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  4. Burnitt Investments Pty Ltd v Body Corporate for St Andrews Community Titles Scheme 20508 - [2002] QDC 6

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Burnitt Investments Pty Ltd v Body Corporate for St Andrews Community Titles Scheme 20508[2002] QDC 6

Burnitt Investments Pty Ltd v Body Corporate for St Andrews Community Titles Scheme 20508[2002] QDC 6

Burnitt Investments Pty Ltd v Body Corporate for St Andrews Community Titles Scheme 20508 [2002] QDC 6 

DISTRICT COURT OF QUEENSLAND

CITATION:

Burnitt Investments P/l v Body Corporate for St Andrews Community Titles Scheme 20508 [2002] QDC 006
 

PARTIES:

BURNITT INVESTMENTS PTY LTD

-v-

BODY CORPORATE FOR ST ANDREWS COMMUNITY TITLES SCHEME 20508

FILE NO/S:

D 5475 OF 2001

PROCEEDING:

Application to amend contribution schedule

ORIGINATING COURT:

Brisbane

DELIVERED ON:

1 February 2002

HEARING DATE:

11 December 2001

JUDGE:

Judge Brabazon QC

ORDER:

Contribution Schedule amended

CATCHWORDS:

BUILDING CONTROL AND TOWN PLANNING LAW – Application for reduction of lot entitlements – contribution schedule – Act provides for adjustment to schedules –whether should be adjusted – whether “just and equitable” to do so

Body Corporate and Community Management Act 1997

Body Corporate and Community Management (Accommodation Module) Regulation 1997

Ciriello v Panitz Centre Building Units Plan 3894 (1999) 20 QLR 138

McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603

Re Hosking (1998) 20 QLR 145

Re Kurilpa Protestant Hall Pty Ltd (1946) SR Qd 170

COUNSEL:

Mr B Laurie for the applicant

Ms HP Bowskill for the respondent

SOLICITORS:

(Burnitt Investments in person)

Wellner & Associates for the respondent

The Application

  1. [1]
    The property known as the Bay Hideaway Resort is at 1 Ibis Boulevard Hervey Bay. It contains 33 units and an area of vacant land. The units and the land are held according to the St Andrews Community Titles Scheme 20508.
  1. [2]
    Burnitt Investments is the owner of the vacant land, Lot 37. While each of the units, and the manager’s unit, has an allocation of one lot entitlement in the contribution schedule, the vacant land has 32 lot entitlements.
  1. [3]
    Its application is for the reduction of its lot entitlements in the contribution schedule, from 32 to 1.

The Development

  1. [4]
    Group Titles Plan 2421 was registered in August 1992. There were 14 units and the balance of the land held by the developer. The total number of lot entitlements was 65, that being the expected number of units to be eventually built. At first, 14 of those lot entitlements were allocated to the 14 units, so that the developer held the remaining 51 lot entitlements.
  1. [5]
    By October 1992, 26 units had been built. The total lot entitlements remained at 65, with the developer holding 39, and the units one each.
  1. [6]
    In 1997, the owner of the balance land built three more units. The balance land was described as Lot 32. It then held 36 lot entitlements.
  1. [7]
    In 1997 the Body Corporate and Community Management Act replaced the Building Units and Group Titles Act.  There were several consequences for this development:
  1. (a)
    the original group titles plan was automatically replaced by a community titles scheme.
  1. (b)
    each lot in the old group titles plan became a lot included in the new scheme.
  1. (c)
    on its establishment, the new scheme was taken to have a community management statement, called an “interim statement”.
  1. (d)
    there were changes to the significance of the lot entitlements.  Under the previous Act, the lot entitlements determined four important matters
  1. (a)
    the voting rights of proprietors;
  1. (b)
    the amount of each proprietor’s share in the common property;
  1. (c)
    the proportion of the body corporate levies payable by each proprietor;
  1. (d)
    in the event that the GTP was extinguished, the shares which the proprietors would hold as tenants in common of the property.
  1. [8]
    The new Act said that the former lot entitlement schedules had to become two schedules – a “contribution schedule” and an “interest schedule” – see s. 45.
  1. [9]
    The contribution schedule lot entitlements are the basis for calculating:
  1. (a)
    the lot owner’s share of the body corporate levies; and
  1. (b)
    the value of the lot owner’s vote on ordinary resolutions if a poll is conducted for such voting.
  1. [10]
    The interest schedule lot entitlements is the basis for calculating:
  1. (a)
    the lot owner’s share of common property;
  1. (b)
    the lot owner’s interest on termination of the scheme; and
  1. (c)
    the unimproved value of the lot.
  1. [11]
    Here, the interim community management statement reflected the old lot entitlements both in the new contribution schedule and the new interest schedule.
  1. [12]
    On 4 January 2000 a new community management statement was recorded for the St Andrew’s Scheme. The interest and contribution schedules, setting out the lot entitlements, remained the same as before.
  1. [13]
    Then, in about October 2001, three more units were built, and the scheme was adjusted accordingly. The total number of lot entitlements remained at 65, with 33 lots each having one entitlement, while the balance land, Lot 37, had 32 entitlements. That is the present position.

