Fischer & Ors v Body Corporate for Centre Point Community Title Scheme 7779 [2004] QDC 17

DISTRICT COURT OF QUEENSLAND CITATION: Fischer & Ors v Body Corporate for Centre Point Community Title Scheme 7779 [2004] QDC 017 PARTIES: WARREN FISCHER First Applicant v BODY CORPORATE FOR CENTRE POINT COMMUNITY TITLE SCHEME 7779 Respondent FILE NO: BD 391 DIVISION: Civil Jurisdiction PROCEEDING: ORIGINATING COURT: District Court Brisbane DELIVERED ON: 13 February 2004 DELIVERED AT: Brisbane HEARING DATE: 28 and 29 January 2004 JUDGE: Samios DCJ ORDER: Application dismissed CATCHWORDS: HOME AND COMMERCIAL UNITS - Body Corporate and Community Management Act 1997 - Application under s 48(1) for adjustment of contribution schedule lot entitlement – whether should be adjusted - whether it should be equal or something else in order to be ‘just and equitable’ – application dismissed in favour of long standing status quo Body Corporate and Community Management Act 1997 s46,47,48,49 Building Units and Group Titles Act 1980 Ciriello v Panitz Centre Building Units Plan 3894 (1999) 20 Qld Lawyer Rep 138 Re: Kurilpa Protestant Hall Pty Ltd (1946) St R Qd 170 Burnitt Investments Pty Ltd v Body Corporate St Andrews Community Titles Scheme 20508 (2002) QDC 6 Sandhurst Trustees Limited Ltd (ACN 004030737) v Condah Bay Investments Pty Ltd (ACN 050 287 206) & Ors (2003) QDC 438 -- 1 of 28 -- 2 COUNSEL: Mr Atkinson for the applicants Mr Perry for the respondent SOLICITORS: Kinneally Miley for the applicants Quinn & Scattini for the respondent [1] This is an application pursuant to section 48(1)(a) of the Body Corporate and Community Management Act 1997 (the Act) for an order for the adjustment of the contribution schedule lot entitlement in the Body corporate Centrepoint Community Title Scheme 7779 (the Scheme). [2] The applicants are ten in number (the applicants)and are the registered owners of an estate in fee simple in ten lots in the Body corporate for the Scheme. There are fifty one lots in the Scheme. The Scheme land is situated at 69 Leichhardt Street, Spring Hill. [3] The Scheme was created upon registration of Building Units Plan No 7474 on 15 August 1986. [4] The building on the Scheme land consists of three levels for covered car parking and ancillary purposes. The bottom level is a half floor only. The car parking spaces are on the title of each lot. There are two towers. Tower Block “A” consists of a common area on the ground floor (facilities include pool, games room and reception) and an additional seven levels of residential lots and Tower Block “B” consists of seven levels of residential lots. There is one lift shaft in each tower. There are gardens and grounds that contain an outdoor swimming pool. The residential lots contain “central” air conditioning drawing on common property resources supplying chilled water. -- 2 of 28 -- 3 [5] It is convenient to reproduce a profile diagram of the two towers and the lots within the two towers:- Building Units and Group Titles Act 1980 BUILDING UNITS AND GROUP TITLES REGULATIONS 1980 (Form 9) Regulation 8(1) CENTREPOINT Sheet No. 18 of 18 Sheets BUILDING UNITS PLAN NO. 7474 PROFILE DIAGRAM TOWER BLOCK ‘A’_ TOWER_BLQCK B K UNITS 50,51 J UNITS 48,49 UNITS 28,29,30,31 UNITS 46, 47 UNITS 24,25,26,27 H UNITS 44, 45 UNfTS 20,21,22,23 G UNITS 40,4/, ,2,43 UNITS 15,16,17,18,19 F UNlTs 36 37 38.39 UNITS 10,11,12 13 14 E UNITS 32,33,34,35 UNITS 5, \:., 7, 8,9 D COMMON UNITS I 2 3. 4 C GARAGES B GARAGES A GARAGES Scale: 1: 400 -- 3 of 28 -- 4 [6] All the lots within the Scheme are used for residential purposes. [7] The schedule of lot entitlement allocation for the Scheme was prepared by or on behalf of the original owner prior to the registration of the Building Units Plan. That schedule was prepared in accordance with the Building Units and Group Titles Act 1980 (the 1980 Act). Under the 1980 Act there was only one schedule of entitlements. [8] The Act commenced on 13 July 1997 replacing the 1980 Act. The Act established two schedules (interest schedule and contribution schedule) in place of the single lot entitlement schedule. [9] For all existing strata developments at 13 July 1997 the Act required the entitlements for each lot in a scheme under the two new schedules to be the same as the entitlements in the single schedule under the 1980 Act. The Scheme currently has an identical interest and contribution schedule. [10] Sections 46, 47, 48 and 49 of the Act provide as follows:- “46 Lot entitlements (1) A “lot entitlement”, for a lot included in a community titles scheme, means the number allocated to the lot in the contribution schedule or interest schedule in the community management statement. (2) The “contribution schedule” is the schedule in a community management statement containing each lot’s contribution schedule lot entitlement. (3) The “interest schedule” is the schedule in a community management statement containing each lot’s interest schedule lot entitlement. (4) The “contribution schedule lot entitlement”, for a lot, means the number allocated to the lot in the contribution schedule. -- 4 of 28 -- 5 (5) The “interest schedule lot entitlement”, for a lot, means the number allocated to the lot in the interest schedule. (6) A lot entitlement must be a whole number, but must not be 0. (7) 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. Examples for subsection (7) of circumstances in which it may be just and equitable for lot entitlements not to be equal— 1. A layered arrangement of community titles schemes, the lots of which have different uses (including, for example, car parking, commercial, hotel and residential uses) and different requirements for public access, maintenance or insurance. 