready access to commercial lots and the walkways for both residents and their visitors in pleasant surroundings coupled with some security is part of the overall scheme for which someone has to pay. I accept the expert opinion that those costs in this scheme should be shared equally amongst the lot owners. In that event, the Contribution Lot Entitlement Schedule should be adjusted in accordance with the originating application. Orders 1. That, pursuant to section 48 of the Body Corporate and Community Management Act 1997, the lot entitlement contribution schedule for Amity Community Titles Scheme 17543 be adjusted so that the respective contribution lot entitlements recorded in the Community Management Statement are as follows: LOT NUMBER CONTRIBUTION LOT ENTITLEMENT 1 208 2 309 31 T.67.29. -- 13 of 15 -- 14 3 140 4 140 5 141 6 141 7 143 8 141 9 141 10 141 11 141 12 196 13 195 14 195 15 196 16 195 17 195 18 198 19 196 20 195 21 195 11 195 23 195 24 195 25 196 26 196 27 195 28 195 29 195 30 195 31 195 32 196 33 196 34 195 35 195 36 195 37 195 38 195 39 196 40 196 41 195 42 195 43 195 44 195 45 195 46 196 47 196 48 195 49 195 50 195 51 195 -- 14 of 15 -- 15 52 195 53 196 TOTAL 9991 2. That, pursuant to section 48(9) of the Body Corporate and Community Management Act 1997, the Body Corporate for Amity Community titles Scheme 17543, as quickly as practicable (but not later than 21 days after the date of this order), lodge with the registrar a Request to Record a New Community Management Statement adopting the lot entitlement contribution schedule as set out in paragraph 1 above. -- 15 of 15 --