Principles

  1. [14]
    The new Act does not immediately require that the entitlements in the contribution schedule should be based on any particular criteria. Section 46(1) says that:

“It is not a requirement for a community management statement for a community titles scheme that the contribution schedule lot entitlements be equal for each lot included in the scheme, or that the interest schedule lot entitlements be directly proportional to the market values of the respective lots. 

  1. [15]
    The Act introduces the possibility of adjustments to those schedules. If the owners agree in writing to a change, the body corporate must lodge with the Registrar of Titles a request to record a new community management statement which reflects that adjustment – s. 47.
  1. [16]
    If the owners do not agree (and they have not agreed in this case) then this court has power to order that one or both of the schedules be adjusted – s. 46(2). If an application is made, the order of the court must be consistent with principles declared by the Act – s. 46(3). Those principles are:

“46(4) 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.

46(5) ...  ”

It will be seen that any adjustment to the contribution schedule should result in equal lot entitlements, except to the extent which it is just and equitable in the circumstances for them not to be equal.

  1. [17]
    The words “just and equitable” are words of the widest significance and do not limit the jurisdiction of the court. It is a question of fact. Each case must depend on its own circumstances (Re Kurilpa Protestant Hall Pty Ltd (1946) SR Qd 170 of 183).
  1. [18]
    It is the consequences of change, to all the lots and to the present owners, that might be significant. It should also be accepted that the “just and equitable” exception should not necessarily be confined to a consideration of the lots and the rights and obligations that go with them. Those aspects of property and the history of the building will usually be the dominant considerations. However, it is possible to imagine situations in which the conduct of lot owners, or a developer, might lead to personal considerations that should be taken into account. (For that wider view, see McMillan v Toledo Enterprises International Pty Ltd (1995) 18 ACSR 603, and Ciriello v Panitz Centre Building Units Plan 3894 (1999) 20 QLR 138 at 142.)  In Re Hosking (1998) 20 QLR 145 at 146, a judge of this court took into account the extent of any increased economic burden on the owners of other lots within the scheme. 
  1. [19]
    It can be seen that the persons directly interested in resisting this application are the proprietors of the other lots in the scheme, having regard to the effect of an alteration on their properties. Here, the respondent to the application is the body corporate. The affidavits show that the proprietors have been informed about this application. The body corporate appears by counsel to resist it on their behalf.

Considerations

  1. [20]
    Several proprietors have prepared statements setting out their reasons why the application should be refused. They mention the unhappy history of the resort, which has seen several changes of developer, and that the expectations of successful lettings have not been realised. Many of the proprietors have suffered losses, in some cases leading to personal financial hardship. No doubt many of the proprietors share the view, that Burnitt Investments, as the present owner of the balance land, should accept the burden of its lot entitlements as a part of the ongoing project that it has undertaken.
  1. [21]
    Mr Burnitt, for his company, informed the proprietors that he intends to complete the development. He has an arrangement with the resident unit manager, Mr Stewart, whereby he will be obliged to pay his company Ralph Stewart Pty Ltd, an agreed amount of money if 14 residential lots in Blocks F,G and H are not completed, by (it seems) the end of 2003.
  1. [22]
    Indeed, the intention of the various developers, now including Burnitt Investments, is recorded in Schedule B to the scheme:

“It is intended that Lot 37 be developed into 32 individual lots ...  This further development might be carried out in one or more stages. When it is completed, the contribution schedule lot entitlement and the interest schedule lot entitlement of each lot is to be one.  The further subdivision will be carried out by way of a building format plan.  The current module (accommodation module) will not alter.  No additional common property is to be created.”