2. A commercial community titles scheme in which the owner of 1 lot uses a larger volume of water or conducts a more dangerous or a higher risk industry than the owners of the other lots. (8) In deciding the contribution schedule lot entitlements and interest schedule lot entitlements for a scheme mentioned in subsection (7), regard must be had to— (a) how the 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. (9) A change to a lot entitlement takes effect on the recording of a new community management statement incorporating the change. “47 Application of lot entitlements (1) This section states the general principles for the application of lot entitlements to a community titles scheme, but has effect subject to provisions of this Act providing more specifically for the application of lot entitlements. (2) The contribution schedule lot entitlement for a lot is 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;12 and -- 5 of 28 -- 6 (b) the value of the lot owner’s vote for voting on an ordinary resolution if a poll is conducted for voting on the resolution. (3) The interest schedule lot entitlement for a lot is the basis for calculating— (a) the lot owner’s share of common property; and (b) the lot owner’s interest on termination of the scheme, including the lot owner’s share in body corporate assets on termination of the scheme; and (c) the unimproved value of the lot, for the purpose of a charge, levy, rate or tax that is payable directly to a local government, the commissioner of land tax or other authority and that is calculated and imposed on the basis of unimproved value. (4) Neither the contribution schedule lot entitlement nor the interest schedule lot entitlement for a lot is used for the calculation of the liability of the owner or occupier of the lot for the supply of a utility service to the lot if the amount of the utility service supplied to each lot is capable of separate measurement, and the owner or occupier is billed directly. “48 Adjustment of lot entitlement schedule (1) The owner of a lot in a community titles scheme may apply— (a) to the District Court for an order for the adjustment of a lot entitlement schedule; or (b) under chapter 6, for an order of a specialist adjudicator for the adjustment of a lot entitlement schedule. (2) Despite any other law or statutory instrument— (a) the respondent for an application mentioned in subsection (1) is the body corporate; and (b) at the election of another owner of a lot in the scheme, the other owner may be joined as a respondent for the application; and (c) each party to the application is responsible for the party’s own costs of the application. (3) An owner who elects, under subsection (2)(b), to become a respondent for the application must give written notice of the election to the body corporate. -- 6 of 28 -- 7 (4) The order of the court or specialist adjudicator must be consistent with— (a) if the order is about the contribution schedule—the principle stated in subsection (5); or (b) if the order is about the interest schedule—the principle stated in subsection (6). (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. (6) For the interest schedule, the respective lot entitlements should reflect the respective market values of the lots included in the scheme when the court or specialist adjudicator makes the order, except to the extent to which it is just and equitable in the circumstances for the individual lot entitlements to reflect other than the respective market values of the lots. (7) If a lot mentioned in subsection (6) is a subsidiary scheme, the market value of the lot is the market value of the scheme land for the subsidiary scheme. (8) For establishing the market value of a lot created under a standard format plan of subdivision, buildings and improvements on the lot are to be disregarded. (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. “49 Criteria for deciding just and equitable circumstances (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. (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. -- 7 of 28 -- 8 (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.” [11] The relevance of the contribution schedule lot entitlement for a lot in this application is that it is the basis for calculating the lot owner’s share of amounts levied by the Body corporate and the value of the lot owner’s vote for voting on an ordinary resolution if a poll is conducted for voting on the resolution (s 47(2)(a) and (b)). [12] Prior to the commencement of these proceedings the first applicant (Mr Fischer) commissioned a report from Stewart Silver King & Burns Strata Management (SSKB). The report from SSKB concluded that, although it was just and equitable for the contributions not to be equal, the existing lot entitlement contributions -- 8 of 28 -- 9 schedule was not just and equitable. The SSKB report contained a recommendation for a fair and equitable contribution schedule of lot entitlements for the Scheme. [13] At an extraordinary general meeting of the Body corporate for the Scheme on 24 June 2002 the first applicant moved that the Body corporate adopt the recommendation contained in the SSKB report. The voting on the motion which was conducted in an open ballot was nine in favour, twenty-one against and four abstaining. The first applicant re-submitted the motion to adopt the new community management statement in accordance with the recommendations contained in the SSKB report again on 