Cairns Aquarius BUP 177, Re [1995] QSC 142

IN THE SUPREME COURT OF QUEENSLAND O.S. No. 444 of 1995 Before the Hon. Mr Justice Thomas [Re Building Units and Group Titles Act 1990] IN THE MATTER of the Building Units and Group Titles Act 1990 - and - IN THE MATTER of Order 64 Rule 1A and Rule 1BB of The Rules of the Supreme Court - and - IN THE MATTER of an application by the proprietors Cairns Aquarius BUP 177 REASONS FOR JUDGMENT - THOMAS J. Judgment delivered 7 July 1995 CATCHWORDS: BUILDING UNITS - by-laws - exclusive use of part of common property - by-law granting rights in favour of lot 3 owned by manager - whether by-law permitted body corporate by ordinary resolution to revoke such rights when management agreement terminated - Building Units and Group Titles Act 1980, ss. 30(7), 30(9) and 46. Counsel: J.D. McKenna for the applicant J.C. Bell QC for the respondent Solicitors: Phillips Fox for the applicant Teys McMahon for the respondent Hearing date: 5 July 1995 -- 1 of 7 -- IN THE SUPREME COURT OF QUEENSLAND O.S. No. 444 of 1995 Before the Hon. Mr Justice Thomas [Re Building Units and Group Titles Act 1990] IN THE MATTER of the Building Units and Group Titles Act 1990 - and - IN THE MATTER of Order 64 Rule 1A and Rule 1BB of The Rules of the Supreme Court - and - IN THE MATTER of an application by the proprietors Cairns Aquarius BUP 177 REASONS FOR JUDGMENT - THOMAS J. Judgment delivered 7 July 1995 Cairns Aquarius is a high-rise block of units. From its inception in 1982 until 31 December 1994, its day-to-day management was undertaken by a series of companies pursuant to various management agreements. The respondent was the most recent of these and remains the proprietor of lot 3. To facilitate their task, all these managers had the exclusive use of a designated reception area on the ground floor of the block. Originally the manager's right to occupy this area was secured merely by a resolution of the applicant as follows: "That the Manager of the Body Corporate from time to time shall be entitled to exclusive use for himself and his licencees of the part of the common property in the foyer of the building known as the 'reception area'." However on 4 December 1985 the Body Corporate made a by-law by means of a special -- 2 of 7 -- 2 resolution without dissent. This was by-law 25, the true meaning of which is the main point in the present application. It states: "The Proprietor for the time being and from time to time of Lot 3 in Building Units Plan No. 177 shall have the right to the exclusive use and enjoyment for themselves and their licencees of the office area outlined in blue on the Plan attached hereto. No future resolution by the Body Corporate or its Council shall have the effect of revoking this resolution except and unless the Proprietor of Lot 3 at the time such resolution is proposed has not in existence, a Management Agreement in writing in respect of the management of the complex Aquarius, the subject of the aforesaid Building Units Plan to the intent that such office area shall be used incidental to the management of the said complex." It is common ground that the respondent's management agreement has been terminated as from 31 December 1994. The respondent claims that it remains entitled to the exclusive use of the reception area and that it cannot be deprived of this entitlement unless by-law 25 is repealed. It submits that under s.30(7) of the Building Units and Group Titles Act 1980 this cannot be done without its consent, which it will not give. The applicant does not contest that under s.30(7) the by-law may not be repealed unless there is a resolution without dissent and there is also the written consent of the proprietor of lot 3. The applicant contends however that on its true construction by-law 25 itself permits the termination of the rights otherwise given in the by-law, by means of a resolution of the Body Corporate when a specified condition operates. In other words by-law 25 on its face grants only a defensible right, and the right may be lost without repealing the by-law. My initial reading of by-law 25 left me with the impression that the exception in the second sentence raises an implied power, in the event that a management agreement is not in existence, for the Body Corporate or its council to pass a resolution revoking the exclusive use otherwise conferred by the by-law. Upon closer analysis, and with the benefit of legal argument, there are more loose thoughts and unsuitable terms in the by-law than I at first thought, but the main thrust and intention of the by-law remains clear enough. As is not -- 3 of 7 -- 3 uncommon in this situation, the by-law is badly drawn. It is desirable however that so far as is reasonably possible I attempt to give it business efficacy and practical effect. So far as the Building Units and Group Title Act 1980 is concerned, various amendments were made in 1988 and 1990 to some of the sections in question, but I do not understand any of them to be material to this determination. I accept that in construing the by-law I should have regard to the legislation as it stood at that time. Subsequent amendments may be looked at to see if any retrospective effect is required. It is to be noted that the resolution that the Body Corporate or Council is impliedly empowered to make is one that has "the effect of revoking this resolution". The reference to "this resolution" is in substance a reference to the positive effect of the by-law, which is contained in the first sentence, and in effect to the right to the exclusive use thereby given. The underlined words "have the effect of revoking this resolution" are important because they signify an effect rather than an actual repeal. It seems to me that it is clearly implied that in the event that a management agreement is no longer in existence there is an implied power to pass a resolution having the effect of revoking the benefit which the by-law would otherwise grant in favour of the proprietor of lot 3. The passing of such a resolution is one of the necessary facts or conditions which must occur in order to defeat the right to exclusive use otherwise conferred. In short it permits the Body Corporate by ordinary resolution, in a particular circumstance which is shown to exist here, to in effect revoke the resolution by terminating the right of exclusive use. These conclusions are aided by the express statement of the purpose or intent of the by- law, the intent being "that such office area shall be used incidental to the management of the said complex". Once the management has ceased there is no use to which