  1. [23]
    Therefore, Burnitt Investments continues with the intention to further develop the complex. The position of Burnitt Investments is put forward by Mr Burnitt in his affidavit. These are the reasons for his company’s application:
  1. (a)
    the body corporate is not required to spend any money on the vacant land, Lot 37.  The main expense with respect to that lot is for mowing.  However, the body corporate does not pay for that, as the company pays it.
  1. (b)
    the effect of the present schedule is that the company pays about half the total expenses of the entire development, when nothing in fact is spent on Lot 37. 
  1. (c)
    the reason for Lot 37’s greater entitlements in the contribution schedule was because of the intention to build more units, and progressively assign the entitlements to them, one by one.  In the meantime, an injustice has been created because of the large contributions it has to make.
  1. (d)
    he points to the levies which have been made for the administrative fund and the sinking fund. It is sufficient to refer to the budget for the present year, from 1.12.01 to 30.11.02. The net levy per unit of entitlement, according to the budget, is $667. For the same year, the net amount per unit of entitlement for sinking fund levies is $244.

He points out that the expenditure in the administration fund is entirely related to the expenses of the Body Corporate, and that they have nothing to do with Lot 37.  That is agreed to be so.  It also appears from the sinking fund budget that it is planned to spend about one third of the levies on expenditure this year.  None of those expenses would relate to Lot 37. 

  1. [24]
    The body corporate does not contest the above observations, as far as they go. However, it is submitted that Mr Burnitt’s approach is over simplified, and does not deal with some benefits of the levy payments. The body corporate’s submissions are based on a report by Mr Sheehan, a solicitor with experience in dealing with community management schemes.
  1. [25]
    In para. 8.4 of his report, Mr Sheehan comments on the unique nature of Lot 37, and the nature of sinking fund expenditure. As he puts it:

“Lot 37 will be progressively subdivided to form 32 other lots.  This means that at some future time there will be more lots to place a burden on and take benefit from the common property.”

The Leary and Partners report is a plan for the equal and systematic accumulation of funds over a 20 year period so that the body corporate always has sufficient money for common property replacements and reinstatements of a capital nature.  It is not for use by the body corporate for the current everyday administrative requirements of the body corporate.  It would not be just and equitable for the current residential lots to carry an equal burden to the development lot.

Consequently, it is the view of the writer that it is just and equitable for Lot 37 to share the burden of contributions to the sinking fund at a higher rate.  The rate applied is 33 times the rate for other non development lots, as this equates to the amount of benefit that will be obtained by the end users of Lot 37 when it is fully subdivided in accordance with Schedule B of the CMS.”

  1. [26]
    He comments further at paragraph 10.1, with respect to the distribution of contribution entitlements:

“The Act provides that, to be just and equitable, the contribution entitlements should be adjusted to follow the proportion of costs each lots caused or is responsible for, relevant to all the costs that are incurred by the body corporate and levied according to the contribution schedule.  Equal contribution entitlements would burden the residential lots with costs for which they receive an unequal benefit.  Conversely equal entitlements would unjustly provide Lot 37 with benefits for which it has not contributed fairly.  The lots that result from Lot 37’s progressive subdivision would receive a windfall gain.

Consequently, it is necessary to determine how those costs should be distributed between the lots within the scheme.”