18 November 2002. On that occasion the motion was defeated in an open ballot there being ten in favour, fifteen against and five abstaining. [14] Mr Fischer, one of the applicants, states he and the applicants have exhausted all avenues available to them to implement a change to the existing contribution schedule without recourse to the Court. Further, he honestly and truly believes that the existing contribution schedule of lot entitlements is inequitable and unfair and that the contributions schedule of lot entitlements proposed in the SSKB report will rectify the inequity and unfairness of the existing schedule. [15] The application is opposed by the Body corporate which is by virtue of s 48(2)(a) of the Act the respondent for the application. Further, five lot owners have sworn affidavits in support of their opposition to the application and gave evidence and were cross-examined on the hearing of this application. [16] The author of the SSKB report is Mr Sheehan. When he gave evidence he said that his report was basically a cost allocation exercise. It proceeded on the basis that -- 9 of 28 -- 10 each of the lots should have a contribution lot entitlement which equates to the cost that lot is either causing or benefiting from. His report endeavoured to establish a user-pay system. He said in terms of that cost allocation exercise there were two steps. The first step involved calculating the Body corporate’s actual costs. He analysed the administrative fund of the Body corporate to determine the money collected and spent in the day-to-day operations of the Body corporate. The second step involved calculating the money required for the sinking fund. He analysed the cost for replacement of items of a long term capital nature such as re-painting the building. Therefore, he determined how much the Body corporate notionally was spending each year. In doing so he allowed for extraordinary items and for periodic payment, for example he did not allow for a repaint every year but rather allowed for a re-paint every 10 years. Therefore, he distributed the painting expense over 10 years. [17] Mr Sheehan then considered each of the items of expenditure and formed a judgment how that was benefiting or being caused by each of the lots and then allocated that expenditure according to that subjective determination. In his evidence Mr Sheehan referred by way of an example to the expenditure by the Body corporate for the payment of a tax return each year. In his opinion that in no way was impacted upon by the size of the lot or whether it had a pool or access to a lift. He saw that as a case of the Body corporate as a separate legal entity doing a tax return. In his opinion that was a cost which should be shared equally so with that item of expenditure he divided that cost by the number of lots, which in this case is fifty-one lots and attributed to each lot an equal share of that cost. However, on items such as painting as, in his opinion, that would bear some relationship to the size of the particular lot, he distributed the painting expenditure based on the size of -- 10 of 28 -- 11 the particular lot. To do this he worked out how big the lot was compared to all other lots and that gave him the percentage and he shared the percentage of the painting of the entire budget through the percentage size that that lot actually was and allocated that amount. He then added up all of the allocations and that produced a percentage of expenditure that in his opinion was either caused by or benefited that particular lot and determined that as a percentage out of 10,000. To produce his report Mr Sheehan also inspected the common property areas of the building. He also considered the Body corporate records and based on that information he then determined how the costs should be shared for this particular building. [18] Mr Sheehan in his report identifies five methods by which it was appropriate to share the costs. [19] His first method involved the sharing of costs equally. That is, he considered certain administrative and sinking fund items that should be shared amongst all lots on an equal basis. Those items of expense either were directly proportional to the number of lots in the Scheme (for example Body corporate administration contract) or were fixed without reference to the number of lots (for example fee for preparation of tax return). In his opinion by this method no particular lot placed any greater or lesser demand on the underlying services. [20] His second method involved the support and shelter costs. That is, in his opinion the purpose of the structure of the building was to provide support and shelter to the lots. Typical support and shelter costs included painting and roof repairs. In his opinion the nature of the construction made it appropriate to share the support and -- 11 of 28 -- 12 shelter costs based on the area of the lot in proportion to the total area of all lots. Intuitively, if Lot A was twice as big as Lot B then it required twice the support and shelter. [21] His third method involved the potential accommodation factor (bedrooms). Some costs were directly related to the use of the common property. In his opinion the use of the common property depended on the nature of the use of the lots, whether residential or commercial and in the case of units that are residential, the number of people who are resident in the complex or invited. In his opinion the most logical determinant of the number of residents and invitees was the number of bedrooms, or the potential accommodation factor. He said actual beds or