the designated area may be regarded as incidental. This at least makes it sensible that there should be a conferral of a right to revoke the benefit in such a circumstance. -- 4 of 7 -- 4 On the construction contended for by the respondent, this intent would be defeated. Any recalcitrant ex-manager retaining ownership of lot 3 would be able to frustrate the future management of the building. It would mean that any ex-manager holding lot 3, even when its management agreement has been validly terminated, could frustrate any future management arrangements. The area in question is the strategic area upon which management arrangements and associated activities would logically take place. If the Body Corporate wished to appoint another manager either outside the building or another lot holder as manager, the new manager could not effectively operate because the non-managing owner of lot 3, on the respondent's submission, retains the exclusive right to this part of the common area, and can permanently withhold the necessary written consent and always prevent the passage of a "resolution without dissent" under s.30(7). Such a consequence is not one that should be lightly reached. Counsel for the respondent submitted that the by-law cannot be revoked without the respondent's consent (s.30(7)) and this is conceded by the applicant. However a resolution revoking the right of exclusive use granted in favour of the proprietor of lot 3 by by-law 25 does not revoke by-law 25; it merely exercises a power of defeasance which the by-law itself grants. Section 30(7) states: " Without limiting the generality of any other provision of this section, a body corporate may, with the consent in writing of the proprietor of a lot, pursuant to a resolution without dissent make a by-law in respect of that lot conferring on that proprietor the exclusive use and enjoyment of, or special privileges in respect of, the common property or any part thereof upon such terms and conditions (including the proper maintaining and keeping in a state of good and serviceable repair of the common property or that part of the common property, as the case may be, and the payment of money by that proprietor to the body corporate) as may be specified in the by-law and may, in like manner, make a by-law amending, adding to or repealing any by-law made under this subsection." I have underlined words which expressly contemplate that a by-law may contain conditions. Whilst the relevant conditions in by-law 25 are badly drawn, their effect as I have construed them would not seem to be beyond the type of conditions that might properly be contained in -- 5 of 7 -- 5 such a by-law. There is no issue between the parties concerning the validity of by-law 25. Counsel for the respondent further submitted that the scheme of the Act is to disclose to any interested party, such as a potential purchaser of a lot, any exclusive use of common property that has been conferred on a proprietor, and to permit the necessary information to be discovered by search of the registered plan. He submitted that such a scheme would be defeated if a right could be taken away without repealing the by-law and replacing it by another by-law after observing the procedures laid down in s.30(7). There is some attraction in this submission, but I do not discern any requirement that everything has to be discoverable by search of the registered plan. By reading by-law 25, any interested person would be put on enquiry as to whether any resolution has been passed capable of affecting the rights of the proprietor of lot 3 contained in the by-law. All resolutions of the Body Corporate are available to search, and there are statutory duties on the Body Corporate to keep minutes of resolutions (s.38D(1)), upon the committee (which has replaced the earlier references in the legislation to "council") to keep minutes of decisions (s.45(4)) and there is a right to inspect such documents (s.40(1)(b)(iv)). It was further submitted that by-law 25 enures as appurtenant to and for the benefit of and is binding upon the proprietor of lot 3. The submission continues that the proprietor of lot 3 is therefor responsible for the duties of the Body Corporate in respect of the designated common area (s.30(7A) and that such duties include keeping the office area in a state of serviceable repair. However it seems to me that upon the cessation of that proprietor's right to the exclusive use of the designated area those obligations would also cease (cf. s.30(9)). The submission is premised on the assumption that by-law 25 continues to confer benefits of exclusive use upon the respondent, and in my view in the events which have happened, if the Body Corporate passes an appropriate resolution revoking the existing rights to exclusive use, the premise will be falsified. The respondent's submission in my view would deprive the second sentence of by-law -- 6 of 7 -- 6 25 of any sensible effect, treating the first sentence as the only effective part. It was submitted that the second sentence could be given some meaning to the effect that no-one could move an resolution effectively revoking the exclusive use until the management agreement had ceased. Then, according to the submission, a motion could be put to revoke by-law 25 and it would have to be carried without dissent under s.30(7). However I do not think that this construction gives sufficient effect to the second sentence. Furthermore, a motion under s.30(7) of the Act to repeal a by-law could not be defeated or avoided by reason of a statement in the by-law itself that it was not to be amended until a particular event happened. Counsel for the respondent further submitted that the reference to "or its Council" in the by-law is inappropriate. I agree with this submission. It should now be taken as a reference to "the committee". A committee does not have the power to deal with a matter that would alter the rights, privileges or obligations of proprietors (s.46(1)(b) s.46(2)). In my view the by-law did not have the power to confer upon the council or the committee such a power. Such an objection does not however apply to the Body Corporate. In my view the proper construction of the by-law requires the severance of the words "or its Council", such words being ultra vires. This defect does not in my view affect the balance of the by-law or require any greater reading out. I shall declare that the applicant Body Corporate may by ordinary resolution revoke the right of exclusive use granted by by-law 25 of the applicant's by-laws. The respondent should pay the applicant's costs. -- 7 of 7 --