  1. [27]
    Mr Sheehan does recognize, as Mr Burnitt says, that the ordinary administrative expenses do not relate at all to Lot 37. Therefore, it is necessary to decide how much more Lot 37 should pay overall, to take into account the future impact of the sinking fund levies. He has undertaken that exercise in Exhibit 3 to his report. The result, in his view, is that the appropriate contribution schedule for Lot 37 should be some 14.5% of the whole. That would amount to 9.45 entitlements. Consistently with that view, counsel for the body corporate has submitted that there might be an adjustment in this case, but it should result in Lot 37 being given a lot entitlement of 10, rather than 1.
  1. [28]
    In substance, Mr Sheehan’s approach should be accepted. He is right when he says that the completion of the planned development will see a larger number of unit owners sharing the burdens of the body corporate – especially in relation to the sinking fund. At the moment, the present owners, including Burnitt Investments are paying for anticipated capital costs in the future that will eventually benefit all the planned units. It is likely that those new units will place more demands on the sinking fund, because they are going to be built under a building format plan of subdivision. The body corporate’s responsibility will extend to maintaining the new units’ foundation structures and roofing, and supporting framework – see s. 108 of the Body Corporate and Community Management (Accommodation Module) Regulation 1987.
  1. [29]
    That being so, it could not be just and equitable for the existing owners, including Burnitt Investments to pay an equal share. Rather, the owner of the balance land should be paying a greater share, in the expectation that it will recoup its expenditure from the future purchasers of the planned units. Mr Sheehan’s approach should be accepted. In addition, it should be kept in mind that any reduction in Burnitt Investments entitlements will place a greater burden on the other owners.
  1. [30]
    It would seem to be reasonable to follow Mr Sheehan’s calculation of the burden that the owner of Lot 37 should carry. Indeed, his calculation has been essentially adopted here in the submissions on behalf of the body corporate – that is, that Lot 37 should carry a lot entitlement of 10. While there are some imponderables, that seems to be an acceptable way of reaching a fair result. It takes into account Mr Sheehan’s views, that the larger part of the levies which go to the administrative fund, are to be shared equally. It rejects the submission for Burnitt Investments that its entitlement should be reduced to 1.
  1. [31]
    Counsel will have an opportunity to make submissions about the precise order which should be made, on the basis of the above findings. Submissions might also be made about costs. The order could simply be to this effect:

“Order that, with respect to the St Andrews Community Title Scheme 20508, the contribution schedule of lot entitlements be adjusted, so that:

  1. (a)
    the total lot entitlements be reduced to 43; and
  1. (b)
    the lot entitlements with respect to Lot 37 be reduced from 32 to 10.”
Close

Editorial Notes

  • Published Case Name:

    Burnitt Investments P/l v Body Corporate for St Andrews Community Titles Scheme 20508

  • Shortened Case Name:

    Burnitt Investments Pty Ltd v Body Corporate for St Andrews Community Titles Scheme 20508

  • MNC:

    [2002] QDC 6

  • Court:

    QDC

  • Judge(s):

    Brabazon DCJ

  • Date:

    01 Feb 2002

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Ciriello v Panitz Centre Building Units Plan 3894 (1999) 20 QLR 138
2 citations
Jump To
Cite 1 - (1999) 20 QLR 138
Cite 2 - (1999) 20 QLR 138
In Re Hosking (1998) 20 QLR 145
2 citations
Jump To
Cite 1 - (1998) 20 QLR 145
Cite 2 - (1998) 20 QLR 145
McMillan v Toledo Enterprises International Pty Ltd & Ors (1995) 18 ACSR 603
2 citations
Jump To
Cite 1 - (1995) 18 ACSR 603
Cite 2 - (1995) 18 ACSR 603
Re Kurilpa Protestant Hall Pty Ltd [1946] St R Qd 170
2 citations
Jump To
Cite 1 - [1946] St R Qd 170
Cite 2 - [1946] St R Qd 170

Cases Citing

Case NameFull CitationFrequency
Fischer v Body Corporate for Centre Point Community Title Scheme 7779 [2004] QDC 172 citations
Fischer v Body Corporate for Centrepoint Community Title Scheme 7779[2004] 2 Qd R 638; [2004] QCA 2141 citation
Franklin v Body Corporate for La Porte D'Or [2004] QDC 1542 citations
Radchenko v Body Corporate for Richmond Apartments CTS 30240 [2018] QCAT 2512 citations
Woodley & Anor v The Proprietors of Quay West Community Title Scheme 16610 [2006] QDC 2772 citations
1

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