actual residents, would be a more accurate measure, but was a measure that may change daily. Consequently, he considered it was inappropriate to use that as the basis for calculating the long term contribution entitlement schedule. The static measure that was most suitable was potential for accommodation. [22] The fourth method related to lift costs. In his opinion lift costs deserved unique treatment as the two towers benefit in different ways from the existence of the lifts. In his opinion the costs associated with the provision of a working lift should be shared equally between the two towers and then equally between the lots in those towers. [23] The fifth and final method related to the lattice costs. That is only 24 lots had lattice. He therefore allocated the cost of the lattice only to those lots. [24] In paragraph 10.2 of Mr Sheehan’s report his analysis of the costs expressed as a percentage of the total costs was as follows: -- 12 of 28 -- 13 “Method Summary of Distribution Costs 1. Costs shared equally 74.08 2. Support and shelter costs 13.47 3. Potential accommodation factor – bedrooms 1.93 4. Lift costs 10.14 5. Lattice costs 0.37” [25] Mr Sheehan then simply created a percentage of costs attributable to the lot by multiplying by 10,000 to express the percentage to two decimal points. [26] Therefore, Mr Sheehan concluded that the contribution schedule for the Body corporate should not be equal because it was just and equitable for the contributions not to be equal. However, his analysis of the costs of the Body corporate dictated the current schedule was not just and equitable. Therefore, his recommendation was the current schedule be as set out in the final table of schedule 5 of his report. [27] It is convenient to set out schedule 5 of Mr Sheehan’s report which includes a comparison between the current lot entitlement and his recommended lot entitlement:- -- 13 of 28 -- 14 “Centrepoint - Working paper 2002-04-15.xls – Distribution of expenditure „ Lot Number Method Method Method Method Method Costs attributable to this lot Suggested Lot Entitlements as a % of Total L/E Current Lot Entitlement as a % of Total L/E Suggested % L/E as a % of Current %L/E Suggested Lot Entitlement Current Lot Entitlement Cost to be distributed among lots 74.08% 13.47% 1.93% 10.14% 0.37% 100.00% 1 1.45% 0.22% 0.03% 0.16% 0.02% 1.89% 1.89% 2.04% 92.59% 189 170 2 1.45% 0.36% 0.03% 0.16% 2.01% 2.01% 1.86% 108.20% 201 155 3 1.45% 0.28% 0.03% 0.16% 1.93% 1.93% 1.68% 114.96% 193 140 4 1.45% 0.31% 0.03% 0.16% 1.96% 1.96% 1.86% 105.57% 196 155 5 1.45% 0.26% 0.03% 0.16% 0.02% 1.92% 1.92% 1.74% 110.40% 192 145 6 1.45% 0.31% 0.03% ' 0.16% 1.96% 1.96% 1.92% 101.87% 196 160 7 1.45% 0.25% 0.03% 0.16% 1.90% 1.90% 1.74% 109.24% 190 145 8 1.45% 0.25% 0.05% 0.16% 1.92% 1.92% 1.92% 99.89% 192 160 9 1.45% 0.26% 0.03% 0.16% 0.02% 1.92% 1.92% 1.62% 118.67% 192 135 10 1.45% 0.26% 0.03% 0.16% 0.02% 1.92% 1.92% 1.80% 106.72% 192 150 11 1.45% 0.29% 0.03% 0.16% 1.94% 1.94% 1.98% 98.09% 194 165 12 1.45% 0.24% 0.03% 0.16% 1.89% 1.89% 1.80% 104.83% 189 150 13 1.45% 0.25% 0.05% 0.16% 1.92% 1.92% 1.98% 96.94% 192 165 14 1.45% 0.24% 0.03% 0.16% 0.02% 1.91% 1.91 % 1.68% 113.61 % 191 140 15 1.45% 0.25% 0.03% 0.16% 0.02% 1.92% 1.92% 1.86% 102.95% 192 155 16 1.45% 0.29% 0.03% 0.16% 1.94% 1.94% 2.04% 95.28% 194 170 17 1.45% 0.24% 0.03% 0.16% 1.89% 1.89% 1.86% 101.61 % 189 155 18 1.45% 0.27% 0.05% 0.16% 1.94% 1.94% 2.04% 94.84% 194 170 19 1.45% 0.26% 0.03% 0.16% 0.02% 1.92% 1.92% 1.74% 110.49% 192 145 20 1.45% 0.25% 0.03% 0.16% 0.02% 1.92% 1.92% '1.92% 99.89% 192 160 21 1.45% 0.38% 0.03% 0.16% 2.03% 2.03% 2.28% 88.81 % 203 190 22 1.45% 0.35% 0.05% 0.16% 2.02% 2.02% 2.52% 80.12% 202 210 23 1.45% 0.26% 0.03% 0.16% 0.02% 1.92% 1.92% 1.80% 106.89% 192 150 24 1.45% 0.25% 0.03% 0.16% 0.02% 1.91% 1.91% 1.98% 96.63% 191 165 25 1.45% 0.32% 0.03% 0.16% 1.97% 1.97% 2.34% 84.24 % 197 195” -- 14 of 28 -- 15 “Centrepoint - Working paper 2002-04-15.xls Lot Number Method 1 Method 2 Method 3 Method 4 Method 5 Costs attributable to this lot Suggested Lot Entitlements as a % of Total L/E Current Lot Entitlement as a % of Total L/E Suggested % L/E as a % of Current % L/E Suggested Lot Entitlement Current Lot Entitlement 26 1.45% 0.33% 0.05% 0.16% 2.00% 2.00% 2.58% 77.54% 200 215 27 1.45% 0.25% 0.03% 0.16% 0.02% 1.92% 1.92% 1.86% 103.19% 192 155 28 1.45% 0.25% 0.03% 0.16% 0.02% 1.92% 1.92% 2.28% 83.98% 192 190 29 1.45% 0.30% 0.03% 0.16% 1.95% 1.95% 2.64% 73.97% 195 220 30 1.45% 0.32% 0.05% 0.16% 1.99% 1.99% 2.88% 68.93% 199 240 31 1.45% 0.27% 0.03% 0.16% 0,02% 1.93% 1.93% 2.16% 89;43% 193 180 32 1.45% 0.20% 0.03% 0.25% 0.02% 1.96% 1.96% 1.56% 125.47% 1% 130 33 1.45% 0.16% 0.02% 0.25% 1.89% 1.89% 1.16% 161.92% 189 97 34 1.45% 0.16% 0.02% 0.25% 1.88% 1.88% 1.19% 158.39% 188. 