High Court explains what it means for a Body Corporate to act “Reasonably”
In the recent case of Ainsworth v Albrecht [2016] HCA 40 (termed “the Viridian Decision”), the High Court of Australia has allowed an appeal against a decision of the Queensland Court of Appeal relating to the rights of lot owners within a community titles scheme. The Viridian Decision demonstrates that a lot owner is well within their rights to oppose a motion or a proposal to create exclusive use by-laws where the opposition is considered reasonable.
Case Background
Kjerulf Ainsworth (“Ainsworth”) is among the owners of lots in a community titles scheme known as the Viridian Noosa Residences Community Title Scheme (“Viridian”). There are 23 lots in Viridian and each lot has a small residence and two balconies.
In or about March 2011, the owner of lot 11 at Viridian, Martin Albrecht (‘Albrecht”) decided that he wanted to join the two balconies together by constructing a deck between them. The proposed deck required approximately five square metres of airspace between the two balconies (“the Balcony”), the airspace being common property and therefore owned by all lot owners.
Albrecht required the approval of the Body Corporate at a general meeting by way of resolution without dissent which meant that no lot owner could vote against his proposal. The motion for Albrecht to have exclusive use of the airspace was considered at an extraordinary general meeting (“EGM”) in or about August 2012. The motion failed to carry as some of the lot owners at Viridian voted against the motion.
The lot owners opposed the Balcony as they were of the view that it would affect the architecture of the building, may increase noise coming from Lot 11 and any person in Lot 11 would be able to view into surrounding lots thereby reducing the privacy of surrounding lots.
Proceedings before the Office of the Commissioner for Body Corporate and Community Management (OCBCCM)
Albrecht lodged an application for dispute resolution with the OCBCCM. The application was then referred to adjudication before an Adjudicator. Albrecht argued that the lot owners at Viridian acted “unreasonably” when they voted against the motion at the EGM. The adjudicator received submissions from lot owners and also reports from architects stating that the Balcony would adversely affect the architectural integrity of Viridian.
On 2 September 2013, the Adjudicator held that the motion should be “…deemed to have been passed, as the opposition to it was unreasonable in the circumstances”. The adjudicator noted in the decision that whilst the design of the Balcony was inconsistent with the architect’s original design, there was no submission that “…demonstrated that the extension would have any noticeable detrimental impact on the appearance, structure or functionality of the architecture of the scheme” (“the Adjudicator’s Orders”).
Proceedings before the Queensland Civil and Administrative Tribunal (QCAT)
Several lot owners appealed the Decision to QCAT and Administrative Appeals Tribunal. On 17 October 2014, the Tribunal set aside the Adjudicator’s Orders and held that the Adjudicator had erred when they found that they were “…not satisfied that the Body Corporate acted reasonably”.
Proceedings before the Queensland Court of Appeal
Albrecht appealed to the Queensland Court of Appeal. On 6 November 2015, in a unanimous decision the Court of Appeal allowed found that the Decision was not wrong in law and that the Tribunal was not entitled to set it aside (“the Court of Appeal decision”). In support of their decision, the Court of Appeal held that the Adjudicator “…was required to reach her own conclusion after considering all relevant matters”. The Court of Appeal found that the decision of the Adjudicator that the opposition was unreasonable was correct.
Proceedings before the High Court of Australia
Ainsworth and others appealed the Court of Appeal Decision to the High Court of Australia on a number of bases including but not limited to the following:-
- That the Court of Appeal erred in formulating the relevant statutory test for an adjudicator;
- That the Court of Appeal erred in finding that the Adjudicator was required to reach their own conclusion as to the reasonableness of the decision;
- That each of the lot owners were entitled to vote having regard to their interests and only if the position adopted was unreasonable having regard to their interests could the Adjudicator override that vote;
- That the Court of Appeal ought to have accepted the decision of the appeal member of QCAT that the function of the Adjudicator was to consider whether the opposition to the motion was objectively unreasonable;
- That the lot owners concerns and opposition was based on real concerns about architectural integrity, noise and privacy;
- That Albrecht would be at an advantage (and the lot owners would not receive anything in return for the granting of that right to Albrecht) and the use of the common property would be of value to Albrecht.
On 12 October 2016, the High Court overturned the Court of Appeal Decision and held that the Adjudicator had adopted the wrong approach in resolving the dispute. The position of the High Court was that the Adjudicator’s role was not to determine whether the outcome of the vote of the EGM achieved a reasonable outcome but whether the opposition to the proposal was unreasonable.
Body Corporates have an obligation to act “reasonably”. The Viridian Decision clarifies what it means to act reasonably. The High Court held that:-
As the opposition against the motion in this case was not based on spite or ill-will the decision to vote against the motion was a reasonable one.
The Court of Appeal decision created uncertainty for Body Corporate. It would have resulted in a number of Body Corporate decisions being reversed if an Adjudicator considered those decisions to be unreasonable in all the circumstances.
Body Corporates can now refer to the Viridian decision to assess whether an opposition to a motion is considered reasonable thereby reducing the risk of an Adjudicator reversing that decision.
If you or your Body Corporate is concerned whether a decision made or about to be made is “reasonable” please do not hesitate to contact our office.