99 35 1.45% 0.25% 0.05% 0.25% 0.02% 2.02% 2.02% 1.62% 124.80% 202 135 36 1.45% 0.22% 0.03% 0.25% 0.02% 1.98% 1.98% 1.56% 126.74 % 198 130 37 :1.45% 0.16% 0.02% 0.25% 1.89% 1.89% 1.19% 158.78% 189 99 38 1.45% 0.15% 0.02% 0.25% 1.88% 1.88% 1.24% 151.87% 188 103 39 1.45% 0.25% 0.05% 0.25% 0.02% 2.02% 2.02% 1.68% 120.07% 202 140 40 1.45% 0.21% 0.03% 0.25% 0.0:2% 1.97% 1.97% 1.62% 121,39% 197 135 41 1.45% 0.16% 0.02% 0.25% 1.88% 1.88% 1.21% 155.13% 188 101 42 1.45% 0.15% 0.02% 0.25% 1.88% 1.88% 1.26% 148.98% 188 105 43 1.45% 0.24% 0.05% 0.25% 0.02% 2.02% 2.02% 1.74% 115.84% 202 145 44 1.45% 0.43% 0.05% 0.25% 0.02% 2.21% 2.21% 3.18% 69.36% 221 265 45 1.45% 0.29% 0.05% 0.25% 0.02% 2.06% 2.06% 1.98% 104.20% 206 165 46 1.45% 0.33% 0.05% 0,25% 2.09% 2.09% 2.88% 72.43 % 209 240 47 1.45% 0.26% 0.05% 0.25% 0.02% 2.04% 2.04% 1.86% 109.44% 204 155 48 1.45% 0.34% 0.05% 0.25% 2.10% 2.10% 2.94% 71.31 % 210 245 49 1.45% 0.26% 0.05% 0.25% 0.02% 2.03% 2.03% 1.92% 105.86% 203 160 50 1.45% 0.33% 0.05% 0.25% 2.09% 2.09% 3.54% 58.92% 209 295 51 1.45% 0:26% 0.05% 0.25% 0.02% 2.03% 2.03% 2.22% 91.35% 203 185 Totals 74.08% 13.47% 1.93% 10.14% 0.37% 100.00% 100.00% 100.00% 10000 8329 „ -- 15 of 28 -- 16 [28] Lot owners opposed to the application commissioned a report from Mr Linkhorn. Although there were some differences in the approach taken by Mr Linkhorn compared to the approach taken by Mr Sheehan, basically Mr Linkhorn’s methodology was the same as that adopted by Mr Sheehan. Mr Linkhorn also concluded that the Body Corporate’s current contribution lot entitlement schedule was not just and equitable to all lot owners in the building. He therefore recommended that the body corporate adopt in place of their current contribution lot entitlement schedule a proposed schedule of contribution lot entitlement values which he considered to be just and equitable in all the circumstances. Mr Linkhorn’s recommendation is not significantly different to that proposed by Mr Sheehan. [29] However, the adoption of either Mr Sheehan’s recommendation or Mr Linkhorn’s recommendation will result in an increase in monetary contributions from some lot owners and a decrease in monetary contributions from other lot owners in the future. [30] Exhibit 1 in these proceedings is a schedule showing the lots in the Scheme, the floor level of the lot, the number of bedrooms in the lot, the current lot entitlement and a comparison between the SSKB recommendation and Mr Linkhorn’s recommendation (DL and SS). It is as follows:- -- 16 of 28 -- 17 “Lot Number Floor Levels No of Bedrooms Current Lot Entitlements SSKB Recommended Lot Entitlements DL & SS Recommended Lot Entitlements Levy Per Unit of Lot Entitlement $23.03 $19.18 $19.18 1 D,A 2 170 189 189 2 D,A 2 155 201 198 3 D,A 2 140 193 192 4 D,A 2 155 196 194 5 E,A 2 145 192 192 6 E,A 2 160 196 194 7 E,A 2 145 190 190 8 E,A 3 160 192 197 9 E,A 2 135 192 192 10 F,B 2 150 192 192 11 F,B 2 165 194 193 12 F, B 2 150 189 189 13 F,B 3 165 192 190 14 F,B 2 140 191 191 15 G,B 2 155 192 191 16 G,B 2 170 194 193 17 G,B 2 155 189 189 18 G,B 3 170 194 198 19 G,B 2 145 192 192 20 H,B 2 160 192 191 21 H,B 2 190 203 198 22 H,B 3 210 202 204 23 H,B 2 150 192 192 24 I,G 2 165 191 191 25 I,G 2 195 197 195 26 I,G 3 215 200 202 27 I,G 2 155 192 192 28 J, G 2 190 192 191 29 J, G 2 220 195 193 30 J, G 3 240 199 201 31 J, G 2 180 193 192 32 E,B 2 130 196 196 33 E,B 1 97 189 185 34 E,B 1 99 188 185 35 E,B 3 135 202 207 36 F,B 2 130 198 198 37 F,B 1 99 189 185 38 F,B 1 103 188 185 39 F,B 3 140 202 206 40 G,B 2 135 197 197 41 G,B 1 101 188 185 42 G,B 1 105 188 185 43 G,B 3 145 202 206 44 H, B 3 265 221 219 45 H,G 3 165 206 209 46 I, B 3 240 209 211 47 I,G 3 155 204 207 48 J, G 3 245 210 211 49 J, G 3 160 203 207 50 K,G 3 295 209 211 51 K,G 3 185 203 207 TOTALS 8,329 10,000 10,000 CENTREPOINT LOT NO'S, FLOOR LEVELS, BEDROOMS, CURRENT & RECOMMENDED ENTITLEMENT SCHEDULES - 27 Jan 04” -- 17 of 28 -- 18 [31] Evidence was given on the hearing of this application by Mr Smith, a certified practising valuer of 31 years’ experience, that should the contribution schedule lot entitlement change as proposed by Mr Sheehan then thirty-one or approximately sixty-one per cent of the lots will have levy increases and twenty or approximately thirty-nine per cent of the lots would have a reduction in the levy. Mr Smith did not attempt to value the individual lots. However, his report demonstrated that for an investor-owner of a lot subject to an increase in the levy the effect would be to decrease the cash flow from the rental income, thus affecting negatively the return on investment and for an owner-occupier the increased levy would create a negative effect on the marketability of the unit. By way of example Mr Smith in his report concludes the potential loss of value of lot 42 would be $35,487. [32] Clearly, if Mr Sheehan’s recommendation or for that matter Mr Linkhorn’s recommendation was accepted as the basis for an adjustment to the contribution schedule lot entitlement there would be an increase in the annual contributions from the five lot owners that gave evidence on the hearing of this application and according to Mr Smith’s evidence the market value of their units could fall by a factor of 18.18 times the annual increase in the amount of the levy. The following is a table showing the impact upon the five lot owners who gave evidence on the hearing of this application. That is not to say there would not be a similar impact on some of the other lot owners in the Body corporate. However, the impact upon these five lot owners is as follows:- -- 18 of 28 -- 19 “Name Lot Increase in contributions per annum Decrease in value of lot Mr and Mrs George 23 $342.13 $6,219.92 Mr and Mrs Baillee 36 $1,104.54 $21,898.54 Mr Makridakis 42 $1,779.69 $32,354.75 Mr Westcott 43 $801.98 $14,580.00 Mr Doherty 49 $313.22 $5,694.25” [33] The Act provides that the owner of a lot may apply to the District Court for an order for the adjustment of a lot entitlement schedule. Further, the order of the Court must be consistent with, if the order is about the contribution schedule, the principle stated in subsection 5 of Section 48. That subsection provides that 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. [34] In Ciriello v Panitz Centre Building Units Plan 3894 (1999) 20 Qld Lawyer Rep 138 His Honour Judge Brabazon QC noted that under the 1980 Act, there was no way of adjusting the relative lot entitlements. His Honour noted the presumption under the 1980 Act was that a purchaser would take into account the entitlements, the burden of body corporate levies, the voting rights and the prospect of extinguishment, in agreeing to a purchase price. His Honour noted the 1980 Act was replaced by the Act which provided for the former lot entitlement schedule to become two schedules as noted earlier. His Honour noted the Act introduced the possibility of adjustments to those schedules. One possibility was for owners to -- 19 of 28 -- 20 agree to a change. If the owners did not agree His Honour noted the court had power to order that one or both of the schedules be adjusted. His Honour said at p 139: “if an application is made, the order of the court must be consistent with principles declared by the Act … those principles are:- … 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. Therefore, whether the application be allowed or refused, in the case of each new schedule the orders of the court must be consistent with the principles set out above.” [35] It is to be noted the Act was amended in March 2003. The applicants submit the changes made to the Act in March 2003 served to underline the presumption in favour of equality. In support of this submission the applicants referred to the following: (a) A provision was inserted stipulating that even at the stage where development approval was being sought, the equality principle applied (section 46(7)). (b) That parliament removed section 46 sub-section 1 which in its terms had provided relevantly “it is not a requirement of the community management statement for a community title scheme that the contribution schedule lot entitlements be equal for each lot included in the Scheme”. (c) The explanatory notes specifically refer to the change as follows:- “clause 10 amends section 44 to change the requirements for the number that is allocated for the contribution schedule lot entitlement. The change is intended to reinforce the concept that usually all lot owners are equally responsible for the cost of upkeep of common property and for the running costs of the community title scheme. However, it is recognised that there may be valid instances where the contribution schedules do not have to be equal. The amendment provides that usually all the number in this schedule are equal, unless it can be demonstrated that it is just and equitable for there to be inequality …”. (d) The explanatory notes proceed to give examples. In particular example 3 provides :- -- 20 of 28 -- 21 “In a basic scheme, if all the lots are residential lots ranging in size from a small lot to a penthouse, the contribution schedule lot entitlements generally would be equal. However, the contribution schedule may be different if the penthouse has its own swimming pool and private lift. The contribution schedule should recognise this type of difference. The other lots in the scheme despite being of differing size or aspect would be expected to have equal contribution schedule lot entitlements …” [36] His Honour Judge Brabazon QC in Ciriello at p 139 noted with respect to the 1980 Act:- “Usually a lot entitlement reflected the expected market value of the lot. Sometimes the entitlements reflected the self interest of the developer, or were based on the level of body corporate levies that might be generated by a particular lot, or were based on the area of the building which the lot occupied. Occasionally, there was no apparent explanation at all for the allocation.” [37] The applicants submit it would only be by an amazing coincidence if the schedules inherited from the legislation as it stood before the amendments comply with the criteria provided for by the Act. [38] However, the respondent submits it is clear from an examination of the existing contribution schedule the schedule was the product of a consideration of differences in the size and location of the lots and are weighted accordingly. Therefore, the respondent submits the existing contribution schedule provides a just, equitable and appropriate means of differentiating between the lot owners. In that way the existing contribution schedule was not inconsistent with the provisions of the Act. [39] The applicants submit that a consideration of the Act as a whole and the explanatory notes and even the second reading speech all point to the court being required to have regard to the physical characteristics of the Scheme and its uses rather than matters that may be peculiar to particular owners. Characteristics peculiar to a -- 21 of 28 -- 22 particular owner would include the financial means of an owner to meet an increase in the contributions were an adjustment to be ordered and whether a lot owner purchased a lot on the expectation that the body corporate levies were for a particular amount and if increased would be increased by factors such as the movement in the consumer price index rather than by a court ordered adjustment pursuant to provisions of the Act. [40] The applicants submit that I either adopt Mr Sheehan’s recommendation or Mr Linkhorn’s recommendation. However, if I was not prepared to accept either of those recommendations that I would, in any event, order an adjustment on the basis that the contributions be equal. [41] In Re: Kurilpa Protestant Hall Pty Ltd (1946) St R Qd 170 at 183 Macrossan CJ said regarding the expression “just and equitable” in the legislation for the winding up of companies:- “The words “just and equitable” are words of the widest significance and do not limit the jurisdiction of the court to any case. It is a question of fact and each case must depend on its own circumstances.” [42] His Honour Judge Brabazon QC in Burnitt Investments Pty Ltd v Body Corporate St Andrews Community Titles Scheme 20508 (2002) QDC 6 cited In re Kurilpa when considering the use of the words “just and equitable” in an application for a reduction of lot entitlements. [43] In Sandhurst Trustees Limited Ltd (ACN 004030737) v Condah Bay Investments Pty Ltd (ACN 050 287 206) & Ors (2003) QDC 438 His Honour Judge Robin QC at para 10 said:- -- 22 of 28 -- 23 “The legislative policy favouring equality of lot entitlements for the contribution schedule is clear.” Further, His Honour said at para 11 with reference to the amendments to the legislation since His Honour Judge Brabazon QC’s decision in Burnitt:- “The court no longer enjoys the untrammelled freedom it did at the time of that decision.” Further, His Honour said at para 12 with respect to s 49 of the Act:- “In my opinion, the new provision reinforces what has been the principle all along that some positive justification must be shown for departing from equality. I think it is inherent that equality is taken to be a ‘just and equitable’ arrangement, even if, as in Burnitt (at the time of the application), the assumption is difficult to justify. The new sub-s 4 of s 49 requires the court to have regard to matters of the kind that were the subject of evidence in contrary ‘expert’ opinions of Mr Sheahan and his protagonist engaged by the respondents, Mr Linkhorn.” [44] Finally, His Honour said at paras 14 and 15:- “In my opinion, applications such as the present should not be approached on the footing that there is a single “just and equitable” solution. There may be many views open, subtly, even glaringly different, which could reasonably be seen as ‘just and equitable.” If there is very little to distinguish the lots – for example, they are units of like size in a “6 pack” – it is unlikely the equality principle could be displaced. Here, the lots are quite easily seen to fit into different categories. The commercial lots are all at ground level, indeed, depend for their viability on their street frontages, one would think. The residential units are readily capable of differentiation as well, should one be minded to differentiate, as happened when the existing lot entitlement schedules were drawn up; they range from studio units to penthouses and a four bedroom unit. The occupants of the larger units will presumably make more use of common facilities and cause more wear and tear. As will be seen, it is suggested that the owners of ground floor residential lots ought not to have to contribute to running costs for lifts; if ground floor residents use a lift that, it is said, can be allocated against the higher level units being accessed. Minds may differ about this, also about whether those who use lifts to access higher floors should pay no more than those who travel only to the lower floors. Another issue as to which approaches may vary concerns whether regard is had to the use owners of individual lots or their invitees may actually make of common property, the swimming pool and garden surroundings in particular, or to the use they may potentially make of those facilities. There may be owner-residents incapable of -- 23 of 28 -- 24 using the pool, because of physical limitations. Should they have to pay for its upkeep? It is not going to be feasible to make adjustments periodically to implement what may be “just” or “equitable” as circumstances of this kind change. One would expect new arrangements to be set having regard to the long term, accepting that things may change with respect to particular lots in the short term. One might not expect the entitlement of a commercial unit to be reviewed every time the nature of the occupier’s business changed.” [45] I do not take His Honour Judge Robin QC’s judgment in Sandhurst as establishing that on an application such as the present application the Court is bound to order in terms of the opinion of Mr Sheehan or Mr Linkhorn. Further, I do not accept that if the Court does not order in terms of the opinion of either Mr Sheehan or Mr Linkhorn the only alternative is to make an order that the contributions be equal. [46] On the hearing of an application pursuant to section 48(1)(a) of the Act the Court 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 purpose for which the lots are used (s 49(4)). However, the Court is not limited to the matters stated in section 49(4) (s 49(3)). [47] Mr Sheehan and Mr Linkhorn in their reports identified the costs of the Body corporate they thought should be treated equally and at the same time identified costs of the Body corporate they thought should not be treated equally. As to the costs of the Body corporate they both thought should not be treated equally they both gave consideration to factors such as the size of the lot and the number of bedrooms in a lot. -- 24 of 28 -- 25 [48] Even though there was no evidence how the original lot entitlements were established, I am satisfied the existing lot entitlements reflect a differentiation between the lots based on the size of the lot, number of bedrooms in the lot and location of the lot in the building. Further, this differentiation has been in existence since the Scheme’s inception. [49] Further, I am satisfied owners of lots including the five lot owners who gave evidence in the respondent’s case purchased their lot on the basis of the existing lot entitlement contributions and paid for their lots a price based amongst other things upon the existing lot entitlement contributions. It is correct to say the Act allows for an application to be made to this Court for an order for the adjustment of a lot entitlement schedule. Further, a purchaser of a lot is to be presumed to know the law which would include in this instance that the Act permits an application to be made for an adjustment of a lot entitlement schedule. However, I do not accept the Court can ignore the basis upon which lot owners opposed to the application did purchase their lot. [50] Further, even though Mr Sheehan and Mr Linkhorn used the size of a lot and the number of bedrooms in the lot, no weight appears to have been given by either Mr Sheehan or Mr Linkhorn to the location of a particular lot. In my opinion the nature, features and characteristics of a lot which is one of the matters the Court may have regard to when deciding just and equitable circumstances is wide enough to include the location of a lot. In my opinion there are two aspects to the location of a lot. These two aspects are the position of the lot in the building as in what level the lot is on and secondly the aspect that might be enjoyed by that particular lot. I accept location in the sense I am considering location in this application is -- 25 of 28 -- 26 something that would be difficult to quantify. Further, by definition Mr Sheehan and Mr Linkhorn have approached their task by considering the money required to fund the Body corporate’s expenses and have sought to determine the costs incurred because of a particular lot. However, the application of their approach to an item of expenditure that can be clearly seen is generated because of a particular lot does not cause the difficulty. The difficulty arises when the expense being examined is said to be caused equally by all the lots and yet not all the lots are equal in size, number of bedrooms and location in the building. I accept the lots in this building are very different. I accept this building has a particular composition, is unique and is very diverse. I do not accept the Act demands the application of the user pays approach particularly when the application of size of the lot and number of bedrooms in the lot produces little by way of differentiation between the lots. That is I do not accept the approach taken by Mr Sheehan or Mr Linkhorn gives any weight to the location of a particular lot in the building having regard to both aspects of location of a lot in the building let alone giving sufficient weight to the size of a lot and the number of bedrooms in a lot. [51] I can accept the expenditure required by way of example for the lattice is an item of expenditure generated because of a particular lot. On the other hand an owner of a particular lot with lattice may argue the location of another lot generates more expenditure for some other item of expenditure because of the location of that other lot. Even though the quantification of the expenditure because of location is difficult, in my opinion, that does not mean no weight should be given to that matter when considering what is just and equitable. Take by way of another example expenditure relating to the lifts. According to Mr Sheehan that expenditure should be divided equally between the two towers and then equally between the lots in each -- 26 of 28 -- 27 tower. In my opinion it could be argued a one bedroom lot on E level does not generate an equal cost of maintaining and servicing the lift to a three bedroom lot on K level. Further, the use of a ratio of floor area between the two lots in that example may not be just and equitable. That is, the ratio of lot size say between lot 33 on E level and lot 51 on K level is about 1:1.5. However, the three bedroom lot on K level it could be argued generates six times the cost of maintaining and servicing the lift in that tower because there are six levels between the two lots. [52] In my opinion the size of a lot or the number of bedrooms in a lot does not numerically produce a ratio creating such a differentiation between lots of different size or bedrooms located in different parts of the building that can be balanced justly and equitably against the weight to be given to the location of the lot in the building. That is so, in my opinion, even if location of the lot is limited to its level in the building rather than considering what aspect is enjoyed by that lot. In my opinion some lot owners would argue the aspect enjoyed by a lot is also a relevant matter to what is just and equitable. [53] Further, I am satisfied there is potential for a reduction in the value of the lots for which the contributions will be increased if an adjustment is ordered as proposed. Again, I do not accept the Court can ignore this potential on this application. [54] Finally, in this instance a majority of the lot owners in the Body corporate do not support the application. [55] I accept there are some expenses of the Body corporate that should not be shared equally. An example of these expenses is the expenses relating to the lattice. Therefore, I am satisfied it is just and equitable that the contribution not be equal. -- 27 of 28 -- 28 However, I am not satisfied the approach of Mr Sheehan and Mr Linkhorn gives sufficient weight to the size of the lot, the number of bedrooms in the lot and the location of the lot. [56] Therefore, having regard to all the matters I have referred to on the evidence in this application I am not satisfied the existing contribution lot entitlement schedule should be adjusted. [57] I therefore dismiss the application. -- 28 of 28 --